DEF 14A 1 uvv-20170630xdef14a.htm DEF 14A Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant x

Filed by a Party other than the Registrant o

Check the appropriate box:
o
Preliminary Proxy Statement
o
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material Pursuant to § 240.14a-12

UNIVERSAL CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
x
No fee required.
 
 
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:
 
(2)
Aggregate number of securities to which transaction applies:
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
(4)
Proposed maximum aggregate value of transaction:
 
(5)
Total fee paid:
 
 
 
o
Fee paid previously with preliminary materials.
 
 
o
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)
Amount Previously Paid:
 
(2)
Form, Schedule or Registration Statement No.:
 
(3)
Filing Party:
 
(4)
Date Filed:





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ANNUAL MEETING OF SHAREHOLDERS
June 26, 2017

Dear Shareholder:

You are cordially invited to attend the 2017 Annual Meeting of Shareholders of Universal Corporation, which will be held in our headquarters building located at 9201 Forest Hill Avenue, Stony Point II Building, Richmond, Virginia 23235, on Thursday, August 3, 2017, commencing at 2:00 p.m., Eastern Time. At the Annual Meeting, you will be asked to (i) elect as directors the three nominees to the Board of Directors named in the accompanying Proxy Statement to serve three-year terms; (ii) cast an advisory vote to approve named executive officer compensation; (iii) cast an advisory vote on the frequency of such advisory vote on named executive officer compensation; (iv) ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for the fiscal year ending March 31, 2018; (v) to approve the Universal Corporation 2017 Stock Incentive Plan; and (vi) vote on one shareholder proposal, if properly presented at the Annual Meeting.

Please note that brokers may not vote your shares on the election of directors and most other proposals in the absence of your specific instructions as to how to vote. Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented and voted at the Annual Meeting. Registered shareholders may vote by signing, dating, and returning the enclosed proxy card or voting instruction, or they may vote over the Internet or by telephone. Instructions for using these convenient services are set forth in the instructions for voting that are attached to the enclosed proxy card or voting instruction. Beneficial owners of shares of our Common Stock held in street name through a bank or brokerage account should follow the enclosed instructions for voting their shares. I hope you will be able to attend the Annual Meeting, but even if you cannot, please vote your shares as promptly as possible.

 
Sincerely,
 
image2a02.jpg
 
GEORGE C. FREEMAN, III
 
Chairman, President, and
 
Chief Executive Officer






Universal Corporation
P.O. Box 25099
Richmond, Virginia 23260


NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

The Annual Meeting of Shareholders of Universal Corporation will be held in our headquarters building located at 9201 Forest Hill Avenue, Stony Point II Building, Richmond, Virginia 23235, on Thursday, August 3, 2017, at 2:00 p.m., Eastern Time, for the following purposes:

(1)
to elect as directors the three nominees to the Board of Directors named in the accompanying Proxy Statement to serve three-year terms;

(2)
to approve a non-binding advisory resolution approving the compensation of our named executive officers;

(3)
to hold a non-binding advisory vote on the frequency (every one, two or three years) of the advisory vote on the compensation of our named executive officers;

(4)
to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for the fiscal year ending March 31, 2018;

(5)
to approve the Universal Corporation 2017 Stock Incentive Plan;

(6)
to vote on one shareholder proposal, if properly presented at the Annual Meeting; and

(7)
to act upon such other matters as may properly come before the meeting or any adjournments or postponements thereof.

Only holders of record of shares of our Common Stock at the close of business on June 9, 2017, shall be entitled to vote at the Annual Meeting.

Please note that brokers may not vote your shares on the election of directors, the advisory vote on executive compensation, the advisory vote on the frequency of the advisory vote on executive compensation, the approval of the Universal Corporation 2017 Stock Incentive Plan, or on the shareholder proposal, in the absence of your specific instructions as to how to vote. Whether or not you expect to attend the Annual Meeting in person, it is important that you vote and we urge you to vote online, by phone or complete, sign, date, and return the enclosed proxy in the envelope provided.

 
By Order of the Board of Directors,
 
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PRESTON D. WIGNER
 
Secretary
June 26, 2017




PROXY STATEMENT

FOR ANNUAL MEETING OF SHAREHOLDERS
OF UNIVERSAL CORPORATION

TO BE HELD AUGUST 3, 2017
APPROXIMATE DATE OF MAILING - JUNE 26, 2017

This Proxy Statement sets forth certain information with respect to the accompanying proxy to be used at the 2017 Annual Meeting of Shareholders of Universal Corporation, which we refer to as the Annual Meeting, or at any adjournments or postponements thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. The Board of Directors has designated our headquarters building located at 9201 Forest Hill Avenue, Stony Point II Building, Richmond, Virginia 23235, as the place of the Annual Meeting. The Annual Meeting will be called to order at 2:00 p.m., Eastern Time, on Thursday, August 3, 2017.

The Board of Directors solicits this proxy and urges you to vote immediately. Unless the context otherwise indicates, reference to “Universal,” “we,” “us,” “our,” or “the Company” means Universal Corporation.

Our Annual Report on Form 10-K for the fiscal year ended March 31, 2017, which we refer to as the fiscal year 2017 Annual Report, is being mailed concurrently with this Proxy Statement to our shareholders. Unless otherwise specifically stated, our fiscal year 2017 Annual Report is not incorporated into this Proxy Statement and shall not be considered a part of this Proxy Statement or soliciting materials.

QUESTIONS AND ANSWERS FOR ANNUAL MEETING

Q:
Who is asking for my vote and why are you sending me this document?

A:
The Board of Directors asks that you vote on the matters listed in the Notice of Annual Meeting of Shareholders, which are more fully described in this Proxy Statement. We are providing this Proxy Statement and related proxy card or voting instruction to our shareholders in connection with the solicitation by the Board of Directors of proxies to be voted at the Annual Meeting. A proxy, if duly executed and not revoked, will be voted and if it contains any specific instructions, it will be voted in accordance with those instructions.

Q:
Who is eligible to vote?

A:
You may vote if you owned shares of Universal Corporation common stock, which we refer to as Common Stock, on June 9, 2017, the record date established by the Board of Directors under Virginia law for determining shareholders entitled to notice of and to vote at the Annual Meeting. We had outstanding as of the record date 25,319,389 shares of Common Stock, each of which is entitled to one vote per share. Only shareholders of record of Common Stock at the close of business on June 9, 2017, will be entitled to vote.

Q:
What is a proxy?

A:
A proxy is your legal designation of another person to vote the stock you own. If you designate someone as your proxy or proxy holder in a written document, that document also is called a proxy or a proxy card. Messrs. Preston D. Wigner and David C. Moore have been designated as proxies or proxy holders for the Annual Meeting. Proxies properly executed and received by our Secretary prior to the Annual Meeting and not revoked will be voted in accordance with the terms thereof.

Q:
What is a voting instruction?

A:
A voting instruction is the instruction form you receive from your bank, broker, or other nominee if you hold your shares of Common Stock in street name. The instruction form instructs you how to direct your bank, broker, or other nominee, as record holder, to vote your shares of Common Stock.

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Q:
What am I voting on at the Annual Meeting?

A:
You will be voting on the following matters:

Ÿ
The election of the three nominees to the Board of Directors set forth in this Proxy Statement to serve three-year terms;
Ÿ
The approval of a non-binding advisory resolution approving the compensation of our named executive officers;
Ÿ
A non-binding advisory vote as to the frequency (every one, two or three years) of the non-binding advisory vote to approve the compensation of our named executive officers;
Ÿ
The ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for the fiscal year ending March 31, 2018;
Ÿ
The approval of the Universal Corporation 2017 Stock Incentive Plan;
Ÿ
One shareholder proposal, if properly presented at the Annual Meeting; and
Ÿ
Any other business properly raised at the Annual Meeting or any adjournments or postponements thereof.

We are not aware of any matters that are to come before the Annual Meeting other than those described in this Proxy Statement. If other matters do properly come before the Annual Meeting, however, it is the intention of the persons named in the enclosed proxy card to exercise the discretionary authority conferred by the proxy to vote such proxy in accordance with their best judgment.

Q:
What constitutes a quorum and how many votes must be present to hold the Annual Meeting?

A:
In order for the Annual Meeting to be conducted, a majority of the shares entitled to vote (i.e., a majority of the outstanding shares of Common Stock as of the record date) must be present in person or represented by proxy at the Annual Meeting for the transaction of business at the Annual Meeting. This is referred to as a quorum. Abstentions, withheld votes, and shares held of record by a bank, broker, or other nominee (“broker shares”) that are voted on any matter are included in determining the number of votes present. Broker shares that are voted on at least one matter will be counted for purposes of determining the existence of a quorum for the transaction of business at the Annual Meeting. Broker shares that are not voted on any matter will not be included in determining whether a quorum is present. In the event that a quorum is not present at the Annual Meeting, it is expected that the Annual Meeting will be adjourned or postponed to solicit additional proxies. It is very important, therefore, that you vote your shares.

Q:
What vote is needed to elect directors?

A:
The election of each nominee for director requires the affirmative vote of the holders of a plurality of the shares of Common Stock voted in the election of directors.

Q:
What vote is needed to approve the non-binding advisory resolution approving the compensation of our named executive officers?

A:
The approval of the non-binding advisory resolution approving the compensation of our named executive officers requires that the votes cast in favor of the proposal exceed the number of votes cast against the proposal. The Board of Directors and the Compensation and Governance Committee value the opinions of our shareholders. To the extent that there is any significant vote against executive compensation, the Board of Directors and the Compensation and Governance Committee will consider shareholder concerns and evaluate whether any actions are necessary to address those concerns.

Q:
What vote is being requested to approve the non-binding advisory vote as to the frequency (every one, two or three years) of the non-binding shareholder vote to approve the compensation of our named executive officers?

A:
Shareholders are not voting to approve or disapprove the recommendation of the Board of Directors with respect to this proposal. The non-binding advisory vote as to the frequency (every one, two or three years) of the non-binding shareholder vote regarding the approval the compensation of our named executive officers will require you to choose among a frequency of every one, two or three years or abstain from voting. The Board of Directors will take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation.

Q:
What vote is needed to ratify the appointment of Ernst & Young LLP?

A:
The ratification of the appointment of Ernst & Young LLP requires that the number of votes cast in favor of the ratification exceed the number of votes cast in opposition to the ratification.


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Q:
What vote is needed to approve the Universal Corporation 2017 Stock Incentive Plan?

A:
The affirmative vote of the holders of a majority of the shares cast with respect to the proposal to approve the 2017 Stock Incentive Plan is required to approve the proposal.

Q: What vote is needed to approve the shareholder proposal requiring the Company to prepare a report regarding the benefits and drawbacks of mediation of alleged human rights violations?

A: The approval of the shareholder proposal requires that the votes cast in favor of the proposal exceed the number of votes cast against the proposal. Although the Board of Directors recommends a vote “against” the proposal, the Board of Directors value the opinions of our shareholders. To the extent that the shareholder proposal is not approved, but there is a significant vote in favor of the shareholder proposal, the Board of Directors will consider shareholder concerns and evaluate whether any actions are necessary to address these concerns.

Q:
What are the voting recommendations of the Board of Directors?

A:
The Board of Directors recommends that shareholders vote “FOR” all of the proposed nominees for director named in this Proxy Statement; “FOR” the approval of the non-binding resolution approving named executive officer compensation; for a “ONE-YEAR” frequency for the non-binding shareholder vote regarding approval of the compensation of our named executive officers; “FOR” the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for the fiscal year ending March 31, 2018; “FOR” the approval of the Universal Corporation 2017 Stock Incentive Plan; and “AGAINST” the shareholder proposal requiring the Company to prepare a report regarding the benefits and drawbacks of mediation of alleged human rights violations.

Q:
How do I vote?

A:
Registered shareholders (shareholders who hold Common Stock in certificated form as opposed to through a bank, broker, or other nominee) may vote in person at the Annual Meeting or by proxy. Registered shareholders have the following ways to vote by proxy:

Ÿ
by mail - complete, sign, date, and return the enclosed proxy card or voting instruction; or
Ÿ
over the Internet or by telephone - follow the instructions provided on the enclosed proxy card or voting instruction.

Registered shareholders are urged to deliver proxies and voting instructions by using the Internet, by calling the toll-free telephone number, or by completing and mailing the enclosed proxy card or voting instruction. The Internet and telephone voting procedures are designed to authenticate shareholders' identities, to allow shareholders to give their proxies or voting instructions, and to confirm that such instructions have been recorded properly. Instructions for voting over the Internet or by telephone are set forth on the enclosed proxy card. Registered shareholders may also send their proxies or voting instructions by completing, signing, and dating the enclosed proxy card or voting instruction and returning it as promptly as possible in the enclosed postage-paid envelope.

Shareholders who hold Common Stock through a bank, broker, or other nominee (street name shareholders) who wish to vote at the Annual Meeting should be provided voting instructions from the institution that holds their shares. If this has not occurred, please contact the institution that holds your shares. Street name shareholders may also be eligible to vote their shares electronically by following the voting instructions provided by the bank, broker, or other nominee that holds the shares, using either the Internet address or the toll-free telephone number provided on the voting instruction, or otherwise complete, date, and sign the voting instruction and return it promptly in the enclosed postage-paid envelope.

The deadline for voting electronically over the Internet or by telephone is 11:59 p.m., Eastern Time, on August 2, 2017.

Q:
Can I attend the Annual Meeting?

A:
The Annual Meeting is open to all holders of our Common Stock as of the close of business on the record date, June 9, 2017. We will not permit cameras, recording devices, or other electronic devices at the Annual Meeting. We encourage you to vote your shares by proxy, but you may also vote by attending the Annual Meeting and voting in person.





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Q:
What do I need in order to attend the Annual Meeting in person?

A:
Any shareholder of record may attend the Annual Meeting; however, street name holders must have a legal proxy from their bank or broker and bring that proxy to the Annual Meeting to confirm you are the beneficial owner, and they must bring evidence of stock holdings, such as a recent brokerage account statement. Upon arrival at the Annual Meeting, you will also be required to present government-issued photo identification, such as a driver's license or passport.

Q:
Can I withhold my vote?

A:
You may withhold your vote with respect to the election of directors.

Q:
Can I change or revoke my proxy?

A:
Any shareholder who gives a proxy may change or revoke his or her proxy at any time before it is voted at the Annual Meeting. A shareholder may change or revoke his or her proxy by:

Ÿ
giving written notice of revocation to our Corporate Secretary, whose address is on page 6 of this Proxy Statement;
Ÿ
executing a proxy dated as of a later date; or
Ÿ
voting in person at the Annual Meeting.

If you voted over the Internet or by telephone, you can also revoke your vote by any of these methods or you can change your vote by voting again over the Internet or by telephone. If you decide to vote by completing, signing, dating, and returning the enclosed proxy card, you should retain a copy of the voter control number found on the proxy card in the event that you decide later to change or revoke your proxy over the Internet or by telephone. Your attendance at the Annual Meeting will not itself revoke a proxy.

If you are a shareholder whose stock is held in street name with a bank, broker, or other nominee, you must follow the instructions found on the voting instruction card provided by the bank, broker, or other nominee, or contact your bank, broker, or other nominee in order to change or revoke your previously given proxy.

Q:
How will my shares be voted if I sign, date, and return my proxy card or voting instruction card, but do not provide complete voting instructions with respect to each proposal?

A:
Shareholders should specify their choice for each matter on the enclosed proxy. If no specific instructions are given, it is intended that all proxies that are signed and returned will be voted “FOR” the election of all of the nominees for director named in this Proxy Statement; “FOR” the approval of the non-binding resolution approving named executive officer compensation; for a “ONE-YEAR” frequency for the non-binding shareholder vote regarding approval of the compensation of our named executive officers; “FOR” the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for the fiscal year ending March 31, 2018; “FOR” the approval of the Universal Corporation 2017 Stock Incentive Plan; and “AGAINST” the shareholder proposal; and according to the discretion of the proxy holders on any other business proposal properly raised at the Annual Meeting.

As to any other business that may properly come before the Annual Meeting, the persons named in the enclosed proxy card or voting instruction will vote the shares of Common Stock represented by the proxy in the manner as the Board of Directors may recommend, or otherwise in the proxy holders' discretion. The Board of Directors does not presently know of any other such business.

Q:
Will my shares be voted if I do not provide my proxy?

A:
It will depend on how your ownership of shares of Common Stock is registered. If you own your shares as a registered holder, which means that your shares of Common Stock are registered in your name with our transfer agent, your unvoted shares will not be represented at the Annual Meeting. They also will not count toward the quorum requirement, which is explained under “What constitutes a quorum and how many votes must be present to hold the Annual Meeting?” on page 2 of this Proxy Statement, unless you attend the Annual Meeting to vote them in person.


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If you are a shareholder whose shares of Common Stock are held in street name, which means that your shares are registered with our transfer agent in the name of your bank, broker or other nominee, then your bank, broker, or other nominee may or may not vote your shares in its discretion if you have not provided voting instructions to the bank, broker, or other nominee. Whether the bank, broker or other nominee may vote your shares depends on the proposals before the Annual Meeting. Brokers have the discretionary authority under the rules of the New York Stock Exchange, which we also refer to as the NYSE, to vote shares for which their clients do not provide voting instructions on certain “routine” matters.

The rules of the NYSE, however, do not permit your bank, broker or other nominee to vote your shares on proposals that are not considered “routine.” When a proposal is not a routine matter and your bank, broker or other nominee has not received your voting instructions with respect to that proposal, your bank, broker or other nominee cannot vote your shares on that proposal. Where brokers do not have discretion to vote or do not exercise such discretion, the inability or failure to vote is referred to as a “broker non-vote.” Under circumstances where a broker is not permitted to, or does not, exercise its discretion, assuming proper disclosure to us of such inability to vote, broker non-votes will not be counted as voting in favor of or against the particular matter. Please note that your bank, broker or other nominee may not vote your shares with respect to (i) the election of the three nominees for director, (ii) the approval of the non-binding advisory resolution approving the compensation of our named executive officers, (iii) the advisory vote on the frequency of the advisory vote on executive compensation, (iv) the approval of the 2017 Universal Corporation Stock Incentive Plan, or (v) the shareholder proposal, in the absence of your specific instructions as to how to vote with respect to these matters. Under the rules of the NYSE, these matters are not considered “routine” matters. Based on NYSE rules, we believe that the ratification of the appointment of Ernst & Young LLP is a routine matter for which brokerage firms may vote on behalf of their clients if no voting instructions are provided. Therefore, if you are a shareholder whose shares of Common Stock are held in street name with a bank, broker or other nominee and you do not return your voting instruction card, your bank, broker or other nominee may vote your shares “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm. Please return your proxy card so your vote can be counted.

Q:
How are abstentions and broker non-votes counted?

A:
With respect to the election of directors, abstentions, withheld votes and broker non-votes will not be included in the vote total for the proposal to elect the nominees for director named in this Proxy Statement and will not affect the outcome of the vote for that proposal.

With respect to the approval of the non-binding advisory resolution approving the compensation of our named executive officers, abstentions and broker non-votes will have no effect on the proposal and will not count either in favor of, or against, the non-binding proposal.

The advisory vote on the frequency of the advisory vote on executive compensation will require you to choose among a frequency of every one, two and three years or abstain from voting. You are not voting to approve or disapprove our recommendation. Abstentions and broker non-votes, therefore, will have no effect on the proposal and will not count either in favor of, or against the non-binding proposal.

With respect to the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for the fiscal year ending March 31, 2018, abstentions and broker non-votes will have no effect on the proposal and will not count either in favor of, or against, the proposal.

With respect to the approval of the Universal Corporation 2017 Stock Incentive Plan, broker non-votes will have no effect on the proposal and will not count either in favor of, or against the proposal, but abstentions will count against the proposal.

With respect to the vote on the shareholder proposal requiring the Company to prepare a report regarding the benefits and drawbacks of mediation of alleged human rights violations, abstentions and broker non-votes will have no effect on the proposal and will not count in favor of, or against, the proposal.

Q:
Where can I find the results of the Annual Meeting?

A:
We expect to announce the preliminary voting results at the Annual Meeting and disclose the final results in a Current Report on Form 8-K filed within four business days after the Annual Meeting.


5



Q:
Who pays for the solicitation of proxies?

A:
We will pay all of the costs associated with this proxy solicitation. Proxies are being solicited by mail and may also be solicited in person or by telephone, facsimile, or other means of electronic transmission by our directors, officers, and employees. We will reimburse banks, brokerage firms, and other custodians, nominees, and fiduciaries for their reasonable expenses in forwarding proxy materials to the beneficial owners of shares of Common Stock. It is contemplated that additional solicitation of proxies will be made by D.F. King & Co., Inc., 48 Water Street, New York, New York 10006, at an anticipated cost to us of approximately $6,500, plus reimbursement of out-of-pocket expenses for such items as mailing, copying, phone calls, faxes, and other related matters. In addition, we will indemnify D.F. King against any losses arising out of D.F. King's proxy soliciting services on our behalf.

Q:
Could other matters be decided in the Annual Meeting?

A:
The Board of Directors does not know of any other business that may be brought before the Annual Meeting. However, if any other matters should properly come before the Annual Meeting or at any adjournment or postponement thereof, it is the intention of the persons named in the enclosed proxy card to vote on such matters as they, in their discretion, may determine.

Q:
Where can I find Universal Corporation's corporate governance materials?

A:
Our Corporate Governance Guidelines, including our independence standards for members of the Board of Directors, Code of Conduct, and the charters of the Audit Committee, the Executive Compensation, Nominating and Corporate Governance Committee, which we refer to as the Compensation and Governance Committee, and all other standing committees, are available under the “Governance” section of our Internet website at http://investor.universalcorp.com/corporate-governance.cfm, and are available in print to any shareholder upon request by contacting us at the following address or phone number:

Universal Corporation
P.O. Box 25099
Richmond, Virginia 23260
Attention: Investor Relations
Telephone: (804) 359-9311

Q:
How do I communicate with the Board of Directors?

A:
Shareholders and other interested parties may at any time direct communications to the Board of Directors as a whole, to the director who presides at the executive sessions of the non-employee directors, or to any individual member of the Board of Directors, through our Internet website or by contacting our Corporate Secretary. The “Governance - Contact the Board” section of our Internet website at http://investor.universalcorp.com/contactboard.cfm contains an e-mail link established for receipt of communications with directors, and communications can also be delivered by mail by sending requests to our Corporate Secretary at the following address:

Universal Corporation
P.O. Box 25099
Richmond, Virginia 23260
Attention: Corporate Secretary
Telephone: (804) 359-9311

Shareholders making such communications are encouraged to state that they are shareholders and provide the exact name in which their shares of Common Stock are held and the number of shares held. Each individual communicating with the Board of Directors will receive a written acknowledgment from or on behalf of our Secretary after receipt of the communication sent in the manner described above. After screening such communications for issues unrelated to shareholder interests, our Secretary will distribute communications to the intended recipient(s) as appropriate. The process for such screening has been approved by our non-employee directors.



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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON AUGUST 3, 2017.

Our Proxy Statement and fiscal year 2017 Annual Report are both available free of charge under the “Investor - Financial Information” section of our Internet website at http://investor.universalcorp.com/financials.cfm.

Our 2017 Annual Report to Shareholders, which includes a copy of our fiscal year 2017 Annual Report on Form 10-K (excluding exhibits) as filed with the Securities and Exchange Commission, is being mailed to shareholders with this Proxy Statement.

We will provide additional copies of our fiscal year 2017 Annual Report, including the financial statements and financial statement schedules, without charge to any person to whom this Proxy Statement has been delivered if they so request. Requests should be directed to Investor Relations at the address or phone number provided on page 6 of this Proxy Statement.

We make available free of charge through our Internet website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, which is referred to herein as the Exchange Act, as well as reports on Forms 3, 4 and 5 filed by our directors and executive officers pursuant to Section 16 of the Exchange Act, as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the Securities and Exchange Commission. The information on our Internet website is not, and shall not be deemed to be, a part of this Proxy Statement or incorporated into any other filings we make with the Securities and Exchange Commission.


7



PROPOSAL ONE
ELECTION OF DIRECTORS
In accordance with our Articles of Incorporation and Bylaws, the Board of Directors is divided into three classes. The term of office of one of the three classes of directors expires each year, and each class is elected for a three-year term.

Five members of our board of directors have previously been elected to terms expiring in 2018 or 2019, as indicated below. The Compensation and Governance Committee has recommended to our Board of Directors, and our Board of Directors has approved, the nomination of the three remaining incumbent directors set forth below to be elected for three-year terms at the Annual Meeting.

The following pages set forth certain information for each nominee, as well as all other incumbent directors, as of March 31, 2017, except as otherwise noted. All of the nominees and incumbent directors listed below are directors previously elected by the shareholders. Each nominee has consented to being named in this Proxy Statement and to serve if elected.

The election of each nominee for director requires the affirmative vote of the holders of a plurality of the shares of Common Stock cast in the election of directors. With a plurality vote, the nominees that receive the highest vote totals for the director positions up for election will be elected. Proxies cannot be voted for a greater number of persons than the number of nominees named in this Proxy Statement. Unless otherwise specified in the accompanying form of proxy, it is intended that votes will be cast for the election of all of the nominees as directors. If, at the time of the Annual Meeting, any nominee should be unavailable to serve as a director, it is intended that votes will be cast, pursuant to the enclosed proxy, for such substitute nominee as may be nominated by the Board of Directors. The Board of Directors has no reason to believe that any of the nominees will be unavailable. In lieu of designating a substitute nominee, however, the Board of Directors may adopt a resolution pursuant to our Articles of Incorporation to reduce the number of directors.

Set forth below is information concerning the age, principal occupation, employment and directorships during the past five years, positions with the Company of each nominee and director, the year in which he or she first became a director of the Company and his or her term of office as a director. Also set forth below is a brief discussion of the specific experience, qualifications, attributes or skills that led to the conclusion that each nominee and director should serve as a director as of the date of this Proxy Statement, in light of the Company's business and structure.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” PROPOSAL ONE.


Incumbent Directors Whose Terms Expire in 2017 (Class II Directors)

GEORGE C. FREEMAN, III, 54, has been our Chief Executive Officer since April 1, 2008, and our President since December 12, 2006. Mr. G. Freeman served as General Counsel and Secretary from February 1, 2001 until November 2005, and was elected Vice President in November 2005. He has been a director since November 7, 2007 and Chairman of the Board of Directors since August 5, 2008. He is Chairman of the Executive Committee and a member of the Finance Committee. Mr. G. Freeman also serves as a director of Tredegar Corporation, a manufacturer of plastic films and aluminum extrusions, since May 24, 2011. He serves on its Executive Compensation and Nominating and Governance Committees.

As Chairman of the Board, Mr. G. Freeman provides the Board of Directors with strong leadership and a considerable amount of experience. In addition, as our President and Chief Executive Officer, Mr. G. Freeman is able to communicate to and inform the Board about our day-to-day operations, customer relationships, management issues and industry developments. The Board believes that Mr. G. Freeman's extensive knowledge of the industry, his financial expertise and his forward-looking thinking brings an invaluable perspective on our current operations and our ongoing relationships with customers and suppliers. Through Mr. G. Freeman's years of service with us and on the Board of Directors, he has developed extensive knowledge in the areas of leadership, risk oversight, management and corporate governance, each of which provides great value to the Board of Directors.

LENNART R. FREEMAN, 65, retired as Executive Vice President of Swedish Match AB (“Swedish Match”), a global tobacco products manufacturer, in February 2011. Mr. L. Freeman worked with Swedish Match for over 30 years, serving as Executive Vice President for the six years prior to his retirement. While at Swedish Match, he successfully completed significant corporate restructurings and served in numerous executive positions within the company. He previously served as a director of the Dometic Group AB, a privately-held global provider of comfort products for the recreational vehicle, automotive and marine

8



markets, until December 2014. Mr. L. Freeman is no relation to Mr. G. Freeman. He is a member of the Audit Committee, the Executive Committee and the Compensation and Governance Committee, and has been a director since 2013.
Mr. L. Freeman's extensive experience in the tobacco industry adds depth to the Board of Director's ability to evaluate and develop industry opportunities and strategies. His years with Swedish Match also add a unique customer perspective to the Board of Directors. In addition, Mr. L. Freeman's extensive leadership experience in a multinational company adds significant value to the Board of Directors.
EDDIE N. MOORE, JR., 69, is the President and Chief Executive Officer of Norfolk State University, a public, historically black liberal arts university. Prior to joining Norfolk State University in September 2013, Mr. E. Moore was Interim President and then Chief Executive Officer and President of St. Paul's College, a private, historically black liberal arts college, from November 2011 to June 2012. Previously, Mr. E. Moore was the President of Virginia State University, a public research university, for more than five years. Upon retirement as President on July 1, 2010, he accepted a position as President Emeritus, a position which he continues to hold. Prior to assuming the position of President in 1993, Mr. E. Moore served as state treasurer for the Commonwealth of Virginia, heading the Department of the Treasury and serving on fifteen state boards and authorities. He is also a director of Owens & Minor, Inc., a distributor of national name-brand medical and surgical supplies and a healthcare supply chain management company since 2005. He is a member of its Audit Committee and Governance and Nominating Committee. He is the Lead Independent Director, Chairman of the Audit Committee and a member of the Finance and Pension Investment Committees and has been a director since 2000.

Mr. E. Moore's strong background in accounting and finance and his leadership experience gained through managing prominent educational institutions is valuable to the Board of Directors. Mr. E. Moore's experience in the public sector brings valuable perspectives and disciplines to the Board of Directors' deliberations and decision-making processes.


Incumbent Directors Whose Terms Expire in 2018 (Class III Directors)

JOHN B. ADAMS, JR., 72, is President, Chief Executive Officer and a director of Bowman Companies, a private land development company, positions he has held for more than five years. He has also been a director of Fauquier Bankshares, Inc., a community bank, since 2003 and has served as Chairman of its Board of Directors since January 2010. He is a member of the Audit, Executive, Finance and Pension Investment Committees and has been a director since 2003.

Having been a director of Fauquier Bankshares, Inc. since 2003, Mr. Adams brings extensive financial and banking experience to the Board of Directors. In addition, his experience as President, Chief Executive Officer and a director of Bowman Companies and his other leadership roles provides the Board of Directors with valuable leadership, business and operational experience.

DIANA F. CANTOR, 59, is a Partner of Alternative Investment Management, LLC, an independent privately-held investment management firm, a position she has held since January 2010. She is also the co-founder and Managing Director of Hudson James Group LLC, a strategic advisory firm, a position she held from February 2012 to December 2014. Mrs. Cantor served as a Managing Director with New York Private Bank and Trust from January 2008 through December 2009, and from 1996 to 2007 she served as a Founder and Executive Director of the Virginia College Savings Plan, an independent agency of the Commonwealth of Virginia. Since 2005, Mrs. Cantor has served on the Board of Directors of Domino's Pizza, Inc., a global pizza restaurant chain and franchise pizza delivery company (she is Chairman of its Audit Committee and a member of its Nominating and Corporate Governance Committee). She is also Vice Chairman and a Trustee of the Virginia Retirement System. Mrs. Cantor previously served as a director and member of the Audit Committee of Revlon, Inc., a global cosmetics company, from 2013 to 2015, and as a director of The Edelman Financial Group, Inc., a provider of investment advice, from 2011 to 2012, and as a director and member of the Audit Committee of Media General, Inc., a provider of news, information and entertainment from 2005 until its merger with Nexstar Broadcasting Group, Inc. to form Nexstar Media Group, Inc. in January, 2017. Mrs. Cantor is Chairman of the Finance Committee and a member of the Pension Investment Committee and the Compensation and Governance Committee and has been a director since 2012.
Mrs. Cantor possesses extensive legal, investment and financial skills and significant public company directorship and committee experience, all of which add important, multi-disciplinary financial perspective to our Board of Directors. Her service on the boards of multinational corporations offers the Board of Directors a valuable perspective on governance best practices and executive leadership, and strengthens the financial and strategic expertise of the Board of Directors.
    

9



ROBERT C. SLEDD, 64, is Managing Partner of Pinnacle Ventures, LLC, a venture capital firm, and Sledd Properties, LLC, an investment company. Mr. Sledd served as the Senior Economic Advisor to the former Governor of Virginia from January 2010 until January 2014, and served as Chairman of Performance Food Group Co. (“PFG”), a foodservice distribution company, from 1995 until June 2008. He served as Chief Executive Officer of PFG from 1987 to 2001 and from 2004 to 2006. He also serves on the Board of Directors of Owens & Minor, Inc., a distributor of national name-brand medical and surgical supplies and a healthcare supply chain management company, since 2007. He is Chairman of its Compensation and Benefits Committee and serves on its Executive Committee and Governance and Nominating Committee. He is also a Director of Pool Corporation, a wholesale distributor of swimming pool supplies, equipment, and related leisure products. He serves on its Audit Committee and Compensation Committee. He is Chairman of the Pension Investment Committee, a member of the Audit and Finance Committees, and has been a director since 2009.

Through Mr. Sledd's prior experience serving as a former chief executive of a foodservice distribution company, he has gained extensive knowledge and understanding of the challenges faced by public companies. In addition, his experience in founding, expanding and taking public PFG provides the Board of Directors with a breadth of perspectives and ideas on matters of management, corporate governance and strategic growth. Having served on the board of directors of other publicly traded companies, he has gained further experience related to corporate governance matters in addition to experience in risk oversight and executive compensation.


Incumbent Directors Whose Terms Expire in 2019 (Class I Directors)

THOMAS H. JOHNSON, 67, has been Managing Partner of THJ Investments, L.P., a private investment firm, from November 2005 to the present. Since 2008, he has also served as Chief Executive Officer of Taffrail Group, LLC, a business consulting firm. Mr. Johnson retired as Chairman and Chief Executive Officer of Chesapeake Corporation (“Chesapeake”), a specialty packaging company, in November 2005, after which he served as Vice Chairman until April 2006. Mr. Johnson was a director and member of the Audit Committee and Compensation Committee of Tumi Holdings, Inc., a global distribution company offering travel and business products in multiple categories until their merger with Samsonite International S.A. in 2016. He was a director of Superior Essex, Inc., a manufacturer of wire and cable products, from December 7, 2005 to August 7, 2008, and Gen On Corporation, a producer of electricity, and the predecessor company, Mirant Corporation, from January 2006 until its merger with NRG Energy, Inc. in December 2012. Mr. Johnson was also a director of Coca Cola Enterprises, Inc., a marketer, produce and distributor of Coca-Cola products, from 2007 until its merger with Coca-Cola European Partners US, LLC in 2016. He is Chairman of the Compensation and Governance Committee and a member of the Executive Committee and has been a director since 2001.

Mr. Johnson's more than 15 years of experience as a chief executive of several large corporations and extensive service on the boards of multinational corporations provides the Board of Directors a valuable perspective on governance best practices and executive leadership. Through these executive management experiences, Mr. Johnson brings investment, manufacturing and distribution expertise to bear on his service as a member of the Board of Directors, and also has extensive international management experience in Europe and Asia. Mr. Johnson's service on the board of directors of other public companies, including such companies' audit, nominating and governance, and compensation and governance committees, provides our Board of Directors with financial, operational and strategic expertise.

MICHAEL T. LAWTON, 58, retired as Executive Vice President and Chief Financial Officer of Domino’s Pizza, Inc. (“Domino’s”), a global pizza restaurant chain and franchise pizza delivery company, in August 2015.  Mr. Lawton was Chief Financial Officer of Domino’s since 2010, and Executive Vice President, Supply Chain Services since October 2014.  He also served as Interim Chief Information Officer from 2011 to 2012, and Executive Vice President of International from 2004 to 2011.  Prior to Domino’s, Mr. Lawton held various financial and general management positions with Gerber Products Company, a subsidiary of Nestle.  Mr. Lawton is a Director of La-Z-Boy, Inc., a manufacturer, importer, distributor and retailer of upholstery furniture products, since 2013 and he is Chairman of its Audit Committee and a member of its Compensation Committee. Mr. Lawton is a member of the Audit Committee and the Pension Investment Committee.

Mr. Lawton’s experience and leadership as a senior executive of a public company and well-known consumer brand, as well as a member of the board of the directors of another publicly-traded company is valuable to the Board of Directors.  He has extensive experience in risk oversight, executive compensation and corporate governance.  In addition, Mr. Lawton has a strong background in accounting and finance as well as extensive international management and supply chain experience that adds significant value to the Board of Directors. 




10



STOCK OWNERSHIP
Principal Shareholders

The following table sets forth as of June 9, 2017, certain information with respect to the beneficial ownership of shares of Common Stock by each person or group we know to beneficially own more than 5% of the outstanding shares of such stock.
Name and Address of Beneficial Owner
 
Number of Shares
 
Percent of Class(1)
 
 
(#)
 
(%)
Vanguard Group, Inc.
 
2,820,300

(2) 
 
11.1
%
100 Vanguard Boulevard
 
 
 
 
 
Malvern, Pennsylvania 19355
 
 
 
 
 
BlackRock, Inc.
 
2,617,493

(3) 
 
10.3
%
40 East 52nd Street
 
 
 
 
 
New York, New York 10022
 
 
 
 
 
Dimensional Fund Advisors LP
 
1,931,271

(4) 
 
7.6
%
Palisades West, Building One
 
 
 
 
 
6300 Bee Cave Road
 
 
 
 
 
Austin, Texas 78746
 
 
 
 
 
FMR LLC
 
1,237,389

(5) 
 
4.9
%
245 Summer Street
 
 
 
 
 
Boston, Massachusetts 02210
 
 
 
 
 
LSV Asset Management
 
1,162,537

(6) 
 
4.6
%
155 N. Wacker Drive
 
 
 
 
 
Suite 4600
 
 
 
 
 
Chicago, Illinois 60606
 
 
 
 
 
(1) 
The percentages shown in the table are based on 25,319,389 shares of Common Stock outstanding on June 9, 2017.
(2) 
As reported on an amended Schedule 13G filed with the Securities and Exchange Commission on February 10, 2017. According to this filing, Vanguard Group, Inc. possessed sole voting power over 28,301 shares of Common Stock, shared voting power over 1,119 shares of Common Stock and sole dispositive power over 2,793,608 shares of Common Stock with shared dispositive power over 26,692 shares of Common Stock.
(3) 
An amended Schedule 13G/A filed with the Securities and Exchange Commission on January 17, 2017 indicates that BlackRock, Inc., acting as a parent holding company, reported that it has sole voting power over 2,568,138 shares of Common Stock, shared voting power over no shares of Common Stock, sole dispositive power over 2,617,493 shares of Common Stock and shared dispositive power over no shares of Common Stock.
(4) 
As reported on an amended Schedule 13G/A filed with the Securities and Exchange Commission on February 9, 2017. The amended Schedule 13G indicates that Dimensional Fund Advisors LP, in its capacity as investment adviser to certain commingled group trusts and separate accounts, has the sole voting power over 1,919,758 shares of Common Stock, shared voting power over no shares of Common Stock, sole dispositive power over 1,931,271 shares of Common Stock and shared dispositive power over no shares of Common Stock that are owned by such companies, trusts, and accounts.
(5) 
As reported on an amended Schedule 13G filed with the Securities and Exchange Commission on February 14, 2017 by FMR LLC ("FMR"), a parent holding company. FMR had sole voting power over 37,389 shares of Common Stock, shared voting power over no shares of Common Stock, sole dispositive power over 1,237,389 shares of Common Stock, and shared dispositive power over no shares of Common Stock.
(6) 
As reported on a Schedule 13G filed with the Securities and Exchange Commission on February 6, 2017 by LSV Asset Management ("LSV"), an investment advisor, LSV had sole voting power over 610,619 shares of Common Stock, shared voting power over no shares of Common Stock, sole dispositive power over 1,162,537 shares of Common Stock, and shared dispositive power over no shares of Common Stock.


11



Directors and Executive Officers

The following table sets forth as of June 9, 2017, certain information with respect to the beneficial ownership of shares of Common Stock by (i) each director or nominee, (ii) each executive officer listed in the “Summary Compensation Table”, who we refer to as the “named executive officers”, and (iii) all current directors and executive officers as a group.
Name of Beneficial Owner
 
Number of Shares(1)
 
Percent of Class(2)
 
 
(#)
 
(%)
John B. Adams, Jr.
 
17,486

 
*

Theodore G. Broome
 
33,931

 
*

Diana F. Cantor
 
7,097

 
*

George C. Freeman, III
 
227,216

 
*

Lennart R. Freeman
 
5,353

 
*

Airton L. Hentschke
 
41,955

 
*

Thomas H. Johnson
 
15,054

 
*

Michael T. Lawton
 
2,145

 
*

David C. Moore
 
78,588

 
*

Eddie N. Moore, Jr.
 
23,065

 
*

Robert C. Sledd
 
10,124

 
*

Preston D. Wigner
 
39,466

 
*

All current directors and executive officers as a group (15 persons)
 
573,264

 
2.3
%
*
Percentage of ownership is less than 1% of the outstanding shares of Common Stock.
(1) 
No executive officers or directors have pledged shares of Common Stock as security.
(2) 
The percentages shown in the table are based on 25,319,389 shares of Common Stock outstanding on June 9, 2017.

Section 16(a) Beneficial Ownership Reporting Compliance

Our directors and executive officers are required under Section 16(a) of the Exchange Act to file reports of ownership and changes in ownership of Common Stock with the Securities and Exchange Commission. Copies of those reports must also be furnished to us.

Based solely on a review of the copies of such reports furnished to us and written representations of our directors and executive officers, we believe that, during fiscal year 2017, all directors and executive officers filed with the SEC on a timely basis all reports required to be filed.


12



CORPORATE GOVERNANCE AND COMMITTEES
General

Our business and affairs are managed under the direction of the Board of Directors in accordance with the Virginia Stock Corporation Act and our Articles of Incorporation and Bylaws. Members of the Board of Directors are kept informed of our business through discussions with the Chairman, President, and Chief Executive Officer and other officers, by reviewing materials provided to them and by participating in meetings of the Board of Directors and its committees. The corporate governance practices we follow are summarized below.

Corporate Governance Guidelines

The Board of Directors has adopted written Corporate Governance Guidelines that set forth the practices of the Board of Directors with respect to the qualification and selection of directors, director orientation and continuing education, director responsibilities, Board of Directors composition and performance, director access to management and independent advisors, director compensation, management evaluation and succession, evaluation of the Board of Directors' performance and various other issues. The Corporate Governance Guidelines are available to shareholders and the public free of charge under the “Governance” section of our Internet website at http://investor.universalcorp.com/corporate-governance.cfm. A printed copy is available to any shareholder free of charge upon written request directed to Investor Relations at the address provided on page 6 of this Proxy Statement.

Code of Conduct

The Board of Directors has adopted a written Code of Conduct applicable to our directors, officers and employees, and the directors, officers and employees of each of our subsidiaries and controlled affiliates. The Code of Conduct satisfies the NYSE requirements for a “Code of Business Conduct and Ethics” and the Securities and Exchange Commission definition of a “Code of Ethics for Senior Financial Officers.” The Code of Conduct addresses such topics as protection and proper use of company assets, compliance with applicable laws and regulations, accuracy and preservation of records, accounting and financial reporting, conflicts of interest and insider trading. The Code of Conduct is available to shareholders and the public free of charge on our Internet website at http://www.universalcorp.com/compliance/. A printed copy is available to any shareholder free of charge upon written request directed to Investor Relations at the address provided on page 6 of this Proxy Statement.

Director Independence

The Board of Directors, in its business judgment, has determined that each member of the Board of Directors, except Mr. G. Freeman, our Chairman, President, and Chief Executive Officer, is independent as defined by the NYSE listing standards and our Corporate Governance Guidelines. In reaching this conclusion and as set forth in the independence standards of our Corporate Governance Guidelines, the Board of Directors evaluated each director or nominee for director in light of the specified independence tests set forth in the NYSE listing standards. In addition, the Board of Directors considered whether we and our subsidiaries conduct business and have other relationships with organizations of which certain members of the Board of Directors or members of their immediate families are or were directors or officers. There has been no such business or relationships for the past three fiscal years.

Executive Sessions

The independent directors of the Board of Directors meet in executive session at least annually without management or employee directors present. The independent directors designate the Lead Independent Director, who is responsible for presiding over the executive sessions of the independent directors. For fiscal year 2017, the independent directors designated Mr. E. Moore as the Lead Independent Director. The Lead Independent Director is responsible for advising the Chairman, President, and Chief Executive Officer of the outcome of any decisions reached or suggestions made at these sessions. Executive sessions where non-employee directors meet on an informal basis may be scheduled either before or after each regularly scheduled Board of Directors meeting.


13



Communications with Directors

Interested parties may at any time direct communications to the Board of Directors as a whole, to the lead independent director, or to any individual member of the Board of Directors, through our Internet website or by contacting our Secretary. The “Corporate Governance - Contact the Board” section of our Internet website at http://investor.universalcorp.com/contactboard.cfm contains an e-mail submission form established for submitting communications to directors. Communications can also be delivered by mail by sending requests to our Corporate Secretary, whose address is on page 6 of this Proxy Statement.

Shareholders making such communications are encouraged to state that they are shareholders and provide the exact name in which their shares of Common Stock are held and the number of shares held. Each individual communicating with the Board of Directors will receive a written acknowledgment from or on behalf of our Secretary after receipt of the communication sent in the manner described above. After screening such communications for issues unrelated to shareholder interests, our Secretary will distribute communications to the intended recipient(s) as appropriate. The process for such screening has been approved by our independent directors.

Board and Committee Meeting Attendance

During fiscal year 2017, there were five meetings of the Board of Directors. Each director attended 75% or more of the total number of meetings of the Board of Directors and of the committees on which they served.

Board Leadership Structure and Role in Risk Oversight

Board Leadership Structure

The Board of Directors does not have a policy on whether or not the role of the Chief Executive Officer and Chairman should be separate or, if it is to be separate, whether the Chairman should be selected from the non-employee directors or be an employee. We operate with one individual, Mr. G. Freeman, serving as Chairman of the Board, President, and Chief Executive Officer. Mr. G. Freeman was elected by the Board of Directors as President on December 12, 2006, Chief Executive Officer on April 1, 2008 and Chairman of the Board on August 5, 2008. Prior to his election as our President and Chief Executive Officer, Mr. G. Freeman served as our General Counsel and Secretary from February 1, 2001 until November 2005, when he was elected Vice President. The Board of Directors believes that because Mr. G. Freeman has unique and extensive experience and understanding of our business, he is well situated to lead and execute strategy and business plans to maximize shareholder value by having a combined role of Chairman of the Board, President, and Chief Executive Officer.

The Company's Corporate Governance Guidelines permit the individual who serves as Chief Executive Officer to serve as Chairman of the Board of Directors. In order to ensure that independent directors continue to play a leading role in our governance, however, the Board of Directors established the position of a Lead Independent Director in our Corporate Governance Guidelines. Mr. E. Moore currently serves as our Lead Independent Director. The Lead Independent Director is elected by the independent directors and ensures that (i) the Board of Directors operates independently of management and (ii) directors and shareholders have an independent leadership contact. The Lead Independent Director, who must satisfy our independence standards, is responsible for presiding over the executive sessions of the independent directors and performing such other duties as may be delegated to the position by the Board of Directors. The Lead Independent Director also has the following additional roles and responsibilities:

Ÿ
chair Board of Directors meetings when the Chairman of the Board of Directors is not present or when there is a potential conflict of interest;
Ÿ
call meetings and set agendas for executive sessions of the independent directors;
Ÿ
preside over meetings of the independent Board members and, as appropriate, provide prompt feedback to the Chief Executive Officer and Chairman of the Board of Directors;
Ÿ
serve as a liaison between the independent directors and the Chief Executive Officer and Chairman of the Board of Directors and senior management to report or raise matters;
Ÿ
serve as a “sounding board” and mentor to the Chief Executive Officer and Chairman of the Board of Directors; and
Ÿ
perform such other duties and responsibilities as may be delegated to the Lead Independent Director by the Board of Directors from time to time.

14



The Board of Directors also has five standing committees: the Audit Committee, the Compensation and Governance Committee, the Finance Committee, the Pension Investment Committee and the Executive Committee. Each committee has a separate chairman and each of the Audit and Compensation and Governance Committees are composed solely of independent directors.

Given our current circumstances, relative size and operating strategies, we believe having a combined Chairman of the Board of Directors and Chief Executive Officer, as well as having a Lead Independent Director and independent standing Board committees, is the most appropriate structure for us and our shareholders. We believe this structure demonstrates clear leadership to our employees, shareholders, and other interested parties and eliminates potential for redundancies and confusion. The Lead Independent Director protects the role of the independent directors by providing leadership to the independent directors and working closely with the Chief Executive Officer and Chairman of the Board of Directors.

As part of the Board of Directors' annual assessment process, the Board of Directors evaluates our board leadership structure to ensure that it remains appropriate for us. The Board of Directors recognizes that there may be circumstances in the future that would lead it to separate the roles of Chief Executive Officer and Chairman of the Board of Directors, but believes that the absence of a policy requiring either the separation or combination of the roles of Chairman and Chief Executive Officer provides the Board of Directors with the flexibility to determine the best leadership structure for us.

Board of Directors' Role in Risk Oversight

The Board of Directors is responsible for our risk oversight. Management is responsible for our risk management, including providing oversight and monitoring to ensure our policies are carried out and processes are executed in accordance with our performance goals and risk tolerances. In carrying out its risk oversight function, each of the five standing committees of the Board of Directors is responsible for risk oversight within their area of responsibility and regularly reports to the Board of Directors. In addition, management holds regular meetings in which they identify, discuss and assess financial risk from current macro-economic, industry, and company-specific perspectives.

The Audit Committee is responsible for discussing with management, the independent registered public accounting firm and the internal auditors our policies and procedures with respect to risk assessment and risk management. As part of its regular reporting process, management reports and reviews with the Audit Committee our material risks, including (i) proposed Risk Factors and other public disclosures, and (ii) mitigation strategies and our internal controls over financial reporting. The Audit Committee also engages in regular periodic discussions with the Chief Financial Officer and other members of management regarding risks as appropriate.

The Finance Committee assists the Board of Directors in control of the Company's financial policies and resources and monitors our financial strategic direction. As part of its responsibilities, the Finance Committee oversees our financial policies, including financial risk management, and reviews and approves significant financial policies and transactions.

In addition to the Audit Committee and Finance Committee, each of the other committees of the Board of Directors considers risks within its area of responsibility. The Compensation and Governance Committee considers succession planning, human resources risks, corporate governance risks and risks that may be a result of our executive compensation programs. In addition, the Pension Investment Committee has oversight of the investments in the Company's ERISA - regulated pension and savings plans. Each of the committees regularly reports to the Board of Directors.

We believe the current leadership structure of the Board of Directors supports the risk oversight functions described above by providing independent leadership at the committee level, with ultimate oversight by the full Board of Directors as led by the Chairman of the Board of Directors and Chief Executive Officer and the Lead Independent Director. Our Board of Directors is committed to fostering a culture of high ethical standards.


15



Committees of the Board

The standing committees of the Board of Directors are the Audit Committee, the Executive Committee, the Compensation and Governance Committee, the Finance Committee, and the Pension Investment Committee.

Audit Committee

The responsibilities of the Audit Committee include the review of the scope and the results of the work of the independent registered public accounting firm and internal auditors, the review of the adequacy of internal accounting controls, and the selection, appointment, compensation, and oversight of our independent registered public accounting firm. The Audit Committee operates under a written charter last amended by the Board of Directors on April 20, 2009. The Audit Committee's charter is available under the “Governance” section of our Internet website at http://investor.universalcorp.com/corporate-governance.cfm.

The members of the Audit Committee are Messrs. E. Moore (Chairman), Adams, L. Freeman, Lawton, and Sledd. The Board of Directors has determined that each of the Audit Committee members is independent as defined under the applicable independence standards set forth in regulations of the Securities and Exchange Commission and the NYSE listing standards. The Board of Directors has also determined that all of the Audit Committee members are financially literate as defined by the NYSE listing standards. Finally, in accordance with the applicable regulations of the Securities and Exchange Commission, the Board of Directors has further determined that the Audit Committee contains at least one “audit committee financial expert” as defined by such regulations. That person is Mr. E. Moore, the Chairman of the Audit Committee. The fact that the Board of Directors did not identify additional Audit Committee members as “audit committee financial experts” does not in any way imply that other members do not meet that definition.

The Audit Committee met six times during fiscal year 2017. Additional information with respect to the Audit Committee is discussed below in the section entitled “Audit Information” on page 65 of this Proxy Statement.

Executive Committee

The Executive Committee has the authority to act for the Board of Directors on most matters during the intervals between Board of Directors meetings. The members of the Executive Committee are Messrs. G. Freeman (Chairman), Adams, L. Freeman and Johnson. The Executive Committee met two times during fiscal year 2017.

Compensation and Governance Committee

The members of the Compensation and Governance Committee are Messrs. Johnson (Chairman), L. Freeman and Mrs. Cantor. The Compensation and Governance Committee performs the responsibilities of the Board of Directors relating to compensation of our executives. The Compensation and Governance Committee's responsibilities include reviewing and setting or approving corporate goals and objectives relevant to compensation of the Chief Executive Officer and other executive officers, evaluating the performance of the Chief Executive Officer and our other executive officers in light of those goals and objectives, and determining and approving compensation levels for the Chief Executive Officer and our other executive officers based on this evaluation; making recommendations to the Board of Directors with respect to annual and long-term incentive compensation plans; evaluating the performance of, and determining the salaries, incentive compensation, and executive benefits for senior management; and administering our equity-based and other executive compensation plans.

The Chairman of the Compensation and Governance Committee works with our Chief Financial Officer to establish the agenda for Compensation and Governance Committee meetings. The Chief Financial Officer and management personnel reporting to him prepare data and materials for review by the Compensation and Governance Committee using market data from both broad-based and targeted national and regional compensation surveys. Competitive industry analysis is enhanced through review of peer company proxy data, professional research consortiums, and nationally recognized compensation databases provided by the Compensation and Governance Committee's external compensation consultant.


16



The Compensation and Governance Committee periodically meets with the Chief Financial Officer and other members of executive management in order to assess progress toward meeting long-term objectives approved by the Board of Directors. The Compensation and Governance Committee reviews the performance and compensation of the Chief Executive Officer with input from both the full Board of Directors and the Chief Executive Officer's self evaluation. The Compensation and Governance Committee approves the compensation of the other executive officers, based upon the evaluation and recommendation of the Chief Executive Officer. Where it deems appropriate, the Compensation and Governance Committee engages its independent compensation consultant or other appropriate advisors to analyze compensation trends and competitiveness of pay packages and to support the Compensation and Governance Committee's duty to establish each of the executive officers' targeted overall compensation levels.

The Compensation and Governance Committee reports regularly to the Board of Directors on matters relating to the Compensation and Governance Committee's responsibilities. In addition, the Compensation and Governance Committee follows regulatory and legislative developments and considers corporate governance best practices in performing its duties. For additional information regarding the compensation-related activities of the Compensation and Governance Committee, see the sections entitled “Compensation Discussion and Analysis” and “Report of the Executive Compensation, Nominating and Corporate Governance Committee” beginning on pages 19 and 38 of this Proxy Statement, respectively.

The Board of Directors has determined that the members of the Compensation and Governance Committee are “non-employee directors” (within the meaning of Rule 16b-3 of the Exchange Act), “outside directors” (within the meaning of Section 162(m) of the Internal Revenue Code) and “independent directors” (as defined under the applicable NYSE listing standards and our Corporate Governance Guidelines). In addition, no Compensation and Governance Committee member is a current or former employee of ours or any of our subsidiaries. While the Compensation and Governance Committee's charter does not specify qualifications required for members, Mr. Johnson has been a member of other public company boards of directors and is a former chief executive officer of public companies, while Mr. L. Freeman has extensive experience as a former senior executive officer of a large international tobacco products manufacturer, and Mrs. Cantor possesses extensive legal, investment and financial skills as well as significant public company directorship experience. The Compensation and Governance Committee met four times during fiscal year 2017.

In performing its responsibilities with respect to executive compensation decisions, the Compensation and Governance Committee receives information and support from the our Human Resources Department and a nationally-recognized executive compensation consultant. For fiscal year 2017, Willis Towers Watson Public Limited Company, whom we refer to as Willis Towers Watson, served as an independent, executive compensation consultant to the Compensation and Governance Committee and received aggregate fees for fiscal year 2017 of approximately $35,000 for these services. Management does not engage an outside compensation consultant and did not engage Willis Towers Watson to provide any other services of significance to the Company. Willis Towers Watson provides consultancy services to the Company regarding its health and welfare benefit plans. After completing a comprehensive competitive bid process and consulting with the Compensation and Governance Committee, the Company engaged Willis Towers Watson to provide investment consulting services for the Company's International Savings Plan effective January 1, 2017. For more information with respect to the Compensation and Governance Committee's compensation consultant, see “Compensation Discussion and Analysis” beginning on page 19 of this Proxy Statement.

The Compensation and Governance Committee also acts as our nominating committee. The Compensation and Governance Committee develops qualifications for director candidates, recommends to the Board of Directors persons to serve as directors, and monitors developments in, and makes recommendations to the Board of Directors concerning, corporate governance practices. The Compensation and Governance Committee operates under a written charter last amended by the Board of Directors on April 9, 2013. The Compensation and Governance Committee's charter is available under the “Governance” section of our Internet website at http://investor.universalcorp.com/corporate-governance.cfm.

The Compensation and Governance Committee employs several methods for identifying and evaluating director nominees. The Compensation and Governance Committee considers candidates for Board of Directors membership suggested by its members and by management, and the Compensation and Governance Committee will also consider candidates suggested informally by our shareholders. The Compensation and Governance Committee periodically assesses whether any vacancies on the Board of Directors are expected due to retirement or otherwise and in the event that vacancies are anticipated, the Compensation and Governance Committee considers possible director candidates. The Compensation and Governance Committee may also retain a third-party executive search firm to identify candidates upon request of the Compensation and Governance Committee from time to time based upon the director membership criteria described in the Corporate Governance Guidelines. Shareholders entitled to vote for the election of directors may submit candidates for formal consideration by the Compensation and Governance Committee in connection with an Annual Meeting if we receive timely written notice, in proper form, for each such recommended director nominee. If the notice is not timely and in proper form, the nominee will not be considered by the Compensation and Governance Committee. To be timely for the 2018 Annual Meeting, the notice must be received within the time frame set forth

17



in the section entitled “Proposals for 2018 Annual Meeting” on page 77 of this Proxy Statement. To be in proper form, the notice must include each nominee's written consent to be named as a nominee and to serve if elected, and information about the shareholder making the nomination and the person nominated for election. These requirements are more fully described in our Bylaws and Corporate Governance Guidelines.

The Compensation and Governance Committee evaluates all director candidates in accordance with the director membership criteria described in the Corporate Governance Guidelines. The Compensation and Governance Committee does not differentiate between Board of Directors candidates submitted by Board of Directors members or those submitted by shareholders with respect to evaluating candidates. All Board of Directors candidates are considered based upon various criteria, such as their broad-based business skills and experience, prominence and reputation in their profession, their global business and social perspective, concern for the long-term interests of the shareholders, knowledge of our industry or related industries, diversity, and personal and professional integrity, ethics, and judgment - all in the context of an assessment of the perceived needs of the Board of Directors at that point in time. Because the needs of the Board of Directors change from time to time, the Compensation and Governance Committee evaluates the totality of the merits of each prospective nominee that it considers and has not established specific minimum qualifications that must be met by potential new directors. The Board of Directors, however, believes that as a matter of policy there should be a substantial majority of independent directors on the Board of Directors.

It also is important to the Compensation and Governance Committee that the members of the Board of Directors work together in a cooperative fashion. When considering a director standing for re-election as a nominee, in addition to the attributes described above, the Compensation and Governance Committee also considers that individual's past contribution and future commitment to us. The Compensation and Governance Committee will also seek to ensure that the Board of Directors, and consequently the Audit Committee, have at least three independent members that satisfy the NYSE financial and accounting experience requirements and at least one member who qualifies as an audit committee financial expert.

After completing potential director nominees' evaluations, the Compensation and Governance Committee makes a recommendation to the full Board of Directors as to the persons who should be nominated by the Board of Directors, and the Board of Directors determines the nominees after considering the recommendation and report of the Compensation and Governance Committee. There is no difference in the manner by which the Compensation and Governance Committee evaluates prospective nominees for director based upon the source from which the individual was first identified.

Messrs. G. Freeman, L. Freeman and E. Moore were each recommended by the Compensation and Governance Committee for nomination for election at the Annual Meeting as directors to serve a three-year term until their respective successors are elected and qualified, or until their earlier resignation or removal. The Compensation and Governance Committee did not receive any Board of Director recommendations from any shareholder in connection with the Annual Meeting.

Finance Committee

The Finance Committee has the responsibility of establishing our financial policies and controlling our financial resources. The members of the Finance Committee are Mrs. Cantor (Chairman), and Messrs. Adams, G. Freeman, E. Moore and Sledd. The Finance Committee met three times during fiscal year 2017.

Pension Investment Committee

The Pension Investment Committee retains and monitors the performance of an investment manager and, with the assistance of the investment manager, establishes investment objectives and policies, and monitors the performance of investments of the retirement plans and other qualified employee benefit plans of Universal Leaf Tobacco Company, Incorporated, which we refer to as Universal Leaf. The members of the Pension Investment Committee are Messrs. Sledd (Chairman), Adams, Lawton, E. Moore and Mrs. Cantor. The Pension Investment Committee met four times during fiscal year 2017.

Annual Meeting Attendance

We expect and encourage each member of the Board of Directors to attend our Annual Meetings when it is reasonably practical for the director to do so. All of the directors attended the 2016 Annual Meeting.



18



COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Universal Corporation is the leading global leaf tobacco supplier. The largest portion of the Company's business involves procuring and processing leaf tobacco for manufacturers of consumer tobacco products throughout the world. As such, our business is subject to risks, including changes in general economic, political, market, and weather conditions, government regulation, and fluctuations in foreign exchange rates. Our executive compensation program, therefore, reflects a strong tie of pay to performance in order to link the interests of executive officers to the interests of shareholders and promote the creation of long-term shareholder value.
Company Performance

Despite supply headwinds, most notably from weather-reduced crop sizes in Brazil and ongoing challenging market conditions in Tanzania, we delivered solid results again this year. Net income for the fiscal year ended March 31, 2017, was $106.3 million, or $0.88 per diluted share, compared with fiscal year 2016's net income of $109.0 million, or $3.92 per diluted share. The fiscal year 2017 results included a one-time reduction of earnings available to common shareholders of $74.4 million, or $2.99 per diluted share, for purposes of determining the amounts reported for basic and diluted earnings per share, from the conversion for cash of the remaining outstanding shares of our Series B 6.75% Convertible Perpetual Preferred Stock under the mandatory conversion in January 2017. Excluding that one time reduction and certain other non-recurring items, diluted earnings per share for the fiscal year of $3.97 increased $0.07 compared to the same period last year. Operating income of $178.4 million for the fiscal year ended March 31, 2017, was down $3.3 million compared to the fiscal year ended March 31, 2016. Segment operating income, which excludes non-recurring items, was $188.5 million for fiscal year 2017, an increase of $2.4 million from the prior year.

The following charts show a five-year history of our diluted earnings per share and our operating income:

proxychartdilutedeps61317.jpg proxychartopinc61317.jpg

During fiscal year 2017, we generated $178.4 million in net cash flows from our operations, returned $239.3 million to shareholders through dividends and share repurchases and continued to strengthen our balance sheet.

Over the last three fiscal years, we have strengthened our balance sheet by generating over $660 million in net cash flow from operations, returning almost $400 million to shareholders through a combination of dividends and share repurchases while maintaining debt below $450 million.
Net debt as a percentage of total capitalization was approximately 11% at March 31, 2017, up from 9% at March 31, 2016. Over the last five fiscal years, we have reduced our net debt as a percentage of total capitalization from 19% to 11%, which remains at a low level for the Company.

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The following charts show a five-year history of our net cash flow from operations, our funds returned to shareholders, and our net debt as a percentage of total capitalization:

proxychartsnetcashflowop.jpg proxychartsfundsreturned.jpg    
    proxychartsnetdebt.jpg              

During fiscal year 2017, we approved our 46th consecutive annual dividend increase on the Common Stock of the Company. We have increased our common dividend every year since 1971.
Based on the closing price of $70.75 for our Common Stock, as quoted on the NYSE on March 31, 2017, the last trading day of fiscal year 2017, our Common Stock increased approximately 51.8% in value over the last five fiscal years compared to the market closing price of $46.60 at March 31, 2012.

The following charts show a five-year history of our dividends declared per share of Common Stock and the market price of our Common Stock:

dividendsdeclaredpershare.jpg pricecommonstockmarch.jpg

We continued to advance our goal of providing compliant leaf produced in a sustainable and competitive manner for our customers, and we maintained our position as the leading global leaf tobacco supplier.

    

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We believe our compensation philosophy is appropriate and aligned with the interests of our shareholders, as demonstrated by our Common Stock performance. The following performance graph compares the cumulative total shareholder return on our Common Stock for the last three fiscal years with the cumulative total return for the same period of the Standard & Poor's SmallCap 600 Index and the peer group index. The peer group represents Alliance One International, Inc. The graph assumes that $100 was invested in Universal Corporation Common Stock at the end of the Company's 2014 fiscal year, and in each of the comparative indices, in each case with dividends reinvested.

uvv3yr2017cropsavedasjpeg.jpg

Executive Compensation

The Compensation and Governance Committee, Board of Directors and management of Universal take pride in our performance-based compensation program and remain committed to maintaining the integrity of the program in good times and bad. We believe that the proportion of at-risk, performance-based compensation should increase as an employee's level of responsibility increases. To this end, our executive compensation program primarily consists of moderate base salary and variable at-risk annual cash and equity incentive awards that are benchmarked to the 50th percentile of the market. While the Compensation and Governance Committee utilizes market data and other statistical information on executive compensation, it is not over-reliant on such data. The Committee recognizes its responsibility to avoid the tendency to permit “benchmarking” to be a contributor to escalating executive compensation. Last year, we limited base salary increases and increases in total direct compensation to 1.00% for our named executive officers. Over the last six years, the base salary of our Chief Executive Officer has increased by an average of only 1.56% per year. For fiscal year 2018, increases in the total direct compensation of our named executive officers were limited to 1.5%, except for our Chief Executive Officer who received an increase of 5.87%. This initial increase was warranted as Mr. G. Freeman's compensation has fallen well below the 50th percentile of our peer group. The target percentages for the components of total direct compensation for two other executives were also changed, but these changes limited the increase in total direct compensation to 1.5%.


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The following charts show the relative components of total compensation for our Chief Executive Officer and our other named executive officers in terms of Base Salary, Short-Term Performance Pay, and Long-Term Performance Pay:

proxychartsceomarch.jpg proxychartsnamedofficersmarc.jpg

(1)
Base Salary is the actual amount paid in fiscal year 2017, Short-Term Performance Pay is the actual amount earned in fiscal year 2017 based on performance, and Long-Term Performance Pay is the value on the grant date of restricted stock units and Performance Shares awards granted in fiscal year 2017. See Summary Compensation Table for the amounts of all elements of reportable compensation described in this section.

Our annual cash incentive payments under the Annual Incentive Plan (i.e., our Short-Term Performance Pay) are based on the Company's achievement against pre-established performance goals for adjusted diluted earnings per share and economic profit. In fiscal year 2017, our reported performance was better than expected and exceeded our performance goals. That performance corresponded to a weighted payout of 131.05% of an executive's individual target cash bonus opportunity amount based on the pre-approved percent-of-target performance tables.

The Compensation and Governance Committee has the challenging task of designing a compensation program that balances the interests of senior management with those of the shareholders. No one form of compensation will perfectly align those interests, but we believe our equity award program plays a significant role in striving to achieve the appropriate balance. Stock ownership, supported by our equity award program (i.e., our Long-Term Performance Pay), is the most effective way to ensure that management is properly motivated to create long-term shareholder value. To that end, we maintain robust stock ownership guidelines applicable to all named executive officers and other equity award participants. As of June 9, 2017, all of our named executive officers, except Mr. Hentschke who became a named executive officer for the first time in fiscal year 2015, are well in excess of their ownership targets and collectively hold beneficial ownership of almost 1.7% of our Common Stock. Our named executive officers, in the aggregate, own approximately $28.2 million of Common Stock equating to approximately 10.5 times their combined base salaries.

We do not use, offer, or provide our executives with many of the types of perquisites that other companies offer their executives, such as:
ž personal use of corporate aircraft;
ž company cars or vehicle allowances;
ž membership dues in social organizations;
ž employment, severance or retention agreements;
ž excise tax gross-ups;
ž employment, severance or retention agreements;
ž other tax reimbursements; or
ž any other tax gross-ups.
 

We currently maintain only three Change of Control Agreements, each of which contains a “double trigger” as well as non-competition and non-solicitation clauses, but do not contain any obligations to gross-up severance payments. We have a recoupment or “clawback” provision applicable to all performance-based compensation, and we have adopted a policy prohibiting hedging and derivatives trading in our Common Stock.

At the 2016 Annual Meeting of Shareholders, 96% of the votes cast supported our executive compensation policies and procedures for our named executive officers. Given the high level of support from our shareholders, as demonstrated by the results of their vote, we did not make any significant changes in our policies or programs in response to their vote.


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Compensation and Governance Committee Activities in Fiscal Year 2017

In fiscal year 2017, the Compensation and Governance Committee reviewed the existing mix, form and calibration of the executive compensation programs and confirmed its commitment to the principles and structure it followed during fiscal year 2016. Some of the significant actions the Compensation and Governance Committee undertook in fiscal year 2017 included:
Ÿ
Reaffirmed the Compensation and Governance Committee's objective of setting total direct compensation (including base salary, annual cash incentive awards, and long-term equity awards) for our executives at levels competitive with the market median for executives in comparable positions at companies of comparable size, complexity, and operational characteristics;
Ÿ
Evaluated the mix of pay to ensure that the appropriate balance among base salary, annual cash incentives, and long-term performance-based award opportunities is maintained;
Ÿ
Adopted a new peer group list for use beginning with fiscal year 2018;
Ÿ
Adjusted executive compensation for fiscal year 2018 to better align the level and mix of compensation to the 50th percentile of our new peer group list;
Ÿ
Evaluated alternative performance metrics and reaffirmed the use of adjusted earnings per share as a performance goal in both the annual incentive and long-term performance award program because adjusted earnings per share is an important driver of our shareholder value;
Ÿ
Reviewed the performance targets and calibration ranges for economic profit and adjusted earnings per share to reflect current and anticipated business conditions and to ensure adequate performance stretch in the annual incentive plan goals;
Ÿ
Reaffirmed that 5-year restricted stock units and 3-year performance-based stock units, which we refer to as Performance Shares, are appropriate forms of long-term incentive awards. The Performance Shares, if earned over a three-year period, will be paid out in shares of Common Stock;
Ÿ
Reviewed the performance target and calibration range for adjusted earnings per share to reflect current and anticipated business conditions and to ensure adequate performance stretch in the goals of the performance based stock units;
Ÿ
Reaffirmed the stock ownership guidelines for all of our officers and the officers of our main operating subsidiary, Universal Leaf, with a title of Senior Vice President or above, and monitored our executive officers' compliance with the guidelines;
Ÿ
Adjusted director compensation to better align the level and mix of compensation to the 50th percentile of our new peer group list;
Ÿ
Increased stock ownership guidelines for the non-employee directors from three to five times their annual cash retainer;
Ÿ
Reviewed participation in the Directors' DIP and decided to freeze the plan with effect at the end of the current plan year;
Ÿ
Conducted a review and assessment of potential risks arising from our compensation policies and programs;
Ÿ
Reaffirmed the “clawback” provision in our performance-based awards with respect to ethical misconduct or material restatements of financial results, in part to address the potential recovery or adjustment of awards in instances where the performance measures on which they were based are restated in a manner that would have decreased the amount of the award;
Ÿ
Reaffirmed a policy prohibiting our executives and directors from hedging or engaging in any derivatives trading in respect to shares of our Common Stock and generally prohibiting pledging of securities. This policy serves to enhance our long-standing policy prohibiting insider trading by executives and directors while in the possession of material information that is not available to the public; and
Ÿ
Reaffirmed a commitment to provide very limited perquisites to executives.

The Compensation and Governance Committee reports regularly to the Board of Directors on matters relating to the Compensation and Governance Committee's responsibilities. In addition, the Compensation and Governance Committee follows regulatory and legislative developments and considers corporate governance best practices in performing its duties.

Guiding Philosophy

The goal of our executive compensation and benefits program is to attract, motivate, reward and retain the management talent required to achieve our business objectives, at compensation levels that are fair, equitable and competitive with those of comparable companies. This goal is furthered by the Compensation and Governance Committee's policy of linking compensation to individual and corporate performance and by encouraging significant stock ownership by senior management in order to support our business strategy and align the financial interests of management with those of the shareholders.


23



In addition to the stated goal of our executive compensation and benefits program, the following objectives serve as guiding principles for all compensation decisions:

Ÿ
Compensation should be set based on the responsibilities, skills, experience and achievements of each executive officer, taking into account competitive market rates;
Ÿ
Compensation should be linked to individual and corporate performance by aligning our executive compensation program to company-wide performance, which we define in terms of economic performance and increases in shareholder value;
Ÿ
There should be an appropriate mix and weighting among base salary, cash incentives and equity awards, such that an adequate amount of each executive officer's total compensation is performance-based or “at risk.” Further, as an executive's responsibilities increase, the portion of “at risk” compensation for the executive should increase as a percentage of total compensation;
Ÿ
Compensation should avoid any arrangements that pay for failure;
Ÿ
Compensation programs should be designed to provide appropriate performance incentives without encouraging executives to take excessive risks in managing the business and which emphasize our commitment to our core values;
Ÿ
Strong emphasis should be placed on equity-based compensation and equity ownership in order to align the financial interests of senior management with those of the shareholders and to ensure the proper focus on long-term business strategies; and
Ÿ
Compensation goals and objectives should be transparent and easy to communicate, both internally and externally. Shareholders should be supplied with clear, comprehensive compensation disclosure.

The Compensation and Governance Committee also believes that the various elements of our compensation program effectively achieve the objective of aligning compensation with performance measures that are directly related to our financial goals and creation of shareholder value, without encouraging executives to take unnecessary and excessive risks.

Retaining Experts to Aid in Discharge of Duties

The Compensation and Governance Committee has sole authority to retain experts, consultants and other advisors to aid in the discharge of its duties. The Compensation and Governance Committee meets privately with its independent outside advisor from time to time without management present to discuss developments and best practices in executive compensation matters. All work completed by the outside advisor, whether for the Compensation and Governance Committee or management, is subject to the approval of the Compensation and Governance Committee. The outside advisor's role with the Compensation and Governance Committee is to provide independent advice and counsel. The Compensation and Governance Committee has considered the six independence factors specified under The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and believes that Willis Towers Watson qualifies as being fully independent. The Compensation and Governance Committee does not delegate authority to its outside advisor or to other parties. Willis Towers Watson is engaged by the Company to provide consulting services for the Company's health and welfare benefit plans at an estimated annual cost of approximately $120,000. The Compensation and Governance Committee assessed the independence of Willis Towers Watson pursuant to Item 407(e)(3)(iv) of Regulation S-K and concluded that no conflict of interest exists that would prohibit Willis Towers Watson from independently representing the Compensation and Governance Committee. Effective January 1, 2017, Willis Towers Watson was also to provide investing consulting services for the Company's International Savings Plan at an estimated annual cost of approximately $23,000,

For fiscal year 2017, Willis Towers Watson continued to serve as the Compensation and Governance Committee's independent outside advisor. Willis Towers Watson's role as outside advisor is to review the analyses and recommendations prepared by the Compensation and Governance Committee and management, to provide alternative market data and guidance on policy development and administration, and to undertake special projects at the request of the Compensation and Governance Committee. To maintain the independence of the outside advisor, management is not permitted to use Willis Towers Watson without the prior approval of the Compensation and Governance Committee. Willis Towers Watson participated in Compensation and Governance Committee meetings during fiscal year 2017, reviewed materials in advance and provided to the Compensation and Governance Committee additional data on market trends and overall compensation design.

During fiscal year 2017, our independent registered public accounting firm, Ernst & Young LLP, reviewed management's calculation of performance measures and the amount of the annual incentive awards to be paid to our executive officers as part of their audit of our consolidated financial statements.


24



Peer Group Analysis

The Compensation and Governance Committee utilizes compensation reports prepared by its independent outside advisor to aid in the determination of competitive levels of compensation for each of our executive officers. On an annual basis, the Compensation and Governance Committee determines the total compensation target for each of our executive officers. The Compensation and Governance Committee then sets the mix of the different components of compensation desired to achieve the total compensation target. From time to time, the Compensation and Governance Committee requests that its outside advisor benchmark the component totals to confirm that such amounts are within reason of our peer group. The Compensation and Governance Committee targets the 50th percentile in measuring competitiveness.

During fiscal year 2017, the Compensation and Governance Committee requested that Willis Towers Watson review and, if necessary, update our then-current peer group list. Willis Towers Watson evaluated the peer group list to discover relevant comparator companies not currently within our peer group and potentially to identify companies currently included in our peer group that may no longer be considered comparable. Characteristics considered in this evaluation included industry relevance, similarity of business operations, markets, relevant size, and market capitalization, as well as business operations conducted in similar environments. Willis Towers Watson did identify changes to the peer group list that would better align that list with us in terms of the overall characteristics considered. Although the leaf tobacco industry is highly competitive, Universal and Alliance One International, Inc. are the only global, independent, publicly traded competitors. We, therefore, lack true “peers” within our own industry. The Compensation and Governance Committee reviewed the proposed list with Willis Towers Watson and reaffirmed the use of the new peer group list for use beginning with fiscal year 2018. The peer group list consists of the following companies:
Alliance One International, Inc.
Fresh Del Monte Produce Inc.
Seaboard Corporation
 
 
 
The Andersons, Inc.
Ingredion Incorporated
Seneca Foods Corporation
 
 
 
Cal-Maine Foods, Inc.
Lancaster Colony Corporation

SunOpta Inc.
 
 
 
Darling Ingredients, Inc.
McCormick & Company, Inc.

TreeHouse Foods, Inc.
 
 
 
Flowers Foods, Inc.
Sanderson Farms, Inc.
 

Stock Ownership Guidelines

The Compensation and Governance Committee believes it is important to align the interests of members of senior management with those of our shareholders. While the Compensation and Governance Committee considers this principle when determining the appropriate mix of base salary, annual cash incentive awards, and long-term equity awards, the Compensation and Governance Committee also established stock ownership guidelines that encourage the accumulation and retention of Common Stock.

Our current stock ownership guidelines are expressed as a multiple of base salary, ranging from 2.5 to 6.0 times base salary. The Compensation and Governance Committee believes this methodology provides for greater individualization of ownership guidelines. The guidelines work in concert with the long-term incentive plan and are intended to foster strong executive ownership of our Common Stock. The Compensation and Governance Committee believes that it is important to achieve and maintain these guideline amounts as minimum target levels of ownership. The Compensation and Governance Committee reviews compliance with our stock ownership guidelines on an annual basis.

Under our stock ownership guidelines, executives must comply within five years from the date of the executive's appointment to a qualifying position and certain executives are provided additional time when they receive promotions that result in higher ownership targets. The guidelines apply to our named executive officers in the following manner:
George C. Freeman, III
6.0 times base salary
Airton L. Hentschke
5.0 times base salary
David C. Moore
5.0 times base salary
Preston D. Wigner
4.0 times base salary
Theodore G. Broome
3.5 times base salary


25



Only shares beneficially owned (as defined by the Securities and Exchange Commission's rules and regulations) by our executive officers, excluding such executives' Performance Shares and Stock Appreciation Rights, or "SARs", but including the executive officers' restricted stock unit awards (and corresponding dividend equivalent rights) are counted in determining compliance with the guidelines. The table below sets forth each of our named executive officers' 2016 holdings and value as compared to 2017 holdings and value.
 
 
Shares held
as of June 10, 2016
 
Value of Shares held
as of June 10, 2016(1)
 
Shares held
as of June 9, 2017
 
Value of Shares held
as of June 9, 2017(2)
 
Actual Ownership as a Multiple of Base Salary
 
 
(#)
 
($)
 
(#)
 
($)
 
(#)
George C. Freeman, III
 
225,944

 
12,530,854

 
227,216

 
15,200,750

 
16.9

Airton L. Hentschke
 
33,347

 
1,849,425

 
41,955

 
2,806,790

 
4.9

David C. Moore
 
91,897

 
5,096,608

 
78,588

 
5,257,537

 
11.7

Preston D. Wigner
 
42,170

 
2,338,748

 
39,466

 
2,640,275

 
6.6

Theodore G. Broome
 
46,432

 
2,575,119

 
33,931

 
2,269,984

 
6.1

(1) 
Based on $55.46 per share, the closing price of a share of our Common Stock as quoted on the NYSE on June 10, 2016.
(2) 
Based on $66.90 per share, the closing price of a share of our Common Stock as quoted on the NYSE on June 9, 2017.

All of our named executive officers exceed their ownership targets or are in compliance with our stock ownership guidelines at the present time. As of June 9, 2017, our named executive officers own approximately 1.7% of the outstanding Common Stock.

In addition, the Compensation and Governance Committee adopted stock ownership guidelines applicable to the non-employee directors. Information with respect to the non-employee directors' stock ownership guidelines is set forth in “Non-Employee Director Stock Ownership Guidelines” on page 61 of this Proxy Statement.

Limitations on Deductibility of Compensation

Section 162(m) of the Internal Revenue Code (the “Code”) generally disallows a tax deduction to public companies for compensation of more than $1 million paid in any year (not including amounts deferred) to a company's chief executive officer and to our three other most highly compensated executive officers other than our chief financial officer. The statute, however, exempts qualifying performance-based compensation from the deduction limit if certain requirements are met. In this regard, we have attempted to take appropriate actions to maximize the deductibility under Section 162(m) of the Code of annual cash incentive awards, Performance Shares and restricted stock unit awards. The rules and regulations promulgated under Section 162(m) of the Code are complicated and subject to change from time to time, sometimes with retroactive effect. There can be no guarantee, therefore, that amounts potentially subject to the Section 162(m) limitations will be treated by the Internal Revenue Service as qualified performance-based compensation under Section 162(m) of the Code and/or deductible by us. A number of requirements must be met under Section 162(m) of the Code in order for particular compensation to so qualify for the exception such that there can be no assurance that “qualified performance-based” compensation will be fully deductible under all circumstances. While our policy is generally to preserve corporate tax deductions by qualifying compensation over $1 million paid to executive officers as performance-based, the Compensation and Governance Committee may, from time to time, conclude that compensation arrangements are in our best interests and the best interests of our shareholders despite the fact that such arrangements might not, in whole or part, qualify for tax deductibility.

Clawback in the Event of Restatements or Ethical Misconduct

The Compensation and Governance Committee adopted a recoupment, or “clawback,” provision during fiscal year 2008 that is applicable to cash incentive awards, as well as performance-based equity awards, beginning with all such awards for fiscal year 2008. The purpose of the clawback provision is to authorize the potential recovery or adjustment of awards when the performance measures on which such awards were based are restated in a manner that would have decreased the amount of the award had the restated performance measure been used to calculate the original award, or when the award is otherwise deemed inappropriate by the Compensation and Governance Committee due to the occurrence of certain stated events. In the event of a material restatement of our financial statements, we may seek recoupment of incentive compensation and equity awards paid under our incentive plans for all relevant performance periods. The clawback provision applied to all cash incentive and equity awards made during fiscal year 2017.


26



Management has also implemented additional effective controls to minimize potential unintended or willful reporting errors. In addition, the Compensation and Governance Committee also has the discretion to reduce or eliminate an executive's incentive compensation and equity awards or seek a recoupment of the same, in the event of ethical misconduct. The Compensation and Governance Committee will review all cash incentive payments, performance-based equity awards, and other performance-based awards that are made to all current and former officers on the basis of having met or exceeded performance goals. Appropriate action will be taken after considering all factors and circumstances.

In addition to the clawback provision, our Benefit Restoration Plan includes a forfeiture provision whereby a participant will forfeit all rights in and to any benefits payable under the Benefit Restoration Plan if we terminate the participant's employment as a result of a participant's fraud, dishonesty or embezzlement where the participant has been materially, unjustly enriched by such conduct.

2007 Stock Incentive Plan

The Compensation and Governance Committee, and subsequently our shareholders at our 2007 Annual Meeting, approved and adopted the Universal Corporation 2007 Stock Incentive Plan, which we call the 2007 Stock Incentive Plan. This plan replaced our 2002 Executive Stock Plan. The 2007 Stock Incentive Plan as amended and restated in fiscal year 2011 and reapproved in fiscal year 2012, serves as the core program for the performance-based compensation components of our named executive officers' total compensation. The 2007 Stock Incentive Plan defines the incentive arrangements for eligible participants and:

Ÿ
authorizes the granting of annual cash incentive awards, stock options, SARs, Performance Shares, restricted stock, restricted stock units and other incentive awards, all of which may be made subject to the attainment of performance goals approved by the Compensation and Governance Committee;
Ÿ
provides for the enumeration of the business criteria on which an individual's performance goals are to be based;
Ÿ
establishes the maximum share grants or awards (or, in the case of incentive awards, the maximum compensation) that can be paid to a participant in the 2007 Stock Incentive Plan; and
Ÿ
prohibits repricing or the exchange of options or stock appreciation rights without the approval of shareholders.

The Company has submitted the 2017 Universal Corporation Stock Incentive Plan for shareholder approval at the Annual Meeting. If approved, the 2017 Universal Corporation Stock Incentive Plan will replace our 2007 Stock Incentive Plan.

Components of Executive Compensation

The Compensation and Governance Committee targets a specific mix of compensation components, with the intent to make each component of total direct compensation competitive with other companies of similar size and operational characteristics while also linking compensation to individual and corporate performance and encouraging stock ownership by senior management. The major components of our executive compensation program are the following:

Total Direct Opportunity Compensation

Ÿ
Base salary. Base salary is intended to reflect the market value of an executive officer's role and responsibility, with differentiation for individual capabilities and experience in their positions.
Ÿ
Annual cash incentive awards. Annual cash incentive awards in the form of market competitive, performance-based, cash bonuses are designed to focus our executives on pre-set goals each year and to drive profitability, growth, and shareholder value.
Ÿ
Long-term equity participation. Long-term equity participation is designed to recognize executives for their contributions to the Company, to highlight the strategic importance of each executive's role, to promote retention, and to align the interests of management and shareholders in long-term growth and stock performance by rewarding executives for the creation of shareholder value.

Total Indirect Compensation

Ÿ
Other benefits.
Ÿ
Retirement and other post-retirement compensation.


27



The tables contained in this Proxy Statement set forth amounts for these components applicable to the following executives, who served in the noted capacities at the end of fiscal year 2017: George C. Freeman, III, our Chairman, President, and Chief Executive Officer; Airton L. Hentschke, our Senior Vice President and Chief Operating Officer; David C. Moore, our Senior Vice President and Chief Financial Officer; Preston D. Wigner, our Vice President, General Counsel, and Secretary; and Theodore G. Broome, Executive Vice President and Sales Director of Universal Leaf Tobacco Company, Inc., our main operating subsidiary. We refer to these five executives as our named executive officers.

In determining executive compensation, the Compensation and Governance Committee reviews all components of the Chief Executive Officer's and each other named executive officer's total compensation, including retirement benefits and the costs of all perquisites received to ensure such compensation meets the goals of the program. As a part of this review, the Compensation and Governance Committee considers corporate performance information, compensation survey data, the advice of its independent advisor, and the recommendations of management. The Compensation and Governance Committee also takes into consideration individual and overall company operating performance to ensure executive compensation reflects past performance as well as future potential and adequately differentiates between employees, based on the scope and complexity of the employee's job position, market comparisons, individual performance and experience, and our ability to pay. The Chief Executive Officer's performance is reviewed annually by the Compensation and Governance Committee prior to considering changes in base salary, annual cash incentive awards, long-term equity awards, and total direct compensation. The Chief Executive Officer's performance is evaluated in light of company performance (as described in greater detail below) and non-financial goals and strategic objectives selected by the Compensation and Governance Committee. Based on its review, the Compensation and Governance Committee believes total compensation for each of the named executive officers is reasonable and not excessive.

In addition, the Compensation and Governance Committee evaluates the amount of compensation apportioned to base salary, annual cash incentive awards, and long-term equity participation, which we refer to as total direct opportunity compensation. The Compensation and Governance Committee sets target levels for each component of total direct opportunity compensation based on its desire to link compensation to individual and corporate performance and to ensure that a sufficient amount of compensation is performance-based or “at risk.” As an executive's responsibilities increase, the portion of “at risk” total direct opportunity compensation for the executive increases as a percentage of total direct opportunity compensation. The Compensation and Governance Committee set the following target percentages for the components of our named executive officers' total direct opportunity compensation for fiscal year 2018:
 
 
Base
Salary
 
Target Cash Incentive
Award
 
Target Long-Term
Equity Award
 
Target Total
George C. Freeman, III
 
25.0
%
 
25.0
%
 
50.0
%
 
100
%
Airton L. Hentschke
 
30.0
%
 
25.0
%
 
45.0
%
 
100
%
David C. Moore
 
30.0
%
 
25.0
%
 
45.0
%
 
100
%
Preston D. Wigner
 
37.5
%
 
25.0
%
 
37.5
%
 
100
%
Theodore G. Broome
 
37.5
%
 
27.5
%
 
35.0
%
 
100
%

Based upon the competitive assessment of executive compensation prepared by Willis Towers Watson in fiscal year 2017, the Compensation and Governance Committee made certain adjustments in the target percentages of the total direct compensation of Messrs. Wigner and Broome for fiscal year 2018. These adjustments were made to better align their mix of pay with the 50th percentile of our new peer group. Each of the two executives only received a 1.5% increase in total direct compensation, although the amount of total direct compensation apportioned to base salaries increased by a higher percentage.



28



1.
Base Salaries

The Compensation and Governance Committee approved the following base salaries for fiscal years 2016, 2017 and 2018 for our named executive officers, which became effective April 1, 2015, April 1, 2016, and April 1, 2017, respectively:
 
 
Fiscal Year
2016
 
Fiscal Year
2017
 
Percentage
Increase
 
Fiscal Year
2018
 
Percentage
Increase
 
 
($)
 
($)
 
(%)
 
($)
 
(%)
George C. Freeman, III
 
841,700

 
850,100

 
1.00
 
900,000

 
5.87
Airton L. Hentschke
 
555,000

 
560,500

 
1.00
 
568,900

 
1.50
David C. Moore
 
439,800

 
444,200

 
1.00
 
450,900

 
1.50
Preston D. Wigner
 
336,700

 
340,100

 
1.00
 
398,300

 
17.11
Theodore G. Broome
 
340,400

 
343,800

 
1.00
 
373,900

 
8.75

For fiscal years 2016 and 2017, the Compensation and Governance Committee evaluated executive compensation based on a periodic assessment conducted by Willis Towers Watson in fiscal year 2013 of the competitiveness of the executive's salary with salaries of executives in our peer group. We do not benchmark every year. Fiscal years 2016 and 2017 base salaries were determined in accordance with the responsibilities, skills and experience of each executive, personal performance of the executive in light of individual levels of responsibility and the competitiveness of the executive's salary with the salaries of executives in our peer group. While the Compensation and Governance Committee considered each of these factors in their totality, the Compensation and Governance Committee did not assign a specific value to each factor. For purposes of assessing the competitiveness of salaries, the Compensation and Governance Committee reviewed compensation data for our peer group described above from its independent outside consultant to determine ranges of total compensation and the individual components of such compensation. While the Compensation and Governance Committee considered many factors including the advice of senior management, the Committee felt it was prudent to increase base salaries of named executive officers for fiscal year 2017 by 1.00%. Over the last six years, the total direct compensation targets of our Chief Executive Officer have only increased by an average of 1.56% per annum.

As part of the compensation setting process for fiscal year 2018 the Compensation and Governance Committee met periodically with Mr. G. Freeman, our Chairman, President, and Chief Executive Officer, during fiscal year 2017, and reviewed his performance and the Company's performance for fiscal year 2017. The Compensation and Governance Committee also evaluated Mr. G. Freeman's compensation level, considering the average base salaries of the chief executive officers at the companies included in the peer group approved for use beginning with fiscal year 2018. The Compensation and Governance Committee believed this new base amount was appropriate and not excessive when viewed in context with chief executive officer compensation for the peer group. The Compensation and Governance Committee also reviewed a variety of compensation surveys and published statistical reports. The Committee also considered affordability within the Company's business plans. After consultation with Willis Towers Watson, as well as management, Mr. G. Freeman's total direct compensation was increased by 5.87% or $199,600. This total increase was apportioned $49,900 to base salary, $49,900 to the target annual cash incentive award and $99,800 to the target annual long-term incentive award. The Compensation and Governance Committee approved this initial step as Mr. G. Freeman's total direct compensation had fallen well below the 50th percentile of our peer group based on the recently completed competitive market assessment.



29



2.
Annual Cash Incentives Awards

The Annual Incentive Plan provides that key managerial employees, including our named executive officers, may receive annual cash incentive awards that vary from year to year based upon corporate and individual performance. The purpose of annual cash incentive awards is to drive our key employees to maximize shareholder value and to provide a means for recognizing individual contribution to our overall results. The cash incentive awards earned for fiscal year 2017 by our named executive officers were approved by the Compensation and Governance Committee on May 26, 2017, and are set forth in Column (g), “Non-Equity Incentive Plan Compensation”, in the “Summary Compensation Table” on page 39 of this Proxy Statement.

Annual cash incentive payments under the Annual Incentive Plan are paid based on the Company's achievements against pre-established performance metrics as set by the Compensation and Governance Committee. The annual cash incentive awards to our named executive officers in fiscal year 2017 were based 50% on the generation of economic profit and 50% on the generation of adjusted earnings per share. We use economic profit and adjusted earnings per share, as these performance measures strongly encourage capital discipline and better investment decisions and lead to enhanced cash flow. The Compensation and Governance Committee also believes that these measures are representative of our overall performance, and they provide transparency to investors and enable period-to-period comparability of financial performance. For purposes of the Annual Incentive Plan, we define "economic profit" as consolidated earnings before interest and taxes after certain adjustments, minus a capital charge equal to our weighted average cost of capital times average funds employed, and we define “adjusted earnings per share” as the fully-diluted earnings per share of Common Stock, adjusted to exclude extraordinary gains and losses, restructuring and impairment, and annual cash incentive award accruals under the Annual Incentive Plan. Economic profit and adjusted earnings per share should not be considered as alternatives to net income or earnings per share determined in accordance with accounting principles generally accepted in the United States.

During fiscal year 2017, the Compensation and Governance Committee considered alternative performance metrics and reaffirmed the use of adjusted earnings per share as a performance goal in both the annual incentive and long-term performance award program because adjusted earnings per share is an important driver of shareholder value. Our business is not capital intensive and we believe that adequate free cash flow is generated at acceptable levels of profitability.

The executive officers who participate in the Annual Incentive Plan are eligible to receive an annual cash incentive award equal to a percentage of their base salary in the event certain threshold levels are met for economic profit and adjusted earnings per share. The following table sets forth the threshold and target levels for the economic profit and adjusted earnings per share metrics that were applicable for fiscal year 2017 awards:
 
 
Threshold Level
 
Target Level
 
Maximum Level
 
2017
Results
Economic Profit
 
$(61.00) million
 
$1.50 million
 
$64.00 million
 
$30.8 million
 
 
 
 
 
 
 
 
 
Adjusted Earnings Per Share
 
$1.93 per share
 
$3.50 per share
 
$5.07 per share
 
$4.05 per share
Based on the definition of adjusted earnings per share provided above, a reconciliation of the adjusted earnings per share of $4.05 achieved for fiscal year 2017 to our reported diluted earnings per share of $0.88 is as follows:
Adjusted Earnings Per Share
 
$
4.05

 
 
 
Per share effect of annual cash incentive award accrual excluded from adjusted earnings per share
 
(0.08
)
 
 
 
Per share effect of restructuring and impairment
 
(0.10
)
 
 
 
Per share effect of cost in excess of carrying value on conversion of preferred stock
 
(2.99
)
 
 
 
Reported Diluted Earnings Per Share
 
$
0.88

Although oversupplied markets during the past three fiscal years have been less than optimal, we performed well over the time frame and our results have been better than anticipated. Our underlying business and customer relationships remain strong. As we entered this period of oversupply, the Compensation and Governance Committee recognized that our performance would be lower following several years of above average operating profitability. The Compensation and Governance Committee, therefore, adjusted the performance targets to better reflect current and anticipated business conditions and to ensure adequate, yet reasonable, performance stretch in the fiscal year Annual Incentive Plan goals. The performance targets for adjusted earnings per share were adjusted to $3.50, $3.95 and $3.90 in fiscal years 2017, 2016 and 2015, respectively. The performance target for economic profit remained unchanged at $1.5 million throughout the period. The Compensation and Governance Committee

30



believed that these goals better reflected for fiscal years 2015-17 the cyclical market supply imbalance and reinforced management's commitment to taking the appropriate long-term approach to our business.

Each executive officer participating in the Annual Incentive Plan is eligible to receive an annual cash incentive award based on a percentage of his or her base salary, which we call the target bonus opportunity percentage. The target bonus opportunity percentage for each executive officer, except the Chief Executive Officer, is initially set by our Chief Executive Officer and is based on the executive officer's experience in his or her present position and job responsibilities. Our Chief Executive Officer submits the recommended target bonus opportunity percentages to the Compensation and Governance Committee for its review and approval each year. For our Chief Executive Officer, the Compensation and Governance Committee determines the target bonus opportunity percentage. The Compensation and Governance Committee also reviews its outside advisor's compensation data for our peer group when evaluating the recommended target bonus opportunity percentages.

Each year, the Compensation and Governance Committee approves percent-of-target performance tables for each performance measure. As Company performance deviates from targeted performance, the percentages in the tables increase or decrease at an accelerated rate. Once the economic profit and adjusted earnings per share performance measures have been calculated for the applicable fiscal year, the Compensation and Governance Committee compares the calculated performance to the preapproved tables to determine the percentage to apply to the executives' target bonus opportunity amounts. The Compensation and Governance Committee applies the resulting percentage to the target bonus opportunity amount to determine the annual cash incentive award each executive is eligible to receive. Annual cash incentive awards are capped at two times the target bonus opportunity percentage for each criterion, regardless of how much the Company's performance exceeded the target level for either criteria. In addition, the Compensation and Governance Committee reserves the right to exercise negative discretion in adjusting any incentive awards, but the Compensation and Governance Committee has no discretion to increase the awards. The Compensation and Governance Committee does not award any discretionary, non-performance based annual cash incentive awards if the performance goals are not achieved.

Using Mr. G. Freeman as an example, we generated positive economic profit and positive adjusted earnings per share during fiscal year 2017, with adjusted earnings per share and economic profit exceeding the threshold and target levels. The economic profit and adjusted earnings per share performance measures for the year corresponded to 131.05% achievement of the target levels on the Compensation and Governance Committee's preapproved tables. Mr. G. Freeman's cash incentive award for fiscal year 2017 was, therefore, 131.05% of his target bonus opportunity amount or $1,114,100.

The following table lists the target bonus opportunity percentages, the target bonus opportunity amounts, the maximum bonus opportunity amounts, and the actual cash incentive awards for fiscal year 2017 for our named executive officers:
 
 
Target Bonus
Opportunity
Percentage
 
Target Bonus
Opportunity
Amount
 
Maximum
Bonus
Opportunity Amount
 
Actual 2017 Bonus
Paid
 
 
(%)
 
($)
 
($)
 
($)
George C. Freeman, III
 
100
%
 
850,100

 
1,700,200

 
1,114,100

Airton L. Hentschke
 
83
%
 
467,100

 
934,200

 
612,100

David C. Moore
 
83
%
 
370,200

 
740,400

 
485,100

Preston D. Wigner
 
77
%
 
261,600

 
523,200

 
342,800

Theodore G. Broome
 
86
%
 
294,700

 
589,400

 
386,200

On June 1, 2017, the Compensation and Governance Committee established the performance measures applicable for the annual cash incentive awards to be awarded for fiscal year 2018. The Compensation and Governance Committee reconfirmed its use of adjusted earnings per share and economic profit as the appropriate performance measures for the fiscal year 2018 cash incentive awards.
3.
Long-Term Equity Participation

The Compensation and Governance Committee administers Universal Corporation's 1997 and 2002 Executive Stock Plans, and the 2007 Stock Incentive Plan, as amended and restated, pursuant to which the Compensation and Governance Committee grants to key executive officers restricted stock units and Performance Shares based upon a determination of competitive aggregate compensation levels. The primary objectives of issuing such equity awards are to encourage significant ownership of Common Stock by management and to provide long-term financial incentives linked directly to market performance of our Common Stock. Long-term equity awards are aligned with the interests of our shareholders as the awards deliver value based on shareholder return

31



and promote retention of management. The Compensation and Governance Committee believes that significant ownership of Common Stock by senior management is the optimal method to align the interests of management and the shareholders, and our stock incentive program is effectively designed to further this objective. Our compensation structure is designed to deliver a significant portion of total direct compensation in the form of long-term equity awards with 35% to 50% for named executive officers.

With the exception of new hires, long-term incentives are awarded annually on a day between two and twelve business days following the public release of our annual earnings. The Compensation and Governance Committee selected this timing, because it enables us to consider the prior year performance of the Company and the participants and our expectations for the next performance period, while also guaranteeing that normal awards will be made after we publicly disclose our performance for the year. The awards also are made as early as practicable in our fiscal year in order to maximize the time period for the incentives associated with the awards. The Compensation and Governance Committee's schedule is determined between six and twelve months in advance, and the proximity of any awards to market events other than earnings announcements is coincidental.

We currently use restricted stock units and Performance Shares as the preferred forms of long-term equity participation. Restricted stock units are used as a cost-effective addition to the compensation mix because such awards do not require the issuance of Common Stock until vesting. Our use of Performance Shares as a long-term equity award places greater emphasis on our long-term financial performance and subjects a higher percentage of the long-term incentive awards to risk based on such performance. The addition of Performance Shares is intended to focus greater attention and rewards on the key underlying drivers of shareholder value. Performance Shares are granted annually, with overlapping multi-year performance cycles. Performance Shares vest on the last day of the performance period selected by the Compensation and Governance Committee and are earned and paid out based on the Company's achievement of certain performance measures selected by the Compensation and Governance Committee. Performance Shares do not carry any dividend rights. Similar to annual cash incentive awards under the Annual Incentive Plan, as the actual performance exceeds the performance measure threshold selected by the Compensation and Governance Committee, the amount of Performance Share payout increases, with 100% payout occurring if performance reaches a target level set by the Compensation and Governance Committee. Payout can exceed 100% if the performance exceeds the target level, but it is capped at a maximum of 150%. Conversely, the payout is reduced if actual performance falls short of the selected performance measure threshold. At the time of vesting, the vested Performance Shares are payable in shares of Common Stock.

For awards granted in fiscal years 2016-2018, the Compensation and Governance Committee selected average adjusted earnings per share as the appropriate criterion for use with Performance Shares and set the performance period at three fiscal years, which began April 1 of each fiscal year. Adjusted earnings per share is calculated in the same manner as it is with Annual Incentive Plan awards. The threshold levels for adjusted earnings per share performance were set based on levels of performance that were believed to be achievable. The target levels for adjusted earnings per share performance were set based on levels of performance that were believed to be aggressive, but obtainable. The maximum levels for adjusted earnings per share performance were set based on levels of performance that were believed to be realizable with exceptional performance.

The Compensation and Governance Committee, after consulting with its outside advisor, reaffirmed that a portion of our executive officers' total compensation should be paid in equity awards through our long-term incentive plans. For fiscal year 2017 long-term equity awards, the Compensation and Governance Committee determined that one-half should consist of Performance Shares and the remaining one-half should consist of five-year restricted stock units. The Compensation and Governance Committee used an equal mix of Performance Shares and restricted stock units because it believes that such mix represents the appropriate balance for our Company in rewarding stock appreciation and relative shareholder return, while also placing sufficient emphasis on our overall financial performance. In order to allocate compensation among the two forms of equity participation, the Compensation and Governance Committee values restricted stock unit awards at the fair market value on the date of grant of the equivalent number of shares of Common Stock. All restricted stock units are awarded with five-year cliff vesting and earn dividend equivalent units during such period. These dividend equivalent units only vest when the underlying award of restricted stock units vest. In addition, our named executive officers have additional vesting restrictions or holding period requirements on their restricted stock unit awards in order to preserve deductibility under Section 162(m) of the Internal Revenue Code. The Compensation and Governance Committee values Performance Shares at the fair market value on the date of grant of the equivalent number of shares of Common Stock. As described above, Performance Shares vest on the last day of the selected performance period and are earned and paid out based on the degree to which our financial performance exceeds a threshold level set by the Compensation and Governance Committee.

    

32



On May 24, 2013, we awarded Performance Shares for the three-year performance period from April 1, 2013 through March 31, 2016. Those awards vested on March 31, 2016 and the payout was approved by the Compensation Committee on May 27, 2016. The performance measure was the three-year average adjusted earnings per share with earnings per share calculated in the same manner as it is with the Annual Incentive Plan awards. We generated average adjusted earnings per share for the performance period covering fiscal years 2014 through 2016 that exceeded the threshold, target levels and maximum levels. The following table sets forth the threshold, target and maximum levels for the adjusted earnings per share metrics applicable for the fiscal year 2014 award:
 
 
Threshold
Level
 
Target
Level
 
Maximum
Level
 
Average
2014-2016
Result
Average Adjusted Earnings per Share
 
$
2.83

 
$
4.40

 
$
5.26

 
$
4.60

A reconciliation of average adjusted earnings per share of $4.60 for the performance period covering fiscal years 2014 through 2016 is as follows:
Fiscal Year 2014
 
$
5.51

Fiscal Year 2015
 
4.25

Fiscal Year 2016
 
4.05

3-year Average Adjusted Earnings Per Share
 
$
4.60

The average adjusted earnings per share performance measure for the performance period exceeded the threshold level and target levels on the Compensation and Governance Committee's pre-approved percent-of-target performance tables. The payouts of the fiscal year 2014 Performance Share awards were, therefore, made at 110.00% of the target award levels.

The following table lists the target Performance Share opportunities, the maximum Performance Share opportunities and the actual number of shares of Common Stock paid out:
 
 
Actual
Payout
as a %
of Target
 
Target
Award
at Grant
(Shares)
 
Maximum
Award
at Grant
(Shares)
 
Actual
Award
(Shares)
 
Target
Award
Value
at Grant(1)
 
Actual
Award
Value(2)
George C. Freeman, III
 
110.0%
 
14,550

 
21,825

 
16,005

 
$
779,298

 
$
889,078

Airton L. Hentschke
 
110.0%
 
2,900

 
4,350

 
3,190

 
$
155,324

 
$
177,205

David C. Moore
 
110.0%
 
5,700

 
8,550

 
6,270

 
$
305,292

 
$
348,299

Preston D. Wigner
 
110.0%
 
3,800

 
5,700

 
4,180

 
$
203,528

 
$
232,199

Theodore G. Broome
 
110.0%
 
2,950

 
4,425

 
3,245

 
$
158,002

 
$
180,260

(1) 
This column represents grant date fair value determined in accordance with FASB ASC Topic 718. Amounts for Performance Shares are determined assuming a price per share of $53.56 which represents a discount to the closing price of $59.72 as of the date of grant due to the lack of dividend rights.
(2) 
This column represents market value based on the May 27, 2016 stock price of $55.55.

On June 2, 2016, the Compensation and Governance Committee granted Performance Shares and restricted stock units to key executives pursuant to the 2007 Stock Incentive Plan. The Compensation and Governance Committee granted 54,675 Performance Shares and 54,675 restricted stock units to 24 executives. The number of Performance Shares and restricted stock units granted to our named executive officers on June 2, 2016, were as follows:
 
 
Performance
Shares
 
Restricted
Stock Units
George C. Freeman, III
 
15,450

 
15,450

Airton L. Hentschke
 
7,650

 
7,650

David C. Moore
 
6,050

 
6,050

Preston D. Wigner
 
4,050

 
4,050

Theodore G. Broome
 
3,100

 
3,100

Additional details regarding the fiscal year 2017 equity participation awards for each of our named executive officers is set forth in the “Grants of Plan-Based Awards” table on page 42 of this Proxy Statement.



33



4.
Other Benefits

The Compensation and Governance Committee believes employee benefits are an essential component of our competitive total compensation package. These benefits are designed to attract and retain our employees. The named executive officers may participate in the same benefit plans as our salaried employees, which include health, dental and life insurance, disability benefits, and our 401(k) savings plan. Our 401(k) savings plan includes a defined company match component, and we have disclosed all company matches for our named executive officers in Column (i), “All Other Compensation”, in the “Summary Compensation Table”, and separately disclosed each amount in Footnote 5 to that table on page 39 of this Proxy Statement.

In addition, we provide certain other benefits to our executives, including our named executive officers. The Compensation and Governance Committee believes these other benefits provide security for current and future needs of the executives and their families and therefore assist in attracting and retaining them. These other benefits are structured to be within the competitive range relative to our peer group. In general, we do not provide our executives with many of the types of perquisites that other companies offer their executives, such as the personal use of a corporate aircraft, car allowances, social memberships or club dues, or preventative health evaluations. We also do not utilize tax gross-ups. The Compensation and Governance Committee re-evaluates and has approved the very limited types of perquisites that we offer on a regular basis. The additional benefits we provide or have provided to some of our executives during fiscal year 2017 consist of the following and are included in the amounts set forth in Column (i), “All Other Compensation”, in the “Summary Compensation Table”, and separately disclosed in Footnote 5 to that table on page 39 of this Proxy Statement: financial planning and tax preparation services and matching gifts from the Company's charitable foundation.


34



5.
Retirement and Post-Termination Compensation

Our named executive officers are covered by a defined benefit retirement plan, a supplemental retirement plan, deferred income plans, and a 401(k) savings plan. Certain of our named executive officers also have Change of Control Agreements addressing a change of control in our company. These items are defined and summarized below. Additional details and all amounts earned by our named executive officers or contributed by us to our named executive officers through those benefits are disclosed in this Proxy Statement where noted below.

A. Defined Benefit Retirement Plan

Our salaried employees, including our named executive officers, participate in a defined benefit retirement plan, the Employees' Retirement Plan of Universal Leaf Tobacco Company, Incorporated and Designated Affiliated Companies, which we refer to as the Pension Plan. The Pension Plan is a company-funded, qualified plan under the Internal Revenue Code, with the purpose of providing a fixed benefit for the life of the participant (and/or the spouse if the joint and survivor option is elected) beginning at the time of the participant's retirement or termination. The Pension Plan also has survivor benefits for participants' spouses.

Effective January 1, 2014, the Pension Plan was changed to implement a new benefit formula for credited service accrued beginning January 1, 2014. The revised benefit formula is based on a compensation average for all compensation earned (often referred to as a Career Average) on or after January 1, 2014 multiplied by a designated percentage. The Excess Benefit portion of the formula was eliminated. The normal retirement benefit under the Pension Plan for service accrued beginning January 1, 2014 is calculated as follows:
Benefit:
Designated Percentage of Average Compensation for All Years
Multiplied by
Years of service beginning January 1, 2014

The Pension Plan benefit for credited service accrued through December 31, 2013 is a percentage of the participant's average compensation, multiplied by the participant's credited years of service under the Pension Plan prior to the change described above. Average compensation is calculated by taking the highest average of annual salary and annual cash incentive awards for any three consecutive calendar-year periods during the participant's participation in the Pension Plan. The normal retirement benefit under the Pension Plan for service accrued through December 31, 2013 is calculated as follows:
Base Benefit:
Designated Percentage of Average Compensation
Multiplied by
All years of service through December 31, 2013
PLUS
Excess Benefit:
Designated Percentage of Average Compensation less Covered Compensation
Multiplied by
Participant's first 35 years of service through
December 31, 2013

Covered compensation, for purposes of the excess benefit, is defined as the average of the Social Security Taxable Wage Base for the 35 calendar-year period ending December 31, 2013.

Benefits are paid as a straight life annuity for the participant's lifetime for a single participant, or a 50% joint and survivor annuity, if elected, for married participants for their joint lifetime. Benefits are normally payable when the participant reaches age 65; however, participants may begin receiving early retirement benefits when they reach age 55 and elect to retire with at least five years of service. If benefits are paid prior to age 65, the benefit is reduced based on the participant's age. Prior to 2014, the benefit reduction for early retirement was based on the participant's age and years of service. This was changed as of January 1, 2014 to a more standard reduction schedule that is based only on age.

Further detail regarding the Pension Plan and disclosure of the estimated value of pension benefits for our named executive officers is set forth in the “Pension Benefits” table and related footnotes beginning on page 46 of this Proxy Statement.

35



B. Benefit Restoration Plan

To the extent benefits payable to our employees at retirement pursuant to the Pension Plan exceed amounts that may be payable under applicable provisions of the Internal Revenue Code, such benefits will be paid under our supplemental retirement plan called the Universal Leaf Tobacco Company, Incorporated 1996 Benefit Restoration Plan, which we refer to as the Benefit Restoration Plan. The Benefit Restoration Plan is a non-qualified defined benefit pension plan that provides eligible individuals the difference between the benefits they would actually accrue under the Pension Plan, but for the maximum benefit limitations and the limitation on compensation pursuant to the Internal Revenue Code that may be recognized under the Pension Plan and deferrals of their compensation under the Deferred Income Plans, our two non-qualified deferred income plans, which are defined and discussed below. Benefits under the Benefit Restoration Plan are paid in one lump sum payment at retirement except where Section 409A restrictions apply, and benefits under the Deferred Income Plans are paid out at or after retirement in accordance with the election option chosen by a participant prior to deferral. The purpose of the Benefit Restoration Plan is not to provide employees with additional benefits but to ensure that our employees who earn more than the amounts set forth in the Internal Revenue Code for maximum benefit limitations receive a retirement benefit that is proportionately equivalent to the benefit provided to our other salaried employees participating in the Pension Plan. We maintain the Pension Plan and Benefit Restoration Plan to ensure an overall competitive compensation and benefits offering and to attract and retain top talent. Our Compensation and Governance Committee believes it is essential that our overall compensation and benefits, including retirement benefits, be competitive in the market.

Retirement benefits under the Benefit Restoration Plan mirror those of the Pension Plan and as such, identical changes to the Pension Plan described in the previous section were implemented to this plan effective January 1, 2014. The Compensation and Governance Committee approved all changes to both the Pension Plan and the Benefit Restoration Plan after completing their evaluation and ensuring that the reduction in retirement benefits were consistently applied to all participants, inclusive of our named executive officers.

Certain participants in the Benefit Restoration Plan, including our named executive officers, entered into agreements with Universal Leaf that provided for taxable cash compensation payments to be made by Universal Leaf to the participant to partially fund their Benefit Restoration Plan payment upon retirement. Under such agreements, the participant directed Universal Leaf to deposit the payments on behalf of the participant directly into an irrevocable trust established by the participant for this purpose. During fiscal year 2010, the Compensation and Governance Committee decided to discontinue all future payments by Universal Leaf in connection with the Benefit Restoration Plan and notified participants that it would not make a payment for benefits earned after January 1, 2010.

During fiscal year 2014, with the approval of the Compensation and Governance Committee, we made the decision to offer all participants covered by the above agreements the opportunity to terminate their individual trust accounts. The termination of these trusts allowed the Company to simplify the distribution process and reduce trust/asset management fees, but maintain the right to offset the benefit payable to the participant under the Benefit Restoration Plan at retirement. The ultimate offset amount will be determined by using the trust account balance on the termination date multiplied and compounded annually by an appropriate interest rate. All participants, including our named executive officers, elected to accept our offer and the trusts were terminated as of October 31, 2013.

The retirement benefit under the Benefit Restoration Plan is paid in a lump sum. Like the Pension Plan, the benefit payable under the Benefit Restoration Plan normally is distributed when the participant reaches age 65. Participants may receive an early distribution of their retirement benefit when they reach age 55 and elect to retire with at least five years of service, but such early retirement benefit is reduced based on the participant's age. Prior to 2014, the benefit reduction for early retirement was based on the participant's age and years of service. This was changed as of January 1, 2014 to a more standard reduction schedule that is based only on age.

C. Deferred Income Plans

We offer all salaried employees, including our named executive officers, the opportunity to participate in the Employees' 401(k) Savings Plan of Universal Leaf Tobacco Company, Incorporated and Designated Affiliated Companies, which we refer to as the 401(k) Plan. Participants can contribute percentages on a monthly basis up to 100% of total compensation excluding annual cash incentive awards, subject to statutory limitations. We match the monthly contributions up to 5% on a monthly basis, subject to a 2016 calendar year contribution limit of $13,250. All of our named executive officers participated in the 401(k) Plan in fiscal year 2017.



36



In addition, we have two non-qualified deferred compensation plans available to certain of our executives: the Universal Leaf Tobacco Company, Incorporated Deferred Income Plan of 1994, and the Universal Leaf Tobacco Company, Incorporated Deferred Income Plan, which we refer to collectively as the DIP Plans. In order to remain in compliance with Section 409A of the Internal Revenue Code, we froze the terms of our original DIP Plan as it pertained to any compensation earned prior to January 1, 2005 and amended and restated the plan in December 2008. Both plans are designed to permit participants to accumulate additional income for retirement and other personal financial goals through the deferral of their annual cash incentive award and portions of their salary, as more fully described in the narrative to the table entitled “Non-qualified Deferred Compensation” on page 49 of this Proxy Statement. Deferred compensation arrangements are common executive programs, and we believe that these arrangements help us in the recruitment and retention of executive talent for which we are competing. The Company does not provide any contributions to either of the DIP Plans.

The DIP Plans are non-qualified savings plans, with eligibility based on a participant's position in the Company and certain of its subsidiaries. Participants elect to make contributions through the deferral of up to 50% of their salary and up to 100% of their annual incentive award. The DIP Plans are unfunded and unsecured by us and provide the participants a variety of investment options from which to choose. These options are selected by the Pension Investment Committee of the Board of Directors. No named executive officers deferred income in either DIP Plan in fiscal year 2017.

D. Change of Control Agreements

We do not offer severance agreements to our named executive officers, nor have we offered them agreements for employment or retention with our company. However, to ensure that we will have the continued dedicated service of certain executives (including some of our named executive officers) notwithstanding the possibility, threat, or occurrence of a change of control, we have change of control agreements, which we refer to as Change of Control Agreements. The Compensation and Governance Committee believes that the Change of Control Agreements serve the best interests of Universal Corporation and our shareholders by ensuring that if a hostile or friendly change of control is ever under consideration, our executives are able to perform their duties and responsibilities and advise the Board of Directors about the potential transaction in the best interests of shareholders, without being unduly influenced by the distracting uncertainty and risk associated with a change of control, such as fear of the economic consequences of losing their jobs as a result of a change of control. The terms and conditions in the Change of Control Agreements are identical for each executive officer who has such an agreement.

A “change of control” is defined in the Change of Control Agreements, and is generally deemed to have occurred if:

Ÿ
any individual, entity, or group acquires 20% or more of either the outstanding shares of Common Stock or the combined voting power of our outstanding voting securities;
Ÿ
a majority of our directors are replaced;
Ÿ
we reorganize, merge, consolidate, or sell all or substantially all of our assets except for certain situations in which control of outstanding shares of Common Stock or outstanding voting securities is maintained; or
Ÿ
our shareholders approve a complete liquidation or dissolution of Universal Corporation.

The Change of Control Agreements:

Ÿ
do not contain any obligation to gross-up severance payments for potential excise taxes incurred by the executive officer;
Ÿ
contain a “double trigger” instead of a “single trigger,” meaning that payments are not made until there is a change of control and the executive officer is effectively terminated within three years of the change of control;
Ÿ
contain non-competition and non-solicitation clauses; and
Ÿ
contain certain administrative elements intended to address the requirements of Section 409A of the Internal Revenue Code applicable to deferred compensation.

During fiscal year 2017, we maintained Change of Control Agreements with only Messrs. G. Freeman, D. Moore and Wigner. The Change of Control Agreements are described in more detail below in the section entitled “Potential Payments Upon Termination or Change of Control” beginning on page 51 of this Proxy Statement.


37



Advisory Votes on Executive Compensation

As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the subsequent rules and regulations promulgated by the SEC, we are including a non-binding advisory resolution approving the compensation of our named executive officers. The vote on this proposal will be non-binding on us and the Board and will not be construed as overruling a decision by us or the Board of Directors. This vote will not create or imply any change to our fiduciary duties or create or imply any additional fiduciary duties for us or the Board of Directors. However, the Board of Directors values the opinions that our shareholders express in their votes and will consider the outcome of the vote when making future decisions on named executive officer compensation as it deems appropriate.

At the 2016 Annual Meeting of Shareholders, 96% of the shares cast on the proposal were voted for the non-binding advisory resolution approving the compensation of our named executive officers. The Board of Directors believes that the voting results indicate our shareholders' overwhelming approval of our named executive officer compensation objectives, program and rationale. As a result, the Board of Directors implemented the same objectives, program and rationale for the compensation of our named executive officers in fiscal year 2017, as disclosed in the “Compensation Discussion and Analysis”, the compensation tables and the accompanying narrative on pages 19 through 38 in this Proxy Statement.

At the 2011 Annual Meeting of Shareholders a large majority of our shareholders approved, on a non-binding basis, the holding of the non-binding vote on the compensation of our named executive officers on an annual basis. As previously disclosed, the Board of Directors and management determined to implement an annual advisory vote on the compensation of our named executive officers. As a result, we are including the non-binding advisory resolution approving the compensation of our named executive officers again in this Proxy Statement. See "Proposal Two" on page 63 of this Proxy Statement.

As discussed above, at the 2011 Annual Meeting of Shareholders, the shareholders, on a non-binding and advisory basis, voted to hold the non-binding advisory vote on the compensation of our executive officers on an annual basis. Every six years, the shareholders are provided the opportunity to redetermine the frequency of this vote. As a result, we are including as "Proposal Three," on page 64 of this Proxy Statement, a non-binding advisory resolution regarding the frequency (one, two or three years) of the non-binding advisory vote to approve the compensation of our named executive officers.

REPORT OF THE EXECUTIVE COMPENSATION,
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
We have reviewed and discussed the “Compensation Discussion and Analysis” section of this Proxy Statement with management. Based on that review and discussion, we have recommended to the Board of Directors that the “Compensation Discussion and Analysis” section be included in this Proxy Statement.

 
THE EXECUTIVE COMPENSATION, NOMINATING AND
 
CORPORATE GOVERNANCE COMMITTEE
 
 
 
Thomas H. Johnson, Chairman
 
Diana F. Cantor
 
Lennart R. Freeman

Richmond, Virginia
May 26, 2017

COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the Compensation and Governance Committee during fiscal year 2017 or as of the date of this Proxy Statement is or has been a Universal officer or employee, and none of our executive officers served on the Compensation and Governance Committee or board of any company that employed any member of our Compensation and Governance Committee or Board of Directors.


38



EXECUTIVE COMPENSATION

The individuals named below include the Chairman, President, and Chief Executive Officer, the Chief Financial Officer and the other named executive officers as of March 31, 2017. Information relating to total compensation is provided, where applicable, for the fiscal years ended March 31, 2015, 2016, and 2017.

SUMMARY COMPENSATION TABLE
Name and
Principal Position
 
Fiscal
Year
 
Salary(1)
 
Stock
Awards(2)
 
Option
Awards(2)
 
Non-Equity
Incentive Plan
Compensation(3)
 
Change in
Pension Value
and
Nonqualified Deferred
Compensation
Earnings(4)
 
All Other
Compensation(5)
 
Total
 
 
 
 
($)
 
($)
 
($)
 
($)
 
($)
 
($)
 
($)
(a)
 
(b)
 
(c)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
George C. Freeman, III
 
2017
 
850,100

 
1,619,161

 

 
1,114,100

 
381,524

 
28,774

 
3,993,659

Chairman, President, and Chief Executive Officer
 
2016
 
841,700

 
1,727,171

 

 
939,300

 
108,740

 
21,266

 
3,638,177

 
 
2015
 
828,400

 
1,486,350

 

 
841,200

 
1,124,148

 
22,003

 
4,302,101

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Airton L. Hentschke
 
2017
 
560,500

 
801,721

 

 
612,100

 
142,445

 
15,758

 
2,132,524

Senior Vice President and Chief Operating Officer
 
2016
 
555,000

 
853,937

 

 
516,200

 
112,978

 
22,557

 
2,060,672

 
 
2015
 
431,400

 
416,178

 

 
415,400

 
149,287

 
13,080

 
1,425,345

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
David C. Moore
 
2017
 
444,200

 
634,041

 

 
485,100

 
380,586

 
14,990

 
1,958,917

Senior Vice President and Chief Financial Officer
 
2016
 
439,800

 
675,430

 

 
409,000

 
119,558

 
15,576

 
1,659,364

 
 
2015
 
432,900

 
584,631

 

 
366,300

 
949,810

 
15,400

 
2,349,041

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preston D. Wigner
 
2017
 
340,100

 
424,441

 

 
342,800

 
94,100

 
14,958

 
1,216,399

Vice President, General Counsel, and Secretary
 
2016
 
336,700

 
453,503

 

 
289,000

 
33,135

 
13,316

 
1,125,654

 
 
2015
 
331,400

 
386,451

 

 
258,900

 
475,929

 
13,311

 
1,465,991

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Theodore G. Broome
 
2017
 
343,800

 
324,880

 

 
386,200

 
214,437

 
13,293

 
1,282,610

Executive Vice President and Sales Director
 
2016
 
340,400

 
347,364

 

 
325,500

 
126,380

 
13,319

 
1,152,963

Universal Leaf Tobacco Co., Inc.
 
2015
 
335,000

 
302,225

 

 
291,600

 
370,730

 
13,061

 
1,312,616

(1) 
Salary amounts include cash compensation earned by each named executive officer during fiscal years 2015, 2016, and 2017, where applicable, as well as any amounts earned in such fiscal years, but contributed into the 401(k) Plan and/or deferred at the election of the named executive officer into our deferred compensation program. For a discussion of the deferred compensation program and amounts deferred by the named executive officers in fiscal year 2017, including earnings on amounts deferred, see “Non-qualified Deferred Compensation” beginning on page 49 of this Proxy Statement.

(2) 
The amount represents the aggregate grant date fair value of stock or options awarded in the applicable fiscal year in accordance with FASB ASC Topic 718. This amount does not reflect our accounting expense for these award(s) during the year and does not correspond to the actual cash value that will be recognized by the named executive officer when received. Performance Share awards do not have dividend rights and therefore reflect a lower grant date fair value than the closing price of our Common Stock on the date of grant. For fiscal years 2015, 2016, and 2017 Performance Share awards, the grant date fair market value per share was $46.41, $45.06 and $49.17, respectively. Amounts for fiscal years 2015, 2016, and 2017 include Performance Share awards calculated at target levels. If these Performance Share awards paid at maximum (150% of target), the aggregate grant date fair value of all stock awards for each of the named executive officers would have been at the time of the grant: for fiscal year 2015, Mr. G. Freeman: $1,834,425; Mr. Hentschke: $513,639; Mr. D. Moore: $721,541; Mr. Wigner: $476,951; and Mr. Broome: $373,000; for fiscal year 2016, Mr. G. Freeman: $2,130,458; Mr. Hentschke: $1,053,328; Mr. D. Moore: $833,140; and Mr. Wigner: $559,394; and Mr. Broome: $428,472; and for fiscal year 2017, Mr. G. Freeman: $1,998,999; Mr. Hentschke: $989,796; Mr. D. Moore: $782,780; Mr. Wigner: $524,010; and Mr. Broome: $401,094. Assumptions used in the calculation of these award amounts are included in Notes 1 and 13 to the consolidated financial statements, included in our Annual Report on Form 10-K for the year ended March 31, 2015, in Notes 1 and 12 to the consolidated financial statements, included in our Annual Report on Form

39



10-K for the year ended March 31, 2016, in Notes 1 and 12 to the consolidated financial statements, included in our Annual Report on Form 10-K for the year ended March 31, 2017, and incorporated by reference into this Proxy Statement. Beginning in fiscal year 2007, fair value expense for stock-based compensation was recognized ratably over the period from grant date to the earlier of (a) the vesting date of the award, or (b) the date the grantee is eligible to retire without forfeiting the award. For employees who are already eligible to retire at the date an award is granted, the total fair value of the award is recognized as expense at the date of grant. Information on individual equity awards granted to the named executive officers in fiscal year 2017 is set forth in the section entitled “Grants of Plan-Based Awards” on page 42 of this Proxy Statement.
(3) 
The amounts represent cash awards to the named executive officers under our performance-based annual cash incentive plan for fiscal years 2015, 2016 and 2017, where applicable, which is discussed in the section entitled “Annual Cash Incentives Awards” beginning on page 30 of this Proxy Statement. While such amounts were earned for fiscal years 2015, 2016 and 2017 performance, they were not paid to the named executive officers until June 10, 2015, and June 8, 2016, and June 12, 2017, respectively.
(4) 
The amounts represent the actuarial increases in the present values of the named executive officers' benefits under our pension plans during fiscal years 2015, 2016 and 2017, as applicable, determined using interest rate and mortality rate assumptions consistent with those used in our financial statements. For all named executive officers, the amounts only reflect changes in pension value because they had no above market interest earnings for fiscal years 2015, 2016 and 2017. For additional information on our pension plans, see the section entitled “Retirement and Post-Termination Compensation” on page 35 of this Proxy Statement and the tables entitled “Pension Benefits” on page 46 of this Proxy Statement and “Non-qualified Deferred Compensation” on page 49 of this Proxy Statement. For a full description of the pension plan assumptions used by us for financial reporting purposes for fiscal years 2015, 2016 and 2017, see Note 10 to our consolidated financial statements, included in our Annual Report on Form 10-K for the year ended March 31, 2017, and incorporated by reference into this Proxy Statement.
(5) 
The table below reflects the types and dollar amounts of perquisites, additional compensation, and other personal benefits provided to the named executive officers during fiscal year 2017. For purposes of computing the dollar amounts of the items listed below, we used the actual out-of-pocket costs to us of providing the perquisite or other personal benefit to the named executive officer. The named executive officers paid any taxes associated with these benefits without reimbursement from us. Each perquisite and personal benefit included in the table below is described in more detail in the narratives immediately following the table:
Column (i) Components
 
G.C.
Freeman, III
 
A.L.
Hentschke
 
D.C.
Moore
 
P.D.
Wigner
 
T.G.
 Broome
 
 
($)
 
($)
 
($)
 
($)
 
($)
Professional Fees (a)
 
7,919

 

 
1,585

 

 

401(k) Match (b)
 
13,355

 
13,319

 
13,305

 
12,958

 
13,293

Matching Gifts (c)
 
7,500

 

 
100

 
2,000

 

Home Leave - Expatriates (d)
 

 
2,439

 

 

 

TOTALS
 
28,774

 
15,758

 
14,990

 
14,958

 
13,293

(a) 
Financial Planning and Tax Preparation Services. Only two of our named executive officers are eligible to be reimbursed for financial planning and tax preparation services they incur during the year, subject to an annual cap of $15,000. All reimbursed amounts paid to our named executive officers during fiscal year 2017 pursuant to our financial planning and tax preparation policy are individually disclosed in the perquisites table above.
(b) 
401(k) Company Match. Each named executive officer is eligible to participate in the 401(k) Plan, which offers them an opportunity to defer income and receive matching contributions from us subject to certain limits. Company contributions made to the named executive officers during fiscal year 2017 are set forth in the table above. Information about the 401(k) Plan is set forth in the section entitled “Deferred Income Plans” beginning on page 36 of this Proxy Statement.
(c) 
Matching Gifts. Each named executive officer is eligible to participate in our matching gifts program in which our charitable foundation matches employees' contributions to charities. The maximum amount applicable to all participants that can be matched in any fiscal year of our foundation is $5,000 per employee. Each of the named executive officers participated in the matching gifts program in amounts equal to or below the maximum amount.
(d) 
Home Leave - Expatriates. Mr. Hentschke is a Brazilian expatriate working in our Richmond, Virginia headquarters and is entitled to one round-trip, economy class airline ticket per year for himself and his dependents.


40



Compensation Risk Assessment

As part of its oversight of our executive compensation program, the Compensation and Governance Committee considers the impact of our executive compensation program, and the incentives created by the compensation awards that it administers, on our risk profile. The Committee has implemented compensation program design features to mitigate the risk that our compensation programs encourage misconduct or imprudent risk-taking. In addition, we review all of our compensation policies and procedures, including the incentives that they create and factors that may reduce the likelihood of excessive risk taking, to determine whether they present a significant risk to us. At the Compensation and Governance Committee's direction, our Senior Vice President and Chief Financial Officer and his staff, our Vice President, General Counsel, and Secretary, and a member of our internal audit team, conducted a risk review assessment of our compensation programs in fiscal year 2017. The Compensation and Governance Committee reviewed the findings of the assessment and concluded that our compensation programs are designed with the appropriate balance of risk and reward in relation to our overall business strategy and that the balance of compensation elements discourages excessive risk taking. The Compensation and Governance Committee, therefore determined that the risks arising from our compensation policies and practices for employees are not reasonably likely to have a material adverse effect on the Company. The Committee also concluded that the performance measures and performance targets do not encourage excessive or unnecessary risk taking. In its discussions, the Compensation and Governance Committee considered the attributes of our programs, including:

Ÿ
the balance between annual and longer-term performance opportunities;
Ÿ
the balance between performance-based and non-performance based pay;
Ÿ
alignment of our programs with business strategies focused on long-term growth and sustained shareholder value, the performance goals established for senior management reflect the objectives set by the Compensation and Governance Committee to increase focus on the achievement of the Company's strategic plan;
Ÿ
placement of an appropriate portion of our executive pay “at risk” and dependent upon the achievement of specific corporate and individual performance goals that are objectively determined with verifiable results. These corporate goals have pre-established thoughtful threshold, target and maximum award limits;
Ÿ
the use of multiple performance metrics that are based on the general performance of the corporation and the use of economic profit as a risk adjusted metric;
Ÿ
the use of rolling three-year Performance Shares to lengthen the overall measurement period;
Ÿ
the Compensation and Governance Committee's ability to exercise negative discretion and to consider non-financial and other qualitative performance factors in determining actual compensation payouts;
Ÿ
stock ownership guidelines that are reasonable and align executives' short- and long-term interests with those of our shareholders;
Ÿ
the recoupment policy to authorize the potential recovery or adjustment of cash incentive awards and long-term equity awards paid to named executive officers and other recipients in the event there was a restatement of incorrect financial results and upon the occurrence of certain specified events; and
 
Ÿ
the policy prohibiting the use of hedging and derivatives trading by executives and directors.

Effective with the long-term equity awards granted in fiscal year 2013, the Compensation and Governance Committee suspended the inclusion of SARs in the Company's portfolio of equity awards. An executive holding SARs receives financial benefit when the stock price increases, but does not have the corresponding downside if the stock price declines. The Compensation and Governance Committee determined that this may incentivize executives to pursue short-term or riskier strategies and, therefore, no longer represents an effective component of our executive compensation program.


41



GRANTS OF PLAN-BASED AWARDS
The following table presents information regarding grants of plan-based awards to the named executive officers during the fiscal year ended March 31, 2017.
Name and Grant Date
 
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards(1)
 
Estimated Future Payouts
Under Equity
Incentive Plan Awards(2)
 
All Other Stock Awards: Number of Shares of Stock or Units(3)
 
All Other
Option
Awards:
Number of
Securities
Underlying Options
 
Exercise
or Base
Price of
Option Awards
 
Market Price of Option Awards on Grant Date
 
Grant Date Fair Value of Stock and Option Awards(4)
 
Threshold
 
Target
 
Max.
 
Threshold
 
Target
 
Max.
 
 
 
 
 
 
 
($)
 
($)
 
($)
 
(#)
 
(#)
 
(#)
 
(#)
 
(#)
 
($/Sh)
 
($/Sh)
 
($)
(a & b)
 
(c)
 
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
 
(k)
 
(l)
 
(m)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
George C. Freeman, III
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0

 
850,100

 
1,700,200

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6/2/2016
 
 
 
 
 
 
 
0

 
15,450

 
23,175

 
 
 
 
 
 
 
55.63

 
759,677

6/2/2016
 
 
 
 
 
 
 
 
 
 
 
 
 
15,450

 
 
 

 
55.63

 
859,484

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Airton L. Hentschke
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0

 
467,100

 
934,200

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6/2/2016
 
 
 
 
 
 
 
0

 
7,650

 
11,475

 
 
 
 
 
 
 
55.63

 
376,151

6/2/2016
 
 
 
 
 
 
 
 
 
 
 
 
 
7,650

 
 
 

 
55.63

 
425,570

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
David C. Moore
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0

 
370,200

 
740,400

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6/2/2016
 
 
 
 
 
 
 
0

 
6,050

 
9,075

 
 
 
 
 
 
 
55.63

 
297,479

6/2/2016
 
 
 
 
 
 
 
 
 
 
 
 
 
6,050

 
 
 

 
55.63

 
336,562

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preston D. Wigner
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0

 
261,600

 
523,200

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6/2/2016
 
 
 
 
 
 
 
0

 
4,050

 
6,075

 
 
 
 
 
 
 
55.63

 
199,139

6/2/2016
 
 
 
 
 
 
 
 
 
 
 
 
 
4,050

 
 
 

 
55.63

 
225,302

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Theodore G. Broome
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0

 
294,700

 
589,400

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6/2/2016
 
 
 
 
 
 
 
0

 
3,100

 
4,650

 
 
 
 
 
 
 
55.63

 
152,427

6/2/2016
 
 
 
 
 
 
 
 
 
 
 
 
 
3,100

 
 
 

 
55.63

 
172,453

(1) 
Amounts represent potential annual cash incentive awards for fiscal year 2017. The actual amount of the annual cash incentive award earned by each named executive officer for fiscal year 2017 is reported in Column (g), “Non-Equity Incentive Plan Compensation,” in the “Summary Compensation Table” on page 39 of this Proxy Statement. For additional information with respect to the annual cash incentive awards under the Incentive Plan, see the section entitled “Annual Cash Incentives Awards” beginning on page 30 of this Proxy Statement.
(2) 
Amounts represent potential vesting of Performance Shares granted during fiscal year 2017. Performance Shares vest in the event the three-year performance measures corresponding to the Performance Shares are met or exceeded. For additional information with respect to Performance Shares granted pursuant to our 2007 Stock Incentive Plan, see the section entitled “Long-Term Equity Participation” beginning on page 31 of this Proxy Statement and in Column (g) in the table entitled “Outstanding Equity Awards at Fiscal Year End” on page 43 of this Proxy Statement.
(3) 
Amounts represent the award of restricted stock units. Each restricted stock unit will convert one-for-one into shares of Common Stock upon vesting. Additional information with respect to restricted stock unit awards is set forth in the section entitled “Long-Term Equity Participation” beginning on page 31 of this Proxy Statement, and in Column (i) in the table entitled “Outstanding Equity Awards at Fiscal Year End” on page 43 of this Proxy Statement.
(4) 
Represents the grant date fair value of the award determined in accordance with FASB ASC Topic 718. The full grant date fair value of the Performance Shares is calculated at the target performance level and will vest, if at all, at the end of a three-year measurement period, if certain performance targets are met. Amounts for Performance Share awards are determined assuming a price per share of $49.17, which represents a discount to the closing price of Common Stock as of the date of grant due to the lack of dividend rights and represents the grant date fair value of the award determined in accordance with FASB ASC Topic 718. Each Performance Share will convert one-for-one into a share of Common Stock upon vesting if the performance target is met. Grant date fair value for the restricted stock unit awards is based on the grant date fair value of the underlying shares of Common Stock. The assumptions used in determining the grant date fair values of these awards are set forth in Note 12 to the consolidated financial statements, included in our Annual Report on Form 10-K for the year ended March 31, 2017, and incorporated by reference into this Proxy Statement.

42



OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The following table presents information concerning the number and value of outstanding restricted stock units, Performance Shares, and SARs held by the named executive officers as of March 31, 2017. There were no unexercised SARs outstanding at March 31, 2017.
 
 
Option Awards
 
Stock Awards
Name and Grant Date
 
Number of
Securities
Underlying
Unexercised
Options
Exercisable
 
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
 
Option
Exercise
Price
 
Option
Expiration
Date
 
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested(1)
 
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested(2)
 
Number of
Shares or
Units of
Stock That
Have Not
Vested(1)
 
Market Value of Shares or Units of Stock That Have Not Vested(2)
 
 
(#)
 
(#)
 
($)
 
 
 
(#)
 
($)
 
(#)
 
($)
(a)
 
(b)
 
(c)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
George C. Freeman, III
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 5, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
20,850

 
1,475,137

May 24, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
16,836

 
1,191,147

June 3, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
16,731

 
1,183,718

May 22, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
19,103

 
1,351,537

June 2, 2016
 
 
 
 
 
 
 
 
 

 

 
15,858

 
1,121,953

June 3, 2014
 
 
 
 
 
 
 
 
 
15,000

 
1,061,250

 
 
 
 
May 22, 2015
 
 
 
 
 
 
 
 
 
17,900

 
1,266,425

 
 
 
 
June 2, 2016
 
 
 
 
 
 
 
 
 
15,450

 
1,093,087

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Airton L. Hentschke
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 5, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
1,981

 
140,156

May 24, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
3,356

 
237,437

June 3, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
4,685

 
331,464

May 22, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
9,446

 
668,304

June 2, 2016