EXHIBIT 4.2
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DATED APRIL 17, 2003
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CARNIVAL CORPORATION
AND
P&O PRINCESS CRUISES PLC
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EQUALIZATION AND GOVERNANCE AGREEMENT
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CONTENTS
PAGE
1. DEFINITIONS AND INTERPRETATION......................................1
2. BOARDS OF P&O PRINCESS AND CARNIVAL.................................9
3. EQUALIZATION OF DISTRIBUTIONS......................................10
4. CAPITAL ACTIONS....................................................11
5. JOINT ELECTORATE ACTIONS...........................................16
6. SEPARATE APPROVALS OF CLASS RIGHTS ACTIONS.........................17
7. MEETINGS AND VOTING................................................19
8. CHANGE OF CONTROL OF EITHER P&O PRINCESS OR CARNIVAL...............20
9. STOCK EXCHANGES....................................................20
10. LIQUIDATION........................................................20
11. TERMINATION........................................................22
12. CONSEQUENCES OF TERMINATION........................................22
13. PERSONAL RIGHTS ONLY...............................................23
14. ISSUE OF EQUALIZATION SHARES.......................................23
15. RELATIONSHIP WITH OTHER DOCUMENTS..................................23
16. MISCELLANEOUS......................................................23
17. NOTICES............................................................24
18. COUNTERPARTS.......................................................25
19. GOVERNING LAW......................................................25
20. ARBITRATION........................................................25
EQUALIZATION AND GOVERNANCE AGREEMENT
THIS AGREEMENT is made on April 17, 2003 between:
(1) CARNIVAL CORPORATION, a Panamanian corporation having its principal
place of business at Carnival Place, 0000 X.X. 00xx Xxxxxx, Xxxxx,
Xxxxxxx, 00000 - 2428 ("CARNIVAL"); and
(2) P&O PRINCESS CRUISES PLC, a public limited company incorporated in
England and Wales (Registered No. 4039524) having its registered office
at 00 Xxx Xxxxxx Xxxxxx, Xxxxxx XX0X 0XX ("P&O PRINCESS").
WHEREAS:
(A) P&O Princess and Carnival entered into the Implementation Agreement,
pursuant to which P&O Princess and Carnival have agreed to do certain
acts and things to implement the DLC Combination and create certain
rights for the Carnival Shareholders and the P&O Princess Shareholders
in respect of their interests in the combined enterprise.
(B) P&O Princess and Carnival wish to agree upon the terms of the ongoing
relationship between them following the DLC Combination, the basic
principles being that:
(i) the two companies shall operate as if they were a single
unified economic entity; and
(ii) the Equalization Ratio shall govern the proportion in which
distributions of income and capital are made to, and the
relative voting rights of, the holders of Carnival Common
Stock relative to the holders of P&O Princess Ordinary Shares.
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless the context otherwise requires:
"ACTION" means, in relation to Carnival or P&O Princess, any action
affecting the amount or nature of issued share capital of such company,
including any non-cash Distribution, offer by way of rights, bonus
issue, sub-division or consolidation, or buy-back;
"APPLICABLE EXCHANGE RATE" means, in relation to any proposed
Distributions by P&O Princess and Carnival in relation to which a
foreign exchange rate is required, the average of the closing mid-point
spot US dollar-sterling exchange rate on the five Business Days ending
on the Business Day before the Distribution Determination Date relating
to such Distributions (as shown in the London Edition of the Financial
Times, or such other point of reference as the parties shall agree), or
such other spot US dollar-sterling exchange rate or average US
dollar-sterling exchange rate as at such other date (or over such other
period) before a Distribution Determination Date as the Boards of P&O
Princess and Carnival shall agree, in each case rounded to five decimal
places;
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"APPLICABLE REGULATIONS" means:
(a) any law, statute, ordinance, regulation, judgement, order,
decree, licence, permit, directive or requirement of any
Governmental Agency having jurisdiction over P&O Princess
and/or Carnival; and
(b) the rules, regulations, and guidelines of:
(i) any stock exchange or other trading market on which
any shares or other securities or depositary receipts
representing such shares or securities of either P&O
Princess or Carnival are listed, traded or quoted;
and
(ii) any other body with which entities with securities
listed or quoted on such exchanges customarily
comply,
(but, if not having the force of law, only if compliance with such
directives, requirements, rules, regulations or guidelines is in
accordance with the general practice of persons to whom they are
intended to apply) in each case for the time being in force and taking
account all exemptions, waivers or variations from time to time
applicable (in particular situations or generally) to P&O Princess or,
as the case may be, Carnival;
"ASSOCIATED TAX CREDIT" means, in relation to any Distribution proposed
to be made by either P&O Princess or Carnival, the amount of any
imputed or associated Tax credit or rebate or exemption (or the value
of any other similar associated Tax benefit) which would be available
to a shareholder receiving or entitled to receive the Distribution,
together with the amount of any credit or benefit in respect of any tax
required to be deducted or withheld from the Distribution by or on
behalf of the paying company;
"BOARD" means the Board of P&O Princess or the Board of Carnival as the
context may require;
"BOARD OF CARNIVAL" means the board of directors of Carnival (or a duly
appointed committee of that board) from time to time;
"BOARD OF P&O PRINCESS" means the board of directors of P&O Princess
(or a duly appointed committee of that board) from time to time;
"BUSINESS DAY" means any day other than a Saturday, Sunday or day on
which banking institutions in the City of New York, London or the
Cayman Islands are authorised or obligated by law or executive order to
close in the United States or England (or on which such banking
institutions are open solely for trading in euros);
"CARNIVAL ARTICLES" means the Third Amended and Restated Articles of
Incorporation of Carnival which will be in effect immediately following
Completion, as amended from time to time;
"CARNIVAL ARTICLES AND BY-LAWS" means the Carnival Articles and the
By-laws of Carnival which will be in effect immediately following
Completion, as amended from time to time;
"CARNIVAL COMMON STOCK" means the issued and outstanding common stock,
par value US$0.01 per share, of Carnival from time to time, as the same
may be subdivided or consolidated from time to time and any capital
stock into which such common stock may be reclassified, converted or
otherwise changed;
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"CARNIVAL CONVERTIBLE INSTRUMENTS" means the $600,000,000 2%
Convertible Senior Debentures due 2021; and the $1,051,175,000 Liquid
Yield Option Notes due 2021 (Zero Coupon-Senior);
"CARNIVAL ENTRENCHED PROVISION" has the meaning given to it in the
Carnival Articles and By-laws;
"CARNIVAL EQUALIZATION SHARE" means any share designated as an
equalization share in Carnival from time to time by the Board of
Carnival;
"CARNIVAL EQUIVALENT NUMBER" means the number of shares of Carnival
Common Stock that have the same rights to distributions of income and
capital and voting rights as one P&O Princess Ordinary Share.
Initially, the Carnival Equivalent Number shall be 0.30040 but shall be
adjusted as provided in Clause 4 and the Schedule. In all cases, the
Carnival Equivalent Number shall be rounded to five decimal places;
"CARNIVAL GROUP" means Carnival and its Subsidiaries from time to time
and a member of the Carnival Group means any one of them;
"CARNIVAL GUARANTEE" means the deed of guarantee of even date herewith
between Carnival and P&O Princess whereby Carnival agrees to guarantee
certain obligations of P&O Princess for the benefit of certain future
creditors of P&O Princess, as amended from time to time;
"CARNIVAL SPECIAL VOTING SHARE" means the special voting share of
US$0.01 in Carnival;
"CLASS RIGHTS ACTION" means any of the actions listed in Clause 6.1;
"COMBINED GROUP" means the P&O Princess Group and the Carnival Group;
"COMBINED SHAREHOLDERS" means the holders of Carnival Common Stock and
the holders of P&O Princess Ordinary Shares;
"COMPLETION" means the time at which the steps set out in Section 2.2
(Transaction to be Effected and Documents to be Exchanged) of the
Implementation Agreement have been completed;
"CURRENT MARKET PRICE" has the meaning given to it in Paragraph 3 of
the Schedule;
"DEALING DAY" has the meaning given to it in Paragraph 3 of the
Schedule;
"DISENFRANCHISED CARNIVAL COMMON STOCK" has the meaning given to that
term in the Carnival Articles;
"DISENFRANCHISED P&O ORDINARY SHARES" has the meaning given to that
term in the P&O Princess Articles of Association;
"DISENFRANCHISED SHARES" means the Disenfranchised P&O Ordinary Shares
and the Disenfranchised Carnival Common Stock;
"DISPUTE" has the meaning given to it in Clause 20(A);
"DISTRIBUTABLE RESERVES" means, with respect to any Distribution by
Carnival or P&O Princess, the total funds available to such company
which it is permitted to use to pay or
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make such Distribution under the Applicable Regulations relating to
Carnival or P&O Princess, as the case may be;
"DISTRIBUTION" means, in relation to Carnival or P&O Princess, any
dividend or other distribution, whether of income or capital, and in
whatever form, made by such company or any of its Subsidiaries to the
holders of such company's Shares, including for the purposes of this
definition Disenfranchised Shares, by way of PRO RATA entitlement,
excluding any Liquidation Distribution or buy-back or repurchase or
cancellation of Shares;
"DISTRIBUTION DETERMINATION DATE" means, with respect to any parallel
Distributions to be made by Carnival and P&O Princess, the date on
which the Board of P&O Princess and the Board of Carnival resolve to
pay or make such parallel Distributions (or, if they resolve on
different dates to pay or make such parallel Distributions, the later
of those dates);
"DLC COMBINATION" means the combination of Carnival and P&O Princess by
means of a dual listed company structure effected pursuant to this
Agreement and the transactions contemplated hereby, including the SVE
Special Voting Deed, the Carnival Articles and By-laws, the P&O
Princess Memorandum and Articles, the Carnival Guarantee and the P&O
Princess Guarantee;
"DLC STRUCTURE" means the structure created by the DLC Combination;
"DLC SVC" means DLC SVC Limited, a company incorporated in England and
Wales, or such other company as replaces DLC SVC Limited pursuant to
the terms of the SVE Special Voting Deed;
"DLC SVC OWNER" means The Law Debenture Trust Corporation p.l.c., a
company incorporated in England and Wales, or such other entity as
shall be agreed between P&O Princess and Carnival;
"DLC TRANSACTIONS" has the meaning given to that term in the
Implementation Agreement;
"EQUALIZATION DISTRIBUTION AMOUNT" means, in relation to either P&O
Princess or Carnival, the amount of any Distribution proposed to be
paid or made by such company at any particular time on its Shares,
before deduction of any amount in respect of Tax required to be
deducted or withheld from such Distribution by or on behalf of such
company and excluding the amount of any Associated Tax Credit, all such
amounts being expressed in the currency of declaration and on a per
share basis;
"EQUALIZATION RATIO" means, at any time, the ratio of (i) one P&O
Princess Ordinary Share to (ii) the Carnival Equivalent Number at such
time;
"EQUALIZATION SHARE" means, in relation to P&O Princess, the P&O
Princess Equalization Share and, in relation to Carnival, the Carnival
Equalization Share;
"EQUITY EQUIVALENTS" has the meaning given in Clause 4.4(A);
"EQUIVALENT DISTRIBUTION" has the meaning given in Clause 3.1;
"EQUIVALENT RESOLUTION" means a resolution of either P&O Princess or
Carnival that is equivalent in nature and effect to a resolution of the
other company;
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"FAIR MARKET VALUE" has the meaning given to it in Paragraph 3 of the
Schedule;
"FINAL AWARD" has the meaning given to it in Clause 20(D);
"FINANCIAL PERIOD" means a financial year of either P&O Princess or
Carnival or any other period for which both of their accounts may by
mutual agreement be made up;
"GOVERNMENTAL AGENCY" means a court of competent jurisdiction or any
government or any governmental, regulatory, self-regulatory or
administrative authority, agency, commission, body or other
governmental entity and shall include any relevant competition
authorities, the UK Panel on Takeovers and Mergers, the European
Commission, the London Stock Exchange, the UK Listing Authority, the
U.S. Securities and Exchange Commission and the NYSE;
"GROUP" means, in relation to P&O Princess, the P&O Princess Group and,
in relation to Carnival, the Carnival Group as the context requires;
"GUARANTEE" means each of the P&O Princess Guarantee and the Carnival
Guarantee;
"IMPLEMENTATION AGREEMENT" means the agreement headed "Offer and
Implementation Agreement" entered into between P&O Princess and
Carnival dated as of 8 January 2003;
"JOINT ELECTORATE ACTION" has the meaning given in Clause 5.1;
"JOINT ELECTORATE PROCEDURE" means the procedures referred to in Clause
5.2;
"LIQUIDATION" means, with respect to either Carnival or P&O Princess,
any liquidation, winding up, receivership, dissolution, insolvency or
equivalent or analogous proceedings pursuant to which the assets of
such company will be liquidated and distributed to creditors and other
holders of provable claims against such company;
"LIQUIDATION DISTRIBUTION" means, in relation to Carnival or P&O
Princess, any dividend or other distribution per Share, whether of
income or capital, and in whatever form, made or to be made by such
company or any of its Subsidiaries to the holders of such company's
Shares by way of PRO RATA entitlement in connection with the
Liquidation of such company;
"LIQUIDATION EXCHANGE RATE" means, as at any date, the average of the
closing mid-point spot US dollar-sterling exchange rate on the five
Business Days ending on the Business Day before such date (as shown in
the London Edition of the Financial Times), or such other US
dollar-sterling exchange rate as the Boards of P&O Princess and
Carnival or the Board of P&O Princess and liquidators of Carnival or
the Board of Carnival and the liquidators of P&O Princess or the
liquidators of both P&O Princess and Carnival, as the case may be, may
determine, in each case rounded to five decimal places;
"LONDON STOCK EXCHANGE" means the London Stock Exchange plc;
"MAJORITY RESOLUTION" means, with respect to Carnival or P&O Princess,
a resolution duly approved at a meeting of the shareholders of such
company by the affirmative vote of a majority of all the votes Voted on
such resolution by all shareholders of such company entitled to vote
thereon (including, where appropriate, the holder of the Special Voting
Share of such company) who are present in person or by proxy at such
meeting;
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"MATCHING ACTION" has the meaning given in Clause 4.5;
"NET ASSETS" has the meaning given in Clause 10.2;
"NYSE" means the New York Stock Exchange, Inc.;
"P&O PRINCESS ARTICLES OF ASSOCIATION" means the Articles of
Association of P&O Princess which will be in effect immediately
following Completion, as amended from time to time;
"P&O PRINCESS ENTRENCHED PROVISION" has the meaning given to it in the
P&O Princess Memorandum and Articles;
"P&O PRINCESS EQUALIZATION SHARE" means the equalization share of
(pound)1 in the capital of P&O Princess;
"P&O PRINCESS ADS" means an American Depositary Share of P&O Princess,
each of which currently represents four P&O Princess Ordinary Shares,
and which is listed on NYSE;
"P&O PRINCESS GUARANTEE" means the deed of guarantee of even date
herewith between P&O Princess and Carnival whereby P&O Princess agrees
to guarantee certain obligations of Carnival for the benefit of certain
future creditors of Carnival, as amended from time to time;
"P&O PRINCESS GROUP" means P&O Princess and its Subsidiaries from time
to time and a member of the P&O Princess Group means any one of them;
"P&O PRINCESS MEMORANDUM AND ARTICLES" means the Memorandum and
Articles of Association of P&O Princess which will be in effect
immediately following Completion, as amended from time to time;
"P&O PRINCESS ORDINARY SHARES" means the issued ordinary shares of
US$0.50 each in P&O Princess from time to time (including the
underlying ordinary shares to each P&O Princess ADS), as the same may
be subdivided or consolidated from time to time and any ordinary shares
into which such class of shares may be reclassified, converted or
otherwise changed;
"P&O PRINCESS SVT" means P&O Princess Special Voting Trust, a trust
organized under the laws of the Cayman Islands or any successor
thereto;
"P&O PRINCESS SPECIAL VOTING SHARE" means the special voting share of
(pound)1 in P&O Princess;
"P&O PRINCESS TRUSTEE" means The Law Debenture Trust Corporation
(Cayman) Limited, as trustee of P&O Princess SVT pursuant to the P&O
Princess SVT Agreement (or any successor trustee appointed pursuant to
Section 7.06 thereof);
"P&O PRINCESS SVT AGREEMENT" means the Voting Trust Deed establishing
P&O Princess SVT between P&O Princess Trustee and Carnival, of even
date herewith as amended from time to time;
"PARALLEL SHAREHOLDER MEETING" means, in relation to Carnival or P&O
Princess, any meeting of the shareholders of that company which is:
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(a) nearest in time to, or is actually contemporaneous with, the
meeting of the shareholders of the other company and at which
some or all of the same resolutions or some or all the
Equivalent Resolutions are to be considered;
(b) designated by the Board of Carnival or the Board of P&O
Princess, as the case may be, as the parallel meeting of a
particular meeting of shareholders of the other company;
"PRIMARY ACTION" has the meaning given in Clause 4.5;
"RELEVANT COMPANY" has the meaning given in Paragraph 1.1 of the
Schedule;
"REPURCHASE" means:
(a) a repurchase of shares in the capital of P&O Princess having
voting rights by any member of the P&O Princess Group or a
reduction by P&O Princess of its issued Ordinary share
capital;
(b) a repurchase of Carnival Common Stock by any member of the
Carnival Group; or
(c) a purchase of shares in the capital of P&O Princess having
voting rights by any member of the Carnival Group; or
(d) a purchase of Carnival Common Stock by any member of the P&O
Princess Group;
provided that the purchase of P&O Princess Ordinary Shares in the Offer
(as defined in the Implementation Agreement) shall not be deemed to be
a Repurchase;
"REQUIRED MAJORITY" has the meaning given in Clause 6.2;
"SHARES" means, in relation to P&O Princess, the P&O Princess Ordinary
Shares which, for the avoidance of doubt shall not include
Disenfranchised P&O Ordinary Shares (except where stated to the
contrary) and, in relation to Carnival, the Carnival Common Stock
which, for the avoidance of doubt shall not include Disenfranchised
Carnival Common Stock (except where stated to the contrary);
"SPECIAL VOTING SHARE" means, in relation to Carnival, the Carnival
Special Voting Share and, in relation to P&O Princess, the P&O Princess
Special Voting Share;
"STERLING" means the lawful currency from time to time of the United
Kingdom;
"SUBSIDIARY" means with respect to Carnival or P&O Princess, any
entity, whether incorporated or unincorporated, in which such company
owns, directly or indirectly, a majority of the securities or other
ownership interests having by their terms ordinary voting power to
elect a majority of the directors or other persons performing similar
functions, or the management and policies of which such party otherwise
has the power to direct;
"SUPERMAJORITY RESOLUTION" means, with respect to Carnival or P&O
Princess, a resolution required by Applicable Regulations and/or the
Carnival Articles and By-laws or the P&O Princess Memorandum and
Articles, as relevant, to be approved by a higher percentage of votes
Voted than required under a Majority Resolution, or where the
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percentage of votes Voted in favour and against the resolution is
required to be calculated by a different mechanism to that required by
a Majority Resolution;
"SVE SPECIAL VOTING DEED" means the agreement of even date herewith
entered into among DLC SVC, the DLC SVC Owner, the P&O Princess
Trustee, P&O Princess and Carnival relating, INTER ALIA, to how each
Special Voting Share is to be voted, as amended from time to time;
"TAX" means any taxes, levies, imposts, deductions, charges,
withholdings or duties levied by any authority (including stamp and
transaction duties) (together with any related interest, penalties,
fines and expenses in connection with them);
"TAX BENEFIT" means any credit, rebate, exemption or benefit in respect
of Tax available to any person;
"TRIBUNAL" has the meaning given to it in Clause 20(B);
"UK LISTING AUTHORITY" means the Financial Services Authority in its
capacity as competent authority for the purposes of Part VI of the UK
Financial Services and Markets Xxx 0000;
"US SECURITIES EXCHANGE ACT" means the U.S. Securities Exchange Act of
1934; and
"VOTED" means the number of votes recorded in favour of and against a
particular resolution at a shareholders' meeting of either P&O Princess
or Carnival by holders of Shares, holders of any other class of shares
entitled to vote and (where appropriate) the holder of the relevant
Special Voting Share PROVIDED THAT votes recorded as abstentions by
holders of Carnival Common Stock or P&O Princess Ordinary Shares (or
any other class of shares entitled to vote) shall not be counted as
having been Voted for these purposes.
1.2 INTERPRETATION
Headings are for convenience only and do not affect interpretation. The
following rules of interpretation apply unless the context requires
otherwise.
(A) The singular includes the plural and conversely.
(B) One gender includes all genders.
(C) Where a word or phrase is defined, its other grammatical forms
have a corresponding meaning.
(D) A reference to a person includes a body corporate, an
unincorporated body or other entity and conversely.
(E) A reference to a Clause or a Schedule is to a Clause of or a
Schedule to this Agreement, and the Schedule forms part of
this Agreement.
(F) A reference to any agreement or document is to that agreement
or document as amended, novated, supplemented, varied or
replaced from time to time, except to the extent prohibited by
this Agreement.
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(G) A reference to any legislation (including any listing rules of
a stock exchange or voluntary codes) or to any provision of
any legislation includes any modification or re-enactment of
it, any legislative provision substituted for it and all
regulations and statutory instruments issued under it.
(H) A reference to "writing" includes a facsimile transmission and
any means of reproducing words in a tangible and permanently
visible form.
(I) Mentioning anything after "include", "includes", or
"including" does not limit what else might be included. Where
particular words are following by general words, the general
words are not limited by the particular.
(J) Reference to a body, other than a party to this Agreement
(including any Governmental Agency) , whether statutory or
not:
(i) which ceases to exist; or
(ii) whose powers or functions are transferred to another body,
is a reference to the body which replaces it or which
substantially succeeds to its powers or functions.
(K) All references to "time" are to the local time in the place
where the relevant obligation is to be performed (or right
exercised).
(L) References in this Agreement to "US$" and "cents" are to
United States dollars and cents and to "(pound)" and "p" are
to pounds sterling and to xxxxx xxxxxxxx.
(M) References to an offer by way of rights by Carnival or P&O
Princess are to any type of offer (whether renounceable or
non-renounceable) made by such company to the holders of its
Shares in proportion to their holdings at the relevant time,
subject to such exclusions or other arrangements as the
relevant Board may deem necessary or expedient in relation to
fractional entitlements or legal or practical difficulties
with making the offer under any Applicable Regulations of or
in any jurisdiction.
(N) References to "party" or "parties" in this Agreement are to
the parties to this Agreement.
2. BOARDS OF P&O PRINCESS AND CARNIVAL
2.1 BOARD PRINCIPLES
P&O Princess and Carnival agree that the following principles are
essential to the implementation, management and operation of the DLC
Structure:
(A) P&O Princess and Carnival must operate as if they were a
single unified economic entity, through boards of directors
which comprise exactly the same individuals and a unified
senior executive management, and the Combined Shareholders
shall be treated as if they were shareholders of a combined
enterprise; and
(B) the directors of P&O Princess and Carnival shall, in addition
to their duties to the company concerned, have regard to the
interests of the other company and both
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the holders of P&O Princess Ordinary Shares and the holders of
Carnival Common Stock as if the two companies were a single
unified legal entity.
2.2 BOARD COMPOSITION
Each of Carnival and P&O Princess will therefore do (and will, to the
extent it is able, procure that each member of its Group will do) all
acts and things necessary and within their respective powers to ensure
that at all times the Board of P&O Princess and the Board of Carnival
comprise exactly the same individuals.
2.3 INDEMNIFICATION OF DIRECTORS
Each of Carnival and P&O Princess will take all actions necessary or
desirable to ensure that the directors of each company shall be
indemnified by such company and the other company for any acts or
omissions by such directors in their capacity as a director of such
company, to the maximum permitted by Applicable Regulations PROVIDED
THAT nothing in this paragraph shall affect the obligations provided
for in Section 4.8.1 (Director and Officer Liability) of the
Implementation Agreement.
3. EQUALIZATION OF DISTRIBUTIONS
3.1 EQUALIZATION PRINCIPLE
3.1.1 Subject to the other provisions of this Agreement, neither
Carnival nor P&O Princess shall pay or make any Distribution
in cash unless the other company also pays or makes a
Distribution in cash at or about the same time and the ratio
of the Equalization Distribution Amount so paid or made by
Carnival to the Equalization Distribution Amount so paid or
made by P&O Princess (converted, if applicable, at the
Applicable Exchange Rate for such Distributions and rounded to
five decimal places) equals the Equalization Ratio in effect
on the Distribution Determination Date for such Distributions
(each, an "EQUIVALENT DISTRIBUTION")
3.1.2 Subject to Clause 3.1.3, neither Carnival nor P&O Princess
shall declare or otherwise become obligated to pay or make a
Distribution in cash unless (i) on the date on which such
declaration is made or such obligation is created, the other
company has sufficient Distributable Reserves to make an
Equivalent Distribution with respect to such Distribution; or
(ii) such company agrees to pay, and does pay, to the other
company (before such other company pays or makes such
Distribution) the minimum amount required by the other company
so that it will have sufficient Distributable Reserves to pay
or make such an Equivalent Distribution. Notwithstanding
compliance with the preceding sentence, if either of Carnival
or P&O Princess shall have declared or otherwise become
obligated to pay or make an Equivalent Distribution and does
not have sufficient Distributable Reserves to pay or make such
Equivalent Distribution when due, then the other company shall
pay to such company the minimum amount required by such
company so that it will have sufficient Distributable Reserves
to pay or make such Equivalent Distribution; PROVIDED HOWEVER
that if the other company does not have sufficient
Distributable Reserves to pay or make in full both the
Equivalent Distribution that it declared or became obligated
to make and the payment required by this sentence, then (1)
such other company shall only pay or make the portion of that
Equivalent Distribution (and any related payment that would
have been required by this sentence in respect of such portion
if it
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were the entire Equivalent Distribution that it had declared
or became obligated to make) that it can make out of its
Distributable Reserves; and (2) the first company shall only
pay or make the portion of its Equivalent Distribution that it
can make out of its Distributable Reserves following receipt
of such payment.
3.1.3 For the purposes of Clause 3.1.2, the amount a company is
required to pay the other company shall be determined after
taking into account all Taxes payable by, and all Tax Benefits
of, the parties with respect to the payment or receipt of such
payment and any such payment may be made on the Equalization
Share issued by the paying party if both Boards deem it
appropriate.
3.2 TIMING OF EQUALIZED DISTRIBUTIONS
The parties agree that, insofar as is practical, the Boards of P&O
Princess and Carnival shall:
(A) in relation to any proposed cash Distribution, agree the
amount of the Equivalent Distribution to be made by each
company;
(B) determine to pay or recommend to pay Equivalent Distributions
at Board meetings convened as close in time to each other as
is practicable;
(C) announce and pay their Equivalent Distributions simultaneously
or as close in time as is practicable;
(D) ensure that the record dates for receipt of the Equivalent
Distributions are on the same date; and
(E) generally co-ordinate the timing of all other aspects of the
payment or making of Equivalent Distributions.
4. CAPITAL ACTIONS
4.1 EQUALIZATION PRINCIPLE
The capital of the DLC Structure is to be deployed and managed in the
most effective way for the benefit of the Combined Shareholders. Solely
for purposes of construing the provisions of this Clause 4 and the
Schedule, and without providing an independent basis for requiring any
adjustment to the Carnival Equivalent Number or the Equalization Ratio
or other action hereunder, Carnival and P&O Princess further intend to
undertake Actions in such a way as will not give rise to a materially
different financial effect as between the interests of the holders of
Carnival Common Stock and the interests of the holders of P&O Princess
Ordinary Shares, unless approved as a Class Rights Action.
4.2 AUTOMATIC ADJUSTMENT
If any Action by Carnival or P&O Princess is covered by the Schedule,
then an automatic adjustment to the Carnival Equivalent Number (and
therefore the Equalization Ratio) will occur pursuant to such Schedule
unless the Board of the other company, in its sole discretion,
undertakes:
(A) a Matching Action; or
11
(B) an alternative to such automatic adjustment, that has been
approved as such by a Class Rights Action,
it being understood that the Board of the other company is under no
obligation to undertake any such Matching Action or to seek approval as
a Class Rights Action of any such alternative.
4.3 OTHER ACTIONS
If any Action by Carnival or P&O Princess is not covered by the
Schedule, then no automatic adjustment to the Carnival Equivalent
Number or the Equalization Ratio will occur but the Board of the other
company shall have the right (in its sole discretion), but not the
obligation (i) to undertake a Matching Action; or (ii) to seek approval
of an adjustment to the Carnival Equivalent Number (and therefore the
Equalization Ratio) as a Class Rights Action in order to ensure that
the proposed Action does not give rise to materially different
financial effects as between the interests of the holders of Carnival
Common Stock and the interests of holders of P&O Princess Ordinary
Shares. In all cases, the Boards of P&O Princess and Carnival will
co-operate in deciding what (if any) Actions or Matching Actions to
undertake.
4.4 NO ADJUSTMENT REQUIRED
Notwithstanding any other provision of this Clause 4 or the Schedule,
no adjustment to the Carnival Equivalent Number or the Equalization
Ratio will be required on the following Actions:
(A) grants or issuances by Carnival or P&O Princess of their
equity securities, or securities convertible into, or
exchangeable or exercisable for, their equity securities
("EQUITY EQUIVALENTS"), under scrip dividend or dividend
reinvestment schemes where the market value of the equity
securities or equity equivalents granted or issued (determined
in the manner customary for such schemes or plans in the
jurisdictions in which they operate) is equal to, or less
than, the cash amount of the dividend waived or reinvested;
(B) issuances of equity securities or equity equivalents by either
P&O Princess or Carnival pursuant to a share or stock option
or purchase or other benefit plan to or on behalf of any one
or more of the directors, officers, employees or consultants
(in their capacity as such) of such company or any of its
Subsidiaries, which plans are either:
(i) in existence prior to the date of this Agreement; or
(ii) approved by the relevant Board and as otherwise
required by Applicable Regulations;
(C) any issuance of Carnival Common Stock under the Carnival
Convertible Instruments;
(D) other issuances by Carnival or P&O Princess of its equity
securities or equity equivalents to any person, including for
acquisitions, other than by way of rights to the holders of
its Shares as a class;
(E) repurchases or buy-backs by Carnival or P&O Princess of its
Shares as follows:
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(i) in the market in an offer (1) not made by way of
rights to the holders of its Shares; or (2) in
compliance with Rule 10b-18 (under the US Securities
Exchange Act);
(ii) (other than under the preceding sub-clause (i)) at or
below market price of such Shares (1) in the case of
a repurchase or buy-back at a fixed price, on the
Dealing Day immediately preceding the date on which
such repurchase or buy-back is announced; or (2)
otherwise, on the Dealing Day immediately preceding
the date on which such repurchase or buy-back is
made;
(iii) any purchase by Carnival of Excess Shares (as defined
in the Carnival Articles and By-laws) under Article
XIII of the Carnival Articles (or any equivalent
amended articles of Carnival's Articles);
(iv) any purchase pursuant to the provisions of the
Carnival Articles and By-laws or the P&O Princess
Memorandum and Articles referred to in Clause 8; and
(v) pro rata by way of rights to the Combined
Shareholders at the same amount of premium to the
market value of the relevant Shares (as adjusted by
the Equalization Ratio);
(F) Matching Actions;
(G) the issue of an Equalization Share in accordance with Clause
14 by either party;
(H) any purchase, cancellation or reduction of Disenfranchised P&O
Ordinary Shares;
(I) any purchase, cancellation or reduction of Disenfranchised
Carnival Common Stock; and
(J) any distribution of shares of beneficial interest in the P&O
Princess SVT by Carnival in accordance with the Pairing
Agreement among P&O Princess Trustee, Carnival and the
transfer agent thereunder, of even date herewith.
4.5 MATCHING ACTION
For the purposes of this Agreement, a "MATCHING ACTION" means, in
relation to an Action in respect of the holders of Shares of Carnival
or P&O Princess (the "PRIMARY ACTION"), an Action in respect of the
holders of Shares in the other company which the Board of such other
company determines (i) has a financial effect on the holders of the
Shares of such other company equivalent (but not necessarily identical)
to the financial effect of the Primary Action on the holders of Shares
of the company undertaking the Primary Action; and (ii) does not
materially disadvantage the holders of the Shares of either company. In
making the determination referred to in the preceding sentence:
(A) the Board of such other company shall consider the then
existing Equalization Ratio, the timing of the Primary Action
and any proposed Matching Action, and any other relevant
circumstances;
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(B) in relation to any Action, when calculating any economic
return to the holders of P&O Princess Ordinary Shares or
Carnival Common Stock, any Tax or Tax Benefit shall be
disregarded; and
(C) the Boards of Carnival and P&O Princess shall have no
obligation to take into account any fluctuations in exchange
rates or in the market value of any securities or any other
changes in circumstances arising after the date on which the
Boards of Carnival and P&O Princess, as the case may be,
decide to undertake a particular Matching Action.
4.6 BOARDS' DECISIONS FINAL
The decision as to whether an Action is a Matching Action shall be a
decision solely for the Boards of P&O Princess and Carnival, which may
obtain appropriate professional advice in connection with such
determination if they, in their sole discretion, consider it to be
appropriate. Any such decision made by the Boards of P&O Princess and
Carnival in accordance with this Clause 4 shall be final and binding.
4.7 REPURCHASE OF SHARES
4.7.1 From the date of this Agreement until the second anniversary
of the date of this Agreement:
(A) no P&O Princess Ordinary Shares (other than P&O
Princess Ordinary Shares which, immediately prior to
such Repurchase, were Disenfranchised P&O Ordinary
Shares) or other shares in the capital of P&O
Princess carrying voting rights shall be Repurchased;
and
(B) Carnival Common Stock may be Repurchased without
restriction.
4.7.2 From the second anniversary of the date of this Agreement
until the fifth anniversary of the date of this Agreement:
(A) Carnival Common Stock may be Repurchased without
restriction; and
(B) during each twelve month period commencing on an
anniversary of this Agreement, P&O Princess Ordinary
Shares representing not more than 5% of the total
aggregate number of issued P&O Princess Ordinary
Shares and other shares in the capital of P&O
Princess carrying voting rights (including for the
purpose of this provision any Disenfranchised P&O
Ordinary Shares) as of the beginning of such twelve
month period may be Repurchased.
4.7.3 From the fifth anniversary of the date of this Agreement:
(A) there shall be no restriction on the Repurchase of
Carnival Common Stock; and
(B) there shall be no restriction on the Repurchase of
P&O Princess Ordinary Shares.
4.7.4 All Repurchases shall be made in accordance with Applicable
Regulations.
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4.8 ISSUANCE OF SHARES
4.8.1 From the date of this Agreement until the second anniversary
of the date of this Agreement:
(A) no shares in the capital of P&O Princess carrying
voting rights or securities convertible into or
exercisable for such shares (other than an
Equalization Share and the P&O Princess Special
Voting Share) shall be issued to any member of the
Carnival Group except where such shares or securities
are issued on a pre-emptive basis to all shareholders
of P&O Princess; and
(B) no shares in the capital of Carnival carrying voting
rights or securities convertible into or exercisable
for such shares (other than an Equalization Share)
shall be issued to any member of the P&O Princess
Group except where such shares or securities are
issued on a pre-emptive basis to all shareholders of
Carnival.
4.8.2 From the second anniversary of the date of this Agreement
until the fifth anniversary of the date of this Agreement:
(A) during each twelve month period commencing on an
anniversary of this Agreement, shares in the capital
of P&O Princess carrying voting rights or securities
convertible into or exercisable for such shares
representing (in the aggregate, on an as-converted
basis) not more than 5% of the total aggregate voting
power of the outstanding shares in the capital of P&O
Princess carrying voting rights and the shares
issuable upon conversion or exercise of such
securities (including any Disenfranchised P&O
Ordinary Shares) as of the beginning of such twelve
month period may be issued to a member of the
Carnival Group; and
(B) during each twelve month period commencing on an
anniversary of this Agreement, shares in the capital
of Carnival carrying voting rights or securities
convertible or exercisable for into such shares
representing (in the aggregate, on an as-converted
basis) not more than 5% of the total aggregate voting
power of the outstanding shares in the capital of
Carnival carrying voting rights and the shares
issuable upon conversion or exercise of such
securities (including for the purpose of this
provision any Disenfranchised Carnival Common Stock)
as of the beginning of such twelve month period may
be issued to a member of the P&O Princess Group.
4.8.3 From the fifth anniversary of the date of this Agreement:
(A) there shall be no restriction on the issue of
Carnival Common Stock to a member of the P&O Princess
Group; and
(B) there shall be no restriction on the issue of P&O
Princess Ordinary Shares to a member of the Carnival
Group.
4.8.4 All issuances of shares by Carnival and P&O Princess shall be
made in accordance with Applicable Regulations.
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5. JOINT ELECTORATE ACTIONS
5.1 JOINT ELECTORATE ACTIONS
5.1.1 All actions put to shareholders of either P&O Princess or
Carnival, except for Class Rights Actions (see Clause 6 below)
or resolutions of a procedural or technical nature (see Clause
7.5 below), will be Joint Electorate Actions.
5.1.2 For the avoidance of doubt, the following actions, if put to
the holders of P&O Princess Ordinary Shares or the holders of
Carnival Common Stock, will be put to the Combined
Shareholders as Joint Electorate Actions in accordance with
the Joint Electorate Procedure set forth in Clause 5.2 below:
(A) the appointment, removal or re-election of any
director of Carnival or P&O Princess, or both of
them;
(B) to the extent such receipt or adoption is required by
Applicable Regulations, the receipt or adoption of
the financial statements of P&O Princess or Carnival,
or both of them, or accounts prepared on a combined
basis, other than any accounts in respect of the
period(s) ended prior to the date of Completion;
(C) a change of name by P&O Princess or Carnival, or both
of them; or
(D) the appointment or removal of the auditors of P&O
Princess or Carnival, or both of them.
5.2 JOINT ELECTORATE PROCEDURE
Subject to Clause 7.4, all Joint Electorate Actions shall be approved
in accordance with the Joint Electorate Procedure. A Joint Electorate
Action shall be approved under the Joint Electorate Procedure if, and
only if, such action shall have been approved by:
(A) a Majority Resolution of P&O Princess (or, if the P&O Princess
Memorandum and Articles or Applicable Regulations require the
action to be approved by Supermajority Resolution of the
holders of the P&O Princess Ordinary Shares, by a
Supermajority Resolution); and
(B) a Majority Resolution of Carnival (or, if the Carnival
Articles and By-laws or Applicable Regulations require the
action to be approved by Supermajority Resolution of the
holders of the Carnival Common Stock, by a Supermajority
Resolution).
5.3 DISENFRANCHISED P&O ORDINARY SHARES
If at any relevant time the rights attached to Disenfranchised P&O
Ordinary Shares enable the holders of such shares to vote at any
general meeting or class meeting of the Company then all references in
Clauses 5.1 and 5.2 to:
(A) shareholders of P&O Princess;
(B) holders of P&O Princess Ordinary Shares; and
(C) Combined Shareholders,
16
shall include the holders of such Disenfranchised P&O Ordinary Shares
and such persons shall have the right to vote such shares on Joint
Electorate Actions, Class Rights Actions of P&O Princess and procedural
resolutions in the same manner as the holders of P&O Princess Ordinary
Shares for the purposes of Clauses 5, 6 and 7.
5.4 DISENFRANCHISED CARNIVAL COMMON STOCK
If at any relevant time the rights attached to Disenfranchised Carnival
Common Stock enable the holders of such shares to vote at any general
meeting or class meeting of the Company then all references in Clauses
5.1 and 5.2 to:
(A) shareholders of Carnival;
(B) holders of Carnival Common Stock; and
(C) Combined Shareholders,
shall include the holders of such Disenfranchised Carnival Common Stock
and such persons shall have the right to vote such shares on Joint
Electorate Actions, Class Rights Actions of Carnival and procedural
resolutions in the same manner as holders of Carnival Common Stock for
the purposes of Clauses 5, 6 and 7.
6. SEPARATE APPROVALS OF CLASS RIGHTS ACTIONS
6.1 CLASS RIGHTS ACTION
Notwithstanding anything to the contrary contained in this Agreement,
if either P&O Princess or Carnival proposes to take any of the
following actions:
(A) the voluntary Liquidation of such company for which the
approval of shareholders is required by Applicable Regulations
or otherwise sought other than a voluntary Liquidation of both
companies at or about the same time with the purpose or effect
of no longer continuing the operation of the businesses of the
companies as a combined going concern and not as part of a
scheme, plan, transaction, or series of related transactions
the primary purpose or effect of which is to reconstitute all
or a substantial part of such businesses in one or more
successor entities;
(B) the sale, lease exchange or other disposition of all or
substantially all of the assets of such company, other than in
a bona fide commercial transaction undertaken for a valid
business purpose in which such company receives consideration
with a fair market value reasonably equivalent to the assets
disposed of and not as a part of a scheme, plan, transaction
or series of related transactions the primary purpose or
effect of which is to collapse or unify the DLC Structure;
(C) any adjustment to the Carnival Equivalent Number or the
Equalization Ratio otherwise than in accordance with the
provisions of this Agreement;
(D) except where specifically provided for in the relevant
agreements, any amendment to the terms of, or termination of,
this Agreement, the SVE Special Voting Deed, the P&O Princess
Guarantee or the Carnival Guarantee (including, for the
avoidance of doubt, the voluntary termination of either
Guarantee);
17
(E) any amendment to, removal or alteration of the effect of
(which shall include the ratification of any breach of) any
P&O Princess Entrenched Provision or any Carnival Entrenched
Provision;
(F) any amendment to, removal or alteration of the effect of
(which shall include the ratification of any breach of)
Article XII or XIII of the Carnival Articles that would cause,
or at the time of implementation would be reasonably likely to
cause, an Exchange Event described in clause (a) of the
definition of such term in the P&O Princess Articles of
Association to occur; and
(G) the doing of anything which the Boards of Carnival and P&O
Princess agree (either in a particular case or generally), in
their absolute discretion, should be approved as a Class
Rights Action,
each of them agrees with the other that it shall only take such action
after it has been approved as a Class Rights Action in accordance with
this Clause 6.
6.2 APPROVALS OF CLASS RIGHTS ACTION
A Class Rights Action shall require approval by a Majority Resolution
of each company, unless Applicable Regulations and/or the Carnival
Articles and By-laws and the P&O Princess Memorandum and Articles (as
relevant) require such Class Rights Action to be approved as a
Supermajority Resolution by either or both companies, in which case it
shall be approved as a Supermajority Resolution by the relevant company
or companies to which such requirement applies (the "REQUIRED
MAJORITY").
6.3 CLASS RIGHTS PROCEDURE
A Class Rights Action must be approved separately by the Required
Majority of (i) the holders of the Carnival Common Stock and the
holders of any other class of shares of Carnival that are entitled to
vote pursuant to Applicable Regulations and/or the Carnival Articles
and By-laws; and (ii) the holders of the P&O Princess Ordinary Shares
and the holders of any other class of shares of P&O Princess that are
entitled to vote pursuant to Applicable Regulations and/or the P&O
Princess Memorandum and Articles. Each of Carnival and P&O Princess
will convene a shareholders meeting at which the holders of its Shares
and the holder of its Special Voting Share (and the holders of any
other relevant class of shares) may vote upon the Class Rights Action
together as a single class on a poll; PROVIDED THAT the holder of the
relevant Special Voting Share shall not vote on such resolution unless
the Class Rights Action is not approved by the Required Majority of the
holders of Shares (and any other relevant class of shares) of the other
company, in which case the holder of the Special Voting Share shall
cast all votes to which the Special Voting Share is entitled against
such resolution in accordance with the Carnival Articles and By-laws
(in the case of the Carnival Special Voting Share) or in accordance
with the P&O Princess Articles of Association (in the case of the P&O
Princess Special Voting Share).
18
7. MEETINGS AND VOTING
7.1 OBLIGATIONS TO CONVENE MEETINGS
In relation to both Joint Electorate Actions and Class Rights Actions:
(A) each party shall, as soon as practicable, convene a meeting of
its shareholders for the purpose of considering a resolution
to approve the Joint Electorate Action or Class Rights Action;
(B) each party shall endeavour to ensure such meetings are held on
dates as close together as is practicable; and
(C) the parties shall co-operate fully with each other in
preparing resolutions, explanatory memoranda or any other
information or material required in connection with the
proposed Joint Electorate Action or Class Rights Action.
7.2 POLL
Each of P&O Princess and Carnival agrees with the other that any
resolution proposed at a meeting of its shareholders in relation to
which the holder of the P&O Princess Special Voting Share, or the
holder of the Carnival Special Voting Share, is or may be entitled to
vote shall be decided on by a poll (i.e. by tabulation of individual
votes) and not, for the avoidance of doubt, on a show of hands.
7.3 TIMING OF POLL
7.3.1 P&O Princess agrees with Carnival that any poll in which the
holder of the P&O Princess Special Voting Share is or may be
entitled to vote shall (as regards the P&O Princess Special
Voting Share) be kept open for such time as to allow the
corresponding general meeting of Carnival to be held and for
the votes attaching to the P&O Princess Special Voting Share
to be calculated and cast on such poll, although such poll may
be closed earlier in respect of shares of other classes.
7.3.2 Carnival agrees with P&O Princess that any poll on which the
holder of the Carnival Special Voting Share is or may be
entitled to vote shall (as regards the Carnival Special Voting
Share) be kept open for such time as to allow the
corresponding general meeting of P&O Princess to be held and
for the votes attaching to the Carnival Special Voting Share
to be calculated and cast on such poll, although such poll may
be closed earlier in respect of shares of other classes.
7.4 DISCRETIONARY MATTERS
The Boards of P&O Princess and Carnival may by agreement (subject to
Applicable Regulations):
(A) decide to seek the approval of the shareholders (or any class
of shareholders) of either or both of P&O Princess and
Carnival for any matter that would not otherwise require such
approval;
(B) require any Joint Electorate Action to be approved instead as
a Class Rights Action; or
19
(C) specify a higher majority vote than the majority that would
otherwise be required for any shareholder vote provided for in
this Clauses 5 and 6.
7.5 PROCEDURAL RESOLUTIONS
Notwithstanding anything to the contrary contained in this Agreement,
resolutions of Carnival or P&O Princess of a procedural or technical
nature (and which do not adversely affect the other company or its
shareholders in any material respect) shall not constitute Joint
Electorate Actions or Class Rights Actions and will be voted on by the
relevant company's shareholders voting separately, and neither Special
Voting Share will have any vote on those resolutions. Resolutions which
will constitute resolutions of a procedural or technical nature may
include any resolution:
(A) that certain people be allowed to attend or excluded from
attending the meeting;
(B) that discussion be closed and the question put to the vote
(provided no amendments have been raised);
(C) that the question under discussion not be put to the vote;
(D) to proceed with matters in an order other than that set out in
the notice of the meeting;
(E) to adjourn the debate (for example, to a subsequent meeting);
and
(F) to adjourn the meeting.
8. CHANGE OF CONTROL OF EITHER P&O PRINCESS OR CARNIVAL
Carnival and P&O Princess shall co-operate with each other in the
prompt enforcement of the provisions of Articles XIV and XV of the
Carnival Articles and Articles 277 to 286 of the P&O Princess Articles
of Association to the full extent possible under law.
9. STOCK EXCHANGES
Each of P&O Princess and Carnival will, and so far as it is able will
ensure that each of its Subsidiaries will, ensure that it is in a
position to comply with obligations imposed on it by all stock
exchanges on which either or both of the parties' shares (or other
securities or depository receipts representing such shares or
securities) are from time to time listed, quoted or traded.
10. LIQUIDATION
10.1 LIQUIDATION PRINCIPLE
If either or both of Carnival and/or P&O Princess goes into any
voluntary or involuntary Liquidation, Carnival and P&O Princess will,
subject to Clause 10.2 below, make and receive such payments or take
such other actions required to ensure that the holders of Shares
(which, for the avoidance of doubt in this Clause 10 do not include the
holders of Disenfranchised Shares) of each entity would, had each
entity gone into Liquidation on the same date, be entitled to receive a
Liquidation Distribution which is equivalent on a per Share basis in
accordance with the then existing Equalization Ratio, having regard to
the Liquidation Exchange Rate but ignoring any shareholder Tax or Tax
Benefit.
20
10.2 LIQUIDATION PROCEDURE
10.2.1 To establish the amount payable under Clause 10.1, each of
Carnival and P&O Princess will determine the amount of assets
(if any) it will have available for distribution in a
Liquidation on the date of Liquidation (or notional date of
Liquidation) to holders of its Shares after payment of all its
debts and other financial obligations, including any tax costs
associated with the realisation of any assets on a Liquidation
and any payments due on any preference shares (its "NET
ASSETS"). To the extent that the Net Assets of one company
would enable it to make a Liquidation Distribution to the
holders of its Shares that is greater than the Liquidation
Distribution that the other company could pay from its Net
Assets to the holders of its Shares, adjusting such
comparative Liquidation Distribution in accordance with the
then existing Equalization Ratio and having regard to the
Liquidation Exchange Rate, but ignoring any shareholder Tax
(including any withholding Tax required to be deducted by the
company concerned) or Tax Benefit, then, subject to Clause
10.2.2, such company will make a balancing payment (or take
any other balancing action described in Clause 10.3 below) in
such amount as will ensure that both companies may make
equivalent Liquidation Distributions to the holders of their
Shares in accordance with the then existing Equalization Ratio
and having regard to the Liquidation Exchange Rate, but
ignoring any shareholder Tax (including any withholding Tax
required to be deducted by the company concerned) or Tax
Benefit, PROVIDED ALWAYS THAT no company need make a balancing
payment (or take any other action) as described in this Clause
10.2 if it would result in neither the holders of Carnival
Common Stock nor the holders of P&O Princess Ordinary Shares
being entitled to receive any Liquidation Distribution at all.
10.2.2 For purposes of Clause 10.2.1, the amount a company is
required to pay the other company shall be determined after
taking into account all Taxes payable by, and all Tax credits,
losses or deductions of, the parties with respect to the
payment or receipt of such payment and any such payment may be
made on the Equalization Share issued by the paying party if
both Boards deem it appropriate.
10.3 LIQUIDATION ACTIONS
In giving effect to the principle regarding a Liquidation of Carnival
and/or P&O Princess described above, Carnival and P&O Princess shall
take such action as may be required to give effect to that principle,
which may include:
(A) making a payment (of cash or in specie) to the other company;
(B) issuing shares (which may include the Equalization Share) to
the other party or to holders of Shares of the other party and
making a distribution or return on such Shares; or
(C) taking any other action that the Boards of Carnival and P&O
Princess shall both consider appropriate to give effect to
that principle.
21
Any action other than a payment of cash by one company to the other
shall require the prior approval of the Boards of both companies.
11. TERMINATION
Either Carnival or P&O Princess may terminate this Agreement:
(A) on the mutual agreement of both parties (upon approval as a
Class Rights Action);
(B) if either party becomes a wholly-owned Subsidiary of the
other; or
(C) after all Liquidation obligations under Clause 10 have been
satisfied.
12. CONSEQUENCES OF TERMINATION
12.1 NON DUAL-LISTED GROUP
In any combination of Carnival and P&O Princess into a single non
dual-listed group, the consideration to be received by the holders of
Shares in the two companies will be calculated by reference to the
applicable Equalization Ratio.
12.2 OTHER CIRCUMSTANCES
12.2.1 In any other circumstances of termination of the DLC
Structure, the Boards of Carnival and P&O Princess will use
their reasonable endeavours to agree a termination proposal to
be put to their shareholders which the Boards consider to be
equitable to both the holders of Carnival Common Stock and the
holders of P&O Princess Ordinary Shares, at the applicable
Equalization Ratio and using an exchange rate agreed by the
parties (failing which, such exchange rate to be determined by
an independent accounting firm). If the Boards cannot agree on
the proposal to be put to their respective holders of Shares,
each Board will appoint an independent accounting firm to
establish the value of its company as at the proposed date of
termination. The two accounting firms will use the same
principles of valuation. If the accounting firms fail to agree
on each other's valuation of any company, then a third
independent accounting firm shall be appointed to finally
determine the value of such company or companies. If, subject
to Clause 12.2.2, the agreed/determined respective values of
each company on a per Share basis (using the agreed or
determined exchange rate) are not equivalent in accordance
with the Equalization Ratio at the proposed date of
termination then a balancing payment, or other balancing
action agreed by the companies, will be made by one company to
the other as appropriate in such amount as will ensure that
such values are equivalent in accordance with such
Equalization Ratio.
12.2.2 For purposes of Clause 12.2.1, the amount a company is
required to pay the other company shall be determined after
taking into account all Taxes payable by, and all Tax credits,
losses or deductions of, the parties with respect to the
payment or receipt of such payment and any such payment may be
made on the Equalization Share issued by the paying party if
both Boards deem it appropriate.
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13. PERSONAL RIGHTS ONLY
13.1 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 2001
The parties to this Agreement do not intend that any term of this
Agreement should be enforceable, by virtue of the Contracts (Rights of
Third Parties) Xxx 0000, by any person who is not a party to this
Agreement.
13.2 PERSONAL RIGHTS
For the avoidance of doubt, the provisions of this Agreement are
personal rights only. They do not, and are not intended to, create any
proprietary right (including any proprietary right in any member,
shareholder or creditor of P&O Princess or Carnival). These
undertakings are not assignable, and cannot be subject to a mortgage,
charge, pledge, encumbrance or other security interest. These
undertakings do not survive any termination of this Agreement. It is
fundamental to the agreement of each of P&O Princess and Carnival to
give these undertakings that they should be relied on solely by the
other, and it is fundamental to the agreement of each of P&O Princess
and Carnival to accept these undertakings that they should be performed
solely by the other.
14. ISSUE OF EQUALIZATION SHARES
The parties agree that the Board of P&O Princess and the Board of
Carnival may agree to the issue of the P&O Princess Equalization Share
to a member of the Carnival Group (against the nominal value of that
share) and of the Carnival Equalization Share to a member of the P&O
Princess Group (against the nominal value of that share), but that
neither Carnival or P&O Princess shall issue its Equalization Share
unless the Board of Carnival and the Board of P&O Princess shall have
agreed to such issue.
15. RELATIONSHIP WITH OTHER DOCUMENTS
In the event of any conflict between this Agreement on the one hand and
on the other hand either of the P&O Princess Memorandum and Articles or
the Carnival Articles and By-laws, the terms of this Agreement shall
prevail and the parties shall use their best endeavours to ensure that
any required amendment to the P&O Princess Memorandum and Articles or
the Carnival Articles and By-laws, as is appropriate, is proposed at
meetings of P&O Princess and/or as the case may be Carnival in order to
conform it or them with the provisions of this Agreement.
16. MISCELLANEOUS
16.1 REGULATORY
The parties will co-operate with each other from time to time to ensure
that all information necessary or desirable for the making of (or
responding to any requests for further information consequent upon) any
notifications or filings made in respect of this Agreement, or the
transactions contemplated hereunder, is supplied to the party dealing
with such notification and filings and that they are properly,
accurately and promptly made.
16.2 NO ASSIGNMENT
Neither of the parties may assign any of its rights or obligations
under this Agreement in whole or in part without the approval of the
other party.
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16.3 NO WAIVER
No waiver by a party of a failure or failures by the other party to
perform any provision of this Agreement shall operate or be construed
as a waiver in respect of any other or further failure whether of a
like or different character.
16.4 NO PARTNERSHIP
Neither this Agreement nor the DLC Transactions are intended for any
legal, tax or other purpose to (i) alter the status of P&O Princess and
Carnival as separate, independent entities (taxed respectively and
exclusively as a United Kingdom and a Panamanian non-resident
corporation), (ii) result in any of Carnival, P&O Princess, their
respective Subsidiaries, or their respective shareholders being treated
as creating an entity or otherwise entering into any partnership, joint
venture, association or agency relationship, or (iii) give either party
(or its respective Subsidiaries or shareholders) any legal or
beneficial ownership interest in the assets or income of the other
party, and shall not be construed as having such effect.
16.5 APPLICABLE REGULATIONS
Each of the obligations of the parties hereto shall be subject to any
Applicable Regulations as in force from time to time. To the extent not
prohibited by law, the parties will do all things necessary to remedy
any situation where Applicable Regulations prevent any party from
performing its obligations hereunder.
16.6 SEVERANCE
If any of the provisions of this Agreement is or becomes invalid,
illegal or unenforceable under any relevant law, the validity, legality
or enforceability of the remaining provisions shall not in any way be
affected or impaired. Notwithstanding the foregoing, the parties shall
thereupon negotiate in good faith in order to agree the terms of a
mutually satisfactory provision, achieving as nearly as possible the
same commercial effect, to be substituted for the provision found to be
invalid, illegal or unenforceable.
16.7 AMENDMENT
Any amendment to or termination of this Agreement shall be made in
writing signed by duly authorised representatives of P&O Princess and
Carnival. Any amendments to this Agreement which are formal or
technical in nature and which are not materially prejudicial to the
interests of the shareholders of either party or are necessary to
correct any inconsistency or manifest error may be agreed between the
Board of P&O Princess and the Board of Carnival. Any other amendment to
this Agreement shall, for the avoidance of doubt, require approval by a
Class Rights Action.
17. NOTICES
Notices, requests, instructions or other documents to be given under
this Agreement shall be in writing and shall be deemed given (i) when
sent if sent by facsimile is promptly confirmed by telephone
confirmation thereof; or (ii) when delivered, if delivered personally
to the intended recipient or sent by overnight delivery via a national
courier service, and in each case, addressed to the intended recipient
at the address shown below:
24
CARNIVAL CORPORATION
0000 X.X. 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000-0000
Attention: Chairman and Chief Executive Officer
Fax: (000) 000-0000
with copies to
CARNIVAL CORPORATION
0000 X.X. 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000-0000
Attention: General Counsel
Fax: (000) 000-0000
P&O PRINCESS CRUISES PLC
Xxxxxxxx Xxxxx
0 Xxxxxxxxx Xxxxx
Xxxxxx XX0 0XX
XX
Attention: Chief Executive Officer
Fax: (+44) (0) 00 0000 0000
with copies to
P&O PRINCESS CRUISES PLC
Xxxxxxxx Xxxxx
0 Xxxxxxxxx Xxxxx
Xxxxxx XX0 0XX
XX
Attention: General Counsel
Fax: (+44) (0) 00 0000 0000
18. COUNTERPARTS
This Agreement may be entered into in any number of counterparts, all
of which taken together, shall constitute one and the same instrument.
Either party may enter into this Agreement by signing any such
counterpart.
19. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Isle of Man.
20. ARBITRATION
(A) Any and all disputes, controversies or claims arising out of
or in connection with this Agreement, any provision hereof, or
any alleged breach hereof, and any and
25
all disputes, controversies or claims relating to the validity
of this Agreement (all of which are referred to herein as
"DISPUTES"), even though some or all of such Disputes are
alleged to be extra-contractual in nature, whether such
Disputes sound in contract, tort or otherwise, at law or in
equity, whether for damages, specific performance or other
relief, shall be finally and exclusively determined by final
and binding arbitration in accordance with this Clause 20.
(B) The arbitral tribunal (the "TRIBUNAL") shall be composed of
three arbitrators, which shall be appointed as follows: each
party shall have the right to appoint one arbitrator; the two
arbitrators so appointed shall then appoint a third arbitrator
who shall serve as the Chairman of the Tribunal. A person or
persons, entitled to appoint an arbitrator, shall appoint such
arbitrator within ten (10) days of receiving notice from a
party of the commencement of an arbitration, failing which
such arbitrator shall, at the written request of either party,
be appointed by the International Chamber of Commerce. At the
initiation of a proceeding and upon the convening of the
Tribunal, the arbitrators shall take an oath of neutrality and
shall decide the matters presented to them based upon the
evidence submitted in the proceeding and without regard to the
origin or circumstances of their appointment or selection for
service on the Tribunal.
(C) The construction and interpretation of this Clause 20, and all
rules of conduct of any arbitration conducted pursuant to this
Clause 20 (including procedural and evidentiary matters),
shall be determined by the Tribunal. Unless otherwise
unanimously agreed by the arbitrators, the venue of the
arbitration shall be Miami, Florida, USA.
(D) The Tribunal shall conduct a hearing as soon as reasonably
practicable after a matter has been submitted for arbitration
by a party and the members of the Tribunal have been selected.
As the Tribunal may direct and without the necessity of
subpoenas or other court orders, the parties shall make their
agents, employees and witnesses available upon reasonable
notice at reasonable times for deposition or for testimony at
the hearing and shall respond to requests for documents. An
award completely disposing of all Disputes (a "FINAL AWARD")
shall be rendered by the Tribunal as soon as reasonably
practicable after the hearing. The Tribunal shall not be
required to submit a detailed statement of its reasons, but
shall set forth concisely in the Final Award the amounts,
actions, contractual responsibilities or other remedial
conclusions that the Tribunal determines to be appropriate.
(E) Each party acknowledges and agrees that in the event either
party breaches any of its obligations under this Agreement,
the other party would be irreparably harmed and could not be
made whole by monetary damages alone. Both parties accordingly
agree that the Tribunal shall have the authority to grant any
party all appropriate non-monetary relief, including ordering
a breaching party to comply fully with its obligations under
the Agreement, ordering specific performance or granting
temporary or permanent injunctive relief; PROVIDED, HOWEVER,
that nothing in this Clause 20 shall be construed to limit the
Tribunal in awarding monetary damages, whether as a sole
remedy or together with remedies for specific performance
and/or injunctive relief.
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(F) Any award made by the Tribunal shall be final and binding upon
each party, each of which expressly waives all right to appeal
or recourse to any court. The Final Award may be confirmed,
and a judgement entered or enforced, in any court of competent
jurisdiction in the United States or the United Kingdom.
(G) The fees and expenses of the arbitrators shall be borne
equally by the parties, but the Final Award may include such
allocations and awards of the arbitrators' fees and expenses
as the Tribunal determines is appropriate.
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IN WITNESS whereof this Agreement has been executed on the date first written
above.
CARNIVAL CORPORATION
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice-Chairman and Chief
Operating Officer
P&O PRINCESS CRUISES PLC
By: /s/ Xxxx Xxxx
----------------------------------
Name: Xxxxxxxx Xxxx
Title: Chief Financial Officer
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SCHEDULE
AUTOMATIC ADJUSTMENTS TO THE CARNIVAL EQUIVALENT NUMBER
1. AUTOMATIC ADJUSTMENTS
1.1 RIGHTS ISSUE OF SHARES
If either Carnival or P&O Princess (the "RELEVANT COMPANY") shall offer
its Shares to the holders of its Shares as a class by way of rights at
less than the Current Market Price of such Shares, the Carnival
Equivalent Number shall be adjusted by:
(i) dividing the Carnival Equivalent Number by the
following fraction where Carnival is the Relevant
Company; and
(ii) multiplying the Carnival Equivalent Number by the
following fraction where P&O Princess is the Relevant
Company:
K + L Q
------- where L = --- M
K + M P
where:
K is the number of Shares of the Relevant Company which rank for the
relevant offer;
M is the aggregate number of Shares being offered to the holders of
Shares of the Relevant Company;
P is the Current Market Price of one Share of the Relevant Company; and
Q is the price per Share being offered to the holders of Shares of the
Relevant Company.
The adjustment to the Carnival Equivalent Number shall become effective
from the later of the time at which the Shares of the Relevant Company
are first traded ex-rights and the time at which the issue of the
Shares becomes wholly unconditional.
1.2 RIGHTS ISSUE OF OTHER SECURITIES
If the Relevant Company shall offer any securities (other than a rights
issue of Shares described in paragraph 1.1 of this Schedule) to holders
of its Shares as a class by way of rights, or grant to such
shareholders as a class by way of rights, any options, warrants or
other rights to subscribe for, purchase or sell any securities,
Carnival Equivalent Number shall be adjusted by:
(i) dividing the Carnival Equivalent Number by the
following fraction where Carnival is the Relevant
Company; and
(ii) multiplying the Carnival Equivalent Number by the
following fraction where P&O Princess is the Relevant
Company:
R - S
-------
R
29
where:
R is the Current Market Price of one Share; and
S is the estimated Fair Market Value (calculated in the same currency
as the Shares described in R above) of the portion of the rights
attributable to one Share of the Relevant Company over any five
consecutive Dealing Days determined by the Board of the Relevant
Company during the twenty Dealing Days preceding the date on which the
Shares are first traded ex-rights.
The adjustment to the Carnival Equivalent Number shall become effective
from the later of the time at which the Shares of the Relevant Company
are first traded ex-rights and the time at which the issue of the
Shares becomes wholly unconditional.
1.3 NON CASH DISTRIBUTIONS AND SHARE REPURCHASES
If the Relevant Company shall implement (i) any distribution of any
non-cash assets; or (ii) any repurchase of its Shares involving an
offer made to all or substantially all of its holders of Shares to
repurchase their Shares at a premium to the Current Market Price of
such shares, the Carnival Equivalent Number shall be adjusted by:
(i) dividing the Carnival Equivalent Number by the
following fraction where Carnival is the Relevant
Company; and
(ii) multiplying the Carnival Equivalent Number by the
following fraction where P&O Princess is the Relevant
Company:
V
T - -
U
-----
T
where:
T is the Current Market Price of one Share of the Relevant Company;
U is equal to the number of Shares of the Relevant Company prior to the
non cash distribution or repurchase; and
V is (i) in the case of a non cash distribution, the aggregate Fair
Market Value of the assets distributed to shareholders of the Relevant
Company; and (ii) in the case of a repurchase, the aggregate premium
paid to holders of Shares; in either case denominated in the same
currency as the Current Market Price referred to in T and disregarding
the effect of any shareholder Taxes or Tax Benefits and/or any fees
incurred in connection with the non-cash Distribution or repurchase.
The adjustment to the Carnival Equivalent Number shall become effective
immediately following implementation of the non-cash Distribution or
repurchase.
1.4 CONSOLIDATION OR SUBDIVISION OF SHARES
If there shall be a change to the number of Shares of the Relevant
Company as a result of a consolidation or subdivision of shares, the
Carnival Equivalent Number shall be adjusted by:
30
(i) dividing the Carnival Equivalent Number by the
following fraction where Carnival is the Relevant
Company; and
(ii) multiplying the Carnival Equivalent Number by the
following fraction where P&O Princess is the Relevant
Company:
X
---
Y
where:
X is the number of Shares of the Relevant Company outstanding or in
issue immediately before such alteration; and
Y is the number of Shares of the Relevant Company outstanding or in
issue immediately after such alteration.
The adjustment to the Carnival Equivalent Number shall become effective
immediately after the alteration takes effect.
1.5 BONUS ISSUE OR STOCK DIVIDEND
If the Relevant Company issues any Shares to holders of Shares for no
consideration or solely by way of capitalisation of profits or
reserves, the Carnival Equivalent Number shall be adjusted by:
(i) dividing the Carnival Equivalent Number following
fraction where Carnival is the Relevant Company; and
(ii) multiplying the Carnival Equivalent Number by the
following fraction where P&O Princess is the Relevant
Company:
X
---
Y
where:
X is the number of Shares of the Relevant Company outstanding
immediately before the issue; and
Y is the number of Shares of the Relevant Company outstanding
immediately after such issue.
The adjustment to the Carnival Equivalent Number shall become effective
from the time the issue of such Shares becomes wholly unconditional.
2. CERTIFICATION
The auditors for the time being of P&O Princess and Carnival shall
jointly certify the arithmetical adjustment to be made to the Carnival
Equivalent Number in the circumstances set out in this Schedule where
an adjustment is made to such Carnival Equivalent Number and any
adjustments so certified shall, in the absence of manifest error, be
final and binding on the parties and on all others affected thereby.
P&O Princess and Carnival agree with each other to make and co-ordinate
such public announcements
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as are appropriate in relation to any such adjustments, subject to the
requirements of Applicable Regulations.
3. DEFINITIONS
In this Schedule:
"CURRENT MARKET PRICE" means the average market price of one Share of
the Relevant Company (on its primary or main stock exchange) calculated
over any five consecutive Dealing Days determined by the Board of the
Relevant Company during the twenty Dealing Days preceding: -
(i) in the case of P in paragraph 1.1 and R in paragraph
1.2, the date on which such Shares are first traded
ex-rights; and
(ii) in the case of T in paragraph 1.3, the date on which
the non-cash distribution or repurchase is
implemented;
"DEALING DAY" means, with respect to any relevant market for the
Shares, a day on which trading is conducted in such market; and
"FAIR MARKET VALUE" means the fair market value determined by an
investment bank of international repute appointed by agreement between
the Boards of Carnival and P&O Princess, acting as expert and not as
arbitrator and whose determination (in the absence of manifest error)
shall be final and binding on the parties and on all others affected by
such determination.
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