FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number 1-9610
CARNIVAL CORPORATION
(Exact name of registrant as specified in its charter)
Republic of Panama 59-1562976
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3655 N.W. 87th Avenue, Miami, Florida 33178-2428
(Address of principal executive offices) (Zip code)
(305) 599-2600
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No__
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Common Stock, $.01 par value - 613,368,768 shares as of July 9, 1999.
CARNIVAL CORPORATION
I N D E X
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets -
May 31, 1999 and November 30, 1998 1
Consolidated Statements of Operations -
Six and Three Months Ended May 31, 1999
and 1998 2
Consolidated Statements of Cash Flows -
Six Months Ended May 31, 1999
and 1998 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings. 21
Item 4. Submission of Matters to a Vote of Security Holders. 22
Item 5. Other Information. 23
Item 6. Exhibits and Reports on Form 8-K. 24
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
<TABLE>
<CAPTION>
May 31, November 30,
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 382,640 $ 137,273
Short-term investments 614,799 5,956
Accounts receivable, net 103,214 60,837
Consumable inventories, at average cost 81,035 75,449
Prepaid expenses and other 100,211 90,764
Total current assets 1,281,899 370,279
PROPERTY AND EQUIPMENT, NET 5,770,921 5,768,114
INVESTMENTS IN AND ADVANCES TO AFFILIATES 494,185 546,693
GOODWILL, LESS ACCUMULATED AMORTIZATION OF
$78,982 AND $72,255 406,708 437,464
OTHER ASSETS 45,595 56,773
$7,999,308 $7,179,323
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 33,667 $ 67,626
Accounts payable 180,115 168,546
Accrued liabilities 202,615 206,968
Customer deposits 822,719 638,383
Dividends payable 55,193 53,590
Total current liabilities 1,294,309 1,135,113
LONG-TERM DEBT 1,240,997 1,563,014
DEFERRED INCOME AND OTHER LONG-TERM LIABILITIES 82,791 63,036
COMMITMENTS AND CONTINGENCIES (Note 5)
MINORITY INTEREST 138,712 132,684
SHAREHOLDERS' EQUITY
Common Stock; $.01 par value; 960,000 shares
authorized; 613,257 and 595,448 shares
issued and outstanding 6,133 5,955
Paid-in-capital 1,620,848 880,488
Retained earnings 3,630,364 3,379,628
Other (14,846) 19,405
Total shareholders' equity 5,242,499 4,285,476
$7,999,308 $7,179,323
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Three Months
Ended May 31, Ended May 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUES $1,544,407 $1,219,196 $796,149 $661,358
COSTS AND EXPENSES
Operating expenses 848,529 669,951 432,426 362,356
Selling and administrative 216,287 163,784 105,517 84,950
Depreciation and
amortization 116,815 89,266 58,911 46,258
1,181,631 923,001 596,854 493,564
OPERATING INCOME BEFORE
LOSS FROM AFFILIATED
OPERATIONS 362,776 296,195 199,295 167,794
LOSS FROM AFFILIATED
OPERATIONS, NET (7,099) (13,034) (1,182) (2,353)
OPERATING INCOME 355,677 283,161 198,113 165,441
NONOPERATING INCOME (EXPENSE)
Interest income 18,362 5,885 11,475 2,148
Interest expense, net of
capitalized interest (26,880) (24,735) (13,490) (12,176)
Other income (expense), net 7,941 (662) 4,945 2,609
Income tax benefit 7,645 6,861 2,839 2,574
Minority interest (1,642) (540)
5,426 (12,651) 5,229 (4,845)
NET INCOME $ 361,103 $270,510 $203,342 $160,596
EARNINGS PER SHARE:
Basic $.59 $.45 $.33 $.27
Diluted $.59 $.45 $.33 $.27
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION> Six Months Ended May 31,
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net income $361,103 $270,510
Adjustments
Depreciation and amortization 116,815 89,266
Dividends received and loss from
affiliated operations, net 19,017 23,621
Minority interest 1,642
Other 2,225 7,047
Changes in operating assets and liabilities,
excluding businesses acquired and consolidated
Increase in:
Receivables (25,046) (4,291)
Consumable inventories (5,586) (4,690)
Prepaid expenses and other (9,482) (20,196)
Increase (decrease) in:
Accounts payable 11,569 38,109
Accrued liabilities (3,219) 2,321
Customer deposits 184,336 191,165
Net cash provided from operating
activities 653,374 592,862
INVESTING ACTIVITIES
(Increase) decrease in short-term
investments, net (608,278) 324
Additions to property and equipment, net (112,860) (702,184)
Acquisitions of consolidated subsidiaries, net 9,415 (246,097)
Other, net 34,797 42,038
Net cash used for investing activities (676,926) (905,919)
FINANCING ACTIVITIES
Proceeds from long-term debt 7,721 1,184,588
Principal payments of long-term debt (363,799) (801,841)
Dividends paid (108,764) (89,183)
Proceeds from issuance of Common Stock, net 733,882 4,098
Other (121) (3,994)
Net cash provided from
financing activities 268,919 293,668
Net increase (decrease) in cash and
cash equivalents 245,367 (19,389)
Cash and cash equivalents at beginning
of period 137,273 139,989
Cash and cash equivalents at end of period $382,640 $120,600
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CARNIVAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS FOR PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The financial statements included herein have been prepared by Carnival
Corporation, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission.
The accompanying consolidated balance sheet at May 31, 1999 and the
consolidated statements of operations for the six and three months ended May
31, 1999 and 1998 and consolidated statements of cash flows for the six months
ended May 31, 1999 and 1998 are unaudited and, in the opinion of management,
contain all adjustments, consisting of only normal recurring accruals,
necessary for a fair presentation. The operations of Carnival Corporation and
its consolidated subsidiaries (referred to collectively as the "Company") and
its affiliates are seasonal and results for interim periods are not necessarily
indicative of the results for the entire year. Certain amounts in prior periods
have been reclassified to conform with the current period's presentation.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
May 31, November 30,
1999 1998
(in thousands)
<S> <C> <C>
Vessels $5,770,648 $5,754,218
Vessels under construction 572,866 526,529
6,343,514 6,280,747
Land, buildings and improvements 236,554 217,597
Transportation and other equipment 348,710 322,069
Total property and equipment 6,928,778 6,820,413
Less accumulated depreciation and
amortization (1,157,857) (1,052,299)
$5,770,921 $5,768,114
</TABLE>
Interest costs associated with the construction of property and equipment,
consisting primarily of vessels, are capitalized during the construction period
and amounted to $19.9 million and $16.0 million for the six months ended May
31, 1999 and 1998, respectively, and $9.5 million and $9.6 million for the
three months ended May 31, 1999 and 1998, respectively.
NOTE 3 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
May 31, November 30,
1999 1998
(in thousands)
<S> <C> <C>
Commercial paper $ 54,209 $ 368,710
Unsecured 5.65% Notes Due October 15, 2000 199,876 199,833
Unsecured 6.15% Notes Due April 15, 2008 199,538 199,512
Unsecured 6.65% Debentures due January 15, 2028 199,261 199,249
Notes payable bearing interest at rates ranging
from 5.1% to 8.0%, secured by vessels,
maturing through 2009 151,524 174,198
Unsecured 6.15% Notes Due October 1, 2003 124,970 124,967
Unsecured 7.20% Debentures Due October 1, 2023 124,883 124,881
Unsecured 7.7% Notes Due July 15, 2004 99,941 99,936
Unsecured 7.05% Notes Due May 15, 2005 99,881 99,871
Other loans payable 20,581 39,483
1,274,664 1,630,640
Less portion due within one year (33,667) (67,626)
$1,240,997 $1,563,014
</TABLE>
NOTE 4 - SHAREHOLDERS' EQUITY
In December 1998, Carnival Corporation issued 17 million shares of its
Common Stock in a public offering and received net proceeds of approximately
$725 million.
During the six months ended May 31, 1999 and 1998, the Company declared
quarterly cash dividends aggregating $.18 and $.15 per share aggregating $110.4
million and $89.2 million, respectively.
Carnival Corporation's Articles of Incorporation, as amended, authorizes
the Board of Directors, at its discretion, to issue up to 40 million shares of
Preferred Stock. The Preferred Stock is issuable in series which may vary as to
certain rights and preferences and has a $.01 par value. At May 31, 1999, no
Preferred Stock had been issued.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Capital Expenditures
A description of ships under contract for construction at May 31, 1999 is
as follows (in millions, except passenger capacity data):
<TABLE>
<CAPTION>
Expected
Service Passenger Total
Vessel Date(1) Shipyard Capacity(2) Cost(3)
<S> <C> <C> <C> <C>
Carnival Cruise Lines
Carnival Triumph 7/99 Fincantieri(4) 2,758 $ 420
Carnival Victory 8/00 Fincantieri 2,758 440
Carnival Spirit 4/01 Masa-Yards 2,112 375
Carnival Pride 1/02 Masa-Yards(5) 2,112 375
Carnival Conquest 12/02 Fincantieri 2,758 450
Carnival Glory 8/03 Fincantieri 2,758 450
Total Carnival Cruise Lines 15,256 2,510
Holland America Line
Volendam 11/99 Fincantieri(4) 1,440 300
Zaandam 3/00 Fincantieri(4) 1,440 300
Amsterdam 11/00 Fincantieri 1,380 300
Total Holland America Line 4,260 900
Total 19,516 $3,410
</TABLE>
(1) The expected service date is the date the vessel is expected to begin
revenue generating activities.
(2) In accordance with cruise industry practice, passenger capacity is
calculated based on two passengers per cabin even though some cabins can
accommodate three or four passengers.
(3) Estimated total cost of the completed vessel includes the contract price
with the shipyard, design and engineering fees, capitalized interest, various
owner supplied items and construction oversight costs.
(4) These construction contracts are denominated in Italian Lira and have
been fixed into U.S. dollars through the utilization of forward foreign
currency contracts.
(5) This construction contract is denominated in German Deutsche Marks
and has been fixed into U.S. dollars through the utilization of forward foreign
currency contracts.
In connection with the vessels under construction, the Company has paid
$573 million through May 31, 1999 and anticipates paying approximately $940
million during the twelve month period ending May 31, 2000 and approximately
$1.9 billion thereafter.
Litigation
Several actions (collectively the "Passenger Complaints") have been filed
against Carnival Cruise Lines ("Carnival") and one action has been filed
against Holland America Westours on behalf of purported classes of persons who
paid port charges to Carnival or Holland America Line ("Holland America"),
alleging that statements made in advertising and promotional materials
concerning port charges were false and misleading. The Passenger Complaints
allege violations of the various state consumer protection acts and claims of
fraud, conversion, breach of fiduciary duties and unjust enrichment. Plaintiffs
seek compensatory damages or, alternatively, refunds of portions of port
charges paid, attorneys' fees, costs, prejudgment interest, punitive damages
and injunctive and declaratory relief. The actions against Carnival are in
various stages of progress and are proceeding.
Holland America Westours has entered into a settlement agreement for the
one Passenger Complaint filed against it. The settlement agreement was approved
by the court on September 28, 1998. Five members of the settlement class
appealed the court's approval of the settlement. Holland America Westours has
settled with four of the five members. The appeal of one member of the
settlement class is likely to take between one and two years to be resolved.
Unless the appeal is successful, Holland America will issue travel vouchers
with a face value of $10-$50 depending on specified criteria, to certain of its
passengers who are U.S. residents and who sailed between April 1992 and April
1996, and will pay a portion of the plaintiffs' legal fees. The amount and
timing of the travel vouchers to be redeemed and the effects of the travel
voucher redemption on revenues is not reasonably determinable. Accordingly, the
Company has not established a liability for the travel voucher portion of the
settlements and will account for the redemption of the vouchers as a reduction
of future revenues. In 1998 the Company established a liability for the
estimated distribution costs of the settlement notices and plaintiffs' legal
costs.
Several complaints were filed against Carnival and/or Holland America
Westours (collectively the "Travel Agent Complaints") on behalf of purported
classes of travel agencies who had booked a cruise with Carnival or Holland
America, claiming that advertising practices regarding port charges resulted in
an improper commission bypass. These actions, filed in California, Alabama,
Washington and Florida, allege violations of state consumer protection laws,
claims of breach of contract, negligent misrepresentation, unjust enrichment,
unlawful business practices and common law fraud, and they seek unspecified
compensatory damages (or alternatively, the payment of usual and customary
commissions on port charges paid by passengers in excess of certain charges
levied by government authorities), an accounting, attorneys' fees and costs,
punitive damages and injunctive relief. These actions are in various stages of
progress and are proceeding.
It is not now possible to determine the ultimate outcome of the pending
Passenger and Travel Agent Complaints. Management believes it has meritorious
defenses to the claims. Management understands that purported class actions
similar to the Passenger and Travel Agent Complaints have been filed against
several other cruise lines.
In the normal course of business, various other claims and lawsuits have
been filed or are pending against the Company. The majority of these claims and
lawsuits are covered by insurance. Management believes the outcome of any such
suits, which are not covered by insurance would not have a material adverse
effect on the Company's financial condition or results of operations.
Ship Lease Transactions
During August and December 1998, the Company entered into lease out and
lease back transactions with respect to two of its vessels. The Company has
effectively guaranteed certain obligations or provided letters of credit to
participants in the transactions which, at May 31, 1999, total approximately
$339 million. Only in the remote event of nonperformance by certain major
financial institutions, which have long-term credit ratings of AAA, would the
Company be required to make any payments under these guarantees. After
approximately 18 years, the Company has the right to exercise purchase options
that would terminate these transactions. As a result of these transactions, the
Company received approximately $44 million (net) which is recorded as deferred
income on the balance sheets and is being amortized to nonoperating income over
approximately 18 years.
NOTE 6 - COMPREHENSIVE INCOME
Effective December 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income". SFAS
No. 130 establishes standards for the reporting and disclosure of comprehensive
income and its components. Comprehensive income is a measure that reflects all
changes in shareholders' equity, except those resulting from transactions with
shareholders. Comprehensive income for the periods indicated is as follows:
<TABLE>
<CAPTION>
Six months Three months
Ended May 31, Ended May,31
1999 1998 1999 1998
(in thousands)
<S> <C> <C> <C> <C>
Net income $361,103 $270,510 $203,342 $160,596
Foreign currency translation
adjustment (29,996) (906) (22,828) (3,383)
Changes in securities
valuation allowance 7 113 8 42
Total comprehensive income $331,114 $269,717 $180,522 $157,255
</TABLE>
NOTE 7 - EARNINGS PER SHARE
Earnings per share have been computed as follows (in thousands, except per
share data):
<TABLE>
<CAPTION>
Six Months Three Months
Ended May 31, Ended May 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
BASIC:
Net income $361,103 $270,510 $203,342 $160,596
Average common shares
outstanding 611,074 594,744 613,161 594,857
Earnings per share $ .59 $ .45 $ .33 $ .27
DILUTED:
Net income $361,103 $270,510 $203,342 $160,596
Effect on net income of
assumed purchase of
minority interest 1,642 540
Net income available
assuming dilution $362,745 $270,510 $203,882 $160,596
Average common shares
outstanding 611,074 594,744 613,161 594,857
Effect of dilutive
securities:
Additional shares
issuable upon:
Assumed exercise
of Cunard Line
Limited's minority
shareholders
purchase option 5,152 5,152
Various stock plans 3,760 3,404 3,621 3,663
Average common shares
outstanding
assuming dilution 619,986 598,148 621,934 598,520
Earnings per share $ .59 $ .45 $ .33 $ .27
</TABLE>
On April 13, 1998, the Board of Directors approved a two-for-one split of
the Company's Common Stock. The additional shares were distributed on June 12,
1998 to shareholders of record on May 29, 1998. All share and per share data
presented herein have been retroactively restated to give effect to this stock
split.
NOTE 8 - RECENT PRONOUNCEMENTS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Pursuant to
SFAS No. 133, changes in the fair value of derivatives are recorded each period
in current earnings or other comprehensive income depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. SFAS No. 133, as amended is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000 (December 1, 2000
for the Company). The Company has not yet determined the impact that the
adoption of SFAS No. 133 will have, but does not currently expect the adoption
to have a material impact on its results of operations or cash flows.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Certain statements under this caption, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", constitute
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). See "Part II. OTHER INFORMATION, ITEM 5 (a) Forward-
Looking Statements".
General
The Company earns its cruise revenues primarily from (i) the sale of
passenger tickets, which includes accommodations, meals, and most shipboard
activities, (ii) the sale of air transportation to and from the cruise ships
and (iii) the sale of goods and services on board its cruise ships, such as
casino gaming, bar sales, gift shop sales and other related services. The
Company also derives revenues from the tour and related operations of Holland
America Westours.
Selected segment and statistical information for the periods indicated is
as follows:
<TABLE>
<CAPTION>
Six Months Three Months
Ended May 31, Ended May 31,
1999 1998 1999 1998
(in thousands, except selected statistical information)
<S> <C> <C> <C> <C>
REVENUES:
Cruise $1,506,179 $1,182,061 $765,103 $631,084
Tour 46,124 45,453 38,620 38,414
Intersegment revenues (7,896) (8,318) (7,574) (8,140)
$1,544,407 $1,219,196 $796,149 $661,358
OPERATING EXPENSES:
Cruise $ 810,896 $ 633,826 $403,830 $335,056
Tour 45,529 44,443 36,170 35,440
Intersegment expenses (7,896) (8,318) (7,574) (8,140)
$ 848,529 $ 669,951 $432,426 $362,356
OPERATING INCOME:
Cruise $ 388,346 $ 319,844 $207,912 $177,420
Tour (19,484) (17,213) (7,586) (6,692)
Corporate, including loss
from affiliates, net (13,185) (19,470) (2,213) (5,287)
$ 355,677 $ 283,161 $198,113 $165,441
SELECTED STATISTICAL INFORMATION:
Passengers carried 1,058,000 923,000 541,000 497,000
Passenger cruise days (1) 6,975,000 5,931,000 3,470,000 3,104,000
Occupancy percentage 100.4% 105.6% 99.9% 105.4%
(1) A passenger cruise day is one passenger sailing for a period of one day.
For example, one passenger sailing on a one week cruise is seven passenger
cruise days.
</TABLE>
Operations data expressed as a percentage of total revenues for the
periods indicated is as follows:
Six Months Three Months
<TABLE>
<CAPTION>
Ended May 31, Ended May 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUES 100% 100% 100% 100%
COSTS AND EXPENSES:
Operating expenses 55 55 54 55
Selling and administrative 14 14 13 13
Depreciation and amortization 8 7 8 7
OPERATING INCOME BEFORE
LOSS FROM AFFILIATED
OPERATIONS 23 24 25 25
LOSS FROM AFFILIATED
OPERATIONS, NET - (1) - -
OPERATING INCOME 23 23 25 25
NONOPERATING INCOME (EXPENSE) - (1) 1 (1)
NET INCOME 23% 22% 26% 24%
</TABLE>
Fixed costs, including depreciation, fuel, insurance and crew costs,
represent more than one-third of the Company's operating expenses and do not
change significantly in relation to changes in passenger loads and aggregate
passenger ticket revenue.
The Company's cruise and tour operations experience varying degrees of
seasonality. The Company's revenue from the sale of passenger tickets for its
cruise operations is moderately seasonal. Historically, demand for cruises has
been greater during the summer months. The Company's tour revenues are
extremely seasonal with a majority of tour revenues generated during the late
spring and summer months in conjunction with the Alaska cruise season.
The year over year percentage increase in average passenger capacity for
the Company's cruise brands is expected to approximate 9.8% and 12.8% in the
third and fourth quarters of fiscal 1999, respectively, as compared to the same
periods of fiscal 1998. These increases are primarily a result of the
introduction into service of Carnival's Paradise in late November 1998 and the
expected introduction into service of the Carnival Triumph in July 1999 and
Holland America's Volendam in November 1999.
The year over year percentage increase in average passenger capacity
resulting from the delivery of vessels currently under contract for
construction for the fiscal years 2000 and 2001 is expected to approximate
13.0% and 10.8%, respectively.
On May 28, 1998, the Company and a group of investors acquired the
operating assets of Cunard, a cruise company operating five luxury cruise
ships. Simultaneous with the acquisition, Seabourn Cruise Line Limited
("Seabourn"), a luxury cruise line in which the Company owned a 50% interest,
was combined with Cunard. The Company owns approximately 68% of the combined
entity, which is named Cunard Line Limited.
The Company and Airtours plc ("Airtours"), a publicly traded leisure
travel company in which the Company holds an approximate 26% interest, each own
a 50% interest in Il Ponte S.p.A. ("Il Ponte"), the parent company of Costa
Crociere, S.p.A. ("Costa"), an Italian cruise company. The Company records its
interest in Airtours and Il Ponte using the equity method of accounting and
records its portion of Airtours' and Il Ponte's consolidated operating results
on a two-month lag basis. Demand for Airtours' and Costa's products is seasonal
due to the nature of the European leisure travel industry and European cruise
season. Typically, Airtours' and Costa's quarters ending June 30 and September
30 experience higher demand, with demand in the quarter ending September 30
being the highest.
As a result of the recent military conflict in the Balkans, in April 1999
the Company announced that it had experienced a slowdown in booking patterns
for its Mediterranean cruise itineraries and had changed the itineraries of
certain of its Mediterranean cruises. The Company also stated that management
estimated that the Balkan conflict could have a six to eight cents per share
negative impact on its 1999 earnings per share, split between the third and
fourth quarters of fiscal 1999. As a result of the cessation of hostilities and
other developments, management currently believes that the impact on its
business could be at or slightly below the low end of this range.
Six Months Ended May 31, 1999 ("1999") Compared
To Six Months Ended May 31, 1998 ("1998")
Revenues
The increase in total revenues of $325.2 million, or 26.7%, was almost
entirely due to an increase in cruise revenues. Approximately $197 million of
the increase was due to the acquisition and consolidation of Cunard and
Seabourn and $127 million was due to increased cruise revenues from Carnival,
Holland America and Windstar. The increase from Carnival, Holland America and
Windstar resulted from an increase of approximately 11.5% in passenger capacity
and a .8% increase in total revenue per passenger cruise day, offset slightly
by a 1.5% decrease in occupancy rates. Passenger capacity increased due
primarily to the introduction into service of Carnival's Paradise in November
1998, the Elation in March 1998 and Windstar Cruises' ("Windstar") Wind Surf in
May 1998. In addition, the .8% increase in total revenue per passenger cruise
day is net of a 1.7% decrease due to a reduction in the number of passengers
electing to use the Company's air program. When a passenger elects to purchase
his/her own air transportation, rather than use the Company's air program, both
the Company's cruise revenues and operating expenses decrease by approximately
the same amount.
Cost and Expenses
Operating expenses increased $178.6 million, or 26.7%. Cruise operating
costs increased by $177.1 million, or 27.9% in 1999. Approximately $135.7
million of the cruise operating costs increase was due to the acquisition and
consolidation of Cunard and Seabourn. Cruise operating costs, excluding Cunard
and Seabourn, increased $41.3 million primarily as a result of increases in
passenger capacity, partially offset by lower airfare and other costs.
Excluding Cunard and Seabourn, cruise operating costs as a percentage of cruise
revenues were 51.6% and 53.6% in 1999 and 1998, respectively.
Selling and administrative expenses increased $52.5 million, or 32.1%, of
which $38.4 million, or 23.4%, was due to the acquisition and consolidation of
Cunard and Seabourn. Selling and administrative expenses, excluding Cunard and
Seabourn, increased primarily as a result of increases in advertising and
payroll and related costs. Excluding Cunard and Seabourn, selling and
administrative expenses as a percentage of revenues were 13.2% and 13.4% in
1999 and 1998, respectively.
Depreciation and amortization increased by $27.5 million, or 30.9%, to
$116.8 million in 1999 from $89.3 million in 1998 primarily due to the
additional depreciation associated with the increase in the size of the fleet
and the acquisition and consolidation of Cunard and Seabourn.
Affiliated Operations
During 1999, the Company recorded $7.1 million of losses from affiliated
operations as compared with $13.0 million of losses in 1998. The Company's
portion of Airtours' losses increased $2.9 million to $14.2 million in 1999.
The Company recorded income of $7.2 million and $2.3 million during 1999 and
1998, respectively, related to its interest in Il Ponte. The affiliated
operations for 1998 include Seabourn.
Nonoperating Income (Expense)
Gross interest expense (excluding capitalized interest) increased $6.1
million in 1999 primarily as a result of higher average debt balances arising
from the acquisition and consolidation of Cunard and Seabourn as well as
investments in new vessel projects. Capitalized interest increased $3.9 million
during 1999 as compared with 1998 due primarily to higher levels of investments
in ship construction projects.
Interest income increased $12.5 million in 1999 as a result of higher
average investment balances primarily resulting from the investment of proceeds
received by the Company upon the sale of its Common Stock in December 1998 (see
Note 4 in the accompanying financial statements).
Other income in 1999 of $7.9 million primarily relates to the Company's
collection of insurance proceeds.
Minority interest was $1.6 million which represents the minority
shareholders' interest in Cunard Line Limited's net income.
Three Months Ended May 31, 1999 Compared
To Three Months Ended May 31, 1998
Revenues
The increase in total revenues of $134.8 million, or 20.4%, was almost
entirely due to an increase in cruise revenues. Approximately $92.6 million of
the increase was due to the acquisition and consolidation of Cunard and
Seabourn and $41.4 million was due to increased cruise revenues from Carnival,
Holland America and Windstar. The increase from Carnival, Holland America and
Windstar resulted from an increase of approximately 6.6% in passenger capacity
and a 1.4% increase in total revenue per passenger cruise day, offset slightly
by a 1.4% decrease in occupancy rates. Passenger capacity increased due
primarily to the introduction into service of Carnival's Paradise in November
1998. In addition, the 1.4% increase in total revenue per passenger cruise day
is net of a 1.6% decrease due to a reduction in the number of passengers
electing to use the Company's air program.
Cost and Expenses
Operating expenses increased $70.1 million, or 19.3%. Cruise operating
costs increased by $68.8 million, or 20.5% in the second quarter of 1999.
Approximately $63.3 million of the cruise operating costs increase was due to
the acquisition and consolidation of Cunard and Seabourn. Cruise operating
costs, excluding Cunard and Seabourn, increased $5.5 million primarily as a
result of increases in passenger capacity, partially offset by lower airfare
and other costs. Excluding Cunard and Seabourn, cruise operating costs as a
percentage of cruise revenues were 50.6% and 53.1% in the second quarter of
1999 and 1998, respectively.
Selling and administrative expenses increased $20.6 million, or 24.2%, of
which $18.5 million, or 21.8%, was due to the acquisition and consolidation of
Cunard and Seabourn. Selling and administrative expenses, excluding Cunard and
Seabourn, increased primarily as a result of increases in advertising and
payroll and related costs. Excluding Cunard and Seabourn, selling and
administrative expenses as a percentage of revenues were 12.4% and 12.8% in the
second quarter of 1999 and 1998, respectively.
Depreciation and amortization increased by $12.7 million, or 27.4%, to
$58.9 million in the second quarter of 1999 from $46.3 million in the second
quarter of 1998 primarily due to the additional depreciation associated with
the increase in the size of the fleet and the acquisition and consolidation of
Cunard and Seabourn.
Affiliated Operations
During the second quarter of 1999, the Company recorded $1.2 million of
losses from affiliated operations as compared with $2.4 million of losses in
the comparable 1998 period. The Company's portion of Airtours' losses increased
$2.5 million to $5.7 million in the second quarter of 1999. The Company
recorded income of $4.6 million and $3.3 million during the second quarter of
1999 and 1998, respectively, related to its interest in Il Ponte. The
affiliated operations for the second quarter of 1998 include Seabourn.
Nonoperating Income (Expense)
Gross interest expense (excluding capitalized interest) increased $1.2
million in the second quarter of 1999 primarily as a result of higher average
debt balances arising from the acquisition and consolidation of Cunard and
Seabourn as well as investments in new vessel projects.
Interest income increased $9.3 million in the second quarter of 1999 as a
result of higher average investment balances primarily resulting from the
investment of proceeds received by the Company upon the sale of its Common
Stock in December 1998 (see Note 4 in the accompanying financial statements).
Other income in the second quarter of 1999 of $4.9 million primarily
relates to the Company's collection of insurance proceeds compared to other
income in the comparable 1998 period of $2.6 million primarily related to the
settlement of certain notes receivable and an estimated insurance recovery.
Minority interest was $.5 million which represents the minority
shareholders' interest in Cunard Line Limited's net income.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash
The Company's business provided $653.4 million of net cash from
operations during the six months ended May 31, 1999, an increase of 10.2%
compared to the same period in 1998. The increase was primarily due to higher
net income.
In December 1998, the Company issued 17 million shares of its Common
Stock and received net proceeds of approximately $725 million. The Company
issued this stock concurrent with the addition of the Company's Common Stock to
the S&P 500 Composite Index.
Uses of Cash
During the first half of fiscal 1999, the Company made net expenditures of
approximately $112.9 million on capital projects, of which $47.8 million was
spent in connection with its ongoing shipbuilding program. The nonshipbuilding
capital expenditures consisted primarily of computer equipment, vessel
refurbishments, tour assets and other equipment.
During the first half of fiscal 1999, the Company had net repayments of
$314.5 million under its commercial paper programs. Additionally, the Company
made scheduled principal payments totaling $44.7 million pursuant to various
notes payable. Finally, the Company paid quarterly cash dividends aggregating
$108.8 million in the first half of fiscal 1999.
Future Commitments
The Company has contracts for the delivery of nine new vessels over the
next four years. The Company will pay approximately $940 million during the
twelve months ending May 31, 2000 relating to the construction and delivery of
these new ships and approximately $1.9 billion thereafter.
In addition to these ship construction contracts, the Company has an
option to construct one additional vessel for expected service in 2002, if the
option is exercised. The Company is also in negotiations with several
shipbuilding yards for a new class of vessel for Holland America and is in the
initial planning phase of a new ocean liner for Cunard. No assurance can be
given that the option will be exercised, that the negotiations for the Holland
America vessels will be successful or that the new Cunard shipbuilding project
will be continued. In the event that all these orders are placed and the
option is exercised, the Company's planned shipbuilding program, including
ships currently under contract, would amount to a total investment of
approximately $5.7 billion through 2003.
At May 31, 1999, the Company had $1.27 billion of long-term debt of which
$33.7 million is due during the twelve months ended May 31, 2000. See Notes 3
and 5 in the accompanying financial statements for more information regarding
the Company's debts and commitments.
Funding Sources
At May 31, 1999, the Company had approximately $997 million in cash, cash
equivalents and short-term investments. These funds along with cash from
operations are expected to be the Company's principal source of capital to fund
its debt service requirements and ship construction costs. Additionally, the
Company may also fund a portion of these cash requirements from borrowings
under its revolving credit facilities or commercial paper programs. At May 31,
1999, the Company had approximately $1.18 billion available for borrowing under
its revolving credit facilities.
To the extent that the Company is required to or chooses to fund future
cash requirements from sources other than as discussed above, management
believes that it will be able to secure such financing from banks or through
the offering of debt and/or equity securities in the public or private markets.
OTHER MATTER
Year 2000
The Year 2000 computer issue is primarily the result of computer programs
using a two digit format, as opposed to four digits, to indicate the year. Such
programs will be unable to interpret dates beyond the year 1999, which could
cause a system failure or other computer errors and a disruption in the
operation of such systems.
State of Readiness
The Company has established internally staffed project teams to address
Year 2000 issues. Each team has implemented a plan that focuses on Year 2000
compliance efforts for information technology ("IT") and non-IT systems for
each consolidated subsidiary. The systems include (1) information systems
software and hardware (e.g. reservations, accounting and associated systems,
personal computers and software and various end-user developed applications)
and (2) building facilities and shipboard equipment (e.g. shipboard navigation,
control, safety, power generation and distribution systems, operating systems
and shipbuilding and communication systems).
The Company's Year 2000 plan addresses the Year 2000 issues in multiple
phases, including: (1) inventory of the Company's systems, equipment and
suppliers that may be vulnerable to Year 2000 issues; (2) assessment of
inventoried items to determine risks associated with their failure to be Year
2000 compliant; (3) testing of systems and/or components to determine if Year
2000 compliant, both prior and/or subsequent to remediation; (4) remediation
and implementation of systems; and (5) contingency planning to assess
reasonably likely worst case scenarios.
Inventories have been completed for all Company shoreside software
applications, hardware and operating systems. A risk assessment was then
prepared based on feedback from the Company's respective business units. Most
of the Company's critical internally developed software systems have been
successfully remediated and tested. All of the Company's reservations systems
have been remediated, tested and are in production. Remediation and integration
testing of all critical shoreside software and hardware applications are
estimated to be completed by August 31, 1999, except for vendor upgrades of
purchased software which are estimated to be completed by September 30, 1999.
Ongoing certification testing of remediated systems that corroborates prior
test results and corroborates integration of remediated items with related
hardware and operating systems will occur throughout 1999.
Inventories have been completed for all building facilities and shipboard
equipment systems. A risk assessment has also been substantially completed for
these systems. In certain cases, the Company has retained third party
consultants to analyze the shipboard hardware and embedded system inventories
and assist the Company in testing, remediation and implementation of these
applications. This process is expected to be completed by September 30, 1999.
Most internally developed shipboard information systems have been remediated,
tested and implemented. Modifications required as a result of testing the
remaining systems have delayed full implementation on the ships until October
31, 1999.
The Company is tracking the Year 2000 compliance status of its material
vendors and suppliers via the Company's own internal vendor compliance effort.
Year 2000 correspondence was sent to critical vendors and suppliers, with
continued follow up for those who failed to respond. All vendor responses are
currently being evaluated to assess any possible risk to or effect on the
Company's operations. The Company has implemented additional procedures for
assessing the Year 2000 compliance status of its most critical vendors and will
modify its contingency plans accordingly.
Risks of Company's Year 2000 Issues
The Company continues to enhance its contingency plans, including the
identification of its most reasonably likely worst case scenarios. Currently,
the most likely sources of risk to the Company include (1) disruption of
transportation channels relevant to the Company's operations, including ports
and transportation vendors (airlines) as a result of a general failure of
support systems and necessary infrastructure; (2) disruption of travel agency
and other sales distribution systems; and (3) inability of principal product
suppliers to be Year 2000 ready, which could result in delays in deliveries
from such suppliers.
Based on its current assessment efforts, the Company does not believe that
Year 2000 issues will have a material adverse effect on its financial condition
or results of operations. However, the Company's Year 2000 issues and any
potential business interruptions, costs, damages or losses related thereto, are
dependent, to a significant degree, upon the Year 2000 compliance of third
parties, both domestic and international, such as government agencies, vendors
and suppliers. Consequently, the Company is unable to determine at this time
whether Year 2000 failures will materially affect the Company. The Company
believes that its compliance efforts have and will reduce the impact on the
Company of any such failures.
Contingency Plans
The Company has prepared preliminary contingency plans to identify and
determine how to minimize the impact of its most reasonably likely worst case
scenarios. The objective of the contingency plans is to establish procedures
for the continuity of the Company's core business processes in the event of any
Year 2000 problems. Comprehensive contingency plans are expected to be
substantially completed by September 30, 1999 and continued refinements are
expected to occur throughout the remainder of the year.
Costs
The Company does not expect that the costs associated with its Year 2000
efforts will be material. The Company estimates aggregate expenditures of
approximately $16 million to address Year 2000 issues. These aggregate
expenditures include $8 million of costs that are being charged to expense and
$8 million of costs, related to the accelerated replacement of non-compliant
systems due to Year 2000 issues, which will be capitalized. The total amount
expended through May 31, 1999 was approximately $10.4 million, of which $6.1
million has been charged to expense and $4.3 million has been capitalized.
These costs do not include costs incurred by the Company as a result of the
failure of any third parties, including suppliers, to become Year 2000
compliant or costs to implement any contingency plans.
The above disclosures are Year 2000 Readiness Disclosures pursuant to the
Year 2000 Information and Disclosure Act.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
Several actions collectively referred to as the "Passenger Complaints"
were previously reported in the Company's Annual Report on Form 10-K for the
year ended November 30, 1998 (the "1998 Form 10-K")and its Quarterly Report on
Form 10-Q for the quarter ended February 28, 1999 (the "First Quarter 1999 Form
10-Q"). The following are material subsequent developments in such cases.
In the action filed against Carnival in Florida in 1996 by Michelle
Hackbarth, Larry Katz, Michelle A. Sutton, Pedro Rene Mier, and others, on
behalf of purported nationwide classes, plaintiffs have appealed the court's
denial of their motion for class certification. In addition, plaintiffs have
filed a motion to enforce a purported oral settlement agreement they allege
that they reached with Carnival and Carnival opposes this motion. After the
parties take mutual discovery the court will hold a hearing on plaintiffs'
motion.
In the action filed against Carnival in Tennessee in 1997 by Brent
Mezzacasa and others, on behalf of a purported nationwide class, the Tennessee
Court of Appeals has affirmed the trial court's order dismissing the action on
the grounds of inconvenient forum. Plaintiffs have sought leave to appeal the
case further to the Tennessee Supreme Court, which has discretionary review.
In the action filed against Holland America Westours in the Superior Court
in King County, Washington, by Francine Pickett and others on behalf of a
purported nationwide class, Holland America Westours has settled with four of
the five members of the settlement class who appealed the court's approval of
the settlement. One member of the settlement class continues to appeal the
court's approval of the settlement.
Several actions collectively referred to as the "Travel Agent Complaints"
were previously reported in the 1998 Form 10-K and the First Quarter 1999 Form
10-Q and the following are the material subsequent developments in such cases.
In the action filed against Holland America Westours in Washington in
September 1997 by N.G.L. Travel Associates, on behalf of a purported nationwide
class of travel agencies who booked cruises with Holland America Westours, the
Court of Appeals refused to accept Holland America Westours' petition for
discretionary review of the class certification and denial of summary judgment
decisions. Consequently, the matter is back before the trial court to consider
various discovery motions as well as provide specifics as to the certified
class.
For a description of other pending litigation, see the 1998 Form 10-K, the
First Quarter 1999 Form 10-Q, and Note 5 in Part I of this Form 10-Q.
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of shareholders of the Company was held on April 19,
1999 (the "Annual Meeting"). Holders of Common Stock were entitled to elect
sixteen directors. On all matters which came before the Annual Meeting, holders
of Common Stock were entitled to one vote for each share held. Proxies for
512,225,356 of the 612,944,684 shares of Common Stock entitled to vote were
received in connection with the Annual Meeting.
The following table sets forth the names of the sixteen persons elected at
the Annual Meeting to serve as directors until the next annual meeting of
shareholders of the Company and the number of votes cast for, against or
withheld with respect to each person.
NAME OF DIRECTOR FOR AGAINST WITHHELD
Micky Arison 508,122,258 -0- 4,103,098
Shari Arison 508,140,481 -0- 4,084,875
Maks L. Birnbach 508,244,481 -0- 3,980,875
Atle Brynestad 508,119,153 -0- 4,106,203
Richard G. Capen, Jr. 508,349,667 -0- 3,875,689
David Crossland 508,133,353 -0- 4,092,003
Robert H. Dickinson 508,128,970 -0- 4,096,386
James M. Dubin 508,138,340 -0- 4,087,016
Howard S. Frank 508,126,821 -0- 4,098,535
A. Kirk Lanterman 507,928,900 -0- 4,296,456
Modesto A. Maidique 508,365,885 -0- 3,859,471
William S. Ruben 508,251,028 -0- 3,974,328
Stuart S. Subotnick 506,842,374 -0- 5,382,982
Sherwood M. Weiser 508,375,098 -0- 3,850,258
Meshulam Zonis 505,158,911 -0- 7,066,445
Uzi Zucker 508,244,384 -0- 3,980,972
The following table sets forth certain additional matters which were
submitted to the shareholders for approval at the Annual Meeting and the
tabulation of the votes with respect to each such matter.
MATTER FOR AGAINST WITHHELD
Approval of an amendment
to the Company's Second Amended
and Restated Articles of
Incorporation to increase the
maximum size of the Board of
Directors from 15 to 17 members: 510,171,636 1,116,360 937,360
Approval of Pricewaterhouse-
Coopers as independent auditors
for the Company for the fiscal
year ending November 30, 1999 511,393,247 52,755 779,354
Item 5. Other Information.
(a) FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q and in the future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases, and in oral statements made by or with the approval of an authorized
executive officer constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors,
which may cause the actual results, performances or achievements of the Company
to be materially different from any future results, performances or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions which may impact levels of disposable income of consumers and
pricing and passenger yields for the Company's cruise products; consumer demand
for cruises, including the effects on consumer demand of armed conflicts or
political instability; increases in cruise industry capacity; changes in tax
laws and regulations; the ability of the Company to implement its shipbuilding
program and to expand its business outside the North American market where it
has less experience; delivery of new vessels on schedule and at the contracted
price; weather patterns; unscheduled ship repairs and drydocking; incidents
involving cruise vessels at sea; computer program Year 2000 compliance; and
changes in laws and regulations applicable to the Company.
ITEM 6. Exhibits And Reports On Form 8-K.
(a) Exhibits
3.1 Amendment to Second Amended and Restated Articles of Incorporation of
the Company.
10.1 Atle Brynestad Indemnification Agreement.
10.2 1994 Carnival Cruise Lines Key Management Incentive Plan as amended on
April 12,1999.
10.3 Subscription Agreement, dated May 27, 1998, between Carnival
Corporation, Seabourn Cruise Line Limited, CG Cruise Invest AS and
others.
10.4 Recapitalization Agreement, dated May 27, 1998, between Carnival
Corporation, Seabourn Cruise Line Limited and CG Holding AS.
10.5 1993 Outside Directors' Stock Option Plan as amended on April 6, 1998.
12 Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARNIVAL CORPORATION
Date: July 13, 1999 BY/s/ Howard S. Frank
Howard S. Frank
Vice Chairman of the Board of
Directors and Chief
Operating Officer
Date: July 13, 1999 BY/s/ Gerald R. Cahill
Gerald R. Cahill
Senior Vice President-Finance
and Chief Financial and
Accounting Officer
INDEX TO EXHIBITS
Page No. in
Sequential
Numbering
System
Exhibits
3.1 Amendment to Second Amended and Restated Articles of
Incorporation of the Company.
10.1 Atle Brynestad Indemnification Agreement.
10.2 1994 Carnival Cruise Lines Key Management Incentive Plan as
amended on April 12, 1999.
10.3 Subscription Agreement, dated May 27, 1998, between Carnival
Corporation, Seabourn Cruise Line Limited, CG Cruise Invest AS
and others.
10.4 Recapitalization Agreement, dated May 27, 1998, between
Carnival Corporation, Seabourn Cruise Line Limited and CG Holding
AS.
10.5 1993 Outside Directors' Stock Option Plan as amended on April
6, 1998.
12 Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule (for SEC use only).
EXHIBIT 3.1
CARNIVAL CORPORATION
AMENDMENT OF SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
The Second Amended and Restated Articles of Incorporation (the "Articles")
of Carnival Corporation (the "Corporation") were amended at a special meeting
of stockholders of the Corporation held on April 19, 1999, at which meeting
there were present or represented by proxy 512,225,356 shares of the
Corporation, being the majority of the issued and outstanding shares of the
Corporation. At said meeting, Article Seventh of the Articles was amended and
restated to read as follows:
"7. Board of Directors. The Board of Directors shall consist of
no less than three (3), and no more than seventeen (17) members.
Within said minimum and maximum, the number shall be set forth by
resolution of the stockholders or by resolution of the Board of
Directors. The meetings of the Board of Directors will be held
in the Republic of Panama or in any other country, and any
Director can be represented and vote by proxy or proxies at any
and all Directors' meetings. The meetings may also be held by
means of telephone conference, fax or any other means of
electronic communication, in which the participants have been in
direct contact. Likewise, the resolutions of the Board of
Directors may be adopted by minutes which are circulated for
signature by the Directors or their proxies in different dates
and places. The Board of Directors shall have absolute control
and full powers of administration on all the matters of the
Corporation, being it understood that the Board of Directors is
empowered to contract loans or financing in general, to grant
guarantees with respect to its properties, subsidiaries, its
obligations and those of third parties, and to mortgage its
properties and assets, and to sell less than all or substantially
all of the assets of the Corporation without shareholder
approval."
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of the 19th day of April, 1999,
between Carnival Corporation, a Panamanian corporation (the "Company"), and
Atle Brynestad (the "Director").
The Company, in order to induce the Director to serve on the Company's
board of directors, wishes to indemnify the Director against certain expenses
and liabilities.
Accordingly, the parties agree as follows:
In the event that the Director is made a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a director of the Company, the Company shall
indemnify the Director against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding to the fullest extent and in
the manner set forth in and permitted by the General Corporation Law of the
Republic of Panama and any other applicable law, as from time to time in
effect. Such right of indemnification shall not be deemed exclusive of any
other rights to which such director or officer may be entitled apart from the
foregoing provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused
this Agreement to be executed by a duly authorized officer, as of the date
first above written.
CARNIVAL CORPORATION
By: /s/ Howard S. Frank
Howard S. Frank, Vice Chairman
and Chief Operating Officer
By: /s/ Atle Brynestad
Atle Brynestad
EXHIBIT 10.2
1994 CARNIVAL CRUISE LINES
KEY MANAGEMENT INCENTIVE PLAN
(adopted by the Board of Directors on January 17, 1994,
and amended on January 5, 1998 and April 12, 1999)
OBJECTIVE
The Carnival Cruise Lines 1994 Key Management Incentive Plan (the
"Plan") is designed to focus managerial attention on the objective of
maximizing the profitability of the Carnival Cruise Lines division
("CCL") of Carnival Corporation. The Plan provides a framework within
which the participants share in the incremental earnings of CCL
achieved from applicable business operations on a fiscal year-to-year
basis.
PLAN ADMINISTRATION
The administrator of the Plan is the Compensation Committee of
Carnival Corporation (the "Committee"). The Committee may, in its
discretion, delegate administrative functions regarding the Plan to a
Vice President of CCL. The Committee shall have sole discretion in
resolving any questions regarding the administration or terms of the
Plan not addressed in this document as well as in resolving any
ambiguities that may exist in this document.
PLAN YEAR
The "Plan Year" shall be the 12-month period ending November 30 of
each year.
PARTICIPATION
The President, Senior Vice Presidents and Vice-Presidents of CCL shall
be eligible to participate in the Plan. The Committee may expand Plan
eligibility to include directors, managers and/or supervisors for any
Plan year. Participation in the Plan shall be determined on an annual
basis by the Committee. No employee will have the automatic right to
be selected as a participant for any year or, having been selected as
a participant for one year, be considered a participant for any other
year.
Only persons who are employed by CCL or one of its divisions on the
first day of the Plan Year are eligible to participate in the Plan
except that persons who commence employment following the beginning of
the Plan Year may, with the approval of the Committee, be allowed to
participate in the Plan. Such late-entry participants will be awarded
Points (as defined below) pro-rated to the time of their entry into
the Plan, subject to the approval of the Committee.
In order to actually receive an Incentive Award (as defined below)
under the Plan, a participant must be employed by CCL or one of its
divisions on the last day of the Plan year. The only exception to
this requirement is for participants whose employment is terminated
prior to the last day of the Plan Year as the result of death,
disability or retirement ("Early Termination Employees").
BONUS POOL
The total amount payable under the Plan for each Plan year (the "Bonus
Pool") shall be equal to two percent (2%) (the "Bonus Percentage") of
(x) the net income generated within each Plan Year by CCL and its
divisions calculated in accordance with generally accepted accounting
principals consistently applied (the "Net Income") minus (y) the
greater of (i) CCL's Net Income for the fiscal year ending November
30, 1993 or (ii) $183,000,000. The Bonus Percentage for the fiscal
years ending November 30, 1996 and thereafter, if applicable, will be
determined by the Board of Directors within 90 days of the
commencement of each such fiscal year.
METHOD OF CALCULATING INCENTIVE AWARDS
The Committee shall, in its discretion, assign a specific number of
points (the "Points") to each participant. The Points awarded to each
participant will be communicated to the participant during the first
ninety (90) days of each Plan Year. Such decisions may be revised
during a Plan Year by the Committee due to major changes in position
responsibilities occurring during the Plan Year.
The Committee, in its sole discretion, shall adjust the Points
assigned to each participant by multiplying such participant's Points
by a percentage within the range set forth below corresponding to such
participant's evaluated performance for such year (the "Weighted
Points"):
EXCELLENT PERFORMANCE 90-100%
GOOD PERFORMANCE 75-89%
FAIR PERFORMANCE 60-74%
LESS THAN FAIR 0-59%
PERFORMANCE
Each participant shall receive an Incentive Award equal to the product
of his or her Weighted Points multiplied by the "Point Value". The
Point Value shall be equal to (i) the amount of the Bonus Pool,
divided by (ii) the aggregate Points (before adjustments) awarded to
participants for each Plan year.
Any amounts remaining in the Bonus Pool following the calculation of
the Incentive Awards pursuant to the preceding paragraph shall be
available for discretionary distribution by the Committee to
participants.
PAYMENT OF INCENTIVE AWARDS
Incentive Awards are paid on a date determined by the Committee which
is within seventy-five (75) days following the conclusion of each Plan
Year. At the discretion of the Committee, advance partial payment of
Incentive Awards may be made based on anticipated Net Income. At the
discretion of the Committee, special arrangements may be made for
earlier payment to Early Termination Employees.
Incentive Awards to Senior Vice Presidents and Vice Presidents shall
be payable eighty percent (80%) in cash and twenty percent (20%) in
shares of Common Stock of Carnival Corporation and Incentive Awards to
all other participants shall be payable as determined by the
Committee. The number of shares issuable to each participant shall be
determined by dividing the dollar amount of the stock portion of the
participant's Incentive Award by the average closing price for the
Common Stock for the last ten (10) trading days of the Plan year, as
quoted on the national stock exchange on which the Common Stock is
traded. Fractional shares of the Common Stock will not be issued.
The value of the Common Stock received by Plan participants will be
reported to governmental taxing authorities, and taxes shall be
withheld in respect of such Common Stock, in accordance with the
requirements of applicable law.
DURATION OF PLAN
The Plan will be effective for the fiscal years 1994, 1995 and 1996.
It is the intent of Carnival Corporation to make a decision on whether
or not to renew the Plan for an additional year in August of each year
in order to effect a 2-year planning horizon (e.q., decision by August
1995 as to whether or not to extend the Plan to 1997).
RESERVATION OF SHARES
Subject to adjustment as provided in the last sentence of this
paragraph, the maximum number of shares of Common Stock that shall be
authorized and reserved for issuance under the Plan shall be 400,000
shares of Common Stock. The maximum number of shares authorized and
reserved may be increased from time to time by approval of the Board,
and, if required pursuant to Rule 16b-3 under the Exchange Act, the
stockholders of Carnival Corporation. The shares to be issued to
participants pursuant to the Plan may be, at the election of Carnival
Corporation, either treasury shares or shares authorized but unissued,
and, if treasury shares are used, all references in the Plan to the
issuance of shares shall, for corporate law purposes, be deemed to
mean the transfer of shares from treasury. Any shares of Common Stock
that are subject to an Incentive Award that lapses or expires shall
automatically again become available for use under the Plan. In the
event of any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split,
combination of shares or any other change in the corporate structure
or shares of Carnival Corporation, the Committee shall make
appropriate adjustment as to the number and kind of securities subject
to and reserved under the Plan and, in order to prevent the dilution
or enlargement of the rights of participants, the number and kind of
securities subject to outstanding stock awards.
PURCHASE FOR INVESTMENT
Common Stock issued will be subject to a restriction on sale
commencing from date of issuance and continuing until, but not
including, the first trading day in the second January following the
end of the Plan year in respect of which the Common Stock was issued
(e.q., Common Stock issued in respect of the Plan year ending November
30, 1994 would be subject to a restriction on sale that would not end
until the first trading day in January, 1996). Holders will be
eligible to receive dividends during the restriction period.
Whether or not the shares of Common Stock covered by the Plan have
been registered under the Securities Act of 1933, as amended, each
person acquiring shares of Common Stock under the Plan may be required
by the Company to give a representation in writing that such person is
acquiring such shares for investment and not with a view to, or for
sale in connection with, the distribution of any part thereof.
Carnival Corporation will endorse any necessary legend referring to
the foregoing restriction upon the certificate or certificates
representing any shares of Common Stock issued or transferred to the
Plan participants upon the grant of any shares of Common Stock under
the Plan.
AMENDMENT OF PLAN
The Board of Directors of Carnival Corporation may amend the Plan from
time to time in such respects as the Board may deem advisable;
provided, however, that no such amendment shall be effective without
approval of the stockholders of Carnival Corporation if stockholder
approval of the amendment is required pursuant to Rule 16b-3 under the
Exchange Act.
GOVERNMENTAL AND OTHER REGULATIONS
The Plan and the Common Stock awards under the Plan shall be subject
to all applicable federal and state laws, rules and regulations and
such approvals by any governmental or regulatory agency or national
securities exchange, as may be required. Carnival Corporation shall
not be required to issue or deliver any certificates or shares of
stock prior to the completion of any registration or qualification of
such shares under any federal or state law, or any ruling or
regulations of any governmental body or national securities exchange
which Carnival Corporation shall, in its sole discretion, determine to
be necessary or advisable.
EXHIBIT 10.3
SUBSCRIPTION AGREEMENT
among
SEABOURN CRUISE LINE LIMITED,
CARNIVAL CORPORATION
and
THE PERSONS NAMED HEREIN
Dated: May 27, 1998
_________________________
=================================================================
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS 2
1.1 Definitions 2
ARTICLE 2 SUBSCRIPTION AND ISSUE OF THE SHARES 5
2.1 Subscription and Issue of the Shares. 5
2.2 The Closing 5
2.3 Post-Closing Adjustment 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7
3.1 Due Incorporation 7
3.2 Qualification 7
3.3 Capital Stock 7
3.4 Authorization; No Contravention 8
3.5 Binding Effect 8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS 8
4.1 Acquisition for Own Account. 9
4.2 Exemption 9
4.3 Non-Registration 9
4.4 Business Knowledge 9
4.5 Authorization; No Contravention 10
4.6 Binding Effect 10
4.7 Investment Limitation 10
ARTICLE 5 CONDITIONS TO THE OBLIGATION
OF THE COMPANY AND THE INVESTORS TO CLOSE 11
ARTICLE 6 LIMITATIONS ON TRANSFER 11
6.1 General Restrictions on Transfer 11
6.2 Void Transfers 12
6.3 Permitted Transfers 12
ARTICLE 7 TAG-ALONG AND BRING-ALONG RIGHTS 13
7.1 Tag-Along Rights 13
7.2 Bring-Along Rights 16
ARTICLE 8 CORPORATE GOVERNANCE AND CERTAIN OTHER ACTIONS 18
8.1 General 18
8.2 Election of Directors 18
8.3 Removal and Replacement 19
8.4 Company Name Change 19
ARTICLE 9 INITIAL PUBLIC OFFERING 19
9.1 Initial Public Offering 19
9.2 Initial Public Offering Procedure 20
9.3 Customary Agreements 20
9.4 Carnival Exchange 20
9.5 Put Option 21
9.6 No Fractional Shares 22
9.7 Closing of the Carnival Exchange and the Put Option 22
9.8 Exchange Ratio Adjustment 23
9.9 No Claims 24
ARTICLE 10 RIGHT TO PARTICIPATE IN CERTAIN ISSUANCE OF CAPITAL
SHARES 25
10.1 Right to Participate in New Issuance 25
10.2 Exercise of Right 25
10.3 Closing 26
ARTICLE 11 SHARES CERTIFICATE LEGEND 26
ARTICLE 12 AFTER-ACQUIRED SECURITIES 27
ARTICLE 13 TRANSACTIONS WITH AFFILIATES 28
13.1 Limitation on Transactions with Affiliates 28
13.2 Exceptions 28
ARTICLE 14 TERMINATION 29
14.1 General 29
14.2 Non-Consummation of Cunard Acquisition 29
14.3 Return of Shares and Purchase Price 29
14.4 Shareholder No Longer Holds Shares 29
14.5 No Liability 30
ARTICLE 15 CONFIDENTIALITY 30
ARTICLE 16 MISCELLANEOUS 31
16.1 Survival of Representations, Warranties,
Other Agreements and Undertakings 31
16.2 Notices 31
16.3 Fees and Expenses 33
16.4 Carnival Expenses. 33
16.5 Third Party Beneficiaries 33
16.6 Successors and Assigns 33
16.7 Amendment and Waiver 34
16.8 Counterparts 34
16.9 Headings 34
16.10 Governing Law 35
16.11 Arbitration 35
16.12 Severability 35
16.13 Entire Agreement 36
16.14 Further Assurances 36
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT, dated as of May 27, 1998, among Seabourn Cruise
Lines Limited, a Bahamas International Business Corporation (the "Company"),
the persons set forth on the signature pages hereto (collectively, the
"Investors") and Carnival Corporation, a Panamanian corporation ("Carnival"
and, together with the Investors, the "Shareholders").
WHEREAS, pursuant to an Agreement for the Sale and Purchase of the
Business of Cunard, dated April 3, 1998, among Cunard Line Limited ("Cunard")
and others as sellers and Carnival as buyer and Kvaerner ASA as guarantor (the
"Sale and Purchase Agreement"), Carnival agreed to acquire the business carried
on by affiliates of Kvaerner ASA under the name Cunard.
WHEREAS, Carnival has assigned its rights and duties under the Sale and
Purchase Agreement to a newly-formed subsidiary ("Newco") of the Company.
WHEREAS, the Company intends to change its name to Cunard Line Limited.
WHEREAS, the parties hereto currently intend to consider an initial public
offering of equity securities of the Company prior to November 30, 1999 and, if
such an initial public offering is made, the parties also intend to consider
listing the equity securities of the Company on the Oslo Stock Exchange, either
as a primary or secondary listing (it being understood that any such decisions
concerning an initial public offering shall be made by Carnival in its sole
discretion).
WHEREAS, the Company desires to issue to the Investors ordinary shares of
the Company, par value $0.10 (the "Shares"), to fund a portion of the purchase
price under the Sale and Purchase Agreement.
WHEREAS, the Shareholders desire to set forth certain agreements among
them relating to the governance of the Company and the transfer of their
Shares.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Adjusted Cunard Price" means the purchase price under the Sale and
Purchase Agreement as adjusted under clause 4.2 thereof plus the actual amount
of fees and expenses of Christiania Markets ("Christiania") reimbursed under
Section 16.3 of this Agreement.
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with, such Person. For
purposes of this definition, "control", when used with respect to any Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Assumed Cunard Price" means US $380,444,000.
"Assumed Investor Share Adjustment" means, with respect to each Investor,
the assumed Investor share adjustment as specified on Schedule 2.1.
"Agreement" means this Agreement as the same may be amended, supplemented
or modified in accordance with the terms hereof.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or public
holiday in England, Wales, the Bahamas, Bermuda and the United States.
"Closing" has the meaning set forth in Section 2.2 of this Agreement.
"Closing Date" means the Business Day (as defined in the Sale and Purchase
Agreement) on which all of the conditions of Completion shall have been
fulfilled or waived by the parties to the Sale and Purchase Agreement.
"Completion" has the meaning set forth in the Sale and Purchase Agreement.
"Initial Public Offering" means an initial public offering of equity
securities of the Company in the United States, the United Kingdom or Norway
and a related listing of such shares on a national securities exchange or
trading market in the United States, the London Stock Exchange or the Oslo
Stock Exchange, respectively.
"Investors" has the meaning set forth in the recitals to this Agreement.
"Investor Purchase Price Adjustment" means, with respect to each Investor,
the product of (i) the Purchase Price Adjustment Amount and (ii) the investment
percentage of such Investor as specified on Schedule 2.1.
"Investor Share Adjustment" means with respect to each Investor, the
Investor Purchase Price Adjustment divided by US $10.00 (the per share purchase
price of the Shares).
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (excluding those arising by operation of law) or
other security interest of any kind or nature whatsoever.
"Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
Governmental Authority or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"Post-Closing Share Issuance Amount" means, with respect to each Investor,
either (i) the Assumed Investor Share Adjustment plus the Investor Share
Adjustment (if the Adjusted Cunard Price exceeds the Assumed Cunard Price) or
(ii) the Assumed Investor Share Adjustment minus the Investor Share Adjustment
otherwise.
"Purchase Price Adjustment Amount" means the product of (i) 0.3 and
(ii) either (a) the Adjusted Cunard Price minus the Assumed Cunard Price (if
the Adjusted Cunard Price exceeds the Assumed Cunard Price) or (b) the Assumed
Cunard Price minus the Adjusted Cunard Price otherwise.
"Recapitalization Agreement" means the Recapitalization Agreement, dated
as of May 27, 1998, among the Company, Carnival and CG Holding AS ("CG").
"US $" means United States dollars, the lawful currency of the United
States of America.
ARTICLE 2.
SUBSCRIPTION AND ISSUE OF THE SHARES
2.1 Subscription and Issue of the Shares. (a) At the Closing, subject
to the terms and conditions of this Agreement, the Company agrees to issue to
the Investors, and the Investors agree to subscribe for and accept from the
Company, the numbers of Shares set forth by each Investor's name on
Schedule 2.1 hereto. After the Closing, the Company shall issue additional
Shares to the Investors subject to the terms of Section 2.3.
(b) The purchase price payable by the Investors in the aggregate
shall be US $114,133,200, subject to adjustment in accordance with Section 2.3.
At the Closing, each Investor shall pay the amounts set forth by each
Investor's name on Schedule 2.1 hereto, which shall be held on account of the
purchase price payable hereunder.
2.2 The Closing (a) The subscription and issue of the Shares (other than
the additional Shares to be issued pursuant to Section 2.3) (the "Closing")
shall take place at the offices of Paul, Weiss, Rifkind, Wharton & Garrison in
New York, at 10:00 a.m., local time, on the Closing Date or at such other time
as the parties may mutually agree.
(b) At the Closing, the Company shall deliver to each Investor
certificates evidencing the number of Shares to which such Investor is entitled
under Section 2.1(a) (other than the additional Shares to be issued pursuant to
Section 2.3) registered in such Investor's name, upon payment of the funds
payable by each Investor under Section 2.1(b). All amounts paid hereunder
shall be paid by wire transfer of immediately available funds to such account
or accounts as may be designated by the Company to the Investors. All Shares
issued hereunder shall be validly issued, fully paid and non-assessable and
free and clear from all Liens.
2.3 Post-Closing Adjustment. Upon completion of the adjustment of the
purchase price under clause 4.2 of the Sale and Purchase Agreement, the Company
shall notify, in writing, each Investor of its Investor Purchase Price
Adjustment. Within five Business Days thereafter, (i) either (a) if the
Adjusted Cunard Price does not exceed the Assumed Cunard Price, the Company
shall pay each Investor its Investor Purchase Price Adjustment (if any) by wire
transfer of immediately available funds to an account of Christiania on behalf
of such Investor as designated in writing by Christiania to the Company or (b)
otherwise, each Investor shall pay the Company its Investor Purchase Price
Adjustment by wire transfer of immediately available funds to the account
designated under Section 2.1(b), and (ii) subject to the receipt of any amounts
due under Section 2.3(i)(b), the Company shall issue to each Investor a number
of Shares equal to the Post-Closing Share Issuance Amount of such Investor.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors on the date hereof
and on the Closing Date as follows:
3.1 Due Incorporation. The Company is an International Business
Corporation duly incorporated and validly existing under the laws of the
Bahamas and has all requisite corporate power and lawful authority to own,
lease and operate its properties and to carry on its business as now being
conducted.
3.2 Qualification. The Company is duly qualified or otherwise authorized
to transact business in each jurisdiction in which such qualification or
authorization is required by applicable law or in which the failure so to
qualify or be authorized would have a material adverse effect on the Company.
3.3 Capital Stock. (a) As of the date hereof, the authorized share
capital of the Company is US $5,000, made up of 5,000 shares. As of the date
hereof, 4,800 shares are issued and outstanding. Upon the Closing, the
authorized share capital of the Company will be US $15 million, made up of 150
million shares. Except for this Agreement and the Recapitalization Agreement,
the Company has no obligations to issue any of its Shares.
(b) Upon the payment of the Investors of the purchase price provided
for under Section 2, the Shares issuable hereunder will be duly authorized,
validly issued, fully paid and non-assessable and free and clear from all
Liens.
3.4 Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and the transactions contemplated
hereby, including, without limitation, the sale, issuance and delivery of the
Shares (i) are within the Company's corporate power and have been duly
authorized by all necessary corporate action of the Company; (ii) do not
contravene the terms of the Memorandum and Articles of Association, or any
amendment of either thereof, or any organizational or governing documents of
the Company; and (iii) do not violate, conflict with or result in any breach or
contravention of, or the creation of any Lien under any material agreement of
the Company.
3.5 Binding Effect. This Agreement has been duly authorized, executed
and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity relating to enforceability.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
applicable (severally as to itself only and not jointly) to the Company on
the date hereof and on the Closing Date as follows:
4.1 Acquisition for Own Account. Such Investor is acquiring the Shares
for its own account, or an account with respect to which it exercises sole
investment discretion, solely for investment and not with a view to resale or
distribution thereof.
4.2 Exemption. Such Investor is (a) a "qualified institutional buyer"
within the meaning of Rule 144A under the United States Securities Act of 1933,
as amended (the "Securities Act"), (b) an "accredited investor" within the
meaning of Regulation D under the Securities Act, or (c) not in the United
States, within the meaning of Regulation S ("Regulation S") promulgated under
the Securities Act, and is neither a U.S. person ("U.S. person"), within the
meaning of Regulation S, nor a person acquiring the Shares for the account or
benefit of a U.S. person.
4.3 Non-Registration. Such Investor acknowledges that the offering and
sale of the Shares has not been and will not be registered under the Securities
Act and may not be offered or sold within the United States or to or for the
account or benefit of, U.S. persons except pursuant to an exemption from
registration or under an effective registration statement under the Securities
Act.
4.4 Business Knowledge. Such Investor has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of its investment in the Company as contemplated by this Agreement,
and is able to bear the economic risk of such investment for an indefinite
period of time, including a complete loss of capital. It has been furnished
access to such information and documents as it has requested and has been
afforded the opportunity to ask questions of and receive answers from
representatives of the Company concerning the terms and conditions of this
Agreement and the proposed transactions and the purchase of the Shares
contemplated hereby.
4.5 Authorization; No Contravention. The execution, delivery and
performance by such Investor of this Agreement and the transactions
contemplated hereby, including, without limitation, the payment of the purchase
price (i) are within such Investor's corporate or other power and have been
duly authorized by all necessary action of such Investor; (ii) do not
contravene the terms of the certificate of incorporation and by-laws (or
comparable instruments), or any amendment of either thereof, or any
organizational or governing documents of such Investor, as applicable, and
(iii) do not violate, conflict with or result in any breach or contravention
of, or the creation of any Lien under any material agreement of such Investor.
4.6 Binding Effect. This Agreement has been duly authorized, executed
and delivered by such Investor and constitutes a legal, valid and binding
obligation of such Investor, enforceable against such Investor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity relating to enforceability.
4.7 Investment Limitation. Except as specifically agreed to by the
Company, as of the Closing, no Investor, its affiliates, or related persons
shall hold Shares with an aggregate purchase price in excess of US $15 million.
After the Closing, no Investor shall acquire more than 5% of the outstanding
Shares of the Company without the consent of the Company; provided however that
if any purchase by any Investor requires Carnival or the Company to make any
filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended then such Investor shall reimburse Carnival or the Company, as the case
may be, for all of its out-of-pocket fees and expenses related to any such
filing.
ARTICLE 5.
CONDITIONS TO THE OBLIGATION
OF THE COMPANY AND THE INVESTORS TO CLOSE
The obligations of the Company to issue Shares on the Closing and the
Investors to pay the amounts under Section 2.1 shall be conditioned upon:
(i) the waiver or satisfaction of all conditions set forth in clause
5 of the Sale and Purchase Agreement; and
(ii) the execution and delivery by the parties thereto of the
Recapitalization Agreement, in the form attached hereto as Exhibit A.
ARTICLE 6.
LIMITATIONS ON TRANSFER
6.1 General Restrictions on Transfer. Each Shareholder agrees that such
Shareholder shall not, either directly or indirectly, offer, sell, transfer,
assign, mortgage, hypothecate, pledge, create a security interest in or Lien
upon, encumber, donate, contribute, place in trust, or otherwise voluntarily or
involuntarily dispose of (any of the foregoing actions, to "Transfer" and, any
offer, sale, transfer, assignment, mortgage, hypothecation, pledge, security
interest or Lien, encumbrance, donation, contribution, placing in trust or
other disposition, a "Transfer") any Shares, or any interest therein, except in
a transaction that is specifically permitted by this Agreement.
6.2 Void Transfers. Any attempt to Transfer any Shares, or any interest
therein, which is not in compliance with this Agreement shall be null and void
ab initio, and the Company shall not give any effect in the Company's stock
records to such attempted Transfer.
6.3 Permitted Transfers. Notwithstanding Sections 6.1 and 6.2, Transfers
(including, without limitation, pledges of Shares as collateral for loans) may
be made pursuant to this Agreement if:
(i) such Transfer complies in all respects with the applicable
provisions of this Agreement including, without limitation, Section 7 and
applicable federal and state securities laws;
(ii) the transferee agrees in writing with the Company and the other
Shareholders to be bound by the terms and conditions of this Agreement with
respect to the Shares Transferred to such transferee to the same extent as the
Shareholder who originally held such Shares is or was bound hereby (whereupon
such transferee shall be entitled to the same rights as such Shareholder who
originally held such Shares had with respect to such Shares and shall be deemed
to be a Shareholder for all purposes hereunder with respect to such Shares);
(iii) if requested by the Company, in its sole discretion, an
opinion of counsel to such transferring Shareholder shall be supplied to the
Company, at such transferring Shareholder's expense, to the effect that such
Transfer complies with applicable United States federal and state securities
laws; and
(iv) except for the parties to this Agreement, such transferee is
not (i) a Person engaged, directly or indirectly, in the cruise line business,
(ii) an owner, partner or shareholder holding more than 10% of the equity
interest in such a Person or (iii) an Affiliate of a Person described in
clauses (i) and (ii).
ARTICLE 7.
TAG-ALONG AND BRING-ALONG RIGHTS
7.1 Tag-Along Rights. (a) If one or more Shareholders (each a "Selling
Shareholder" and, the "Selling Shareholders") shall desire to sell Shares
representing a majority of all outstanding Shares (a "Proposed Sale") to any
Person other than another Shareholder or an Affiliate of such Shareholder (a
"Third Party Purchaser"), then such Selling Shareholders shall offer the other
Shareholders which are not Selling Shareholders (the "Tag-Along Shareholders")
the right to participate in the Proposed Sale with respect to a number of
Shares determined as provided in this Section 7.1 by sending written notice
(the "Tag-Along Notice") to the Company and the Tag-Along Shareholders, which
notice shall (i) state the number of Shares proposed to be sold in such
Proposed Sale by such Selling Shareholders (the "Proposed Sale Shares"),
(ii) state the proposed purchase price per Proposed Sale Share (the "Tag-Along
Price") and all other material terms and conditions of such Proposed Sale and
(iii) if applicable, be accompanied by any written offer from the Third Party
Purchaser; provided, however, that the Selling Shareholders shall not be
obligated to deliver a Tag-Along Notice if the Transfer (if consummated) is
made pursuant to Section 7.2.
(b) Each Tag-Along Shareholder shall have the right to require the
Selling Shareholder to cause the Third Party Purchaser to purchase from such
Tag-Along Shareholder at the Tag-Along Price (and otherwise upon the same terms
and conditions as those set forth in the Tag-Along Notice) a number of Shares
owned by such Tag-Along Shareholder (such Tag-Along Shareholder's "Tag-Along
Shares") not in excess of the product of (i) the total number of Proposed Sale
Shares, times (ii) a fraction, the numerator of which is the total number of
Shares owned by such Tag-Along Shareholder and the denominator of which is
equal to the sum of the total number of Shares owned by the Selling
Shareholders and the Tag-Along Shareholders and any other Persons owning Shares
entitled to participate in such Sale. Such right of each Tag-Along Shareholder
shall be exercisable by written notice to the Selling Shareholders with copies
to the Company given within 10 Business Days after receipt of the Tag-Along
Notice (the "Tag-Along Notice Period"), which notice shall state the number of
Tag-Along Shares that such Tag-Along Shareholder elects to sell in the Proposed
Sale, if less than the maximum number of such Tag-Along Shareholder's Tag-Along
Shares; provided that, if such notice shall not state a number of Tag-Along
Shares, then such Tag-Along Shareholder will be deemed to have elected to sell
the maximum number of such Tag-Along Shareholder's Tag-Along Shares. Failure
by a Tag-Along Shareholder to respond within the Tag-Along Notice Period shall
be regarded as a rejection of the offer made pursuant to the Tag-Along Notice.
Each Tag-Along Shareholder that elects to sell any or all of such Tag-Along
Shareholder's Tag-Along Shares is referred to in this Section 7.1 as a
"Participating Tag-Along Shareholder" and the number of Tag-Along Shares
elected, or deemed to be elected, by such Tag-Along Shareholder to be sold as
provided above is referred to in this Section 7.1 as such Tag-Along
Shareholder's "Participating Tag-Along Shares". The number of Shares to be
sold by the Selling Shareholders in the Proposed Sale shall be reduced by the
aggregate number of Participating Tag-Along Shares to be sold pursuant to this
Section 7.1 by all Participating Tag-Along Shareholders.
(c) At the request of the Selling Shareholders made not less than
two Business Days prior to the proposed Transfer, a Participating Tag-Along
Shareholder shall deliver to the Selling Shareholders certificates representing
such Participating Tag-Along Shareholder's Participating Tag-Along Shares, duly
endorsed, in proper form for Transfer, together with a limited power-of-
attorney authorizing the Selling Shareholders to transfer such Participating
Tag-Along Shares to the Tag-Along Purchaser and to execute all other documents
required to be executed in connection with such transaction.
(d) If no Transfer of the Tag-Along Shares in accordance with the
provisions of this Section 7.1 shall have been completed within 70 Business
Days of the Tag-Along Notice, then the Selling Shareholders shall promptly
return to the Participating Tag-Along Shareholder, in proper form, all
certificates representing such Participating Tag-Along Shareholder's
Participating Tag-Along Shares and the limited power-of-attorney previously
delivered by such Participating Tag-Along Shareholder to the Selling
Shareholders.
(e) The closing of the sale of the Participating Tag-Along Shares by
the Participating Tag-Along Shareholders shall be held at the same place and
time as the closing of the sale by the Selling Shareholders in the Proposed
Sale. Promptly after the consummation of the Transfer of the Participating Tag-
Along Shares pursuant to this Section 7.1, each Participating Tag-Along
Shareholder shall receive (i) the consideration with respect to the
Participating Tag-Along Shares so Transferred and (ii) such other evidence of
the completion of such Transfer and the terms and conditions (if any) thereof
as may reasonably be requested by such Participating Tag-Along Shareholder.
(f) The provisions of this Section 7.1 shall remain in effect,
notwithstanding any return to any Participating Tag-Along Shareholder of
Participating Tag-Along Shares as provided in Section 7.1(d).
7.2 Bring-Along Rights. (a) In the event that one or more Selling
Shareholders owning at least 60% of the number of outstanding shares of the
Company receives a bona fide offer from a Third Party Purchaser (excluding
offers from Affiliates of any of the Shareholders) to purchase (including a
purchase by merger) at least a majority of the outstanding Shares, the Selling
Shareholders may send written notice (a "Buyout Notice") to the Company and the
other Shareholders notifying the other Shareholders that they will be required
to sell the same percentage of their Shares in such sale as the Selling
Shareholder propose to sell (which percentage shall be specified in such Buyout
Notice) (the "Designated Percentage").
(b) Upon receipt of a Buyout Notice, each Shareholder receiving such
notice shall be obligated:
(i) to sell the Designated Percentage of such Shareholder's
Shares in the transaction (including a sale or merger) contemplated by the
Buyout Notice on the same terms and conditions as the Selling Shareholders;
(ii) to provide for the payment by such Shareholder of such
shareholder's pro rata portion of all costs associated with such transaction,
in the proportion that the number of Shares owned by such Shareholder bears to
the number of outstanding Shares; and
(iii) otherwise to take all necessary action to cause the
consummation of such transaction, including voting its Shares in favor of such
transaction and not exercising any appraisal rights in connection therewith.
(c) Each Shareholder further agrees to (i) take all actions
(including executing documents) in connection with the consummation of the
proposed transaction as may reasonably be requested of it by the Selling
Shareholders and (ii) appoint the Selling Shareholders as its attorneys-in-fact
to do the same on its behalf.
(d) In the event a contract with respect to the transaction
contemplated by the Buyout Notice has not been entered into within the 90 days
after the date of delivery of the Buyout Notice, the obligations of the
Shareholders under this Section 7.2 with respect to such Buyout Notice shall
terminate, subject, however, to the right of the Selling Shareholders to
deliver a further Buyout Notice.
ARTICLE 8.
CORPORATE GOVERNANCE AND CERTAIN OTHER ACTIONS
8.1 General. Each Shareholder shall vote its Shares at any regular or
special meeting of Shareholders of the Company, or in any written consent
executed in lieu of such a meeting of Shareholders, and shall take all other
actions necessary, to give effect to the provisions of this Agreement
(including, without limitation, Section 8.2 hereof), and to ensure that the
Company's Memorandum and Articles of Association and By-Laws do not, at any
time hereafter, conflict in any respect with the provisions of this Agreement.
8.2 Election of Directors . Each Shareholder agrees that, except as the
Shareholders may otherwise agree in writing, the number of directors
constituting the entire Board of Directors shall be seven, comprised of the
following individuals:
(i) five individuals designated by Carnival; and
(ii) two individuals designated by the Investors holding a majority
of all Shares held by the Investors (the "Majority Investors").
The initial directors designated by Carnival shall be Atle Brynestad,
Micky Arison, Howard Frank, Paris Katsoufis and Larry Pimentel and the initial
directors designated by the Majority Investors shall be Jorgen Lund and Knut
Heje.
8.3 Removal and Replacement. Each of Carnival and the Majority Investors
shall be entitled at any time and for any reason (or for no reason) to
designate any or all of its designees on the Board of Directors for removal.
If at any time a vacancy is created on the Board of Directors by reason of the
death, removal or resignation of any director, then Carnival or the Majority
Investors shall, as soon as practicable thereafter, designate a replacement
director and, as soon as practicable thereafter, the Company and each of the
Shareholders shall take action, including, if necessary, the voting of its
Shares, to elect or cause the election by the Board of Directors of such
replacement director in accordance with Section 8.2(a)(i) or (ii), as the case
may be.
8.4 Company Name Change. Each Shareholder hereby agrees to approve the
change of the Company's name to Cunard Line Limited and to take all action
necessary, including the voting of its Shares, to effect the same.
ARTICLE 9.
INITIAL PUBLIC OFFERING
9.1 Initial Public Offering. It is the current intention of the parties
to complete the Initial Public Offering prior to November 30, 1999 (the "IPO
Deadline"); provided that, if market conditions do not permit the Initial Pubic
Offering prior to the IPO Deadline, the IPO Deadline may be extended at the
option of Carnival. If the Initial Public Offering is in the United States,
the Company and the Investors shall in good faith attempt to negotiate a
registration rights agreement with customary terms and provisions to provide
the Investors (as a group) with one demand registration right and with piggy-
back registration rights.
9.2 Initial Public Offering Procedure. Prior to the Initial Public
Offering, the Company shall provide the Investors with written information
regarding the Initial Public Offering process and, to the extent determined by
Carnival in its sole discretion, shall invite the Investors to participate in
such Initial Public Offering. Any Investor so invited which desires to sell
Shares in the Initial Public Offering shall, with a time limit set out by the
Company in writing, notify the Company in writing of its wish to sell and the
amount of Shares it desires to sell; provided that Carnival may require each
Investor to sell up to 50% of such Investor's Shares in the Initial Public
Offering and, upon written request from Carnival, the Investors shall sell such
Shares in the Initial Public Offering.
9.3 Customary Agreements. In connection with the Initial Public
Offering, each Investor agrees to enter into customary agreements (including,
without limitation, a lock-up agreement) with the Company and the
arrangers/underwriters of the Initial Public Offering.
9.4 Carnival Exchange. Notwithstanding Sections 9.1, 9.2 and 9.3, at the
option of Carnival, in its sole discretion, in lieu of an Initial Public
Offering, Carnival may at any time elect to purchase all of the Shares owned by
the Investors (the "Carnival Exchange") in exchange for shares of common stock
of Carnival (the "Carnival Common Stock"). Prior to effecting the Carnival
Exchange, Carnival shall, in its sole discretion, consider first whether to
effect the Initial Public Offering. In the Carnival Exchange, each Investor
shall be entitled to receive a number of shares equal to the product of (i) the
number of Shares owned by such Investor and (ii) the Exchange Ratio. The
Exchange Ratio shall initially be 0.14493 and shall be subject to adjustment as
provided in Section 9.7 below. If it elects to effect the Carnival Exchange,
Carnival shall notify each Investor in writing of the Carnival Exchange. Such
notice shall specify the Exchange Ratio and the place and time of the closing
of the Carnival Exchange (which shall be a date within 20 Business Days of the
calculation of the Exchange Ratio).
9.5 Put Option. Notwithstanding Sections 9.1, 9.2, 9.3 and 9.4, if on
the third anniversary of the Closing, the Company has not completed the Initial
Public Offering and the Carnival Exchange has not occurred, each Investor
shall, from and after the third anniversary of the Closing, have the option
(the "Put Option") to put all of such Investor's Shares to Carnival in exchange
for Carnival Common Stock. The Put Option shall be exercisable by each
Investor by delivery of written notice to Carnival (the "Put Option Notice")
within 10 Business Days after the third anniversary of the Closing. At the
closing of the Put Option, each Investor who has exercised the Put Option shall
be entitled to receive a number of shares of Carnival Common Stock equal to the
product of (i) the number of Shares owned by such Investor and (ii) the
Exchange Ratio. At the closing of the Put Option Carnival shall be obligated
to purchase all of the Shares owned by the Investors exercising the Put Option
in exchange for shares of Carnival Common Stock as determined in accordance
with the preceding sentence. Carnival shall provide notice in writing to each
Investor exercising the Put Option of the Exchange Ratio and the place and time
of the closing of the Put Option (which closing date shall be within 45
Business Days after the third anniversary of the Closing).
9.6 No Fractional Shares. No fraction of Carnival Shares will be issued
to the Investors in connection with the Carnival Exchange or the exercise of
the Put Option. In lieu thereof, Carnival shall pay to such Investors
otherwise entitled to a fractional share cash in an amount equal to the product
of such fraction and the closing price for the Carnival Common Stock on the New
York Stock Exchange Composite Tape on the last trading day prior to the closing
of either the Carnival Exchange or the Put Option.
9.7 Closing of the Carnival Exchange and the Put Option. The closing for
the purchase of the Shares pursuant to Sections 9.4 or 9.6 shall be held at
such place and time as Carnival shall designate in writing to the Investors.
At such closing, in exchange for all of the Shares held by each Investor
participating in the Carnival Exchange or the Put Option, as the case may be,
Carnival shall issue, sell and deliver to such Investor and such Investor shall
purchase, acquire and accept from Carnival, certificates evidencing the number
of Shares of Carnival Common Stock to which such Investor is entitled under
Sections 9.4 and 9.6, registered in such Investor's name, all of which, upon
issuance shall have been duly authorized, validly issued, fully paid and non-
assessable and free and clear from all Liens. All Shares delivered by each
Investor to Carnival under this Section 9.7 shall be free and clear from all
Liens.
9.8 Exchange Ratio Adjustment. If Carnival or the Company shall, at any
time or from time to time, (i) declare a dividend of shares of the Carnival
Common Stock or Shares payable in Carnival Common Stock or Shares,
respectively, (ii) subdivide the outstanding shares of Carnival Common Stock or
Shares, (iii) combine the outstanding Carnival Common Stock or Shares into a
smaller number of shares, or (iv) issue any shares of Carnival Common Stock or
Shares in a reclassification of Carnival Common Stock or Shares, respectively
(including any such reclassification in connection with a consolidation or
merger in which Carnival or the Company is the surviving corporation), then in
each such case, the Exchange Ratio in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification, shall be proportionately adjusted so that upon the Carnival
Exchange or the closing of the Put Option each Investor shall be entitled to
receive the same aggregate number of shares of Carnival Common Stock which, if
the Carnival Exchange or the closing of the Put Option had occurred immediately
prior to such date, such Investor would have owned upon such Carnival Exchange
or the closing of the Put Option and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If there occurs any
reclassification of the Carnival Common Stock, consolidation or merger of
Carnival with or into another Person (other than a merger or consolidation of
Carnival in which Carnival is the continuing corporation and which does not
result in any reclassification or change of outstanding shares of the Carnival
Common Stock) or the sale or conveyance of all or substantially all of the
assets of Carnival to another Person, then each Investor will thereafter be
entitled to receive, upon the Carnival Exchange or the closing of the Put
Option, the same kind and amounts of securities (including shares of stock) or
other assets, or both, which were issuable or distributable to the holders of
outstanding Carnival Common Stock upon such reclassification, consolidation,
merger, sale or conveyance, in respect of that number of shares of Carnival
Common Stock then deliverable upon the Carnival Exchange or the closing of the
Put Option if the Carnival Exchange or the Put Option had been exercised
immediately prior to such reclassification, consolidation, merger, sale or
conveyance. Any such adjustment of the Exchange Ratio shall become effective
immediately after the record date of such dividend or the effective date of
such subdivision, combination, reclassification, consolidation, merger, sale or
conveyance. Such adjustment of the Exchange Ratio shall be made successively
whenever any event listed above shall occur. If a stock dividend is declared
and such stock dividend is not paid, the Exchange Ratio shall again be adjusted
to be the Exchange Ratio in effect immediately prior to such record date.
9.9 No Claims. Each Investor understands and agrees that it shall have
no claim against the Company, Newco, Carnival or any of their directors,
officers or affiliates if the Initial Public Offering shall not occur or if
Carnival elects to effect the Carnival Exchange and to the fullest extent
permitted by law, waives any such claim.
ARTICLE 10.
RIGHT TO PARTICIPATE IN CERTAIN ISSUANCE OF CAPITAL SHARES
10.1 Right to Participate in New Issuance. If the Company determines to
issue any Shares or any security convertible into or exercisable or
exchangeable for Shares, to any shareholder of the Company (including a
Shareholder) (other than capital shares to be issued (i) in connection with an
employee stock option plan or other bona fide employment compensation
arrangement that is approved by the Company's Board of Directors, (ii) pursuant
to a stock split or stock dividend, (iii) pursuant to the exercise of any
option, warrant or convertible security theretofore issued, (iv) as
consideration in connection with a bona fide acquisition by the Company or any
of its subsidiaries or (v) pursuant to the Initial Public Offering) (each such
issuance not excluded by the immediately preceding parenthetical being herein
referred to as a "New Issuance"), then the Company shall notify the
Shareholders of the proposed New Issuance. Such notice shall specify the
number and class of securities to be issued, the rights, terms and privileges
thereof and the estimated price at which such securities will be issued.
10.2 Exercise of Right. By written notice to the Company given within 15
Business Days of being notified of such New Issuance, each Shareholder shall be
entitled to purchase that percentage of New Issuance determined by dividing (a)
the total number of Shares owned by such Shareholder by (b) the total number of
all outstanding Shares. Such right shall be exercisable within 15 Business
Days following the receipt of the notice delivered pursuant to the previous
sentence. To the extent the Shareholders do not elect to purchase all of the
securities proposed to be offered and sold in the New Issuance, the Company may
issue those securities not so subscribed for to the shareholders participating
in such issuance, provided that such sales are consummated within 120 Business
Days after the Shareholders? rights hereunder have expired or been waived.
10.3 Closing. The closing of the New Issuance shall be held at such time
as the Company shall designate in writing to the Shareholders that elect to
purchase securities in the new Issuance pursuant to this Article 10 not fewer
than five Business Days prior to the date of such closing, at the Company's
principal offices, or at another place designated by the Company in writing to
such Shareholders in such notice.
ARTICLE 11.
SHARES CERTIFICATE LEGEND
The Company and Shareholders agree that each certificate representing the
Shares now or hereafter held by a Shareholder shall be endorsed with a legend
in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A "TRANSFER" AND VOTING OF ANY OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE
SUBSCRIPTION AGREEMENT, DATED AS OF MAY 27, 1998 (THE "SUBSCRIPTION
AGREEMENT", AMONG SEABOURN CRUISE LINE LIMITED, (THE "COMPANY",
CARNIVAL CORPORATION AND THE PERSONS NAMED THEREIN, A COPY OF WHICH
MAY BE INSPECTED AT THE COMPANY'S PRINCIPAL OFFICE. THE COMPANY WILL
NOT REGISTER THE TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE
COMPANY UNLESS AND UNTIL THE TRANSFER HAS BEEN MADE IN COMPLIANCE
WITH THE TERMS OF THE SUBSCRIPTION' AGREEMENT."
ARTICLE 12.
AFTER-ACQUIRED SECURITIES
Except as otherwise provided in Article 14, all of the provisions of this
Agreement shall apply to all of the Shares now owned or that may be issued or
transferred hereafter to a Shareholder in consequence of any additional
issuance, purchase, exchange or reclassification of any of the Shares
(including without limitation, upon the exercise of any option or warrant),
corporate reorganization, or any other form of recapitalization, consolidation,
merger, share split or share dividend, or that are acquired by a Shareholder in
any other manner, and, in the case of any such event, appropriate adjustment
shall be made to any number of Shares hereunder to take account of such event
provided, however, that, with respect to CG, only (i) Shares issued pursuant to
this Agreement and (ii) Shares issued as a result of a recapitalization,
reclassification, combination, stock dividend or otherwise with respect to
Shares issued pursuant to this Agreement shall be subject to the terms of this
Agreement.
ARTICLE 13.
TRANSACTIONS WITH AFFILIATES
13.1 Limitation on Transactions with Affiliates. From and after the
Closing, the Company will not sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or make any contract, agreement, loan, advance or guarantee with, or
for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless such Affiliate Transaction is on terms no less favorable
to the Company than those that could be obtained an arm's length basis with a
third party.
13.2 Exceptions. The limitation under Section 13.1 does not limit, and
shall not apply to (i) any transaction or series of transactions approved by a
majority of the disinterested members of the Board of Directors; (ii) any
transaction between the Company and a wholly-owned subsidiary; (iii) the
payment of reasonable compensation to directors and officers of the Company;
(iv) reasonable loans made by the Company to its officers and directors as
approved by the Board of Directors; (v) any employment agreement with officers
entered into by the Company in the ordinary course of business of the Company.
ARTICLE 14.
TERMINATION
14.1 General. This Agreement shall become effective upon the execution
hereof and shall terminate upon the earlier of:
(i) the consummation by the Company of the Initial Public Offering
or the consummation of the Carnival Exchange; and
(ii) such earlier date as the Shareholders shall unanimously agree
in writing to terminate this Agreement.
14.2 Non-Consummation of Cunard Acquisition. This Agreement shall
terminate (i) upon the termination of the Sale and Purchase Agreement or
(ii) if acquisition of the business of Cunard is not consummated for any
reason.
14.3 Return of Shares and Purchase Price. If this Agreement is
terminated pursuant to Section 14.2 and the Company has issued the Shares to
the Investors under Section 2.1(a) and the Investors have paid to the Company
the purchase price under Section 2.1(b), then the Investors shall surrender to
the Company the certificates representing the Shares and upon the receipt of
such Shares, the Company shall repay to each Investor such amount as such
Investor paid under Section 2.1(b) by wire transfer of immediately available
funds to such account as may be designated by each Investor to the Company.
14.4 Shareholder No Longer Holds Shares. Notwithstanding Section 14.1,
this Agreement shall terminate permanently as to any Shareholder at such time
as such Shareholder no longer owns any Shares; provided that any other Person
that holds any Shares previously held by a Shareholder and has agreed to be
bound hereby in accordance with the terms hereof in connection with the
Transfer to such other Person shall continue to be bound hereby as a
Shareholder with respect to such Shares.
14.5 No Liability. If this Agreement is terminated as provided in
Section 14.2, no party shall have any liability or further obligation to any
other party under this Agreement.
ARTICLE 15.
CONFIDENTIALITY
All information relating to the Company provided to any Investor shall be
kept confidential and shall not be disclosed to any third party except (a) as
has become generally available to the public (other than through disclosure by
such Investor in contravention of this Agreement), (b) to such Investor's
directors, officers, trustees, partners, employees, agents and professional
consultants on a need-to-know basis, (c) to any other Shareholder, (d) to any
Person to which such Investor offers to sell or transfer any Shares, provided
that the prospective transferee shall agree to be bound by the provisions of
this Article 15, or (e) in order to comply with any law, rule, regulation or
order applicable to such Investor.
ARTICLE 16.
MISCELLANEOUS
16.1 Survival of Representations, Warranties, Other Agreements and
Undertakings. All of the representations and warranties, as well as those
other agreements and undertakings made herein to be performed after the Closing
Date, shall survive the execution and delivery of this Agreement, any
investigation by or on behalf of the Investors or acceptance of the Shares.
16.2 Notices. All notices, demands and other communications provided for
or permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested, telecopier, courier
service, overnight mail or personal delivery:
(a) if to the Company:
3655 N.W. 87th Avenue
Miami, Florida 33178
Telecopier No.: (305) 471-4700
Attention: General Counsel
with a copy to:
Thommessen Krefting Greve Lund
Haakon VII's gate 10, P.O. Box 1484
0116 Oslo, Norway
Attention: Jorgen Lund
Telecopier No.: (47) 23 11 10 10
(b) if to Carnival:
Carnival Corporation
3655 N.W. 87th Avenue
Miami, Florida 33178
Telecopier No.: (305) 471-4700
Attention: General Counsel
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Telecopy: (212) 757-3990
Attention: James M. Dubin, Esq.
(c) if to the Investors:
Christiania Markets
Postboks 1166 Sentrum
0107 Oslo, Norway
Telecopy: (47) 22 69 08 88
with a copy to:
Haight, Gardner, Holland & Knight
195 Broadway
New York, New York 10007
Telcopy: (212) 385-9010
Attention: Mark A. Saunders, Esq.
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial courier service; five (5) Business Days
after being deposited in the mail, postage prepaid, if mailed by airmail; and
when receipt is mechanically acknowledged, if telecopied.
16.3 Fees and Expenses. The Company agrees (i) to pay to Christiania a
fee equal to 2% of the purchase price paid by the Investors, under this
Agreement (up to a maximum amount of US $2,000,000) with US $1,600,000 to be
paid on the Closing Date and the remainder to be paid on the date on which the
additional Shares are issued under Section 2.3 and (ii) to reimburse
Christiania for the reasonable third-party fees and expenses incurred by
Christiania in connection with the negotiation, execution and delivery of the
Sale and Purchase Agreement and this Agreement (up to a maximum amount of US
$350,000) on the Closing Date.
16.4 Carnival Expenses. The Company agrees to reimburse Carnival for all
out-of-pocket expenses incurred by Carnival in connection with the transactions
contemplated by the Sale and Purchase Agreement and this Agreement and the
transactions contemplated thereby and hereby (including, without limitation,
travel, expenses and legal and accounting fees and expenses).
16.5 Third Party Beneficiaries. Nothing herein expressed or implied is
intended to or shall be construed to confer upon or give any person or entity,
other than the parties hereto, and their respective successors, permitted
assigns and affiliates, any rights or remedies under or by reason of this
Agreement.
16.6 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of the parties
hereto. The Company may not assign any of its rights or obligations under this
Agreement, except to a successor-in-interest to the Company, without the
written consent of the Majority Investors and no Shareholder may assign any of
its rights or obligations without the consent of the Company (except for an
assignment pursuant to Section 6.3).
16.7 Amendment and Waiver.
(a) Any amendment, supplement or modification of or to any provision
of this Agreement, any waiver of any provision of this Agreement, and any
consent to any departure by the parties from the terms of any provision of this
Agreement, shall be effective (i) only if it is made or given in writing and
signed by the Company, Carnival and the Majority Investors, and (ii) only in
the specific instance and for the specific purpose for which made or given.
(b) No failure or delay on the part of the parties in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not exclusive
of any remedies that may be available to the parties at law, in equity or
otherwise.
16.8 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
16.9 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
16.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to agreements
made and to be performed entirely within such State.
16.11 Arbitration. (i) After the Closing, any dispute, controversy, or
claim arising out of or relating to any provision of this Agreement or the
interpretation, enforceability, performance, breach, termination, or validity
hereof, including, without limitation, this Section 16.11 shall be solely and
finally settled by arbitration in New York City, the State of New York in
accordance with the Commercial Arbitration Rules and Supplementary Procedures
for International Commercial Arbitration of the American Arbitration
Association as modified by the provisions of this Article. An award rendered
in connection with an arbitration pursuant to this Section 16.11 shall be final
and binding upon the parties, and any judgment upon such an award may be
entered and enforced in any court of competent jurisdiction.
(ii) Proceedings in the arbitration shall be conducted in the
English language, and all documents not in English submitted by either party
must be accompanied by a translation to English.
16.12 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair
the benefits of the remaining provisions hereof.
16.13 Entire Agreement. This Agreement, together with the schedules
hereto is intended by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein.
16.14 Further Assurances. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any governmental authority
or any other Person) as may be reasonably required or desirable to carry out or
to perform the provisions of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date first above written.
SEABOURN CRUISE LINE LIMITED
By: /s/ Jorgen Lund
Name: Jorgen Lund
Title: Director
CARNIVAL CORPORATION
By: /s/ Arnaldo Perez
Name: Arnaldo Perez
Title: Vice President
STOREBRAND
By: /s/ Truls Evensen
Name: Truls Evensen
Title: Portfolio Manager
VITAL
By: : /s/ Peter Hermanrud
Name: Peter Hermanrud
Title: Investment Director
VESTA FORSIKRING
By: /s/ Robert Lingaas
Name: Robert Lingaas
Title: Portfolio Manager
AVANSE
By: /s/ Bjorn W. Johansen
Name: Bjorn W. Johansen
Title: Inv. Director
INDUSTRIFINANS
By: /s/Bengt Losnedal
Name: Bengt Losnedal
Title: Portfolio Manager
POSTBANKEN VERDIPAPIRFOND
By: /s/ Dagfin Hopsdal
Name: Dagfin Hopsdal
Title: Inv. Director
STATOIL
By: /s/ Terje Moi
Name: Terje Moi
Title: Senior Manager
K-HOLDING
By: /s/ Birger Harneshaug
Name: Birger Harneshaug
Title: Adm. Director
TOLUMA (WILH.WILHELMSEN)
By: /s/ Knut Wang
Name: Knut Wang
Title: Managing Director
K-FONDENE
By: /s/ Thomas Voght
Name: Thomas Voght
Title:
VESTA FORVALTNING
By: /s/ Hogne Tyssoy
Name: Hogne Tyssoy
Title: Investment Director
GJENSIDIGE FORSLKRING
By: /s/ Bard Johannessen
Name: Bard Johannessen
Title: Portfolio Manager
HAFSLUND INVEST
By: /s/ Steven Kunz
Name: Steven Kunz
Title:
CG CRUISE INVEST AS
By: /s/ Jorgen Lund
Name: Jorgen Lund
Title: Attorney-in-fact
CHRISTIANIA BANK OG KREDITKASSE ASA
By: /s/ Tom Knoff
Name: Tom Knoff
Title:
Christiania irrevocably and unconditionally guarantees the due and punctual
payment of the purchase price by each Investor under Section 2.1(b) and any
Investor Purchase Price Adjustment owed by any Investor under Section 2.3.
CHRISTIANIA MARKETS
By: /s/ Tom Knoff
Name: Tom Knoff
Title:
<PAGE>
Schedule 2.1
Subscription for Shares
Initial
Subscription
Price To Be Shares Assumed
Paid At To Be Investor Investment
Closing Issued at Share Percentage
(US$) Closing Adjustment ( % )
Storebrand
Storebrand Liv 12,912,241 1,032,979 258,245 11.31
Helikopeterservice PK fund 53,790 4,303 1,076 0.05
Wilh.Wilhelmsen PK fund 63,751 5,100 1,275 0.06
Bergens Tidende PK fund 11,289 903 226 0.01
Bergesen d.y. PK fund 40,110 3,209 802 0.04
IBM konsern PK fund 358,601 28,688 7,172 0.31
Kraft Freia PK fund 46,485 3,719 930 0.04
Kvinherad Kom Kraft fund 80,619 6,450 1,612 0.07
Sparebankenes Sikrings fund 73,978 5,918 1,480 0.06
Forretningsbankenes Sikrings 55,118 4,409 1,102 0.05
fund
Vidal
Vital Forsikring 9,130,656 730,452 182,613 8.00
Vesta Forsikring
Vesta Forsikring 3,968,858 317,509 79,377 3.48
Vesta Liv 2,432,526 194,602 48,651 2.13
Avanse
Avanse Vekst 2,282,664 182,613 45,653 2.00
Avanse Shipping 913,066 73,045 18,261 0.80
Avanse Kapital 5,934,926 474,794 118,699 5.20
Industrifinans
Industrifinans Aktiv 3,245,353 259,628 64,907 2.84
Industrifinans Aksje Norge 2,342,212 187,377 46,844 2.05
Industrifinans Stor Kunde 1,310,051 104,804 26,201 1.15
Postbanken Verdipapirfond
Postbanken Aksjespar 5,441,176 435,294 108,824 4.77
Postbanken Aksjevekst 960,208 76,817 19,204 0.84
Statoil
Statoil 6,401,384 512,111 128,028 5.61
K-Holding
K-Holding 2,580,403 206,432 51,608 2.26
Toluma (Wilh. Wilhelmsen)
Skips AS Tudor 2,647,890 211,831 52,958 2.32
AS Wingana 913,066 73,045 18,261 0.80
Katten Invest DA 91,307 7,305 1,826 0.08
K-fondene
K-Avkastning 5,972,640 477,811 119,453 5.23
K-Kapital 2,328,317 186,265 46,566 2.04
K-Vekst 1,822,161 145,773 36,443 1.60
Vesta forvaltning
Vesta AMS 2,257,852 180,628 45,157 1.98
Vesta Horisont 922,990 73,839 18,460 0.81
Vesta 2010 248,116 19,849 4,962 0.22
Vesta 2020 129,020 10,322 2,580 0.11
Vesta 2030 94,284 7,543 1,886 0.08
Gjensidige Forslkring
Gjensidige Skade 913,066 73,045 18,261 0.80
Gjensidige Liv 3,652,262 292,181 73,045 3.20
Hafslund Invest 2,719,348 217,548 54,387 2.38
CG Cruise Invest AS
GC Cruise Invest AS 26,796,490 2,143,719 535,930 23.48
Christiania Bank ASA
Christiania Bank ASA 1,984,925 158,794 39,699 1.74
TOTAL 114,133,199 9,130,656 2,282,664 100.0
EXHIBIT 10.4
RECAPITALIZATION AGREEMENT
Among
SEABOURN CRUISE LINE LIMITED
CARNIVAL CORPORATION
and
CG HOLDING AS
Dated: May 27, 1998
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS 2
1.1 Definitions. 2
ARTICLE 2 TERMS OF RECAPITALIZATION AND PURCHASE OF SHARES 6
2.1 Articles Amendment. 6
2.2 Recapitalization 6
2.3 Purchase and Sale of the New Shares by Carnival 7
2.4 The Closing 8
2.5 Recapitalization Post-Completion Adjustment 8
2.6 Cunard Post-Closing Adjustment 11
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 12
3.1 Due Incorporation 12
3.2 Qualification 12
3.3 Capital Stock 12
3.4 Authorization; No Contravention 12
3.5 Binding Effect 13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE EXISTING SHAREHOLDERS 13
4.1 Title to Shares. 13
4.2 Authorization; No Contravention 14
4.3 Binding Effect 14
ARTICLE 5 CONDITIONS TO THE OBLIGATION OF THECOMPANY AND THE
EXISTING SHAREHOLDERS TO CLOSE 14
ARTICLE 6 LIMITATIONS ON TRANSFER 15
6.1 General Restrictions on Transfer 15
6.2 Void Transfers 15
6.3 Permitted Transfers 15
ARTICLE 7 RIGHT OF FIRST OFFER, TAG-ALONG AND BRING-ALONG RIGHTS 17
7.1 Right of First Offer 17
7.2 Tag-Along Rights 18
7.3 Bring-Along Rights 20
ARTICLE 8 CHANGE OF CONTROL BUYOUT 22
ARTICLE 9 CORPORATE GOVERNANCE AND CERTAIN OTHER
ACTIONS 24
9.1 General 24
9.2 Election of Directors 24
9.3 Removal and Replacement. 24
9.4 Company Name Change 25
ARTICLE 10 INITIAL PUBLIC OFFERING 25
10.1 Initial Public Offering 25
10.2 Initial Public Offering Procedure 25
10.3 Customary Agreements 26
10.4 Carnival Exchange 26
10.5 Put Option 26
10.6 No Fractional Shares 27
10.7 Closing of the Carnival Exchange and the Put Option 27
10.8 Exchange Ratio Adjustment 28
10.9 No Claims 29
ARTICLE 11 RIGHT TO PARTICIPATE IN CERTAIN ISSUANCE OF CAPITAL SHARES 30
11.1 Right to Participate in New Issuance 30
11.2 Exercise of Right 30
11.3 Closing 31
ARTICLE 12 SHARES CERTIFICATE LEGEND 31
ARTICLE 13 AFTER-ACQUIRED SECURITIES 32
ARTICLE 14 TRANSACTIONS WITH AFFILIATES 33
14.1 Limitation on Transactions with Affiliates 33
14.2 Exceptions 33
ARTICLE 15 TERMINATION 33
15.1 General. 33
15.2 Non-Consummation of Cunard Acquisition 34
15.3 No Liability 34
15.4 No Liability. 34
ARTICLE 16 TERMINATION OF JOINT VENTURE AGREEMENT 34
ARTICLE 17 CONFIDENTIALITY 35
ARTICLE 18 MISCELLANEOUS 35
18.1 Survival of Representations, Warranties,
Other Agreements and Undertakings 35
18.2 Notices 36
18.3 Expenses 37
18.4 Third Party Beneficiaries 37
18.5 Successors and Assigns 38
18.6 Amendment and Waiver 38
18.7 Counterparts 38
18.8 Headings 39
18.9 Governing Law 39
18.10 Arbitration 39
18.11 Severability 39
18.12 Entire Agreement 40
18.13 Further Assurances 40
RECAPITALIZATION AGREEMENT
This Recapitalization Agreement is made and entered into as of this
27th day of May, 1998 among Seabourn Cruise Line Limited, a Bahamas
International Business Corporation (the "Company"), Carnival Corporation, a
Panamanian Corporation ("Carnival") and CG Holding AS ("CG" and together with
Carnival, the "Existing Shareholders").
WHEREAS, each of the Existing Shareholders is the legal and
beneficial owner of 2,400 of issued and outstanding shares of the Company (the
"Existing Shares").
WHEREAS, pursuant to an Agreement for the Sale and Purchase of the
Business of Cunard, dated April 3, 1998, among Cunard Line Limited and others
as sellers and Carnival as buyer and Kvaerner ASA as guarantor (the "Sale and
Purchase Agreement"), Carnival agreed to acquire the business carried on by
affiliates of Kvaerner ASA under the name Cunard.
WHEREAS, Carnival will assign its rights and duties under the Sale
and Purchase Agreement to a newly-formed subsidiary ("Newco") of the Company.
WHEREAS, the Company intends to change its name to Cunard Line
Limited and contribute its assets and business to the combined entity.
WHEREAS, the parties hereto currently intend to consider an initial
public offering of equity securities of the Company prior to November 30, 1999
and, if such an initial public offering is made, the parties will consider
listing the equity securities of the Company on the Oslo Stock Exchange, either
as primary or secondary listing (it being understood that any such decisions
concerning an initial public offering shall be made by Carnival in its sole
discretion).
WHEREAS, prior to the acquisition of the business of Cunard Line
Limited (the "Cunard Acquisition"), the Company and the Existing Shareholders
desire to effect a recapitalization of the Company pursuant to which the
Existing Shareholders will receive ordinary shares of the Company (the "New
Shares");
WHEREAS, at Closing (as defined herein), as part of the
recapitalization, the parties will be issued an aggregate of 11,760,000 New
Shares of Seabourn based upon an assumed purchase price of Seabourn of
US$147,000,000 and, after Closing, the parties will be issued additional New
Shares reflecting an adjustment to the assumed purchase price.
WHEREAS, the Company wishes to issue and sell to Carnival, and
Carnival wishes to purchase from the Company, additional New Shares to finance
the Cunard Acquisition and repay the Seabourn Subordinated Loan (as defined
herein).
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Actual Seabourn Share Issuance Amount" means with respect to each
Existing Shareholder, an amount equal to (i) the product of 0.5 and the
Adjusted Seabourn Price divided by (ii) US$10.00.
"Adjusted Cunard Price" means the purchase price under the Sale and
Purchase Agreement as adjusted under clause 4.2 thereof plus the actual amount
of the fees and expenses of Christiania reimbursed under Section 16.3 of the
Subscription Agreement.
"Adjusted Seabourn Price" means (i) US$310 million minus (ii) the
principal amount of the Seabourn Subordinated Loan (immediately prior to the
Closing) the amount of any long-term debt of the Company (at the Closing) and
the Company Debits (calculated in accordance with Section 2.5) plus (iii) the
Company Credits (calculated in accordance with Section 2.5).
"Affiliate means, with respect to any Person, any other Person
controlling, controlled by or under common control with, such Person. For
purposes of this definition, "control", when used with respect to any Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Assumed Carnival Share Issuance Amount" means the assumed post-
closing share adjustment amount of Carnival set forth on Schedule A.
"Assumed Cunard Price" means US$380,444,000.
"Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Business Day" means any day other than a Saturday, Sunday or public
holiday in England and Wales, the United States, Bermuda or the Bahamas.
"Carnival Additional Share Adjustment Amount" means the Carnival
Purchase Price Adjustment divided by US$10.00.
"Carnival Share Issuance Amount" the sum of (i) either (a) the
Assumed Carnival Share Issuance Amount plus the Carnival Additional Share
Adjustment Amount (if the Adjusted Cunard Price exceeds the Assumed Cunard
Price) or (b) the Assumed Carnival Share Issuance Amount minus the Carnival
Additional Share Adjustment Amount otherwise.
"Carnival Purchase Price Adjustment" means the product of (i) 0.7 and
(ii) either (a) the Adjusted Cunard Price minus the Assumed Cunard Price (if
the Adjusted Cunard Price exceeds the Assumed Cunard Price) or (b) the Assumed
Cunard Price minus the Adjusted Cunard Price otherwise.
"Closing" has the meaning set forth in Section 2.4 of this Agreement.
"Closing Date" means the second Business Day (as defined in the Sale
and Purchase Agreement) after all of the conditions of Completion shall have
been fulfilled or waived by the parties to the Sale and Purchase Agreement.
"Completion" has the meaning set forth in the Sale and Purchase
Agreement.
"Control" means direct or indirect ownership of stock or shares
possessing more than 50 percent of the total combined voting power of all
classes of stock or shares entitled to vote.
"Debt Repayment Amount" means (i) the outstanding principal amount
under the Seabourn Subordinated Loan at Closing divided by (ii) 10.
"Existing Shareholders" has the meaning set forth in the recitals to
this Agreement.
"Initial Public Offering" means an initial public offering of equity
securities of the Company in the United States, the United Kingdom or Norway
and a related listing of such shares on a national securities exchange or
trading market in the United States, the London Stock Exchange or the Oslo
Stock Exchange, respectively.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (excluding those arising by operation of law) or
other security interest of any kind or nature whatsoever.
"Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
governmental authority or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"Seabourn Additional Share Issuance Amount" means, with respect to
each Existing Shareholder, the Actual Seabourn Share Issuance Amount minus the
Seabourn Base Shares.
"Seabourn Base Shares" means, with respect to each Existing
Shareholder, the number of New Shares representing base shares as set forth
opposite such Existing Shareholder's name on Schedule A.
"Seabourn Subordinated Loan" means the Secured Term Loan Agreement
dated February 18, 1992, by and between Seabourn, as Borrower and Carnival as
Lender, as amended by Addendum No. 1 dated February 15, 1996.
"Subscription Agreement" means the Subscription Agreement, dated as
of the date hereof, between the Company, Carnival and the persons named
therein.
"US$" means United States dollars, the lawful currency of the United
States of America.
ARTICLE 2
TERMS OF RECAPITALIZATION AND PURCHASE OF SHARES
2.1 Articles Amendment Prior to the Closing, the Company and the
Existing Shareholders shall take all action necessary to adopt, file and make
effective the amendments to the Company's Memorandum and Articles of
Association attached hereto as Exhibits A and B respectively.
2.2 Recapitalization.
(a) Upon the terms and subject to the conditions set forth
herein, the Company shall effect a recapitalization by way of an increase of
the share capital by a transfer to the share capital account from the paid-in
capital account to increase the par value of the Existing Shares, and a
subsequent stock split whereby the Existing Shares shall be converted into a
number of New Shares equal to the number determined under Sections 2.2(b) and
2.5.
(b) At the Closing, each of the Existing Shareholders, upon
presentation and surrender to the Company of the certificate representing the
Existing Shares held by such Existing Shareholder, shall be entitled to receive
a certificate representing the Seabourn Base Shares. After the Closing, the
Company shall issue additional New Shares to the Existing Shareholders subject
to the terms of Section 2.5.
(c) Upon the terms and subject to the conditions herein, the
Company agrees to issue to Carnival, and Carnival agrees to subscribe for and
accept from the Company a number of New Shares equal to the Debt Repayment
Amount in repayment for the outstanding principal amount under the Seabourn
Subordinated Loan. At the Closing, the Company shall pay to Carnival all
accrued interest and other fees and expenses on the Seabourn Subordinated Loan
through and including the Closing Date.
(d) At the Closing, upon delivery of the New Shares specified
in Section 2.2(c), all amounts outstanding under the Seabourn Subordinated Loan
shall be deemed repaid in accordance with terms of the agreements governing the
Seabourn Subordinated Loan.
2.3 Purchase and Sale of the New Shares by Carnival. (a) At the
Closing, upon the terms and subject to the conditions set forth herein, the
Company agrees to issue to Carnival, and Carnival agrees to subscribe for and
accept from the Company, an aggregate of 26,304,864 New Shares. After the
Closing, the Company shall issue additional New Shares to Carnival subject to
the terms of Section 2.6.
(b) The purchase price payable by Carnival for the New Shares
under this Section 2.3 shall be US$266,310,800, subject to adjustment in
accordance with Section 2.6. At the Closing, Carnival shall pay to the Company
US$266,310,800, which shall be held on account for the purchase price payable
hereunder.
2.4 The Closing. (a) The closing of the transactions
contemplated hereby (other than the additional New Shares to be issued pursuant
to Sections 2.5 and 2.6) (the "Closing") shall take place at the offices of
Paul, Weiss, Rifkind, Wharton and Garrison in New York, at 10 a.m., local time,
on the Closing Date or at such other time as the parties may mutually agree.
(b) At the Closing, (i) the Company shall deliver to each
Existing Shareholder certificates evidencing the number of Seabourn Base Shares
to which such Existing Shareholder is entitled registered in such Existing
Shareholder's name, upon presentation and surrender to the Company of the
certificate representing such Existing Shares held by such Existing
Shareholder, (ii) the Company shall deliver to Carnival certificates
representing a number of New Shares equal to the Debt Repayment Amount
registered in Carnival's name, in full satisfaction of all amounts owing under
the Seabourn Subordinated Loan and (iii) the Company shall deliver to Carnival
certificates evidencing 26,304,864 New Shares registered in Carnival's name,
upon payment of the funds payable by Carnival under Section 2.3(b). All
amounts paid by Carnival hereunder shall be paid by wire transfer of
immediately available funds to such account as may be designated by the
Company. Upon payment of all amounts required under Sections 2.3 and 2.6 and
the repayment of the Seabourn Subordinated Loan, all New Shares issued
hereunder shall be validly issued, fully paid and non-assessable and free and
clear from all Liens.
2.5 Recapitalization Post-Completion Adjustment. (a) Within 45
days of the Closing, or as otherwise agreed to by the parties to the Sale and
Purchase Agreement, the Company shall deliver to the Existing Shareholders (and
to the parties to the Subscription Agreement) a statement (the "Initial
Financial Statement") prepared by Price Waterhouse LLP ("Price Waterhouse"),
the Company's independent accountants, setting forth, as of the Closing Date
the Adjusted Seabourn Price and the Company's debits (the "Company Debits") and
credits (the "Company Credits") as described on Schedule 2.5 and itemized to
reflect each of the categories set forth on Schedule 2.5 (it being understood
that Schedule 2.5 sets forth a calculation of such amounts as of February 28,
1998 for informational purposes only). The Initial Financial Statement should
be prepared on a basis consistent with generally accepted accounting principles
in the United States and the Company's audited financial statements.
(b) The calculation of the Adjusted Seabourn Price, Company
Debits and Company Credits in the Initial Financial Statement shall become
final and binding on the Company and the Existing Shareholders for all purposes
of this Agreement unless either of the Existing Shareholders shall give written
notice of its disagreement (a "Notice of Disagreement") to the Company within
20 Business Days following receipt of its Initial Financial Statement. Any such
Notice of Disagreement shall specify in all reasonable detail the nature of any
disagreements so asserted. During a period of 10 Business Days following the
aforesaid 20 Business Day period, the Company and the Existing Shareholders
shall attempt to resolve in writing any differences they may have with respect
to any matter specified in any Notice of Disagreement. If at the end of such
10 Business Day period, the Company and the Existing Shareholders are unable to
reach agreement with respect to all such matters, then all such matters
specified in any Notice of Disagreement as to which such written agreement has
not been reached (the "Disputed Matters") shall be submitted to and reviewed
by an expert (the "Expert"), which shall be an independent public accounting
firm of outstanding international reputation (other than Price Waterhouse)
selected by the Company and the Existing Shareholders. If within five Business
Days following the expiration of such 10 Business Day period, the Company and
the Existing Shareholders have failed to agree in writing upon the selection of
the Expert or any Expert selected by them has not agreed to perform the
services called for thereunder, the Company shall select the Expert by lot from
among the following independent accounting firms (Arthur Andersen LLP, Coopers
& Lybrand L.L.P. or KPMG Peat Marwick LLP). Within 10 Business Days, the
Expert shall calculate each Disputed Matter in the Initial Financial Statement
and deliver a report to the Company and the Existing Shareholders. Each
Existing Shareholder shall pay one-half of the Expert's reasonable costs.
(c) The Company shall provide to its accountants and the Expert such
access and assistance as they may reasonably require to allow them to perform
their duties under this Section 2.5 (including, without limitation, reasonable
access to all working papers, records, accounts, invoices and other documents
used by Price Waterhouse in connection with the preparation of the Initial
Financial Statement and reasonable access to such personnel of Price Waterhouse
as were involved in the preparation of the Initial Financial Statement).
(d) If a Notice of Disagreement is delivered in a timely manner,
the calculation of the Adjusted Seabourn Price, Company Debits and Company
Credits, as modified to reflect the resolution of Disputed Matters in
accordance with this Section 2.5, shall become final and binding on the Company
and the Existing Shareholders for all purposes of this agreement upon the
earlier of (i) the date the Company and the Existing Shareholders resolve in
writing all Disputed Matters and (ii) the date the Expert delivers its report
that resolves all Disputed Matters.
(e) Within five Business Days after the calculation of Company
Credits and Company Debits is determined to be final and binding under this
Section 2.5, the Company shall issue to each Existing Shareholder a number of
New Shares equal to the Seabourn Additional Share Issuance Amount.
2.6 Cunard Post-Closing Adjustment. Upon completion of the
adjustments of the purchase price under clause 4.2 of the Sale and Purchase
Agreement, the Company shall notify Carnival in writing of the Carnival
Purchase Price Adjustment and whether the Company or Carnival must pay such
adjustment. Within five Business Days thereafter, (i) either (a) if the
Adjusted Cunard Price exceeds the Assumed Cunard Price, Carnival shall pay the
Carnival Purchase Price Adjustment by wire transfer of immediately available
funds to the account designated under Section 2.2 or (b) otherwise the Company
shall pay Carnival the Carnival Purchase Price Adjustment by wire transfer of
immediately available funds to an account of Carnival as designated in writing
by Carnival to the Company and (ii) subject to the receipt of any amounts due
under Section 2.6(i)(a), the Company shall issue to Carnival a number of
additional New Shares equal to the Carnival Share Issuance Amount.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Existing Shareholders on
the date hereof and on the Closing Date as follows:
3.1 Due Incorporation. The Company is an International Business
Corporation duly incorporated and validly existing under the laws of the
Bahamas and has all requisite corporate power and lawful authority to own,
lease and operate its properties and to carry on its business as now being
conducted.
3.2 Qualification. The Company is duly qualified or otherwise
authorized to transact business in each jurisdiction in which such
qualification or authorization is required by applicable law or in which the
failure so to qualify or be authorized would have a material adverse effect on
the Company.
3.3 Capital Stock. (a) As of the date hereof, the authorized share
capital of the Company is US$5,000, made up of 5,000 shares. As of the date
hereof, 4,800 shares are issued and outstanding. Upon the Closing, the
authorized share capital of the Company will be US$15 million, made up of 150
million shares. Except for this Agreement and the Subscription Agreement, the
Company has no obligations to issue any of its New Shares.
(b) Upon the payment by Carnival of the purchase price provided
under Section 2, the New Shares issuable hereunder will be duly authorized,
validly issued, fully paid and non-assessable and free and clear of all Liens.
3.4 Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and the transactions contemplated
hereby, including, without limitation, the sale, issuance and delivery of the
New Shares (i) are within the Company's corporate power and have been duly
authorized by all necessary corporate action of the Company; (ii) do not
contravene the terms of the Memorandum and Articles of Association, or any
amendment of either thereof, or any other organizational or governing documents
of the Company; and (iii) do not violate, conflict with or result in any breach
or contravention of, or the creation of any Lien under any material agreement
of the Company.
3.5 Binding Effect. This Agreement has been duly authorized,
executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity relating to
enforceability.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE EXISTING SHAREHOLDERS
Each of the Existing Shareholders represents and warrants as
applicable (severally as to itself only and not jointly) to the Company on the
date hereof and on the Closing Date that:
4.1 Title to Shares Such Existing Shareholder has good and
marketable title to the Existing Shares which are to be transferred to the
Company by such Existing Shareholder pursuant hereto, free and clear of any and
all Liens.
4.2 Authorization; No Contravention. The execution, delivery and
performance by such Existing Shareholder of this Agreement and the transactions
contemplated hereby, including, without limitation, the payment of the purchase
price (i) are within such Existing Shareholder's corporate or other power and
have been duly authorized by all necessary action of such Existing Shareholder;
(ii) do not contravene the terms of the certificate of incorporation and by-
laws (or comparable instruments), or any amendment of either thereof, or any
organizational or governing documents of such Existing Shareholder, as
applicable, and (iii) do not violate, conflict with or result in any breach or
contravention of, or the creation of any Lien under any material agreement of
such Existing Shareholder.
4.3 Binding Effect. This Agreement has been duly authorized,
executed and delivered by such Existing Shareholder and constitutes a legal,
valid and binding obligation of such Existing Shareholder enforceable against
such Existing Shareholder in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability.
ARTICLE 5
CONDITIONS TO THE OBLIGATION OF THE
COMPANY AND THE EXISTING SHAREHOLDERS TO CLOSE
The obligations of the Company to issue New Shares on the Closing
Date and the Existing Shareholders to surrender certificates under
Section 2.2(b) and the obligation of Carnival to pay the amounts under
Section 2.3(b) and to deem the Seabourn Subordinated Loan repaid, shall be
conditioned upon the waiver or satisfaction of all conditions set forth in
clause 6 of the Sale and Purchase Agreement.
ARTICLE 6
LIMITATIONS ON TRANSFER
6.1 General Restrictions on Transfer. Each Existing Shareholder
agrees that such Existing Shareholder shall not, either directly or indirectly,
offer, sell, transfer, assign, mortgage, hypothecate, pledge, create a security
interest in or Lien upon, encumber, donate, contribute, place in trust, or
otherwise voluntarily or involuntarily dispose of (any of the foregoing
actions, to "Transfer" and, any offer, sale, transfer, assignment, mortgage,
hypothecation, pledge, security interest or Lien, encumbrance, donation,
contribution, placing in trust or other disposition, a "Transfer") any New
Shares, or any interest therein, except in a transaction that is specifically
permitted by this Agreement.
6.2 Void Transfers. Any attempt to Transfer any New Shares, or any
interest therein, which is not in compliance with this Agreement shall be null
and void ab initio, and the Company shall not give any effect in the Company's
stock records to such attempted Transfer.
6.3 Permitted Transfers. Notwithstanding Sections 6.1 and 6.2,
Transfers (including, without limitation, pledges of New Shares as collateral
for loans) may be made pursuant to this Agreement if:
(i) such Transfer complies in all respects with the appli
cable provisions of this Agreement including, without limitation,
Articles 7 and/or 8 and applicable federal and state securities laws;
(ii) the transferee agrees in writing with the Company and
the other Existing Shareholders to be bound by the terms and conditions of
this Agreement with respect to the New Shares transferred to such
transferee to the same extent as the Existing Shareholder who originally
held such New Shares is or was bound hereby (whereupon such transferee
shall be entitled to the same rights as such Existing Shareholder who
originally held such New Shares had with respect to such New Shares and
shall be deemed to be a Existing Shareholder for all purposes hereunder
with respect to such New Shares);
(iii) if requested by the Company, in its sole discretion,
an opinion of counsel to such transferring Existing Shareholder shall be
supplied to the Company, at such transferring Existing Shareholder's
expense, to the effect that such Transfer complies with applicable United
States federal and state securities laws; and
(iv) except for the parties to this Agreement, such
transferee is not (i) a Person engaged, directly or indirectly, in the cruise
line business, (ii) an owner, partner or shareholder holding more than 10% of
the equity interest in such a Person or (iii) an Affiliate of a Person
described in clauses (i) and (ii).
ARTICLE 7
RIGHT OF FIRST OFFER, TAG-ALONG AND BRING-ALONG RIGHTS
7.1 Right of First Offer. (a) If CG shall desire to sell all or
any portion of its New Shares to any Person other than Carnival, CG shall offer
such New Shares first to Carnival by sending written notice (the "Offering
Notice" to Carnival which shall state (a) the number of New Shares proposed to
be transferred (the "Offered Shares") and (b) the proposed purchase price per
Offered Shares which the Selling Stockholder is willing to accept (the "Offer
Price"). Upon delivery of the Offering Notice, such offer shall be irrevocable
unless and until the rights of first offer provided for herein shall have been
waived or shall have expired.
(b) For a period of 15 Business Days after the giving of the
Offering Notice pursuant to Section 7.1(a) (the "Carnival Option Period"),
Carnival shall have the right (the "Carnival Option") to purchase all (but not
less than all) of the Offered Shares at a purchase price equal to the Offer
Price and upon the terms and conditions set forth in the Offering Notice. The
right of Carnival to purchase all of the Offered Shares under this
Section 7.1(b) shall be exercisable by delivering written notice of the
exercise thereof, prior to the expiration of the 15 Business Day period
referred to above, to CG. The failure of Carnival to respond within such
15 Business Day period shall be deemed to be a waiver of Carnival's rights
under Section 7.1(a). Carnival may waive its rights under Section 7.1(a) prior
to the expiration of the 15 Business Day period by written notice to CG.
(c) The closing of the purchase of the Offered Shares
subscribed for by Carnival under Section 7.1(b) shall be held at such place and
time as Carnival shall designate in writing to CG. At such closing, CG shall
deliver the Offered Shares to Carnival upon payment of the Offer Price. All
amounts paid hereunder shall be paid by wire transfer of immediately available
funds to such account as may be designated by CG to Carnival. At such closing,
the Offered Shares shall be free and clear from all Liens.
7.2 Tag-Along Rights. (a) If Carnival shall desire to sell New
Shares representing a majority of all outstanding New Shares (a "Proposed
Sale") to any Person other than CG or an Affiliate of Carnival (a "Third Party
Purchaser"), then Carnival shall offer CG the right to participate in the
Proposed Sale with respect to a number of New Shares determined as provided in
this Section 7.2 by sending written notice (the "Tag-Along Notice") to the
Company and CG, which notice shall (i) state the number of New Shares proposed
to be sold in such Proposed Sale by Carnival (the "Proposed Sale Shares"),
(ii) state the proposed purchase price per Proposed Sale Share (the "Tag-Along
Price") and all other material terms and conditions of such Proposed Sale and
(iii) if applicable, be accompanied by any written offer from the Third Party
Purchaser; provided, however, that Carnival shall not be obligated to deliver a
Tag-Along Notice if the Transfer (if consummated) is made pursuant to
Section 7.3
(b) CG shall have the right to require Carnival to cause the Third
Party Purchaser to purchase from CG at the Tag-Along Price (and otherwise upon
the same terms and conditions as those set forth in the Tag-Along Notice) a
number of New Shares owned by CG ("CG's Tag-Along Shares") not in excess of the
product of (i) the total number of Proposed Sale Shares, times (ii) a fraction,
the numerator of which is the total number of New Shares owned by CG and the
denominator of which is equal to the sum of the total number of New Shares
owned by Carnival and CG and any person owning New Shares entitled to
participate in such Proposed Sale pursuant to the Subscription Agreement. Such
right of CG shall be exercisable by written notice to Carnival with copies to
the Company given within 10 Business Days after receipt of the Tag-Along Notice
(the "Tag-Along Notice Period"), which notice shall state the number of Tag-
Along Shares that CG elects to sell in the Proposed Sale, if less than the
maximum number of CG's Tag-Along Shares; provided that, if such notice shall
not state a number of Tag-Along Shares, then CG will be deemed to have elected
to sell the maximum number of CG's Tag-Along Shares. Failure by CG to respond
within the Tag-Along Notice Period shall be regarded as a rejection of the
offer made pursuant to the Tag-Along Notice. The number of Tag-Along Shares
elected, or deemed to be elected, by CG to be sold as provided above is
referred to in this Section 7.2 as CG's "Participating Tag-Along Shares". The
number of New Shares to be sold by Carnival in the Proposed Sale shall be
reduced by the aggregate number of Participating Tag-Along Shares to be sold
pursuant to this Section 7.2 by CG.
(c) At the request of Carnival made not less than two Business Days
prior to the proposed Transfer, CG shall deliver to Carnival certificates
representing its Participating Tag-Along Shares, duly endorsed, in proper form
for Transfer, together with a limited power-of-attorney authorizing Carnival to
transfer such Participating Tag-Along Shares to the Third Party Purchaser and
to execute all other documents required to be executed in connection with such
transaction.
(d) If no Transfer of the Tag-Along Shares in accordance with the
provisions of this Section 7.2 shall have been completed within 70 Business
Days of the Tag-Along Notice, then Carnival shall promptly return to CG, in
proper form, all certificates representing CG's Participating Tag-Along Shares
and the limited power-of-attorney previously delivered by CG to Carnival.
(e) The closing of the sale of the Participating Tag-Along Shares by
the Participating Tag-Along Shareholders shall be held at the same place and
time as the closing of the sale by Carnival in the Proposed Sale. Promptly
after the consummation of the Transfer of the Participating Tag-Along Shares
pursuant to this Section 7.2, CG shall receive (i) the consideration with
respect to the Participating Tag-Along Shares so Transferred and (ii) such
other evidence of the completion of such Transfer and the terms and conditions
(if any) thereof as may reasonably be requested by Carnival.
(f) The provisions of this Section 7.2 shall remain in effect,
notwithstanding any return to CG of Participating Tag-Along Shares as provided
in Section 7.2(d).
7.3 Bring-Along Rights. (a) In the event that Carnival
receives a bona fide offer from a Third Party Purchaser (excluding offers from
Affiliates of Carnival) to purchase (including a purchase by merger) at least a
majority of the outstanding New Shares, Carnival may send written notice (a
"Buyout Notice") to the Company and CG notifying CG that it will be required to
sell the same percentage of its New Shares in such sale as the Selling
Shareholder propose to sell (which percentage shall be specified in such Buyout
Notice) (the "Designated Percentage").
(b) Upon receipt of a Buyout Notice, CG shall be obligated:
(i) to sell the Designated Percentage of its New Shares in
the transaction (including a sale or merger) contemplated by the Buyout
Notice on the same terms and conditions as Carnival;
(ii) to provide for the payment by CG of its pro rata
portion of all costs associated with such transaction, in the proportion
that the number of New Shares owned by such Existing Shareholder bears to
the number of outstanding New Shares; and
(iii) otherwise to take all necessary action to cause the
consummation of such transaction, including voting its New Shares in favor
of such transaction and not exercising any appraisal rights in connection
therewith.
(c) CG further agrees to (i) take all actions (including
executing documents) in connection with the consummation of the proposed
transaction as may reasonably be requested of it by Carnival and (ii) appoint
Carnival as its attorneys-in-fact to do the same on its behalf.
(d) In the event a contract with respect to the transaction
contemplated by the Buyout Notice has not been entered into within the 90
Business Days after the date of delivery of the Buyout Notice, the obligations
of CG under this Section 7.3 with respect to such Buyout Notice shall
terminate, subject, however, to the right of Carnival to deliver a further
Buyout Notice.
ARTICLE 8
CHANGE OF CONTROL BUYOUT
(a) If Atle Brynestad no longer has Control of CG (a "Loss
of Control"), then Carnival may, within 30 Business Days of such Loss of
Control, by notice in writing to CG (the "Loss of Control Notice"), offer to
purchase all (but not some) of the New Shares held by CG (the "CG Shares") at
such price per share (the "Stated Price") as shall be specified by Carnival in
the Loss of Control Notice. At the closing contemplated under Section 8(c), CG
shall sell the CG Shares to Carnival and Carnival shall purchase the CG Shares
pursuant to the terms of this Article
(b) The Loss of Control Notice shall become final and
binding on the Existing Shareholders for all purposes of this Agreement unless
CG shall, within 14 Business Days, give written notice to Carnival requesting
that the value of the CG Shares be appraised (the "Appraisal Notice"). The
appraised per share value of the CG Shares (the "Appraised Value") shall be
determined by an appraisal conducted by a committee of three appraisers (the
"Appraisal Committee"). Each of the Existing Shareholders shall, within five
Business Days of the delivery of the Appraisal Notice to Carnival, select one
of the appraisers constituting such committee and the two appointed appraisers
shall select a third. The Company shall be responsible for their reasonable
costs of the Appraisal Committee. If either Existing Shareholder fails within
the specified time to select an appraiser, the committee shall be comprised of
such appraiser or appraisers who have been so selected. The Appraisal
Committee shall be instructed that the appraisal report (which shall set forth
the Appraisal Value) (the "Appraisal Report") shall be completed and delivered
to the Company and to the Existing Shareholders within 28 Business Days of the
appointment date of the Appraisal Committee. Such appraisal shall be made on
the basis of the fair market value of the Company taking into account the value
and goodwill, if any, of the established business operations conducted by the
Company, and the Appraised Value shall be such fair market value as so
determined divided by the fully diluted number of New Shares issued and
outstanding. In the event that the Appraisal Committee cannot agree on the
Appraised Value, the Appraised Value shall be the highest amount supported by a
majority of the appraisers. If the Appraisal Price is determined under this
Section 8(b), then the Appraisal Price shall, notwithstanding Section 8(a), be
the Stated Price for all purposes of Article 8. The determination of the
Appraisal Price under this Section 8(b) shall become final and binding on the
Company and the Existing Shareholders for all purposes of this Agreement.
(c) The closing of the sale contemplated by this Article 8
shall occur within five Business Days after the calculation of the Stated Price
is determined to be final and binding under this Article 8 and be held at such
place and time as Carnival shall designate in writing to CG. At such closing,
CG shall deliver to Carnival certificates evidencing all of the CG Shares upon
payment by Carnival to CG of a per share price equal to the Stated Price. All
amounts paid hereunder shall be paid by wire transfer of immediately available
funds to such account as may be designated by CG to Carnival. All CG Shares
when delivered to Carnival shall be free and clear from all Liens.
ARTICLE 9
CORPORATE GOVERNANCE AND CERTAIN OTHER ACTIONS
9.1 General. Each Existing Shareholder shall vote its New Shares at
any regular or special meeting of Existing Shareholders of the Company, or in
any written consent executed in lieu of such a meeting of Existing
Shareholders, and shall take all other actions necessary, to give effect to the
provisions of this Agreement (including Sections 2.1 and 9.2), and to ensure
that the Company's Memorandum and Articles of Association do not, at any time
hereafter, conflict in any respect with the provisions of this Agreement.
9.2 Election of Directors. Each Existing Shareholder agrees that,
except as the Existing Shareholders may otherwise agree in writing, the number
of directors constituting the entire Board of Directors shall be seven. One of
such directors shall be designated by CG; provided that if CG ceases to own 10%
of the issued and outstanding New Shares, CG's designated director shall resign
from the Board of Directors and CG shall no longer have the right to designate
a director. The initial director designated by CG shall be Atle Brynestad.
9.3 Removal and Replacement. CG shall be entitled at any time and
for any reason (or for no reason) to designate its designee on the Board of
Directors for removal. If the CG designee dies, is removed or resigns as a
director, then CG shall, as soon as practicable thereafter, designate a
replacement director and, as soon as practicable thereafter, the Company and
each of the Existing Shareholders shall take action, including, if necessary,
the voting of its New Shares, to elect or cause the election by the Board of
Directors of such replacement director in accordance with Section 9.2.
9.4 Company Name Change. Each Existing Shareholder hereby agrees to
approve the change of the Company's name to Cunard Line Limited and to take all
action necessary, including the voting of its New Shares, to effect the same.
ARTICLE 10
INITIAL PUBLIC OFFERING
10.1 Initial Public Offering. It is the current intention of the
parties to complete the Initial Public Offering prior to November 30, 1999 (the
"IPO Deadline"); provided that, if market conditions do not permit the Initial
Pubic Offering prior to the IPO Deadline, the IPO Deadline may be extended at
the option of Carnival. If the Initial Public Offering is in the United
States, the Company and CG shall in good faith attempt to negotiate a
registration rights agreement with customary terms and provisions to provide CG
with one demand registration right and with piggy-back registration rights.
10.2 Initial Public Offering Procedure. Prior to the Initial Public
Offering, the Company shall provide CG with written information regarding the
Initial Public Offering process and, to the extent determined by Carnival in
its sole discretion, shall invite CG to participate in such Initial Public
Offering. If, after being so invited, CG desires to sell New Shares in the
Initial Public Offering CG shall, within a time limit set out by the Company in
writing, notify the Company in writing of its wish to sell and the amount of
New Shares it desires to sell.
10.3 Customary Agreements. In connection with the Initial Public
Offering, Carnival and CG agree to enter into customary agreements (including,
without limitation, a lock-up agreement) with the Company and the
arrangers/underwriters of the Initial Public Offering.
10.4 Carnival Exchange. Notwithstanding Sections 10.1, 10.2
and 10.3, at the option of Carnival, in its sole discretion, in lieu of an
Initial Public Offering, Carnival may at any time elect to purchase all of the
New Shares owned by CG (the "Carnival Exchange") in exchange for shares of
common stock of Carnival (the "Carnival Common Stock"). Prior to effecting the
Carnival Exchange, Carnival shall, in its sole discretion, consider first
whether to effect the Initial Public Offering. In the Carnival Exchange, CG
shall be entitled to receive a number of shares equal to the product of (i) the
number of New Shares owned by CG and (ii) the Exchange Ratio. The Exchange
Ratio shall initially be 0.14493 and shall be subject to adjustment as provided
in Section 10.7 below. If it elects to effect the Carnival Exchange, Carnival
shall notify CG in writing of the Carnival Exchange. Such notice shall specify
the Exchange Ratio and the place and time of the closing of the Carnival
Exchange (which shall be a date within 20 Business Days of the calculation of
the Exchange Ratio).
10.5 Put Option. Notwithstanding Sections 10.1, 10.2, 10.3 and
10.4, if on the third anniversary of the Closing, the Company has not completed
the Initial Public Offering and the Carnival Exchange has not occurred, CG
shall, from and after the third anniversary of the Closing, have the option
(the "Put Option") to put all of CG's New Shares to Carnival in exchange for
Carnival Common Stock. The Put Option shall be exercisable by CG by delivery
of written notice to Carnival (the "Put Option Notice") within 10 days after
the third anniversary of the Closing. At the closing of the Put Option, CG
shall be entitled to receive a number of shares of Carnival Common Stock equal
to the product of (i) the number of New Shares owned by CG and (ii) the
Exchange Ratio. At the closing of the Put Option Carnival shall be obligated
to purchase all of the New Shares owned by CG in exchange for shares of
Carnival Common Stock as determined in accordance with the preceding sentence.
Carnival shall provide notice in writing to CG of the Exchange Ratio and the
place and time of the closing of the Put Option (which closing date shall be
within 45 Business Days after the third anniversary of the Closing).
10.6 No Fractional Shares. No fraction of Carnival Shares will be
issued to CG in connection with the Carnival Exchange or the exercise of the
Put Option. In lieu thereof, Carnival shall pay to CG cash in an amount equal
to the product of such fraction and the closing price for the Carnival Common
Stock on the New York Stock Exchange Composite Tape on the last trading day
prior to the closing of either the Carnival Exchange or the Put Option.
10.7 Closing of the Carnival Exchange and the Put Option. The
closing for the purchase of the New Shares pursuant to Sections 10.4 or 10.6
shall be held at such place and time as Carnival shall designate in writing to
CG. At such closing, in exchange for all of the New Shares held by CG,
Carnival shall issue, sell and deliver to CG shall purchase, acquire and accept
from Carnival, certificates evidencing the number of shares of Carnival Common
Stock to which CG is entitled under Sections 10.4 or 10.6, registered in CG's
name, all of which, upon issuance shall have been duly authorized, validly
issued, fully paid and non-assessable and free and clear from all Liens. All
New Shares delivered by CG to Carnival under this Section 10.7 shall be free
and clear from all Liens.
10.8 Exchange Ratio Adjustment. If Carnival or the Company shall,
at any time or from time to time, (i) declare a dividend of shares of the
Carnival Common Stock or New Shares payable in Carnival Common Stock or New
Shares, respectively, (ii) subdivide the outstanding shares of Carnival Common
Stock or New Shares, (iii) combine the outstanding Carnival Common Stock or New
Shares into a smaller number of shares, or (iv) issue any shares of Carnival
Common Stock or New Shares in a reclassification of Carnival Common Stock or
New Shares, respectively (including any such reclassification in connection
with a consolidation or merger in which Carnival or the Company is the
surviving corporation), then in each such case, the Exchange Ratio in effect at
the time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, shall be proportionately adjusted
so that upon the Carnival Exchange or the closing of the Put Option CG shall be
entitled to receive the same aggregate number of shares of Carnival Common
Stock which, if the Carnival Exchange or the closing of the Put Option had
occurred immediately prior to such date, CG would have owned upon such Carnival
Exchange or the closing of the Put Option and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification. If
there occurs any reclassification of the Carnival Common Stock, consolidation
or merger of Carnival with or into another Person (other than a merger or
consolidation of Carnival in which Carnival is the continuing corporation and
which does not result in any reclassification or change of outstanding shares
of the Carnival Common Stock) or the sale or conveyance of all or substantially
all of the assets of Carnival to another Person, then CG will thereafter be
entitled to receive, upon the Carnival Exchange or the closing of the Put
Option, the same kind and amounts of securities (including shares of stock) or
other assets, or both, which were issuable or distributable to the holders of
outstanding Carnival Common Stock upon such reclassification, consolidation,
merger, sale or conveyance, in respect of that number of shares of Carnival
Common Stock then deliverable upon the Carnival Exchange or the closing of the
Put Option if the Carnival Exchange or the Put Option had been exercised
immediately prior to such reclassification, consolidation, merger, sale or
conveyance. Any such adjustment of the Exchange Ratio shall become effective
immediately after the record date of such dividend or the effective date of
such subdivision, combination, reclassification, consolidation, merger, sale or
conveyance. Such adjustment of the Exchange Ratio shall be made successively
whenever any event listed above shall occur. If a stock dividend is declared
and such stock dividend is not paid, the Exchange Ratio shall again be adjusted
to be the Exchange Ratio in effect immediately prior to such record date.
10.9 No Claims. CG understands and agrees that it shall have no
claim against the Company, Newco, Carnival or any of their directors, officers
or affiliates if the Initial Public Offering shall not occur or if Carnival
elects to effect the Carnival Exchange and to the fullest extent permitted by
law, waives any such claim.
ARTICLE 11
RIGHT TO PARTICIPATE IN CERTAIN ISSUANCE OF CAPITAL SHARES
11.1 Right to Participate in New Issuance. If the Company
determines to issue any Shares or any security convertible into or exercisable
or exchangeable for Shares, to any shareholder of the Company (including an
Existing Shareholder) (other than capital shares to be issued (i) in connection
with an employee stock option plan or other bona fide employment compensation
arrangement that is approved by the Company's Board of Directors, (ii) pursuant
to a stock split or stock dividend, (iii) pursuant to the exercise of any
option, warrant or convertible security theretofore issued, (iv) as
consideration in connection with a bona fide acquisition by the Company or any
of its subsidiaries or (v) pursuant to the Initial Public Offering) (each such
issuance not excluded by the immediately preceding parenthetical being herein
referred to as a "New Issuance"), then the Company shall notify the Existing
Shareholders of the proposed New Issuance. Such notice shall specify the
number and class of securities to be issued, the rights, terms and privileges
thereof and the estimated price at which such securities will be issued.
11.2 Exercise of Right. By written notice to the Company given
within 15 Business Days of being notified of such New Issuance, each Existing
Shareholder shall be entitled to purchase that percentage of New Issuance
determined by dividing (a) the total number of Shares owned by such Existing
Shareholder by (b) the total number of all outstanding Shares. Such right
shall be exercisable within 15 Business Days following the receipt of the
notice delivered pursuant to the previous sentence. To the extent the Existing
Shareholders do not elect to purchase all of the securities proposed to be
offered and sold in the New Issuance, the Company may issue those securities
not so subscribed for, provided that such sales are consummated within 120
Business Days after the Existing Shareholders' rights hereunder have expired or
been waived.
11.3 Closing. The closing of the New Issuance shall be held at such
time as the Company shall designate in writing to the Existing Shareholders
that elect to purchase securities in the New Issuance pursuant to this Article
11 not fewer than five Business Days prior to the date of such closing, at the
Company's principal offices, or at another place designated by the Company in
writing to such Existing Shareholders in such notice.
ARTICLE 12
SHARES CERTIFICATE LEGEND
The Company and Existing Shareholders agree that each certificate
representing the New Shares now or hereafter held by an Existing Shareholder
shall be endorsed with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE
RECAPITALIZATION AGREEMENT, DATED AS OF MAY 27, 1998 (THE
"RECAPITALIZATION AGREEMENT"), AMONG SEABOURN CRUISE LINE LIMITED,
(THE "COMPANY"), CARNIVAL CORPORATION AND CG HOLDING AS, A COPY OF
WHICH MAY BE INSPECTED AT THE COMPANY'S PRINCIPAL OFFICE. THE
COMPANY WILL NOT REGISTER THE TRANSFER OF SUCH SECURITIES ON THE
BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS BEEN MADE IN
COMPLIANCE WITH THE TERMS OF THE RECAPITALIZATION AGREEMENT."
ARTICLE 13
AFTER-ACQUIRED SECURITIES
All of the provisions of this Agreement shall apply to all of the New
Shares now owned or that may be issued or transferred hereafter to an Existing
Shareholder in consequence of any additional issuance, purchase, exchange or
reclassification of any of the New Shares (including without limitation, upon
the exercise of any option or warrant), corporate reorganization, or any other
form of recapitalization, consolidation, merger, share split or share dividend,
or that are acquired by an Existing Shareholder in any other manner, and, in
the case of any such event, appropriate adjustment shall be made to any number
of New Shares hereunder to take account of such event provided, however, with
respect to CG, no New Shares that are subject to the terms of the Subscription
Agreement shall be subject to the terms of this Agreement.
ARTICLE 14
TRANSACTIONS WITH AFFILIATES
14.1 Limitation on Transactions with Affiliates. From and after the
Closing, the Company will not sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or make any contract, agreement, loan, advance or guarantee with, or
for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless such Affiliate Transaction is on terms no less favorable
to the Company than those that could be obtained on an arm's length basis with
a third party.
14.2 Exceptions. The limitation under Section 14.1 does not limit,
and shall not apply to (i) any transaction or series of transactions approved
by a majority of the disinterested members of the Board of Directors; (ii) any
transaction between the Company and a wholly-owned subsidiary; (iii) the
payment of reasonable compensation to directors and officers of the Company;
(iv) reasonable loans made by the Company to its officers and directors as
approved by the Board of Directors; (v) any employment agreement with officers
entered into by the Company in the ordinary course of business of the Company.
ARTICLE 15
TERMINATION
15.1 General This Agreement shall become effective upon the
execution hereof and shall terminate upon the earlier of:
(i) the consummation by the Company of the Initial Public
Offering or the consummation of the Carnival Exchange; and
(ii) such earlier date as the Existing Shareholders shall
unanimously agree in writing to terminate this Agreement;
15.2 Non-Consummation of Cunard Acquisition. This Agreement shall
terminate (i) upon the termination of the Sale and Purchase Agreement or
(ii) if acquisition of the business of Cunard is not consummated for any
reason.
15.3 No Liability. If this Agreement is terminated pursuant to
Article 15.2 and the Company has issued the Purchased Shares to Carnival under
Section 2.3(a) and Carnival has paid to the Company the purchase price under
Section 2.3(b), then Carnival shall surrender to the Company the certificates
representing the Purchased Shares and upon the receipt of such Purchased
Shares, the Company shall repay to Carnival such amount as Carnival paid under
Section 2.3(b) by wire transfer of immediately available funds to such account
as may be designated by Carnival to the Company.
15.4 No Liability. If this Agreement is terminated as provided in
Section 15.2, no party shall have any liability or further obligation to any
other party under this Agreement.
ARTICLE 16
TERMINATION OF JOINT VENTURE AGREEMENT
Each of CG, Carnival and the Company hereby consents to the
termination of the Joint Venture Agreement, dated February 18, 1992 (the "Joint
Venture Agreement"), between CG, Carnival and the Company, which shall,
effective as of the Closing Date, be terminated and of no further force and
without further obligation of any party thereunder.
ARTICLE 17
CONFIDENTIALITY
All information relating to the Company provided to CG and its
affiliates shall be kept confidential and shall not be disclosed to any third
party except (a) as has become generally available to the public (other than
through disclosure by CG or its affiliates in contravention of this Agreement),
(b) to CG's directors, officers, trustees, partners, employees, agents and
professional consultants on a need-to-know basis, (c) to any Person to which CG
offers to sell or transfer any New Shares, provided that the prospective
transferee shall agree to be bound by the provisions of this Article 17, or
(d) in order to comply with any law, rule, regulation or order applicable to CG
or its affiliates.
ARTICLE 18
MISCELLANEOUS
18.1 Survival of Representations, Warranties, Other Agreements and
Undertakings. All of the representations and warranties, as well as those
other agreements and undertakings made herein to be performed after the Closing
Date, shall survive the execution and delivery of this Agreement, any
investigation by or on behalf of the Existing Shareholders or acceptance of the
New Shares.
18.2 Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service, overnight mail or personal delivery:
if to the Company:
3655 N.W. 87th Avenue
Miami, Florida 33178
Telecopier No.: (305) 471-4700
Attention: General Counsel
with a copy to:
Thommessen Krefting Greve Lund
Haakon VII?s gate 10, P.O. Box 1484
0116 Oslo, Norway
Attention: Jorgen Lund
Telecopier No.: (47) 23 11 10 10
if to Carnival, to:
Carnival Corporation
3655 N.W. 87th Avenue
Miami, Florida 33178
Attention: General Counsel
Telecopier No.: (305) 471-4700
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: James M. Dubin, Esq.
Telecopier No.: (212) 757-3990
if to CG, to:
CG Holding AS
Smallvollveien 65, P.O. Box 50 Bryn
0611 Oslo, Norway
Attention: Atle Brynestad
Telecopier No.: (47) 22 90 88 99
with a copy to:
Thommessen Krefting Greve Lund AS
Haakon VII's gate 10, P.O. Box 1484
0116 Oslo, Norway
Attention: Jorgen Lund
Telecopier No.: (47) 23 11 10 10
All such notices and communications shall be deemed to have been duly given
when delivered by hand, if personally delivered; when delivered by courier, if
delivered by commercial courier service; five Business Days after being
deposited in the mail, postage prepaid, if mailed by airmail; and when receipt
is mechanically acknowledged, if telecopied.
18.3 Expenses. The Company agrees to reimburse each of Carnival
and CG for all out of pocket expenses incurred by such party in connection with
the transactions contemplated by the Sale & Purchase Agreement, the
Subscription Agreement and this Agreement and the transactions contemplated
thereby and hereby (including without limitation, travel expenses and legal and
accounting fees and expenses).
18.4 Third Party Beneficiaries. Nothing herein expressed or
implied is intended to or shall be construed to confer upon or give any person
or entity, other than the parties hereto, and their respective successors,
permitted assigns and affiliates, any rights or remedies under or by reason of
this Agreement.
18.5 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. The Company may not assign any of its rights or obligations
under this Agreement, except to a successor-in-interest to the Company, without
the written consent of the Existing Shareholders and no Existing Shareholder
may assign any of its rights or obligations without the consent of the Company
(except for an assignment pursuant to Section 6.3).
18.6 Amendment and Waiver.
(a) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the parties from the terms of any provision of
this Agreement, shall be effective (i) only if it is made or given in writing
and signed by the Company and the Existing Shareholders, and (ii) only in the
specific instance and for the specific purpose for which made or given.
(b) No failure or delay on the part of the parties in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the parties at
law, in equity or otherwise.
18.7 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
18.8 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
18.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
18.10 Arbitration. (i) After the Closing, any dispute, controversy,
or claim arising out of or relating to any provision of this Agreement or the
interpretation, enforceability, performance, breach, termination, or validity
hereof, including, without limitation, this Section 18.9 shall be solely and
finally settled by arbitration in New York City, the State of New York in
accordance with the Commercial Arbitration Rules and Supplementary Procedures
for International Commercial Arbitration of the American Arbitration
Association as modified by the provisions of this Article. An award rendered
in connection with an arbitration pursuant to this Section 18.9 shall be final
and binding upon the parties, and any judgment upon such an award may be
entered and enforced in any court of competent jurisdiction.
(ii) Proceedings in the arbitration shall be conducted in the
English language, and all documents not in English submitted by either party
must be accompanied by a translation into English.
18.11 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair
the benefits of the remaining provisions hereof.
18.12 Entire Agreement. This Agreement, together with the schedules
hereto is intended by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein.
18.13 Further Assurances. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any governmental authority
or any other Person) as may be reasonably required or desirable to carry out or
to perform the provisions of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
SEABOURN CRUISE LINE LIMITED
By: /s/ Jorgen Lund
Name: Jorgen Lund
Title: Director
CARNIVAL CORPORATION
By: /s/ Arnaldo Perez
Name: Arnaldo Perez
Title: Vice President
CG HOLDING AS
By: /s/ Jorgen Lund
Name: Jorgen Lund
Title: Attorney-in-fact
Schedule A
Seabourn Cunard Assumed
Base Base Carnival
Shares(1) Shares(2) Share
Issuance
Amount
Carnival(3) 5,880,000 26,304,864 5,326,216
CG 5,880,000 -- --
(1) Approximately 80% of the assumed number of New Shares to be issued
based on assumed purchase price, 1,470,000 New Share are assumed to be the
post-closing adjustment.
(2) Approximately 80% of the assumed number of New Shares to be issued
based on assumed price of $380,440,000 for Cunard and 5,000,000 ?option?
New Shares. Based on the assumed purchase price, 5,326.216 New Shares are
assumed to be the post-closing adjustment.
(3) Does not include 1,500,000 New Shares assumed to be issued to
Carnival in satisfaction of the Seabourn Subordinated Loan.
SEABOURN CRUISE LINE LIMITED
SCHEDULE 2.5 - COMPANY CREDITS AND DEBITS
AS OF FEBRUARY 28, 1998
COMPANY CREDITS
(a) Cash 4,244,271
(b) Trade debtors 64,857
(c) Insurance claims (H&M, P&I, etc.) 431,685
(d) Prepaid marketing/credit card fees 1,047,327
(e) Prepaid insurance/other 1,492,188
(f) Inventories 8,623,790
(g) Miscellaneous debtors 2,212,105
(h) Other prepayments 2,672,918
Total Company Credits: 20,789,141
COMPANY DEBITS
(a) Trade creditors 3,592,945
(b) Bank Credit Line 4,200,226
(c) Other passage money 225,766
(d) Wages and salaries 2,441,858
(e) Accrued expenses 2,861,357
(f) Steiner/Other concessionaires 226,885
(g) Miscellaneous creditors
(h) Customer prepayments 45,139,580
Total Company Debits: 58,688,418
Company Credits less Company Debits: -37,899,275
EXHIBIT 10.5
CARNIVAL CORPORATION
1993 OUTSIDE DIRECTORS' STOCK OPTION PLAN
(adopted by the Board of Directors on July 10, 1993 and amended on April 6,
1998)
CARNIVAL CORPORATION, a Panamanian corporation (the "Company"), hereby
formulates and adopts the following 1993 Outside Directors' Stock Option Plan
(the "Plan") for Eligible Directors of the Company and its Subsidiaries (as
defined in Paragraph 4).
1. Purpose. The purpose of the Plan is to promote the interests of the
Company and its stockholders by strengthening the Company's ability to attract
and retain the services of experienced and knowledgeable nonemployee directors
and by encouraging such directors to acquire an increased proprietary interest
in the Company.
2. Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors.
Subject to the express provisions of the Plan, the Committee shall
have plenary authority to interpret the Plan, to prescribe, amend and rescind
the rules and regulations relating to it and to make all other determinations
deemed necessary and advisable for the administration of the Plan. The
determinations of the Committee shall be conclusive.
3. Common Stock Subject to Options. Subject to the adjustment provisions
of Paragraph 13 below, a maximum of 400,000 shares of Class A Common Stock, par
value $.01 per share, of the Company (the "Common Stock") may be made subject
to options granted under the Plan. If, and to the extent that, options granted
under the Plan shall terminate, expire or be canceled for any reason without
having been exercised, new options may be granted in respect of the shares
covered by such terminated, expired or canceled options. The granting and such
terms of such new options shall comply in all respects with the provisions of
the Plan.
Shares sold upon the exercise of any option granted under the Plan
may be shares of authorized and unissued Common Stock, shares of issued Common
Stock held in the Company's treasury, or both.
There shall be reserved at all times for sale under the Plan a number
of shares, of either authorized and unissued shares of Common Stock, shares of
Common Stock held in the Company's treasury, or both, equal to the maximum
number of shares which may be purchased pursuant to options granted or that may
be granted under the Plan.
4. Participation in Plan. Each member of the Company's Board of
Directors (a "Director") who is not otherwise an employee of the Company
or any subsidiary of the Company (an "Eligible Director") shall be
eligible to participate in the Plan.
5. Option Grants.
(a) Each Eligible Director serving in such capacity at the time of
the adoption of the Plan by the Board of Directors shall be granted an option
to purchase 10,000 shares of Common Stock. In addition, each Eligible Director
shall receive (i) an option to purchase 10,000 shares of Common Stock for each
five year period of service as a Director prior to the adoption of the Plan and
(ii) credit (the "Prior Service Credit") for any such prior period of service
of less than five years, such credit to be added to future years of service
until a five year period is accrued.
(b) Any Eligible Director elected or appointed to the Board of
Directors following the adoption of the Plan shall be granted immediately upon
such election or appointment an option to purchase 10,000 shares of Common
Stock.
(c) An option to purchase 10,000 options shall be granted
automatically to each Director who is an Eligible Director after completion of
each five-year period of consecutive service in such capacity, taking into
account any Prior Service Credit.
An Eligible Director receiving an option pursuant to the Plan is
hereinafter referred to as an "Optionee".
6. Price. The option price of each share of Common Stock purchasable
under any option granted pursuant to the Plan shall not be less than the Fair
Market Value (as defined below) thereof at the time the option is granted.
For purposes of the Plan, "Fair Market Value" of a share of Common
Stock means the average of the high and low sales prices of a share of Common
Stock on the New York Stock Exchange Composite Tape on the date in question.
If shares of Common Stock are not traded on the New York Stock Exchange on such
date, "Fair Market Value" of a share of Common Stock shall be determined by the
Committee in its sole discretion.
7. Duration of Options. Except as set forth in the following sentence,
each option granted hereunder shall become immediately exercisable. Any
options granted prior to the approval of the Plan by the shareholders of the
Company shall not vest or be exercisable or transferrable in any manner until
such shareholder approval is obtained at the next Annual Meeting of the
Shareholders following adoption of the Plan by the Board of Directors. If such
shareholder approval is not obtained at such meeting, all options issued
pursuant to the Plan shall be cancelled and deemed null and void. Each option
granted hereunder prior to April 13, 1998 shall be exercisable for a period of
five years from the date of grant and each option granted hereunder on or after
April 13, 1998 shall be exercisable for a period of ten years from the date of
grant.
8. Exercise of Options. An option granted under this Plan shall be
deemed exercised when the person entitled to exercise the option (a) delivers
written notice to the Company at its principal business office, directed to the
attention of its Secretary, of the decision to exercise, (b) concurrently
tenders to the Company full payment for the shares to be purchased pursuant to
such exercise,, and (c) complies with such other reasonable requirements as the
Committee establishes pursuant to Paragraph 2 of the Plan.
Payment for shares with respect to which an option is exercised may
be made in cash, check or money order and, subject to the Committee's consent,
by Common Stock. No person will have the rights of a shareholder with respect
to shares subject to an option granted under this Plan until a certificate or
certificates for the shares have been delivered to him.
9. Nontransferability of Options. Subject to Paragraph 7 of the Plan, no
option or any right evidenced thereby shall be transferable in any manner other
than by will or the laws of descent and distribution, and, during the lifetime
of an Optionee, only the Optionee (or the Optionee's court-appointed legal
representative) may exercise an option. In the Committee's discretion, an
option may be transferred pursuant to a "qualified domestic relations order",
as defined in section 414(p) of the Code.
10. Rights of Optionee. Neither the Optionee nor the Optionee's executor
or administrator shall have any of the rights of a stockholder of the Company
with respect to the shares subject to an option until certificates for such
shares shall actually have been issued upon the due exercise of such option. No
adjustment shall be made for any regular cash dividend for which the record
date is prior to the date of such due exercise and full payment for such shares
has been made therefor.
11. Right To Terminate Relationship. Nothing in the Plan or in any
option shall confer upon any Optionee the right to continue to serve as a
Director of the Company.
12. Nonalienation of Benefits. No right or benefit under the Plan shall
be subject to anticipation, alienation, sale, assignment, hypothecation,
pledge, exchange, transfer, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer,
encumber or charge the same shall be void. To the extent permitted by
applicable law, no right or benefit hereunder shall in any manner be liable for
or subject to the debts, contracts, liabilities or torts of the person entitled
to such benefits.
13. Adjustment Upon Changes in Capitalization, etc. In the event of any
stock split, stock dividend, stock change, reclassification, recapitalization
or combination of shares which changes the character or amount of Common Stock
prior to exercise of any portion of an option theretofore granted under the
Plan, such option, to the extent that it shall not have been exercised, shall
entitle the Optionee (or the Optionee's executor or administrator) upon its
exercise to receive in substitution therefor such number and kind of shares as
the Optionee would have been entitled to receive if the Optionee had actually
owned the stock subject to such option at the time of the occurrence of such
change; provided, however, that if the change is of such a nature that the
Optionee, upon exercise of the option, would receive property other than shares
of stock the Committee shall make an appropriate adjustment in the option to
provide that the Optionee (or the Optionee's executor or administrator) shall
acquire upon exercise only shares of stock of such number and kind as the
Committee, in its sole judgment, shall deem equitable; and, provided further,
that any such adjustment shall be made so as to conform to the requirements of
section 424(a) of the Code.
In the event that any transaction (other than a change specified in
the preceding paragraph) described in section 424(a) of the Code affects the
Common Stock subject to any unexercised option, the Board of Directors of the
surviving or acquiring corporation shall make such similar adjustment as is
permissible and appropriate.
If any such change or transaction shall occur, the number and kind of
shares for which options may thereafter be granted under the Plan shall be
adjusted to give effect thereto.
14. Purchase for Investment. Whether or not the options and shares
covered by the Plan have been registered under the Securities Act of 1933, as
amended, each person exercising an option under the Plan may be required by the
Company to give a representation in writing that such person is acquiring such
shares for investment and not with a view to, or for sale in connection with,
the distribution of any part thereof. The Company will endorse any necessary
legend referring to the foregoing restriction upon the certificate or
certificates representing any shares issued or transferred to the Optionee upon
the exercise of any option granted under the Plan.
15. Form of Agreements with Optionees. Each option granted pursuant to
the Plan shall be in writing and shall have such form, terms and provisions,
not inconsistent with the provisions of the Plan, as the Committee shall
provide for such option. The effective date of the granting of an option shall
be the date on which the Committee approves such grant. Each Optionee shall be
notified promptly of such grant, and a written agreement shall be promptly
executed and delivered by the Company and the Optionee.
16. Termination and Amendment of Plan and Options. Unless the Plan shall
theretofore have been terminated as hereinafter provided, options may be
granted under the Plan at any time, and from time to time, prior to the tenth
anniversary of the Effective Date (as defined below), on which date the Plan
will expire, except as to options then outstanding under the Plan. Such
options shall remain in effect until they have been exercised, have expired or
have been canceled.
The Board, without further approval of the Company's shareholders,
may amend this Plan at any time and from time to time in such respects as the
Board of Directors may deem advisable, subject to any shareholder or regulatory
approval required by law; provided that (i) any such amendment shall comply
with the applicable requirements for exemption (to the extent necessary) under
Rule 16b-3 under the Securities Exchange Act of 1934 and (ii) in no event shall
the Plan be amended more than once every six months other than to comport with
changes in the Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules and regulations promulgated by the Securities and Exchange
Commission.
No termination, modification or amendment of the Plan, without the
consent of the Optionee, may adversely affect the rights of such person with
respect to such option. With the consent of the Optionee and subject to the
terms and conditions of the Plan, the Committee may amend outstanding option
agreements with any Optionee.
17. Effective Date of Plan. The Plan shall become effective upon its
adoption by the Board of Directors (the "Effective Date"), subject, however, to
its approval by the Company's shareholders within 12 months after the date of
such adoption.
18. Government and Other Regulations. The obligation of the Company with
respect to options granted under the Plan shall be subject to all applicable
laws, rules and regulations and such approvals by any governmental agency as
may be required, including, without limitation, the effectiveness of any
registration statement required under the Securities Act of 1933, as amended,
the rules and regulations of any securities exchange on which the Common Stock
may be listed.
19. Withholding. The Company's obligation to deliver shares of Common
Stock in respect of any option granted under the Plan shall be subject to all
applicable federal, state and local tax withholding requirements. Federal,
state and local tax withholding tax due upon the exercise of any option (or
upon any disqualifying disposition of shares of Common Stock subject to an
Incentive Option) in the Committee's sole discretion, may be paid in shares of
Common Stock (including the withholding of shares subject to an option) upon
such terms and conditions as the Committee may determine.
20. Separability. If any of the terms or provision of the Plan conflict
with the requirements of Rule 16b-3 under the Exchange Act, then such terms or
provisions shall be deemed inoperative to the extent they so conflict with the
requirements of Rule 16b-3.
21. Exclusion from Pension and Profit-Sharing Computation. By acceptance
of an option, each Optionee shall be deemed to have agreed that such grant is
special incentive compensation that will not be taken into account, in any
manner, as salary, compensation or bonus in determining the amount of any
payment under any pension, retirement or other employee benefit plan of the
Company or any of its Subsidiaries. In addition, such option will not affect
the amount of any life insurance coverage, if any, provided by the Company on
the life of the Optionee which is payable to such beneficiary under any life
insurance plan covering employees of the Company or any of its Subsidiaries.
22. Governing Law. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Florida.
EXHIBIT 12
CARNIVAL CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
<TABLE>
<CAPTION>
Six Months Ended May 31,
1999 1998
<S> <C> <C>
Net income $361,103 $270,510
Income tax benefit (7,645) (6,861)
Income before income taxes 353,458 263,649
Adjustments to Earnings:
Minority interest 1,642
Dividends received in
excess of income from
affiliates 19,017 23,621
Earnings as adjusted 374,117 287,270
Fixed Charges:
Interest expense 26,880 24,735
Interest portion of rent
expense (1) 1,275 1,533
Capitalized interest 19,915 15,979
Total fixed charges 48,070 42,247
Fixed charges not affecting
earnings:
Capitalized interest (19,915) (15,979)
Earnings before fixed charges $402,272 $313,538
Ratio of earnings to fixed
charges 8.4X 7.4X
</TABLE>
(1) Represents one-third of rent expense, which management believes
to be representative of the interest portion of rent expense.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> MAY-31-1999
<CASH> 382,640
<SECURITIES> 614,799
<RECEIVABLES> 103,214
<ALLOWANCES> 0
<INVENTORY> 81,035
<CURRENT-ASSETS> 1,281,899
<PP&E> 6,928,778
<DEPRECIATION> 1,157,857
<TOTAL-ASSETS> 7,999,308
<CURRENT-LIABILITIES> 1,294,309
<BONDS> 1,240,997
<COMMON> 6,133
0
0
<OTHER-SE> 5,236,366
<TOTAL-LIABILITY-AND-EQUITY> 7,999,308
<SALES> 0
<TOTAL-REVENUES> 1,544,407
<CGS> 0
<TOTAL-COSTS> 848,529
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,880
<INCOME-PRETAX> 355,100
<INCOME-TAX> 7,645
<INCOME-CONTINUING> 361,103
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 361,103
<EPS-BASIC> 0.59
<EPS-DILUTED> 0.59
</TABLE>
