[Proposed Form]
DATED 200[2][3]
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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 ............................................................ 20
8. Change of Control of either P&O Princess or Carnival ........................... 21
9. Stock Exchanges ................................................................ 21
10. Liquidation .................................................................... 21
11. Termination .................................................................... 23
12. Consequences of Termination .................................................... 23
13. Personal Rights Only ........................................................... 24
14. Issue of Equalization Shares ................................................... 24
15. Relationship with other Documents .............................................. 24
16. Miscellaneous .................................................................. 24
17. Notices ........................................................................ 25
18. Counterparts ................................................................... 26
19. Governing Law .................................................................. 26
20. Arbitration .................................................................... 26
EQUALIZATION AND GOVERNANCE AGREEMENT
THIS AGREEMENT is made on . 200[2][3] between:
(1) CARNIVAL CORPORATION, a Panamanian corporation having its principal place
of business at Carnival Place, 3655, 87 Avenue, Miami, Florida, 33178 -
2482 ("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 77 New
Oxford Street, London WC1A 1PP ("P&O Princess")
WHEREAS:
(A) P&O Princess and Carnival entered into an Implementation Agreement as of .
200[2][3] 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 or London 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 Amended 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
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subdivided or consolidated from time to time and any capital stock into
which such common stock may be reclassified, converted or otherwise
changed;
"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 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 agreement of even date herewith 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 SVC" means Carnival SVC Limited, a company incorporated in
England and Wales with registered number . or such other company as
replaces Carnival SVC Limited pursuant to the terms of the SVC Special
Voting Deed;
"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
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to pay or 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 SVC
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 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 Fraction" means, as of any date, the Equalization Ratio as of
such date expressed as a fraction where the numerator is one and the
denominator is the P&O Princess Equivalent Number comprising the second
element of such Equalization Ratio;
"Equalization Ratio" means the ratio of (i) one share of Carnival Common
Stock to (ii) that number of P&O Princess Ordinary Shares that have the
same rights to distributions of income and capital and voting rights as one
share of Carnival Common Stock (the "P&O Princess Equivalent Number"). The
Equalization Ratio shall initially be 1:3.3289 but if the Parties agree to
make such subdivisions and/or combinations of Carnival Common Stock and/or
P&O Princess Ordinary Shares as are necessary to achieve the result it
shall instead be 1:1 immediately after Completion and shall be subject to
adjustment in the future as provided in Clause 4 and the Schedule. In all
cases, the P&O Princess Equivalent Number shall be rounded to five decimal
places;
"Equalization Share" means, in relation to P&O Princess, the P&O Princess
Equalization Share and, in relation to Carnival, the Carnival Equalization
Share;
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"equity equivalents" has the meaning given in Clause 4.4(A);
"Equivalent Distribution" has the meaning given in Clause 3.1;
"Equivalent Liquidation Payments" has the meaning given in Clause 10.2;
"Equivalent Resolution" means a resolution of either P&O Princess or
Carnival, certified by a duly authorised officer of P&O Princess or
Carnival as equivalent in nature and effect to a resolution of the other
company;
"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 as
of . 200[2][3];
"Joint Electorate Action" means any of the resolutions referred to 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 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
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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;
"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 (Pounds)50,000 in the capital of P&O Princess;
"P&O Princess Equivalent Number" has the meaning given in the definition of
"Equalization Ratio";
"P&O Princess ADS" means an American Depositary Share of P&O Princess, each
of which represents four P&O Princess Ordinary Shares, which is listed on
NYSE;
"P&O Princess Guarantee" means the agreement of even date herewith 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$[.]
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;
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"P&O Princess SVC" means P&O Princess SVC Limited, a company incorporated
in England and Wales with registered number ? or such other company as
replaces P&O Princess SVC Limited pursuant to the terms of the SVC Special
Voting Deed;
"P&O Princess Special Voting Share" means the special voting share of
(Pounds)1 in P&O Princess;
"Parallel Shareholder Meeting" means, in relation to Carnival or P&O
Princess, any meeting of the shareholders of that company which is:
(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 P&O Princess Ordinary Shares by P&O Princess or a
reduction by P&O Princess of its issued Ordinary share capital;
(b) a repurchase of Carnival Common Stock by Carnival; or
(c) a purchase of P&O Princess Ordinary Shares by any member of the
Carnival Group; or
(d) a purchase of Carnival Common Stock by any member of the P&O Princess
Group.
"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;
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"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 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;
"SVC Special Voting Deed" means the agreement of even date herewith entered
into between Carnival SVC, P&O Princess SVC, the 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);
"Trustee" means [.] or such other trust company as shall be agreed between
P&O Princess and Carnival;
"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 Act 2000;
"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 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.
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(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.
(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 "(Pounds)" and "p" are to pounds sterling and
to pence sterling.
(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:
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(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 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
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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 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 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.
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4.2 Automatic Adjustment
If any Action by Carnival or P&O Princess is covered by the Schedule, then
an automatic adjustment to 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
(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 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 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 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;
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(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:
(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; and
(I) any purchase, cancellation or reduction of Disenfranchised Carnival
Common Stock.
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:
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(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;
(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 Disenfranchised P&O
Ordinary Shares) or other shares in the capital of P&O Princess
carrying voting rights shall be Repurchased;
(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;
(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;
(B) there shall be no restriction on the Repurchase of P&O Princess
Ordinary Shares.
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4.7.4 All Repurchases shall be made in accordance with Applicable
Regulations.
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 P&O Princess Ordinary Shares or other shares or securities
convertible into shares in the capital of P&O Princess carrying
voting rights (other than an Equalization Share) shall be issued
to any member of the Carnival Group except where P&O Princess
Ordinary Shares or other shares or securities convertible into
shares in the capital of P&O Princess carrying voting rights are
issued on a pre-emptive basis to all shareholders of P&O
Princess;
(B) no Carnival Common Stock or other shares or securities
convertible into common stock of Carnival carrying voting rights
(other than an Equalization Share) shall be issued to any member
of the P&O Princess Group except where Carnival Common Stock or
other shares or securities convertible into common stock of
Carnival carrying voting rights 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, 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 or securities
convertible into 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 issued to a member of the Carnival
Group;
(B) during each twelve month period commencing on an anniversary of
this Agreement, Carnival Common Stock representing not more than
5% of the total aggregate outstanding Carnival Common Stock and
other shares or securities convertible into common stock of
Carnival carrying voting rights (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;
(B) there shall be no restriction on the issue of P&O Princess
Ordinary Shares to a member of the Carnival Group;
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4.8.4 All issuances of shares by Carnival and P&O Princess shall be made in
accordance with Applicable Regulations.
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 administrative 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:
(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
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 the Disenfranchised P&O
Ordinary Shares enable the holders of such shares to attend or 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 the 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 the Disenfranchised Carnival
Common Stock enable the holders of such shares to attend or 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 the 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 proposed 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 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 SVC
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
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 vote as follows:
(A) in respect of the Carnival Special Voting Share whereby the resolution
was not approved by the Requisite Majority of 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 (excluding
the P&O Princess Special Voting Share):
(i) if the resolution needs to be passed by a Majority Resolution,
then the Carnival Special Voting Share shall vote to cast such
number of votes
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representing the largest whole percentage that is less than the
percentage of the number of votes as would be necessary to defeat
a Majority Resolution if the total votes capable of being cast by
the outstanding Carnival Common Stock and other class of shares
of Carnival that are entitled to vote pursuant to Applicable
Regulations and/or the Carnival Articles and By-laws (including
the Carnival Special Voting Share) were cast in favour of the
resolution at the Carnival Parallel General Meeting; and
(ii) if the resolution needs to be passed by a Supermajority
Resolution, then the Carnival Special Voting Share shall vote to
cast such number of votes representing the largest whole
percentage that is less than the percentage of the number of
votes as would be necessary to defeat a Supermajority Resolution
if the total votes capable of being cast by the outstanding
Carnival Common Stock and other class of shares of Carnival that
are entitled to vote pursuant to Applicable Regulations and/or
the Carnival Articles and By-laws (including the Carnival Special
Voting Share) were cast in favour of the resolution at the
Carnival Parallel General Meeting; and
(B) in respect of the P&O Princess Special Voting Share whereby the
resolution was not approved by the Requisite Majority of the holders
of the Carnival Common Stock and the holders of any other class of
shares or Carnival that are entitled to vote pursuant to Applicable
Regulations and/or the Carnival Articles and By-laws (excluding the
Carnival Special Voting Share):
(i) if the resolution needs to be passed by a Majority Resolution,
then the P&O Princess Special Voting Share shall vote to cast
such number of votes representing the largest whole percentage
that is less than the percentage of the number of votes as would
be necessary to defeat a Majority Resolution if the total votes
capable of being cast by the issued P&O Princess Ordinary Shares
and 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 (including the P&O Princess Special
Voting Share) were cast in favour of the resolution at the P&O
Princess Parallel General Meeting; and
(ii) if the resolution needed to be passed by a Supermajority
Resolution, then the P&O Princess Special Voting Share shall vote
to cast such number of votes representing the largest whole
percentage that is less than the percentage of the number of
votes (less one vote) as would be necessary to defeat a
Supermajority Resolution if the total votes capable of being cast
by the issued P&O Princess Ordinary Shares and 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 (including the P&O Princess Special Voting Share) were
cast in favour of the resolution at the P&O Princess Parallel
General Meeting.
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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
20
(C) specify a higher majority vote than the majority that would otherwise
be required for any shareholder vote provided for in this Clause 7.
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 Memorandum and
Articles 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
21
existing Equalization Ratio, having regard to the Liquidation Exchange
Rate but ignoring any shareholder Tax or Tax Benefit.
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 (taking into account the then existing Equalization
Ratio) than the equivalent 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 ("Equivalent
Liquidation Payments"), 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 Payments, 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.
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.
22
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 1999
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) Act 1999, 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.
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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.
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
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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 such person or persons at such address or addresses as
each party shall notify in writing to the other party at the address
given at the head of this Agreement or thereafter at the relevant
address for notification from time to time.
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
English law.
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 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
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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.
(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.
IN WITNESS whereof this Agreement has been executed on the date first written
above.
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Schedule
Automatic Adjustments to the Equalization Ratio
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 Equalization
Ratio shall be adjusted by:
(i) multiplying the Equalization Fraction by the following
fraction where Carnival is the Relevant Company; and
(ii) dividing the Equalization Fraction 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 Equalization Ratio 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, the
Equalization Ratio shall be adjusted by:
(i) multiplying the Equalization Fraction by the following
fraction where Carnival is the Relevant Company; and
(ii) dividing the Equalization Fraction by the following
fraction where P&O Princess is the Relevant Company:
R - S
-----
R
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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 Equalization Ratio 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 Equalization Ratio shall be adjusted by:
(i) multiplying the Equalization Fraction by the following
fraction where Carnival is the Relevant Company; and
(ii) dividing the Equalization Fraction 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 Equalization Ratio 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
Equalization Ratio shall be adjusted by:
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(i) multiplying the Equalization Fraction by the following
fraction where Carnival is the Relevant Company; and
(ii) dividing the Equalization Fraction 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 Equalization Ratio 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 Equalization Ratio shall be adjusted by:
(i) multiplying the Equalization Fraction by the following
fraction where Carnival is the Relevant Company; and
(ii) dividing the Equalization Fraction 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 Equalization Ratio 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
Equalization Ratio in the circumstances set out in this Schedule where
an adjustment is made to such Equalization Ratio 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 as are appropriate in
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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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