REPORT OF THE AUDIT COMMITTEES
Carnival Corporation and Carnival plc are two separate legal entities and,
therefore, each has a separate board of directors, each of which in turn has its
own Audit Committee. In accordance with their charter (a copy of which is
attached as Annex F to this proxy statement), each Audit Committee assists the
relevant board of directors in carrying out its oversight of:
• the integrity of the relevant financial statements;
• the company's compliance with legal and regulatory requirements;
• the independent auditors' qualifications and independence; and
• the performance of the company's internal audit functions and independent
auditor and independent registered certified public accounting firm.
Both Audit Committees are subject to the audit committee independence
requirements under the corporate governance standards of the NYSE and relevant
U.S. Securities and Exchange Commission rules, and the Audit Committee of
Carnival plc is also subject to the requirements of the UK Combined Code. The
two Audit Committees have identical members and each currently consists of five
independent (as defined by the listing standards of the NYSE currently in effect
and the UK Combined Code), non-employee directors. Each board of directors has
determined that Stuart Subotnick is both "independent" and an "audit committee
financial expert," as defined by SEC rules. In addition, the board of Carnival
plc has determined that Stuart Subotnick has "recent and relevant financial
experience" for purposes of the UK Combined Code.
Management has primary responsibility for Carnival Corporation & plc's financial
reporting process, including its system of internal control, and for the
preparation of consolidated financial statements. Carnival Corporation & plc's
independent auditors are responsible for performing an independent audit of
those financial statements and expressing an opinion on the conformity of those
financial statements with U.S. generally accepted accounting principles. The
Audit Committees are responsible for monitoring and overseeing the financial
reporting process and the preparation of consolidated financial statements and
for supervising the relationship between Carnival Corporation & plc and its
independent auditors, as well as reviewing the group's systems of internal
controls and compliance with the group Code of Business Conduct and Ethics. The
Audit Committees have met and held discussions with management of Carnival
Corporation & plc and the independent auditors. In this context, management
represented to the Audit Committees that Carnival Corporation & plc's
consolidated financial statements were prepared in accordance with U.S.
generally accepted accounting principles.
The Audit Committees (i) reviewed and discussed Carnival Corporation & plc's
audited financial statements for the year ended November 30, 2004 with Carnival
Corporation & plc's management and with Carnival Corporation & plc's independent
auditors; (ii) discussed with Carnival Corporation & plc's independent auditors
the matters required to be discussed by Statement on Auditing Standards No. 61;
and (iii) received the written disclosures and the letter from Carnival
Corporation & plc's independent accountants required by Independence Standards
Board Statement No. 1 (Independence Discussions with Audit Committees) and
discussed with Carnival Corporation & plc's independent auditors the independent
auditor's independence. The Audit Committees also considered whether the
provision to the relevant entity by the independent auditors of non-audit
services was compatible with maintaining the independence of the independent
auditors. Based on the reviews and discussions described above, the Audit
Committees recommended to the boards of directors that the audited consolidated
financial statements of Carnival Corporation & plc be included in Carnival
Corporation & plc's Annual Report on Form 10-K for the year ended November 30,
2004 for filing with the U.S. Securities and Exchange Commission.
The Audit Committee The Audit Committee
of Carnival Corporation of Carnival plc
Stuart Subotnick, Chairman Stuart Subotnick, Chairman
Richard G. Capen, Jr. Richard G. Capen, Jr.
Arnold W. Donald Arnold W. Donald
Richard J. Glasier Richard J. Glasier
Sir John Parker Sir John Parker
59
TRANSACTIONS OF MANAGEMENT AND DIRECTORS
Transactions with Micky Arison. Micky Arison, our Chairman and Chief Executive
Officer is also the Chairman and Chief Executive Officer and the indirect sole
shareholder of Florida Basketball Associates, Inc., the sole general partner of
the Miami Heat Limited Partnership ("MHLP"), the majority owner of the Miami
Heat, a professional basketball team. Pursuant to a five-year advertising and
promotion agreement between Carnival Cruise Lines and MHLP, Carnival Cruise
Lines agreed to pay an aggregate of $240,000 per year (subject to a 3% increase
for each additional year) for the advertising and promotion of Carnival Cruise
Lines during Miami Heat games played at the American Airlines Arena, located in
Miami, Florida. In addition, Carnival Corporation entered into a seven-year
agreement with Basketball Properties, Ltd. for the use of six courtside lounge
seats at the Miami Heat games played at the American Airlines Arena and other
public events at the arena. Under the agreement, Carnival Corporation agreed to
pay $180,000 per year for the first five years, subject to a 5% increase in
years six and seven.
Transactions with the Ted Arison Family Foundation USA, Inc. Shari Arison is the
Chairman of the Board of Trustees and President of the Ted Arison Family
Foundation USA, Inc. (the "Foundation"), a charitable foundation established by
Carnival Corporation's founder, Ted Arison. Carnival Corporation leases
approximately 100 square feet of office space to the Foundation and employs one
of its employees. During fiscal 2004, Carnival Corporation received
approximately $115,000 from the Foundation for both lease payments and for all
costs incurred by Carnival Corporation related to this employee. It is expected
that Carnival Corporation will continue these arrangements with the Foundation
in the future.
Registration Rights. Pursuant to a letter agreement (the "Trust Registration
Rights Agreement") dated July 11, 1989, Carnival Corporation granted to the Ted
Arison Irrevocable Trust (the "Irrevocable Trust") and the Arison Children's
Irrevocable Trust (the "Children's Trust," and together with the Irrevocable
Trust, the "Trusts") certain registration rights with respect to certain shares
of Carnival Corporation common stock held for investment by the Trusts (the
"Shares"). The beneficiaries of the Trusts included the children of Ted Arison,
including Micky Arison, our Chairman of the boards and Chief Executive Officer,
and Shari Arison, a major shareholder. Effective December 26, 1991, the
Children's Trust was divided into three separate continued trusts, including
continued trusts for Micky Arison, Shari Arison and Michael Arison.
Under the Trust Registration Rights Agreement, Carnival Corporation has granted
the Trusts demand and piggyback registration rights. Carnival Corporation is not
required to effect any demand registration unless all of the Shares owned by
either of the Trusts are included in the demand. Carnival Corporation has agreed
to bear all expenses relating to such demand and piggyback registrations, except
for fees and disbursements of counsel for the Trusts, selling costs,
underwriting discounts and applicable filing fees.
Under a registration rights agreement dated June 14, 1991 (the "Arison
Registration Rights Agreement"), Carnival Corporation granted certain
registration rights to Ted Arison with respect to certain shares of common stock
beneficially owned by him (the "Arison Shares") in consideration for $10,000.
The registration rights were held by the Estate of Ted Arison. The Estate of Ted
Arison subsequently transferred the Arison Shares to the Nickel 1997 Irrevocable
Trust (formerly known as The 1997 Irrevocable Trust of Micky Arison), the
Artsfare 1992 Irrevocable Trust (formerly known as the Ted Arison 1992
Irrevocable Trust for Lin No. 2) and the Eternity Four Trust (formerly known as
the Ted Arison 1994 Irrevocable Trust for Shari No. 1) (collectively, the
"Family Trusts"). The Arison Registration Rights Agreement provides for demand
and piggyback registration rights. Carnival Corporation has agreed to bear all
expenses relating to such demand and piggyback registrations, except for fees
and disbursements of counsel for the Family Trusts, selling costs, underwriting
discounts and applicable filing fees.
Transactions with Cruise Specialists. Until January 2005, Janet Olczak
Lanterman, the wife of A. Kirk Lanterman, one of our directors and a former
executive officer, was the owner of a travel agency located in Seattle,
Washington, named Cruise Specialists. Under the laws of the State of Washington,
Ms. Lanterman's ownership interest in Cruise Specialists was her separate
property and, accordingly, Mr. Lanterman did not have any ownership interest in
the agency. Cruise Specialists sells cruises and other similar products for
various travel providers, including us, under arrangements that are common
throughout the travel industry, whereby Cruise Specialists receives a commission
based on sales generated. In fiscal 2004, Cruise Specialists generated
approximately $15.2 million of gross revenues for Carnival Corporation & plc. In
connection with such revenues, Cruise Specialists received from Carnival
60
Corporation & plc approximately $3.2 million in commissions and other
marketing incentives. Carnival Corporation and Carnival plc believe that the
terms and conditions of the agreement with Cruise Specialists are no less
favorable to Carnival Corporation & plc than those terms and conditions
available for comparable transactions with unaffiliated persons.
Brother of Robert H. Dickinson. Carnival Cruise Lines entered into an agreement
with Waste Management National Services, Inc. ("WMNS") for the analytical,
management, collection, transportation, disposal and recycling services for
certain wastes generated or accumulated by its vessels in U.S. and foreign
ports. We have been advised that John Dickinson, the brother of Robert H.
Dickinson (President and Chief Executive Officer of Carnival Cruise Lines and a
member of our boards of directors), served as a consultant to WMNS in connection
with the negotiation of this agreement and receives fees based on Carnival
Cruise Lines' usage of WMNS under the agreement. During fiscal 2004, Carnival
Cruise Lines paid approximately $4.4 million to WMNS for their services. John
Dickinson advised us that he received approximately $40,500 during fiscal 2004
from WMNS.
Loan to Stein Kruse. In February 2000, HAL made a $250,000 advance to Stein
Kruse, currently the President and Chief Executive Officer of HAL, against
amounts he was expected to receive under the Holland America Line Key Management
Incentive Plan during the following five years. In March 2002, when the unpaid
balance under the advance was $150,000, HAL agreed that no further deductions
would be made from Mr. Kruse's Key Management Incentive Plan awards in respect
of this advance and the loan would be forgiven in full if he remained employed
by HAL through November 30, 2004. As of November 30, 2004, Mr. Kruse was
employed by HAL. As a result, the outstanding balance of the loan was forgiven.
Son of Pier Luigi Foschi. The son of Pier Luigi Foschi, one of our executive
officers and a director, is a minority partner in Studio Biscozzi-Nobili, an
Italian tax consulting firm, which is retained from time to time to provide tax
advice to Costa Crociere, S.p.A., one of our subsidiaries. During fiscal 2004,
Studio Biscozzi-Nobili earned approximately $151,000 for providing such services
to Costa.
Transactions with Affiliated Entities. Carnival Corporation & plc has adopted a
policy of dealing with affiliated entities on an arm's-length basis and Carnival
Corporation & plc may not engage in business transactions with any affiliate on
terms and conditions less favorable to Carnival Corporation & plc than terms and
conditions available at the time for comparable transactions with unaffiliated
persons. All contracts between us and an entity in which a director or senior
employee of Carnival Corporation & plc has an interest must be approved by the
boards of directors.
61
CHANGE IN INDEPENDENT AUDITORS
As previously disclosed, on April 17, 2003, KPMG Audit Plc ("KPMG") resigned as
the independent auditors for Carnival plc. The report of KPMG on Carnival plc's
financial statements for the years ended December 31, 2002 and December 31, 2001
contained no adverse opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles. During the
years ended December 31, 2001 and December 31, 2002 and the subsequent interim
period through April 17, 2003, there were no disagreements with KPMG on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements, if not resolved to the
satisfaction of KPMG, would have caused it to make reference thereto in its
reports on the financial statements for such periods.
On April 17, 2003, based on a decision to have one audit firm to audit the
consolidated financial statements of Carnival Corporation & plc, Carnival plc
engaged PricewaterhouseCoopers LLP to serve as its independent auditors for the
financial period ended November 30, 2003 and this appointment was approved by
Carnival plc shareholders at their annual general meeting on June 23, 2003. The
decision to engage PricewaterhouseCoopers LLP was approved by the Audit
Committee of the board of directors of Carnival plc.
During the years ended December 31, 2001 and 2002 and the subsequent interim
period through April 17, 2003, Carnival plc did not consult
PricewaterhouseCoopers LLP with respect to the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on Carnival plc's financial statements,
or any other matters or reportable events as set forth in Item 304(a)(1)(v) of
Regulation S-K.
62
Annex A
CARNIVAL CORPORATION
AMENDED AND RESTATED
2001 OUTSIDE DIRECTOR STOCK PLAN
(Adopted by the Board of Directors on February 16, 2001 and approved by the
shareholders on April 17, 2001, effective as of January 1, 2001, amended by the
Board of Directors on October 8, 2001, further amended by the Board of Directors
on July 19, 2004 and, further amended and restated by the Board of Directors on
January 18, 2005)
1. Purpose.
The purpose of the Plan is to promote the interests of the Combined Group by
strengthening the Combined Group's ability to attract and retain the services of
experienced and knowledgeable non-executive directors and by encouraging such
directors to acquire an increased proprietary interest in the Combined Group and
more closely align the interests of such directors with those of the Combined
Group's shareholders.
The Plan provides for granting of Options, Restricted Stock Awards, and
Restricted Stock Unit Awards.
2. Definitions.
The following definitions shall be applicable throughout the Plan.
(a) "Affiliate" means (i) any entity that directly or indirectly is controlled
by, controls or is under common control with the Company or Carnival plc, and
(ii) to the extent provided by the Committee, any entity in which the Company or
Carnival plc has a significant equity interest.
(b) "Award" means, individually or collectively, any Option, Restricted Stock
Award or Restricted Stock Unit Award.
(c) "Award Agreement" means a Stock Option Agreement, Restricted Stock
agreement or Restricted Stock Unit agreement.
(d) "Board" means the Board of Directors of the Company.
(e) "Carnival plc" means the entity previously known as P&O Princess Cruises
plc, a public limited company incorporated under the laws of England and Wales,
and any successor thereto.
(f) "Code" means the Internal Revenue Code of 1986, as amended. Reference in
the Plan to any section of the Code shall be deemed to include any amendments or
successor provisions to such section and any regulations under such section.
(g) "Committee" means the Compensation Committee of the Board.
(h) "Common Stock" means the common stock, par value $0.01 per share, of the
Company and any stock into which such common stock may be converted or into
which it may be exchanged.
(i) "Combined Group" means the Company and Carnival plc and any successor
thereto.
(j) "Company" means Carnival Corporation, a corporation organized under the
laws of the Republic of Panama, and any successor thereto.
(k) "Date of Grant" means the date on which the granting of an Award is
authorized, or such other date as may be specified in such authorization or, if
there is no such date, the date indicated on the applicable Award Agreement.
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(l) "Disability" means a condition that would entitle a Participant to receive
benefits under the long-term disability plan of a member of the Combined Group
or an Affiliate, as if such Participant were eligible to participate in such
plan whether or not any such plan is applicable to such Participant, the
existence of such condition to be reasonably determined by the Board.
(m) "Effective Date" means January 1, 2001.
(n) "Eligible Director" shall have the meaning assigned to it in Section 6.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(p) "Fair Market Value", on a given date, means (i) if the Shares are listed on
a national securities exchange, the average of the highest and lowest sale
prices reported as having occurred on the primary exchange with which the Shares
are listed and traded on such date, or, if there is no such sale on that date,
then on the last preceding date on which such a sale was reported; (ii) if the
Shares are not listed on any national securities exchange but is quoted in the
Nasdaq National Market ("Nasdaq") on a last sale basis, the average between the
high bid price and low ask price reported on the date prior to such date, or, if
there is no such sale on that date, then on the last preceding date on which a
sale was reported; or (iii) if the Shares are not listed on a national
securities exchange nor quoted in the Nasdaq on a last sale basis, the amount
determined by the Committee to be the fair market value based upon a good faith
attempt to value the Shares accurately and computed in accordance with
applicable regulations of the Internal Revenue Service.
(q) "Mature Shares" means Shares owned by a Participant which are not subject
to any pledge or security interest and have either been held by the Participant
for six months, previously acquired by the Participant on the open market or
meet such other requirements as the Committee may determine are necessary in
order to avoid an accounting earnings charge on account of the use of such
Shares to pay the Option Price or satisfy any applicable withholding obligation
in respect of an Option.
(r) "Option" means an Award granted under Section 8.
(s) "Option Price" means the exercise price for an Option as described in
Section 8(a).
(t) "Pairing Agreement" means the Pairing Agreement, dated April 17, 2003,
among the Company, The Law Debenture Trust Corporation (Cayman) Limited, as
trustee of the Carnival plc Special Voting Trust, and Sun Trust Bank, as
transfer agent, as it may be amended from time to time.
(u) "Participant" means each Eligible Director receiving an Award pursuant to
the Plan.
(v) "Plan" means this Carnival Corporation Amended and Restated 2001 Outside
Director Stock Plan.
(w) "Restricted Period" means, with respect to any Share of Restricted Stock or
any Restricted Stock Unit, the period of time during which such Award is subject
to restrictions set forth in Section 9 and the applicable Award Agreement.
(x) "Restricted Stock" means Shares issued or transferred to a Participant
subject to forfeiture and the other restrictions set forth in Section 9 and the
applicable Award Agreement.
(y) "Restricted Stock Award" means an Award of Restricted Stock granted under
Section 9.
(z) "Restricted Stock Unit" means a hypothetical investment equivalent to one
Share granted in connection with an Award made under Section 9.
(aa) "Restricted Stock Unit Award" means an Award of Restricted Stock Units
granted under Section 9.
(bb) "Securities Act" means the Securities Act of 1933, as amended.
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(cc) "Share" means the aggregate of one share of Common Stock and one Trust
Share.
(dd) "Stock Option Agreement" means any agreement between the Company and a
Participant who has been granted an Option pursuant to Section 8 which defines
the rights and obligations of the parties thereto.
(ee) "Subsidiary" means any subsidiary of the Company as defined in Section
424(f) of the Code.
(ff) "Trust Share" has the meaning assigned to it in the Pairing Agreement.
(gg) "Vested Unit" has the meaning assigned to it in Section 9(d).
3. Effective Date, Duration and Shareholder Approval.
(a) The Plan is effective as of the Effective Date, and the Plan was approved
by shareholders at a meeting held on April 17, 2001 in a manner intended to
comply with the shareholder approval requirements of the New York Stock
Exchange. This amendment and restatement shall be effective as of January 18,
2005, subject to approval by the Company's shareholders in a manner intended to
comply with the shareholder approval requirements of the New York Stock
Exchange. The validity of any and all Awards granted after January 18, 2005 to
Participants are contingent upon approval of the January 18, 2005 amendment and
restatement of the Plan by the shareholders of the Company in a manner intended
to comply with the shareholder approval requirements of the New York Stock
Exchange.
(b) The expiration date of the Plan, on and after which no Awards may be
granted hereunder, shall be January 1, 2011; provided, however, that the
administration of the Plan shall continue in effect until all matters relating
to Awards previously granted have been settled.
4. Administration.
(a) The Plan shall be administered by the Committee. A majority of the
Committee will constitute a quorum and the acts of a majority of the members
present at any meeting at which a quorum is present, or acts approved in writing
by all members of the Committee without a meeting, will be acts of the
Committee.
(b) 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. No member of the
Committee shall be liable for anything done or omitted to be done by him or by
any other member of the Committee in connection with the Plan, except for his
own willful misconduct or gross negligence. All decisions which are made by the
Committee with respect to interpretation of the terms of the Plan and with
respect to any questions or disputes arising under the Plan shall be final and
binding on the Company and the participants, their heirs or beneficiaries. The
Committee shall not be empowered to take any action, whether or not otherwise
authorized under the Plan, which would result in any Eligible Director failing
to qualify as a "disinterested person."
5. Shares Subject to Awards.
(a) Subject to the adjustment provisions of Section 10(e), the aggregate number
of Shares in respect of which Awards may be granted under the Plan shall not
exceed 1,000,000.
(b) Shares shall be deemed to have been used in settlement of Awards whether or
not they are actually delivered. In the event any Award shall be surrendered,
terminate, expire, be forfeited or be cancelled for any reason whatsoever
without the Participant having benefited therefrom, the number of Shares no
longer subject thereto shall thereupon be released and shall thereafter be
available for new Awards under the Plan. For purposes of the foregoing sentence,
a Participant shall not be deemed to have received any "benefit" in the case of
forfeited Restricted Stock Awards by reason of having enjoyed voting rights and
dividend rights prior to the date of forfeiture.
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(c) Shares delivered by the Company in settlement of Awards may be authorized
and unissued Shares or Shares held in the treasury of the Company or purchased
on the open market or by private purchase.
(d) There shall be reserved at all times for sale under the Plan a number of
Shares, of either authorized and unissued Shares, Shares held in the Company's
treasury, or both, equal to the maximum number of shares in respect of which
Awards may be granted under the Plan.
6. Participation in Plan. Each member of the Company's Board of Directors who
is not otherwise an employee of the Company or any Affiliate or subsidiary of
the Company within the meaning of the Employee Retirement Income Security Act of
1974 (an "Eligible Director") shall be eligible to participate in the Plan. A
director who is an employee and who retires or resigns from employment with the
Company and/or its Affiliates, but remains an Eligible Director of the Company,
shall become eligible to participate in the Plan in accordance with Section 7,
effective as of the first annual meeting of shareholders held after his
termination of employment.
7. Annual Award Grants. Each Eligible Director shall receive upon initial
election to office by the shareholders and thereafter annually on the date of
the Company's annual meeting of shareholders at which such Eligible Director is
re-elected to office, or on any other date properly approved pursuant to this
Section 7, an Award representing 10,000 "points." An Option shall represent one
point; and each Share of Restricted Stock or a Restricted Stock Unit shall
represent four points. An Award may be composed of Options, Restricted Stock,
Restricted Stock Units or a combination thereof, at the discretion of the
Committee which discretion shall be exercised not later than the Date of Grant
of such Award. The Board may authorize a Date of Grant other than the date of
the Company's annual meeting of shareholders, provided, that Awards granted to
each Participant do not exceed 10,000 points in any given calendar year.
8. Terms of Options.
(a) Option Price. The Option Price per Share for each Option shall be the Fair
Market Value at the Date of Grant.
(b) Vesting. Subject to Section 8(e), Options shall vest and become exercisable
in five equal annual installments commencing on the first anniversary of the
Date of Grant.
(c) Duration of Options. Subject to Section 8(e), each Option granted hereunder
shall be exercisable for a period of ten years from the Date of Grant.
(d) Manner of Exercise and Form of Payment.
(i) An Option granted under the 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, specifying the number of shares with respect to which
the option is exercised and the price per share designated in the Stock Option
Agreement, (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 Section 8 of
the Plan.
(ii) Full payment for Shares purchased by the Participant shall be made at the
time of any exercise, in whole or in part, of an Option, and certificates for
such Shares shall be delivered to the Participant as soon thereafter as is
reasonably possible. No Shares shall be transferred to the Participant until
full payment therefor has been made and the Participant shall have none of the
rights of a shareholder with respect to any Shares subject to an Option until a
certificate for such shares shall have been issued and delivered to the
Participant. Such payment shall be made in cash or by check or by money order
payable to the Company, in each case payable in U.S. currency. In the
Committee's discretion, such payment may be made by delivery of Mature Shares
having a Fair Market Value (determined as of the date of the Option is so
exercised in whole or in part), that, when added to the value of any cash, check
or money order satisfying the foregoing requirements, will equal the aggregate
purchase price.
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(e) Termination of Board Membership.
(i) Death or Disability. Upon a Participant's ceasing to be a member of the
Board due to death or Disability, all unvested Options shall immediately vest
and become exercisable and all vested Options shall continue to be exercisable
by the Participant or his estate, as applicable, until the earlier to occur of
(i) the original expiration date of such Option, and (ii) one year from such
cessation.
(ii) Other Termination. Except as provided in the proviso to this Section, upon
a Participant's ceasing to be a member of the Board for any reason other than
death or Disability, all unvested Options shall continue to vest in accordance
with their initial terms, and all vested Options shall continue to be
exercisable until the original expiration date of such Option; provided,
however, that if the Participant ceases to be a member of the Board prior to
serving in such capacity for one year, all of such Participant's Options shall
immediately expire upon such termination.
9. Restricted Stock and Restricted Stock Units.
(a) Awards of Restricted Stock and Restricted Stock Units.
(i) Each Participant granted a Restricted Stock Award shall execute and deliver
to the Company a Restricted Stock agreement with respect to the Restricted Stock
setting forth the restrictions and other terms and conditions applicable to such
Restricted Stock including the Restricted Period set forth in Section 9(c). If
the Committee determines that the Restricted Stock shall be held in escrow
rather than delivered to the Participant pending the release of the applicable
restrictions, the Committee may require the Participant to additionally execute
and deliver to the Company (A) an escrow agreement satisfactory to the Committee
and (B) the appropriate blank stock powers with respect to the Restricted Stock
covered by such agreement. If a Participant shall fail to execute an agreement
evidencing an Award of Restricted Stock and, if applicable, an escrow agreement
and stock powers, the Award shall be null and void. Subject to the restrictions
set forth in Section 9(b) and Section 9(c), the Participant generally shall have
the rights and privileges of a stockholder as to such Restricted Stock,
including the right to vote such Restricted Stock. At the discretion of the
Committee, cash dividends and stock dividends with respect to the Restricted
Stock may be either currently paid to the Participant or withheld by the Company
for the Participant's account, and interest may be credited on the amount of
cash dividends withheld at a rate and subject to such terms as determined by the
Committee. To the extent applicable, the cash dividends or stock dividends so
withheld by the Committee and attributable to any particular share of Restricted
Stock (and earnings thereon, if applicable) shall be distributed to the
Participant upon the release of restrictions on such share and, if such share is
forfeited, the Participant shall have no right to such cash dividends, stock
dividends or earnings.
(ii) Upon the grant of an Award of Restricted Stock, the Committee shall cause
a stock certificate registered in the name of the Participant to be issued and,
if it so determines, deposited together with the stock powers with an escrow
agent designated by the Committee. If an escrow arrangement is used, the
Committee may cause the escrow agent to issue to the Participant a receipt
evidencing any stock certificate held by it registered in the name of the
Participant.
(iii) The terms and conditions of a grant of Restricted Stock Units shall be
reflected in a written Restricted Stock Unit agreement. No Shares shall be
issued at the time an Award of Restricted Stock Units is made, and the Company
will not be required to set aside a fund for the payment of any such Award. At
the discretion of the Committee, each Restricted Stock Unit (representing one
Share) awarded to a Participant may be credited with cash and stock dividends
paid by the Company in respect of one Share ("Dividend Equivalents"). At the
discretion of the Committee, Dividend Equivalents may be either currently paid
to the Participant or withheld by the Company for the Participant's account, and
interest may be credited on the amount of cash Dividend Equivalents withheld at
a rate and subject to such terms as determined by the Committee. Dividend
Equivalents credited to a Participant's account and attributable to any
particular Restricted Stock Unit (and earnings thereon, if applicable) shall be
distributed to the Participant upon settlement of such Restricted Stock Unit
and, if such Restricted Stock Unit is forfeited, the Participant shall have no
right to such Dividend Equivalents.
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(b) Restrictions; Forfeiture.
(i) Restricted Stock awarded to a Participant shall be subject to the following
restrictions until the expiration of the Restricted Period, and to such other
terms and conditions as may be set forth in the applicable Restricted Stock
agreement: (A) if an escrow arrangement is used, the Participant shall not be
entitled to delivery of the stock certificate; and (B) the Shares shall be
subject to the restrictions on transferability set forth in the applicable
Restricted Stock agreement. Restricted Stock awarded to a Participant who has
not been a member of the Board for at least one year at the time of such award
shall be forfeited, and the applicable stock certificates returned to the
Company, if the Participant ceases to be a member of the Board for any reason
other than death or Disability prior to the one-year anniversary of his or her
initial election to the Board. In the event of such a forfeiture, all rights of
the Participant to such Restricted Stock, and as a shareholder in respect
thereof, shall terminate without further obligation on the part of the Company.
(ii) Restricted Stock Units awarded to any Participant who has not been a
member of the Board for at least one year at the time of such award shall be
forfeited, and all rights of the Participant to in respect thereof, shall
terminate without further obligation on the part of the Company if the
Participant ceases to be a member of the Board for any reason other than death
or Disability prior to the one-year anniversary of his or her initial election
to the Board. Restricted Stock Units shall be subject to such other terms and
conditions as may be set forth in the applicable Restricted Stock Unit
agreement.
(iii) The Committee shall have the authority to remove any or all of the
restrictions on the Restricted Stock and Restricted Stock Units whenever it may
determine that, by reason of changes in applicable laws or other changes in
circumstances arising after the date of the Restricted Stock Award or Restricted
Stock Unit Award, such action is appropriate.
(c) Restricted Period. The Restricted Period of Restricted Stock Awards and
Restricted Stock Unit Awards granted to any Participant shall commence on the
Date of Grant and shall expire as to twenty percent (20%) of the Restricted
Stock or Restricted Stock Units, as applicable, subject thereto on each of the
first, second, third, fourth and fifth anniversaries of the Date of Grant
whether or not such Participant continues to be a member of the Board; provided,
however, that upon a Participant's ceasing to be a member of the Board due to
death or Disability, the Restricted Period shall expire as to one hundred
percent (100%) of the Shares subject thereto.
(d) Delivery of Restricted Stock and Settlement of Restricted Stock Units.
(i) Upon the expiration of the Restricted Period with respect to any Shares
covered by an Award of Restricted Stock which has not been forfeited in
accordance with the second sentence of Section 9(b)(i), the restrictions set
forth in this Section 9 and the Restricted Stock agreement shall be of no
further force or effect with respect to shares of Restricted Stock which have
not then been forfeited. If an escrow arrangement is used, upon such expiration,
the Company shall deliver to the Participant, or his beneficiary, without
charge, the stock certificate evidencing the shares of Restricted Stock with
respect to which the Restricted Period has expired (to the nearest full share)
and any cash dividends or stock dividends credited to the Participant's account
with respect to such Restricted Stock and the interest thereon, if any.
(ii) Upon the expiration of the Restricted Period with respect to any
Restricted Stock Units covered by a Restricted Stock Unit Award which has not
been forfeited in accordance with Section 9(b)(ii), the Company shall deliver to
the Participant, or his beneficiary, without charge, one Share for each
Restricted Stock Unit with respect to which the Restricted Period has expired
("Vested Unit") and cash equal to any Dividend Equivalents credited with respect
to each such Vested Unit in accordance with Section 9(a)(iii) hereof and the
interest thereon, if any; provided, however, that, if explicitly provided in the
applicable Restricted Stock Unit agreement, the Committee may, in its sole
discretion, elect to pay cash or part cash and part Shares in lieu of delivering
only Shares for Vested Units. If a cash payment is made in lieu of delivering
Shares, the amount of such payment shall be equal to the Fair Market Value of
the Shares as of the date on which the Restricted Period lapsed with respect to
such Vested Unit.
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(e) Stock Restrictions. Each certificate representing Restricted Stock awarded
under the Plan shall bear a legend substantially in the form of the following
until the lapse of all restrictions with respect to the Shares subject to the
Award as well as any other information the Company deems appropriate:
Transfer of this certificate and the shares represented hereby is restricted
pursuant to the terms of the Carnival Corporation Amended and Restated 2001
Outside Director Stock Plan and a Restricted Stock Agreement, dated as of
________________, between Carnival Corporation and ________________. Copies of
such Plan and Agreement are on file at the offices of Carnival Corporation.
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
10. General.
(a) Nontransferability of Awards. No Award 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 a Participant, only the Participant
(or the Participant's court-appointed legal representative) may exercise an
Option. In the Committee's discretion, an Award may be transferred pursuant to a
"qualified domestic relations order," as defined in section 414(p) of the Code
or any similar domestic relations order enforceable in the jurisdiction in which
such Participant resides.
(b) Rights of Participant. Neither the Participant nor the Participant's
executor or administrator shall have any of the rights of a shareholder 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.
(c) Right To Terminate Relationship. Nothing in the Plan or in any Award shall
confer upon any Participant the right to continue to serve as a director of the
Company.
(d) 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.
(e) Adjustment Upon Changes in Capitalization, etc.
(i) Awards granted under the Plan, any Award Agreements, and the maximum number
of Shares subject to all Awards stated in Section 5(a) shall be subject to
adjustment or substitution, as determined by the Committee in its sole
discretion, as to the number, price or kind of a share of stock or other
consideration subject to such Awards or as otherwise determined by the Committee
to be equitable in the event of any stock split, stock dividend, stock change,
reclassification, an unpairing of the shares of Common Stock from the Trust
Shares, recapitalization or combination of shares which changes the character or
amount of Shares (x) in the case of Options, prior to exercise of any portion of
an Option theretofore granted under the Plan, such that such option, to the
extent that it shall not have been exercised, shall entitle the Participant (or
the Participant's executor or administrator) upon its exercise to receive in
substitution therefor such number and kind of shares as the Participant would
have been entitled to receive if the Participant had actually owned the Shares
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 Participant, 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
Participant (or the Participant'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; and (y) in the case of Restricted Stock and Restricted Stock Units,
occurring after the Date of Grant of any such Awards.
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(ii) 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 Shares
subject to any unexercised Option or subject to any Award with respect to which
the Restricted Period has not expired, 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 Awards may thereafter be granted under the Plan shall
be adjusted to give effect thereto.
(f) Purchase for Investment. Whether or not the Options and Shares covered by
the Plan have been registered under the Securities Act of 1933, 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 Participant upon the
exercise of any Option granted under the Plan.
(g) Form of Agreements with Participants. Each Award 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 Award. Each Participant shall be notified promptly of such grant, and an
Award shall be promptly executed and delivered by the Company and the
Participant.
(h) Termination and Amendment of Plan and Awards.
(i) Unless the Plan shall theretofore have been terminated as hereinafter
provided, Awards may be granted under the Plan at any time, and from time to
time, prior to the tenth anniversary of the Effective Date, on which date the
Plan will expire, except as to Awards then outstanding under the Plan. Such
Awards shall remain in effect until they have been exercised, have expired or
have been canceled.
(ii) The Board, without further approval of the Company's shareholders, may
terminate, modify or amend this Plan at any time and from time to time in such
respects as the Board may deem advisable, subject to any shareholder or
regulatory approval required by law or the New York Stock Exchange; provided,
that any such amendment shall comply with the applicable requirements for
exemption (to the extent necessary) under Rule 16b-3 under the Exchange Act.
(iii) No termination, modification or amendment of the Plan, without the consent
of the Participant, may adversely affect the rights of such person with respect
to such Award. With the consent of the Participant and subject to the terms and
conditions of the Plan, the Committee may amend outstanding Award agreements
with any Participant.
(iv) Notwithstanding the above, without shareholder approval, the Committee may
not take any action that results in the "repricing" of any Option granted under
the Plan. For purposes of this Section 10(h)(iv), a "repricing" means any of the
following (or any other action that has the same effect of any of the
following): (a) amending or modifying the terms of an Option after the Date of
Grant in a manner that reduces the Option Price of such Option; (b) any other
action that would either (A) be reportable on the Company's proxy statement as
Options which have been "repriced" (as such term is used in Item 402 of
Regulation S-K promulgated under the Exchange Act) or (B) results in an Option
being considered repriced under generally accepted accounting principles; or (c)
canceling an Option at time when its Option Price is equal to or less than the
Fair Market Value of the Shares subject to the Option, in exchange for another
Option, Restricted Stock Award, Restricted Stock Unit Award, or any other
equity-based award. A cancellation and exchange described in clause (c) of the
preceding sentence will be considered a "repricing" regardless of whether (A)
the Option, Restricted Stock Award, Restricted Stock Unit Award, or other
equity-based award is delivered simultaneously with the cancellation of the
Option, (B) it is reportable as a repricing in the Company's proxy statement or
under generally accepted accounting principles, or (C) the cancellation of the
Option was voluntary on the part of the Participant.
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(i) Government and Other Regulations. The obligation of the Company with
respect to Awards 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, the rules and
regulations of any securities exchange on which the Shares may be listed.
(j) Withholding. A Participant may be required to pay to a member of the
Combined Group or any Affiliate, and each member of the Combined Group or any
Affiliate shall have the right and is hereby authorized to withhold from any
Shares or other property deliverable under any Award or from any compensation or
other amounts owing to a Participant the amount (in cash, Shares or other
property) of any required tax withholding in respect of an Award, its exercise,
or any payment or transfer under an Award or under the Plan and to take such
other action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes.
(k) 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.
(l) Governing Law. The Plan shall be governed by and construed in accordance
with the internal laws of the State of Florida without regard to the principles
of conflicts of law thereof, or principles of conflicts of laws of any other
jurisdiction which could cause the application of the laws of any jurisdiction
other than the State of Florida.
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Annex B
CARNIVAL PLC 2005 EMPLOYEE SHARE PLAN
(As adopted by the board of directors of Carnival plc on 18 January 2005
and to be approved by shareholders of Carnival plc in general meeting on 13
April 2005)
1. PURPOSE
The purpose of the Plan is to provide a means through which each member of the
plc Group may attract able persons to enter and remain in the employ of members
of the plc Group and to provide a means whereby employees and executive
directors of each member of the plc Group can acquire and maintain Share
ownership, or be paid incentive compensation measured by reference to the value
of Shares, thereby strengthening their commitment to the welfare of the members
of the plc Group and promoting an identity of interest between shareholders and
these persons. It is intended that the Plan will be an employees' share scheme
within the meaning of section 743 of the Companies Act 1985.
The Plan provides for the granting of Options (Incentive Share Options,
Nonqualified Share Options, Unapproved Options and Approved Options), Restricted
Shares and Restricted Share Units to eligible employees. Inland Revenue Approved
Options may be granted under an Appendix to the Plan approved by the Inland
Revenue.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan;
ADRs means American Depositary Receipts evidencing American Depositary Shares
deposited by the Company with a depositary pursuant to a depositary agreement;
Affiliate means:
(a) any entity that directly or indirectly is Controlled by, Controls or is
under common Control with the Company or Carnival Corporation; and
(b) to the extent provided by the Committee, any entity in which the Company or
Carnival Corporation has a significant equity interest.
Approved Option means an Option granted under an Inland Revenue approved share
plan contained in the Appendix to this Plan;
Award means, individually or collectively, any Incentive Share Option,
Nonqualified Share Option, Unapproved Option, Approved Option, Restricted Share
Award or Restricted Share Unit Award;
Award Agreement means a Share Option Agreement, Restricted Share Agreement or
Restricted Share Unit Agreement;
Board means the board of directors of the Company;
Capital Reorganisation means any variation in the share capital or reserves of
the Company (including, without limitation, by way of capitalisation issue,
rights issue, sub-division, consolidation, or reduction);
Carnival Corporation means Carnival Corporation, a corporation organised under
the laws of the Republic of Panama;
Cause means a member of the plc Group having a right to terminate a
Participant's employment summarily either in accordance with the terms of the
Participant's contract of employment with that member or otherwise at common law
including without limitation:
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(a) the determination by the Committee that the Participant has ceased to
perform his duties to a member of the plc Group (other than as a result of
his incapacity due to physical or mental illness or injury), which failure
amounts to an intentional and extended neglect of his duties to his
employer;
(b) the Committee's determination that the Participant has engaged or is about
to engage in wilful misconduct or conduct which causes or may reasonably be
expected to cause substantial damage to a member of the plc Group;
(c) the Participant having been convicted of, or pleaded guilty to, an offence
involving as a material element fraud or dishonesty; or
(d) the failure of the Participant to follow the lawful instructions of the
Board or any of his superiors;
Change of Control means the occurrence of any of the following:
(a) a person (either alone or together with any person acting in concert with
him) obtaining Control of the Company as a result of a general offer or
otherwise for the whole of the share capital of the Company (other than
those shares which are already owned by him and/or any person acting in
concert with him);
(b) a person (either alone or together with any person acting in concert with
him) acquiring 50% or more (on a fully diluted basis) of either:
(i) the then outstanding Shares taking into account as outstanding for this
purpose such Shares as are issuable upon the exercise of options or
warrants, the conversion of convertible shares or debt and the exercise
of any similar right to acquire such Shares (the "Outstanding Shares");
or
(ii) the combined voting power of the then outstanding voting shares or
securities of the Company entitled to vote generally in the election of
directors (the Outstanding Company Voting Securities);
provided, however, that for purposes of this Plan, the following
acquisitions shall not constitute a Change of Control:
(A) any acquisition by the Company or any Affiliate,
(B) any acquisition by any employee benefit plan sponsored or maintained
by the Company or any Affiliate,
(C) any acquisition by Marilyn B. Arison, Micky Arison, Shari Arison,
Michael Arison or their spouses or lineal descendents, any trust
established for the benefit of any of the aforementioned Arison family
members, or any person directly or indirectly controlling, controlled
by or under common control with any of the aforementioned Arison
family members or any trust established for the benefit of any of the
aforementioned Arison family members or any charitable trust or
non-profit entity established by any person or entity described in
this sub-paragraph (C); or
(D) any acquisition by any person which falls within the proviso to
paragraph (e) below or sub-paragraphs (i), (ii) and (iii) of paragraph
(h) below;
and for the purposes of this Plan an event falling within sub-paragraphs (a) or
(b) of this definition shall be referred to as an Acquisition;
(c) individuals who, on the date this Plan is approved by shareholders in
general meeting, constitute the board of directors of the Company (the
Incumbent Directors) ceasing for any reason to constitute at least a
majority of the board, provided that any person who becomes a director
subsequently and whose election or nomination for election was approved by a
vote of at least two-thirds of the Incumbent Directors then on the board
(either by a specific vote of the directors or
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by approval of the proxy statement or annual report and accounts of the
Company in which such person is nominated for election by shareholders,
without written objection to such nomination) shall be an Incumbent
Director; and for the purposes of this Plan an event falling within this
sub-paragraph (c) shall be referred to as a Board Change;
(d) a person becoming bound or entitled to give notice under sections 428 to
430F of the Companies Act 1985 to acquire Shares (a Compulsory Acquisition
Procedure);
(e) a Court directing that a meeting of the holders of Shares be convened
pursuant to section 425 of the Companies Act 1985 for the purposes of
considering a scheme of arrangement of the Company or its amalgamation with
any other company or companies and the scheme of arrangement being approved
by the shareholders' meeting or sanctioned by the Court (as the Committee
may determine) (the Relevant Condition) provided, however, that the
Committee may determine that the scheme of arrangement shall not constitute
a Change of Control if the purpose and effect of the scheme of arrangement
is to create a new holding company for the Company, such company having
substantially the same shareholders with the same proportionate
shareholdings as the Company had immediately prior to the scheme of
arrangement, and for the purposes of this Plan an event falling within this
sub- paragraph (e) shall be referred to as a Scheme of Arrangement;
(f) notice being duly given of a resolution for the voluntary winding-up of the
Company (a Voluntary Winding Up);
(g) the sale, transfer or other disposition of all or substantially all of the
business or assets of the Company (a Sale); or
(h) the completion of a reorganization, recapitalization, merger, consolidation,
share exchange or similar form of corporate transaction involving the
Company that requires the approval of the Company's shareholders, whether
for such transaction or the issuance of securities in the transaction (a
Business Combination), unless immediately following such Business
Combination:
(i) more than 50% of the total voting power of:
(A) the company or body corporate resulting from such Business Combination
(the Surviving Company); or
(B) if applicable, the ultimate parent company or body corporate that
directly or indirectly has beneficial ownership of sufficient voting
securities eligible to elect a majority of the directors of the
Surviving Company (the Parent Company), is represented by the
Outstanding Company Voting Securities that were outstanding
immediately prior to such Business Combination (or, if applicable, is
represented by shares into which the Outstanding Company Voting
Securities were converted pursuant to such Business Combination), and
such voting power among the holders thereof is in substantially the
same proportion as the voting power of the Company's Voting Securities
among the holders thereof immediately prior to the Business
Combination,
(ii) no person, is or becomes the beneficial owner, directly or indirectly, of
50% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent Company (or, if
there is no Parent Company, the Surviving Company); and
(iii) at least a majority of the members of the board of directors of the
Parent Company (or, if there is no Parent Company, the Surviving Company)
following the completion of the Business Combination were members of the
board of directors of the Company at the time of the board's approval of
the execution of the initial agreement providing for such Business
Combination
and for the purposes of this Plan a transaction falling within this
sub-paragraph (h) shall be referred to as a Corporate Transaction;
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Code means the United States Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section;
Combined Group means the plc Group and Carnival Corporation and any subsidiary
of Carnival Corporation as that term is defined in section 736 of the Companies
Act 1985;
Committee means the Compensation Committee of the board of directors. Unless
the Board determines otherwise, each member of the Committee shall, at the time
he takes any action with respect to an Award under the Plan, be an Eligible
Director. However, the mere fact that a Committee member shall fail to qualify
as an Eligible Director shall not invalidate any Award which is otherwise
validly granted under the Plan;
Company means Carnival plc, a company incorporated under the laws of England
and Wales;
Control has the meaning given to it by section 840 of ICTA;
Date of Grant means the date on which the granting of an Award is authorized,
or such other date as may be specified in such authorization or, if there is no
such date, the date indicated on the applicable Award Agreement;
Dealing Day means any day on which the London Stock Exchange is open for the
transaction of business;
Effective Date means the date on which the Plan is approved by the Company's
shareholders in general meeting;
Eligible Director means a person who is a "non-employee director" within the
meaning of Rule 16b-3 under the Exchange Act, or a person meeting any similar
requirement under any successor rule or regulation;
Employee means any employee (including an executive director) of a member of
the plc Group whose terms of service require him to devote substantially the
whole of his working time to the affairs of a member of the Combined Group;
Employee Share Plan means any share option plan or other employees' share
incentive plan established by the Company including the P&O Princess Cruises
Deferred Bonus & Co-Investment Matching Plan;
Exchange Act means the U.S. Securities Exchange Act of 1934, as amended;
Fair Market Value means, on a given date:
(a) for so long as the Shares are traded on the London Stock Exchange, the
closing middle market quotation for a Share as derived from the Daily
Official List of the London Stock Exchange for that day; or
(b) subject to (a) above, its market value determined in accordance with Part
VIII of the Taxation of Chargeable Gains Act 1992 and in the case of any
Award under which Shares are to be issued, the nominal value of a Share;
ICTA means the United Kingdom Income and Corporation Taxes Act 1988;
ITEPA means the United Kingdom Income Tax (Earnings and Pensions) Act 2003;
Incentive Share Option means an Option granted by the Committee to a US
Participant under the Plan which is designated by the Committee as an incentive
stock option as described in Section 422 of the Code and which otherwise meets
the requirements set forth herein;
the London Stock Exchange means London Stock Exchange plc or any successor body
thereto;
B-4
Nonqualified Share Option means an Option granted by the Committee to a US
Participant under the Plan, which is not designated by the Committee as an
Incentive Share Option;
Option means an Award granted under Section 7 being either an Incentive Share
Option, a Nonqualified Share Option, an Unapproved Option or an Approved Option;
Option Holder means any individual who holds a subsisting Option (including,
where the context permits, the legal personal representatives of a deceased
Option Holder);
Option Period means such period commencing on the Date of Grant and not
exceeding ten years, as the Committee may be determine under Section 7.6 in
respect of an Option or portions of an Option;
Option Price means the exercise price of an Option as described in Section 7.3;
Participant means an Employee who has been selected by the Committee to
participate in the Plan and to receive an Award;
Performance Goals means the performance objectives which may be established by
the Committee for the purpose of determining whether, and to what extent, Awards
will vest or be subject to a Restricted Period.
Plan means this Carnival plc 2005 Employee Share Plan, as amended from time to
time;
the plc Group means the Company and the Subsidiaries and member of the Group
shall be construed accordingly;
Registered Holder means any person or persons nominated by the Committee to
hold Restricted Shares on behalf of a Participant;
Relevant Period means in the case of:
(a) an Acquisition, the period of three months from the date of completion of
the acquisitions and if the acquisitions occur as a result of an offer which
is made subject to conditions, the period of three months from the date when
the offer becomes or is declared unconditional in all respects;
(b) a Board Change, the period of three months from the date that the relevant
majority no longer subsists;
(c) a Compulsory Acquisition Procedure, the period of 30 days from the date on
which a notice of compulsory acquisition is first issued;
(d) a Scheme of Arrangement, the period between the date of the Court's
direction and twelve noon on the day immediately preceding the date for
which the shareholders' meeting is convened or such longer period up to the
date on which the Court sanctions the Scheme of Arrangement as the Committee
may determine;
(e) a Voluntary Winding Up, the period of two months from the date the resolution;
(f) a Sale, the period of three months from the date of completion of the
relevant transaction; and
(g) a Corporate Transaction, the period of three months from the date of
completion of the relevant transaction;
Restricted Period means, with respect to any Restricted Shares or any
Restricted Share Unit, the period of time determined by the Committee during
which such Award is subject to the restrictions set forth in Section 9 (unless
foreshortened pursuant to the rules of this Plan);
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Restricted Shares means Shares issued or transferred to a Participant subject
to forfeiture and the other restrictions set forth in Section 9;
Restricted Share Award means an Award of Restricted Shares granted under
Section 9;
Restricted Share Unit means a hypothetical investment equivalent to one Share
granted in connection with an Award made under Section 9;
Restricted Share Unit Award means an Award of Restricted Share Units granted
under Section 9;
Retirement means the cessation of a Participant's employment with a member of
the plc Group on or after the earlier of:
(a) age 65 with at least five years of service with a member of the plc Group; or
(b) age 55 with at least 15 years of service with a member of the plc Group;
Retirement Age means age 55 for the purposes of paragraph 35A of Schedule 4 to
ITEPA;
Securities Act means the Securities Act of 1933, as amended;
Shares means fully paid and irredeemable ordinary shares in the capital of the
Company or shares representing those shares following any Capital
Reorganization;
Share Option Agreement means any agreement between the Company and a
Participant who has been granted an Option pursuant to Section 7 which evidences
the grant of an Option and in the case of an Option granted by way of a share
option certificate, shall mean the share option certificate;
Subsidiary means any subsidiary of the Company, as defined in Section 736 of
the Companies Act 1985, of which the Company has Control;
UKLA means the United Kingdom Listing Authority;
Unapproved Option means an Option granted to a Participant other than a US
Participant under the Plan which is not designated by the Committee as an
Approved Option; and
Vested Unit shall have the meaning assigned to it in Section 9.12.
3. EFFECTIVE DATE,DURATION AND SHAREHOLDER APPROVAL
3.1 The Plan is effective as of the Effective Date [, and the Plan was approved
by shareholders at a general meeting held on 13 April 2005 in a manner intended
to comply with the shareholder approval requirements of Sections 422(b)(1) of
the Code and the New York Stock Exchange].1
3.2 The expiration date of the Plan, on and after which no Awards may be
granted hereunder, shall be the tenth anniversary of the Effective Date;
provided, however, that the administration of the Plan shall continue in effect
until all matters relating to Awards previously granted have been settled.
4. ADMINISTRATION
4.1 The Committee shall administer the Plan.
4.2 Subject to the provisions of the Plan and applicable law, the Committee
shall have the power, in addition to other express powers and authorizations
conferred on the Committee by the Plan, to:
1 Square brackets to be removed if the Plan approved by shareholders in general
meeting on 13 April 2005.
B-6
(a) designate Participants;
(b) determine the type or types of Awards to be granted to a Participant;
(c) determine the number of Shares to be covered by, or with respect to which
payments, rights, or other matters are to be calculated in connection with,
Awards;
(d) determine the terms and conditions of any Awards;
(e) determine whether, to what extent, and under what circumstances Awards may
be settled or exercised in cash, Shares, other securities, other Awards or
other property, or cancelled, forfeited or suspended and the method or
methods by which Awards may be settled, exercised, cancelled, forfeited or
suspended;
(f) determine whether, to what extent, and under what circumstances the delivery
of cash, Shares, other securities, other Awards, other property and other
amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(g) interpret, administer, reconcile any inconsistency, correct any defect
and/or supply any omission in the Plan and any instrument or agreement
relating to, or Award granted under, the Plan;
(h) establish, amend, suspend, or waive such rules and regulations and appoint
such agents as it shall deem appropriate for the proper administration of
the Plan; and
(i) make any other determination and take any other action specified under the
Plan or that the Committee deems necessary or desirable for the
administration of the Plan.
4.3 Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award or any documents evidencing Awards shall be within the sole
discretion of the Committee, may be made at any time and shall be final,
conclusive and binding upon all parties, including, without limitation, each
member of the Combined Group, any Participant, any holder or beneficiary of any
Award, and any shareholder.
5. GRANT OF AWARDS;SHARES SUBJECT TO THE PLAN
5.1 The Committee may, from time to time, grant Awards of Options, Restricted
Shares or Restricted Share Units to one or more Employees provided that no Award
to subscribe for Shares shall be granted to the extent that the aggregate number
of Shares that could be issued pursuant to that Award and any other Awards
granted at the same time when added to the number of Shares that:
(a) could be issued on the exercise of any other subsisting share options or
awards granted during the preceding ten years under the Plan or any other
Employee Share Plan; and
(b) have been issued on the exercise of any share options or awards granted
during the preceding ten years under the Plan or any other Employee Share
Plan; and
(c) have been issued during the preceding ten years under any Employee Share
Plan or any profit sharing or other employee share incentive plan
established by the Company;
would exceed 10% of the ordinary share capital of the Company for the time being
in issue.
5.2 Shares delivered by or on behalf of the Company in settlement of Awards may
be authorized and unissued Shares or Shares held in the treasury of the Company
or purchased on the open market or by private purchase.
5.3 Any member of the plc Group may provide money to the trustees of any trust
or any other person to enable them or him to acquire Shares to be held for the
purposes of the Plan, or enter into any guarantee or indemnity for those
purposes, to the extent not prohibited by section 151 of the Companies Act 1985.
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6. ELIGIBILITY
Participation shall be limited to Employees who have received written
notification from the Committee, or from a person designated by the Committee,
that they have been selected to participate in the Plan.
7. TERMS OFOPTIONS
7.1 The Committee is authorized to grant one or more Approved Options,
Unapproved Options, Incentive Share Options or Nonqualified Share Options to any
Employee. Each Option so granted shall be subject to the conditions set forth in
this Section 7, or to such other conditions consistent with this Plan as may be
reflected in the applicable Share Option Agreement.
Option Price
7.2 The Option Price per Share for each Option shall be set by the Committee at
the Date of Grant but shall not be less than the Fair Market Value of a Share on
the Date of Grant and, if the Shares are to be issued, the nominal value of a
Share.
Manner of Exercise and Form of Payment
7.3 No Shares shall be delivered pursuant to any exercise of an Option until
payment in full of the Option Price therefor is received by the Company or the
Participant has made arrangements acceptable to the Company for the payment of
the Option Price. Options which have become exercisable may be exercised by
delivery of written notice of exercise to the Company accompanied by payment of,
or an undertaking to pay, the aggregate Option Price. The Option Price shall be
payable in cash.
Conditions of Grant
7.4 An Option may be granted subject to such conditions for payment of
taxation, employees' National Insurance contributions and employer's National
Insurance contributions liability as the Committee may determine (including
without limitation the right to sell on an Option Holder's behalf sufficient
Shares to satisfy any taxation or National Insurance contributions) and if any
condition is imposed relating to the assumption, payment or reimbursement by the
Option Holder of employer's National Insurance contributions liability, such
conditions shall comply with any applicable legislation or regulations and the
Company shall be entitled to waive in whole or in part the Option Holder's
obligation in respect of such liability.
Vesting, Option Period and Expiration
7.5 Subject to Sections 8 and 13, Options shall vest and become exercisable in
such manner and on such date or dates as the Committee may determine at the Date
of Grant and set out in a vesting schedule (a Vesting Schedule) in the
applicable Share Option Agreement or share option certificate. The Committee may
determine that an Option may vest in full on one date only or may vest partially
as to different portions on different dates so that an Option may have one
Option Period or a number of Option Periods applying to determine when each
portion shall vest. Subject to Sections 8 and 13 Options shall lapse on the
earlier of:
(a) the expiry of the Option Period; and
(b) the Option Holder being declared bankrupt or entering into any general
composition with or for the benefit of his creditors including a voluntary
arrangement under the Insolvency Act 1986;
provided, however, that notwithstanding any vesting dates set by the Committee,
the Committee may, in its sole discretion, accelerate the exercisability of any
Option, which acceleration shall not affect the terms and conditions of such
Option provided for in this Plan other than with respect to exercisability. If
an Option is exercisable in installments, such installments or portions thereof
which vest and become exercisable shall remain exercisable until the Option
lapses but subject to any earlier lapse provisions under Sections 8 and 13.
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Performance Goals
7.6 The Committee shall determine prior to the Date of Grant whether any
Performance Goals shall apply to the vesting of an Option and if so these shall
be set out in the applicable Share Option Agreement or share option certificate.
Other Terms and Conditions
7.7 Each Option granted under the Plan shall be evidenced by a Share Option
Agreement or a share option certificate. Immediately prior to the granting of
any Options, the Committee may, in its absolute discretion, enter into a deed
poll recording its intention to be bound by the share option certificates to be
issued to the Option Holder in respect of such Option. Except as specifically
provided otherwise in a Share Option Agreement or a share option certificate,
each Option granted under the Plan shall be subject to the following terms and
conditions:
(a) each Option or portion thereof that is exercisable shall be exercisable for
the full amount or for any part thereof;
(b) each Share acquired through the exercise of an Option shall be treated as
fully paid up at the time of issue or transfer. Each Option shall cease to
be exercisable, as to any Share, when the Participant acquires the Share or
when the Option lapses;
(c) subject to Sections 11.9 and 11.10, Options shall not be transferable by the
Participant except by will or the laws of inheritance and shall be
exercisable during the Participant's lifetime only by him;
(d) each Option shall vest and become exercisable by the Participant in
accordance with the Vesting Schedule established by the Committee and set
forth in the Share Option Agreement;
(e) at the time of any exercise of an Option, a Participant must take whatever
action is reasonably required by the Committee to ensure compliance with
applicable securities laws; and
(f) each Participant awarded an Incentive Share Option under the Plan shall
notify the Company in writing immediately after the date he makes a
disqualifying disposition of any Shares acquired pursuant to the exercise of
such Incentive Share Option. A disqualifying disposition is any disposition
(including any sale) of such Shares before the later of (i) two years after
the Date of Grant of the Incentive Share Option or (ii) one year after the
date the Participant acquired the Shares by exercising the Incentive Share
Option.
Incentive Share Option Grants to 10% Shareholders
7.8 Notwithstanding anything to the contrary in this Section 7, if an Incentive
Share Option is granted to a Participant who owns shares representing more than
ten percent of the voting power of all classes of shares of the Company or of a
Subsidiary or a parent of the Company, the Option Period shall not exceed five
years from the Date of Grant of such Option and the Option Price shall be at
least 110 percent of the Fair Market Value (on the Date of Grant) of the Shares
subject to the Option.
Time of Grant
7.9 The Committee shall not grant Options at any time when it would be
prohibited from doing so by the Model Code for Securities Transactions by
Directors of Listed Companies (or the Company's dealing code).
$100,000 Per Year Limitation for Incentive Share Options
7.10 To the extent the aggregate Fair Market Value (determined as of the Date
of Grant) of Shares for which Incentive Share Options are exercisable for the
first time by any Participant during any calendar year (under all plans of the
Company) exceeds $100,000, such excess Incentive Share Options shall be treated
as Nonqualified Share Options.
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8. EXERCISE ANDLAPSE OF OPTIONS - CESSATION OFEMPLOYMENT
8.1 Save as otherwise provided in these rules, an Option shall lapse
automatically on the Option Holder ceasing to be an employee of the plc Group
(whether lawfully or unlawfully).
8.2 Where an Option Holder ceases to be an employee of the plc Group before the
end of the Option Period by reason of his employment with a member of the plc
Group being terminated by a member of the plc Group without Cause or by the
Participant for any reason other than Retirement, the Option shall lapse on the
earlier of:
(a) the last day of the Option Period; and
(b) the date that is three months after the date of such termination;
provided, however, that any Participant whose employment with a member of the
plc Group is terminated and who is subsequently re-hired or re-engaged by a
member of the plc Group prior to the lapse of the Option shall not be treated as
if his employment had terminated.
In the event of a termination described in this Section 8.2, the Option shall
remain exercisable by the Participant until its lapse only to the extent the
Option was exercisable at the time of such termination.
8.3 Where an Option Holder ceases to be an employee of the plc Group before the
end of the Option Period by reason of his death or his disability (as determined
by the Committee) while still in the employment of a member of the plc Group, or
he dies following a cessation of employment described in this Section 8.2, the
Option shall lapse on the earlier of:
(a) the last day of the Option Period; and
(b) the date that is one year after the date of such death or cessation on
account of disability of the Participant, as applicable.
In such event, the Option shall remain exercisable by the Participant or his or
her personal representatives or beneficiaries determined in accordance with
Section 11, as applicable, until its lapse only to the extent the Option was
exercisable by the Participant at the time of such event.
8.4 Where the Participant ceases to be an employee of a member of the plc Group
by reason of Retirement prior to the end of the Option Period, the Option shall:
(a) lapse at the end of the Option Period; and
(b) continue vesting in accordance with the Vesting Schedule set forth in the
share option certificate or Share Option Agreement (as applicable), without
regard to any requirement that the Participant remain employed with a member
of the plc Group as a condition to vesting.
8.5 For the avoidance of doubt, an Option exercisable under Sections 8.2 to 8.4
may lapse at an earlier date by virtue of Section 13 and may not be exercised
after the expiry of the Option Period.
8.6 For the purposes of Sections 8.1 to 8.5 a female Option Holder shall not be
treated as ceasing to be an employee of a member of the plc Group if absent from
work wholly or partly because of pregnancy or confinement until she ceases to be
entitled to exercise any statutory or contractual right to return to work.
8.7 Where any exercise of an Option under Sections 8.2 to 8.5 would be
prohibited by law or the Model Code for Securities Transactions by Directors of
Listed Companies (or the Company's dealing rules) the period during which the
Option Holder may exercise his Options shall be extended by an additional period
equal to the length of the period of prohibition but not beyond the expiry of
the Option Period.
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9. RESTRICTED SHAREAWARDS AND RESTRICTED SHARE UNIT AWARDS
Awards of Restricted Shares and Restricted Share Unit Awards
9.1 The Committee shall have the authority:
(a) to grant Restricted Share Awards and Restricted Share Unit Awards to Employees;
(b) to issue or transfer Restricted Shares to Registered Holders on behalf of
Participants; and
(c) to establish terms, conditions and restrictions applicable to such
Restricted Shares and Restricted Share Units, including the Restricted
Period, which may differ with respect to each Participant, the time or times
at which Restricted Shares or Restricted Share Units shall become vested and
the number of Shares or units to be covered by each grant and whether the
Award shall be subject to Performance Goals.
No Restricted Share Awards or Restricted Share Unit Awards shall be granted at
any time when the Committee is prohibited from doing so by the Model Code for
Securities Transactions by Directors of Listed Companies (or the Company's
dealing rules).
9.2 The Committee may require a Participant granted a Restricted Share Award to
execute and deliver to the Company a Restricted Share Agreement with respect to
the Restricted Shares setting forth the restrictions applicable to such
Restricted Shares. The Committee shall determine whether:
(a) the Restricted Shares shall be held in escrow rather than delivered to the
Participant pending the release of the applicable restrictions, in which
case the Committee may require the Participant to additionally execute and
deliver to the Company an escrow agreement satisfactory to the Company; or
(b) the Restricted Shares shall be registered in the name of the nominated
Registered Holder during the Restricted Period; or
(c) other arrangements shall apply to the holding of Restricted Shares during
the Restricted Period, the terms of such arrangements being consistent with
the terms of this Plan.
9.3 If an escrow arrangement is used, the Committee shall cause a share
certificate registered in the name of the Participant to be issued and, if it so
determines, deposited together with the share powers with any escrow agent
designated by the Committee. The Committee may cause the escrow agent to issue
to a Participant a receipt evidencing any share certificate held by it
registered in the name of the Participant.
9.4 If a nominated Registered Holder is used, the Committee shall cause a share
certificate registered in the name of the Participant to be issued and, if it so
determines, deposited together with the share powers with any Registered Holder
nominated by the Committee. The Participant shall not be entitled to delivery of
the share certificate until the Restricted Period has expired and the Registered
Holder shall retain custody of such shares during the Restricted Period.
9.5 Subject to the restrictions set forth in Section 9.7 to 9.9, the
Participant generally shall have the rights and privileges of a beneficial owner
as to such Restricted Shares, including the right to direct the Registered
Holder how to vote such Restricted Shares. At the discretion of the Committee,
cash dividends and share dividends with respect to the Restricted Shares may be
either currently paid to the Participant or withheld by the Company or the
Registered Holder for the Participant's account, and interest may be credited on
the amount of cash dividends withheld at a rate and subject to such terms as
determined by the Committee. The cash dividends or share dividends so withheld
by the Committee and attributable to any particular Restricted Shares (and
earnings thereon, if applicable) shall be distributed to the Participant upon
the release of restrictions on such Restricted Shares and, if such Restricted
Share is forfeited, the Participant shall have no right to such cash or share
dividends.
B-11
9.6 The terms and conditions of a grant of a Restricted Share Unit Award will
be reflected in a written Restricted Share Unit Award Agreement. The Committee
may determine that a Restricted Share Unit Award be granted in the form of a nil
cost option or a conditional or contingent right to acquire shares. Where a
Restricted Share Unit Award is granted in the form of a nil cost option, any
reference to the Restricted Period expiring in respect of Restricted Share Units
shall be construed as meaning that a Participant may call for the Restricted
Share Units within the period determined by the Committee. A Participant shall
not have any beneficial interest in any Shares during the Restricted Period as a
result of being granted a Restricted Stock Unit Award. The Company will not be
required to set aside a fund for the payment of any such Award. At the
discretion of the Committee, each Restricted Share Unit (representing one Share)
awarded to a Participant may be credited with cash and share dividends paid in
respect of one Share (Dividend Equivalents). At the discretion of the Committee,
Dividend Equivalents may be either currently paid to the Participant or withheld
by the Company for the Participant's account, and interest may be credited on
the amount of cash Dividend Equivalents withheld at a rate and subject to such
terms as determined by the Committee. Dividend Equivalents credited to a
Participant's account and attributable to any particular Restricted Share Unit
(and earnings thereon, if applicable) shall be distributed to the Participant
upon settlement of such Restricted Share Unit and, if such Restricted Share Unit
is forfeited, the Participant shall have no right to such Dividend Equivalents.
Restrictions
9.7 Restricted Shares comprised in a Restricted Share Award granted to a
Participant shall be subject to the following restrictions until the expiration
of the Restricted Period and the attainment of any other vesting criteria
established by the Committee, and to such other terms and conditions as may be
set forth in the applicable Restricted Share Award Agreement:
(a) the Participant shall not be entitled to delivery of the share certificate;
(b) the Restricted Shares shall be subject to the restrictions on
transferability set forth in the Restricted Share Award Agreement; and
(c) the Restricted Shares shall be subject to forfeiture to the extent provided
in the Rules and the applicable Restricted Share Agreement and, to the
extent such Restricted Shares are forfeited, the share certificates shall be
returned to the Company, and all rights of the Participant to such
Restricted Shares and as a shareholder shall terminate without further
obligation on the part of the Company.
9.8 Restricted Share Units awarded to any Participant shall be subject to:
(a) forfeiture until the expiration of the Restricted Period and the attainment
of any other vesting criteria established by the Committee, to the extent
provided in these Rules and the applicable Restricted Share Unit Agreement,
and to the extent such Restricted Share Units are forfeited, all rights of
the Participant to such Restricted Share Units shall terminate without
further obligation on the part of the Company; and
(b) such other terms and conditions as may be set forth in the applicable
Restricted Share Unit Agreement.
9.9 The Committee shall have the authority to remove any or all of the
restrictions on the Restricted Shares and Restricted Share Units whenever it may
determine that, by reason of changes in applicable laws or other changes in
circumstances arising after the date of the Restricted Share Award or Restricted
Share Unit Award, such action is appropriate.
Restricted Period
9.10 The Restricted Period applicable to Restricted Shares and Restricted Share
Units comprised in an Award shall commence on the Date of Grant and shall expire
from time to time as to that part of the Restricted Shares and Restricted Share
Units indicated in a schedule (the Vesting Schedule) established by the
Committee in the applicable Restricted Share Agreement or Restricted Share Unit
Agreement.
B-12
Delivery of Restricted Shares and Settlement of Restricted Share Units
9.11 Upon the expiration of the Restricted Period with respect to any
Restricted Shares covered by a Restricted Share Award and the attainment of any
other vesting criteria established by the Committee, the restrictions set forth
in Section 9.7 to 9.9 and the Restricted Share Agreement shall be of no further
force or effect with respect to the Restricted Shares which have not then been
forfeited. The Company shall deliver or procure the delivery to the Participant,
or his beneficiary, without charge, the share certificate evidencing the
Restricted Shares which have not then been forfeited and with respect to which
the Restricted Period has expired and any other vesting criteria established by
the Committee has been attained (to the nearest full share) and any cash
dividends or share dividends credited to the Participant's account with respect
to such Restricted Shares and the interest thereon, if any.
9.12 Upon the expiration of the Restricted Period and the attainment of any
other vesting criteria established by the Committee, with respect to any
Restricted Share Units covered by a Restricted Share Unit Award, the Company
shall determine whether the Award shall be settled in Shares or cash. If the
Committee determines that the Award shall be settled in Shares, the Company
shall procure the delivery to the Participant, or his beneficiary, without
charge, one Share for each Restricted Share Unit which has not then been
forfeited and with respect to which the Restricted Period has expired and any
other such vesting criteria are attained (Vested Unit). If the Committee has
elected to pay cash (or part cash and part Shares) for Vested Units, the amount
of such payment shall be equal to the Fair Market Value of the Shares as of the
date on which the Restricted Period lapsed with respect to such Vested Unit.
Conditions of Grant
9.13 Restricted Share Awards and Restricted Share Unit Awards may be granted
subject to such conditions for payment of tax and employees' National Insurance
contributions and employer's National Insurance contributions as the Committee
may determine, including that, with respect to Awards of Restricted Shares which
qualify as employment related restricted securities under Chapter 2 of Part VII
of ITEPA, any member of the plc Group may require a Participant to enter into an
election under section 430 or section 431 of ITEPA.
10. FORFEITURE
Restricted Shares
10.1 Save as otherwise provided in these rules and unless otherwise stated in
the applicable Restricted Share Award Agreement, Restricted Shares shall be
forfeited automatically on the Participant ceasing to be an employee of the plc
Group (whether lawfully or unlawfully) before the end of the Restricted Period.
10.2 Where a Participant ceases to be an employee of the plc Group before the
end of the Restricted Period by reason of Retirement, the Restricted Shares
shall not be forfeited and the restrictions attaching to the Restricted Shares
shall continue and shall lapse in accordance with the terms of the Restricted
Share Award provided, however, that the Committee may in its discretion
determine that some or all of the Restricted Shares may be released early.
10.3 Where a Participant ceases to be an employee of the plc Group before the
end of the Restricted Period by reason of his death while still in the
employment of a member of the plc Group, or he dies following a cessation of
employment described in Section 10.2 the Restricted Shares shall not be
forfeited and the Restricted Period shall expire forthwith and the restrictions
shall lapse.
Restricted Share Units
10.4 Save as otherwise provided in these rules and unless otherwise stated in
the applicable Restricted Share Unit Award Agreement, Restricted Share Units
shall be forfeited automatically on the Participant ceasing to be an employee of
the plc Group (whether lawfully or unlawfully) before the end of the Restricted
Period.
B-13
10.5 Where a Participant ceases to be an employee of the plc Group before the
end of the Restricted Period by reason of Retirement, the Restricted Share Units
shall not be forfeited and the restrictions attaching to the Restricted Share
Units shall continue and shall lapse in accordance with the terms of the
Restricted Share Unit Award provided, however, that the Committee may in its
discretion determine that some or all of the Restricted Share Units may be
released early.
10.6 Where a Participant ceases to be an employee of the plc Group before the
end of the Restricted Period by reason of his death while still in the
employment of a member of the plc Group, or he dies following a cessation of
employment described in Section 10.2 the Restricted Share Units shall not be
forfeited and the Restricted Period shall expire forthwith and the restrictions
shall lapse.
10.7 For the avoidance of doubt, an Award that is retained under this Section
10 may lapse at an earlier date by virtue of Section 13.
10.8 For the purposes of Sections 10.1 to 10.6 a female Participant shall not
be treated as ceasing to be an employee of a member of the plc Group if absent
from work wholly or partly because of pregnancy or confinement until she ceases
to be entitled to exercise any statutory or contractual right to return to work.
10.9 Where any release or exercise of an Award under this Section 10 would be
prohibited by law or the Model Code for Securities Transactions by Directors of
Listed Companies (or the Company's dealing rules) the period during which the
Restricted Shares or Restricted Share Units may be released to a Participant
shall be extended by an additional period equal to the length of the period of
prohibition.
11. GENERAL
Additional Provisions of an Award
11.1 Awards granted to a Participant under the Plan also may be subject to such
other provisions (whether or not applicable to Awards granted to any other
Participant) as the Committee determines appropriate including, without
limitation, provisions to assist the Participant in financing the acquisition of
Shares upon the exercise of Options (provided that the Committee determines that
providing such financing does not violate the Sarbanes-Oxley Act of 2002 and
applicable UK law), provisions for the forfeiture of or restrictions on resale
or other disposition of Shares acquired under any Award, provisions giving the
Company the right to repurchase Shares acquired under any Award in the event the
Participant elects to dispose of such Shares, provisions allowing the
Participant to elect to defer the receipt of Shares upon the exercise of Awards
for a specified period or until a specified event, and provisions to comply with
US Federal and state securities laws and US Federal and state tax withholding
requirements. Any such provisions shall be reflected in the applicable Award
Agreement.
Privileges of Share Ownership
11.2 Except as otherwise specifically provided in the Plan, no person shall be
entitled to the privileges of ownership in respect of Shares which are subject
to Awards hereunder until such Shares have been issued or transferred to that
person.
Government and Other Regulations
11.3 The obligation of the Company to issue Shares upon the exercise of Options
or otherwise settle Awards in Shares shall be subject to all applicable laws,
rules, and regulations, and to such approvals by governmental agencies as may be
required.
Tax Withholding
11.4 A Participant may be required to pay to a member of the Combined Group,
and each member of the Combined Group shall have the right and is hereby
authorized to withhold from any Shares or other property deliverable under any
Award or from any compensation or other amounts owing to a Participant the
amount (in cash, Shares or other property) of any required tax withholding and
payroll taxes in respect
B-14
of an Award, its exercise, or any payment or transfer under an Award or under
the Plan and to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of such taxes.
11.5 Without limiting the generality of clause 11.4 above, the Committee may,
in its sole discretion, permit a Participant to satisfy, in whole or in part,
the foregoing withholding liability (but no more than the minimum required
withholding liability if using method (b) or (c) of this subsection) by:
(a) payment in cash;
(b) delivery of Shares owned by the Participant with a Fair Market Value equal
to such withholding liability;
(c) having the Company withhold from the number of Shares otherwise issuable
pursuant to the exercise of the Award a number of Shares with a Fair Market
Value equal to such withholding liability; or
(d) authorising the Company to arrange the sale of sufficient Shares to generate
proceeds sufficient to discharge any withholding liability.
Claim to Awards and Employment Rights
11.6 The rights and obligations of an Employee under the terms and conditions
of his office or employment shall not be affected by his participation in the
Plan or any right he may have to participate in the Plan. An individual who
participates in the Plan waives all and any rights to compensation and damages
in consequence of the termination of his office or employment with any company
for any reason whatsoever (whether lawfully or unlawfully) insofar as those
rights arise, or may arise, from his ceasing to have rights under or his
entitlement to an Award under the Plan as a result of such termination or from
the loss or diminution in value of such rights or entitlements. In the event of
conflict between the terms of this Section 11.6 and the Employee's terms of
employment, this Section will take precedence.
Governing Law
11.7 The Plan shall be governed by, and construed in accordance with, the laws
of England. All disputes arising out of or in connection with the rules shall be
subject to the exclusive jurisdiction of the courts of England and Wales.
Funding
11.8 No provision of the Plan shall require the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made or otherwise
to segregate any assets, nor shall the Company maintain separate bank accounts,
books, records or other evidence of the existence of a segregated or separately
maintained or administered fund for such purposes. Participants shall have no
rights under the Plan other than as unsecured general creditors of the Company,
except that insofar as they may have become entitled to payment of additional
compensation by performance of services, they shall have the same rights as
other employees under general law.
Nontransferability
11.9 Each Award shall be exercisable only by a Participant during the
Participant's lifetime, or, if permissible under applicable law, by the
Participant's legal guardian or personal representative. No Award may be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant otherwise than by will or by the laws of inheritance
and any such purported assignment, alienation, pledge, attachment, sale,
transfer or encumbrance shall be void and unenforceable against each member of
the plc Group.
B-15
11.10 Notwithstanding the foregoing, the Committee may, in its sole discretion,
permit Awards other than Incentive Share Options to be transferred by a
Participant, without consideration, subject to such rules as the Committee may
adopt consistent with any applicable Award Agreement to preserve the purposes of
the Plan, to:
(a) any person who is a spouse or child or step child under the age of 18 of the
Participant (an Immediate Family Member);
(b) a trust solely for the benefit of the Participant and his or her Immediate
Family Members;
(c) a partnership or limited liability company whose only partners or
shareholders are the Participant and his Immediate Family Members;
(each transferee described in clauses (a), (b) and (c) above is hereinafter
referred to as a Permitted Transferee); provided that the Participant gives the
Committee advance written notice describing the terms and conditions of the
proposed transfer and the Committee notifies the Participant in writing that
such a transfer would comply with the requirements of the Plan.
11.11 The terms of any Award transferred in accordance with Section 11.10 shall
apply to the Permitted Transferee and any reference in the Plan, or in any
applicable Award Agreement or share option certificate, to a Participant shall
be deemed to refer to the Permitted Transferee, except that:
(a) Permitted Transferees shall not be entitled to transfer any Award, other
than by will or the laws of inheritance;
(b) Permitted Transferees shall not be entitled to exercise a transferred
Nonqualified Share Option unless there shall be in effect a registration
statement on an appropriate form covering the Shares to be acquired pursuant
to the exercise of such Nonqualified Share Option if the Committee
determines, consistent with any applicable Share Option Agreement, that such
a registration statement is necessary or appropriate,
(c) the Committee or any member of the plc Group shall not be required to
provide any notice to a Permitted Transferee, whether or not such notice is
or would otherwise have been required to be given to the Participant under
the Plan or otherwise; and
(d) the consequences of a Participant no longer being employed by, or in the
services of, a member of the plc Group under the terms of the Plan and the
applicable Award Agreement or share option certificate shall continue to be
applied with respect to the Participant, including, without limitation, that
a Nonqualified Share Option shall be exercisable by the Permitted Transferee
only to the extent, and for the periods, specified in the Plan and the
applicable Share Option Agreement.
Relationship to Other Benefits
11.12 No payment under the Plan shall be taken into account in determining any
benefits under any pension, retirement, profit sharing, group insurance or other
benefit plan of a member of the Combined Group except as otherwise specifically
provided in such other plan.
Expenses
11.13 The expenses of administering the Plan shall be borne by the plc Group.
Gender and Number
11.14 Where the context admits, masculine pronouns and other words of masculine
gender shall refer to both men and women, words in the singular shall include
the plural and words in the plural shall include the singular.
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Termination of Employment
11.15 For all purposes herein, a person who transfers from employment with a
member of the plc Group to employment or service with a member of the Combined
Group shall not be deemed to have terminated employment or service with a member
of the plc Group.
Titles and Headings
11.16 The titles and headings of the sections in the Plan are for convenience of
reference only, and in the event of any conflict, the text of the Plan, rather
than such titles or headings shall control.
Severability
11.17 If any provision of the Plan or any Award Agreement is or becomes or is
deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any
person or Award, or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to the applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan or Award, such provision shall be stricken as to such
jurisdiction, person or Award and the remainder of the Plan and any such Award
shall remain in full force and effect.
12. CHANGES INCAPITAL STRUCTURE
12.1 In the event of any:
(a) Capital Reorganisation;
(b) Corporate Transaction; or
(c) the implementation by the Company of a demerger, or the payment by the
Company of a dividend in specie or a super dividend or other transaction or
any change in applicable laws or any change in circumstances which in the
opinion of the Committee (acting fairly and reasonably and taking into
account any criteria it may consider to be relevant) would materially affect
(whether by increasing or reducing) the current or future value of an Award
the number or type of shares subject to an Award and the Option Price per Share
may be adjusted or the Awards may be subject to substitution in such manner as
the Committee may determine is fair and reasonable, PROVIDED THAT:
(i) in respect of an Award under which Shares are to be transferred, prior
notification shall be given to the person holding the Shares to which the
Award relates;
(ii) no adjustment shall be made pursuant to this Section which would decrease
the aggregate Option Price of any Option; and
(iii) except as provided in this sub-paragraph (iii), no adjustment may have
the effect of reducing the Option Price of any Option to less than the
nominal value of a Share. Where an Option subsists over both issued and
unissued Shares, any such adjustment may only be made if the reduction of
the Option Price of Options over both issued and unissued Shares can be
made to the same extent. Any adjustment to the Option Price of Options
over unissued Shares shall only be made if and to the extent that the
Committee shall be authorised to capitalise from the reserves of the
Company a sum equal to the amount by which the nominal value of the
Shares in respect of which the Option is exercisable exceeds the adjusted
Option Price. The Company may apply such sum in paying up such amount on
such Shares and so that, on exercise of any Option in respect of which
such reduction shall have been made, the Company shall capitalise such
sum (if any) and apply the same in paying up such amount as aforesaid;
and
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(iv) any adjustment in Incentive Stock Options under this Section 12 shall be
made only to the extent not constituting a "modification" within the
meaning of Section 424(h)(3) of the Code, and any adjustments under this
Section 12 shall be made in a manner which does not adversely affect the
exemption provided pursuant to Rule 16b-3 under the Exchange Act.
12.2 Notwithstanding the above, in the event of any of the following:
(a) the Company is merged or consolidated with another company or body corporate
and, in connection therewith, consideration is received by shareholders of
the Company in a form other than shares or other equity interests of the
surviving entity;
(b) a Sale;
(c) the reorganization or liquidation of the Company; or
(d) the Company enters into a written agreement to undergo an event described in
sub-paragraphs (a), (b) or (c) above,
then the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Awards and cause the
holders thereof to be paid, in cash or shares, or any combination thereof, the
value of such Awards based upon the price per share of the shares or other
consideration received or to be received by shareholders of the Company in the
event.
12.3 The Company shall give each Participant notice of an adjustment hereunder
and, upon notice, such adjustment shall be conclusive and binding for all
purposes.
13. EFFECT OF CHANGEOF CONTROL
13.1 In the event of a Change of Control which is not a Scheme of Arrangement,