Filed Pursuant to Rule 424(b)(5)
Registration No. 333-62950
PROSPECTUS
CARNIVAL CORPORATION
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$600,000,000 2% CONVERTIBLE SENIOR DEBENTURES DUE 2021
15,400,000 SHARES OF COMMON STOCK
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This prospectus relates to $600,000,000 aggregate principal amount of our 2%
convertible senior debentures due 2021 held by certain selling securityholders.
The debentures may be sold from time to time by or on behalf of the selling
securityholders named in this prospectus or in supplements to this prospectus.
This prospectus also relates to 15,400,000 shares of our common stock issuable
upon conversion of the debentures held by certain selling securityholders, plus
such additional indeterminate number of shares as may become issuable upon
conversion of the debentures by reason of adjustment to the conversion price in
certain circumstances.
The selling securityholders may sell all or a portion of the debentures in
market transactions, negotiated transactions or otherwise and at prices which
will be determined by the prevailing market price for the debentures or in
negotiated transactions. The selling securityholders may also sell all or a
portion of the shares of common stock from time to time on the New York Stock
Exchange, in negotiated transactions or otherwise, and at prices which will be
determined by the prevailing market price for the shares or in negotiated
transactions. The selling securityholders will receive all of the proceeds from
the sale of the debentures and the common stock. We will not receive any
proceeds from the sale of debentures or common stock by the selling
securityholders.
Our common stock is traded on the New York Stock Exchange under the symbol CCL.
On October 2, 2001, the last reported sales price of the common stock was $22.30
per share. There is no public market for the debentures, and we do not intend to
apply for listing of them or any securities exchange or to seek approval for
quotation of them through any automated quotation system.
WE URGE YOU TO CAREFULLY READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 10,
WHERE WE DESCRIBE SPECIFIC RISKS ASSOCIATED WITH THESE SECURITIES, BEFORE YOU
MAKE YOUR INVESTMENT DECISION.
Neither the Securities and Exchange Commission, nor any state securities
commission, has approved or disapproved of these debentures or common stock or
passed upon the adequacy or accuracy of this prospectus. Any representation to
the contrary is a criminal offense.
The date of this prospectus is October 4, 2001.
TABLE OF CONTENTS
Where You Can Find More Information......................... 2
Incorporation Of Documents By Reference..................... 3
Summary..................................................... 4
Securities Being Offered.................................... 6
Risk Factors................................................ 10
Risks Related To Our Business............................... 10
Risks Relating To Our Corporate Structure................... 11
Risks Relating To The Debentures And Our Common Stock....... 13
Special Note Regarding Forward-Looking Statements........... 14
Ratio Of Earnings To Fixed Charges.......................... 15
Price Range Of Common Stock And Dividends................... 15
Selected Consolidated Financial Data........................ 16
Capitalization.............................................. 17
Use Of Proceeds............................................. 18
Selling Securityholders..................................... 18
Plan Of Distribution........................................ 22
Description Of Debentures................................... 24
Description Of Capital Stock................................ 43
Certain Panamanian And United States Federal Income Tax
Consequences.............................................. 46
Experts..................................................... 50
Legal Matters............................................... 50
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, and file reports, proxy statements and other information with the
SEC. We have also filed with the SEC a registration statement on Form S-3 to
register the debentures and the underlying common stock. This prospectus, which
forms part of the registration statement, does not contain all of the
information included in that registration statement. For further information
about Carnival Corporation and the securities offered in this prospectus, you
should refer to the registration statement and its exhibits. You may read and
copy any document we file with the SEC at the SEC's Public Reference Room, 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of these reports, proxy
statements and information may be obtained at prescribed rates from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the Public Reference Room. In addition, the SEC maintains a web site that
contains reports, proxy statements and other information regarding registrants,
such as us, that file electronically with the SEC. The address of this web site
is http://www.sec.gov.
You should only rely on the information contained in this prospectus and
incorporated by reference therein.
2
INCORPORATION OF DOCUMENTS BY REFERENCE
We are incorporating by reference into this prospectus the documents listed
below and any other filings made by us with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act prior to the termination of the offering:
- Our Annual Report on Form 10-K for the fiscal year ended November 30,
2000.
- Our Quarterly Reports on Form 10-Q for the fiscal quarters ended February
28, 2001, May 31, 2001 and August 31, 2001.
- Our Current Reports on Form 8-K filed on December 21, 2000, February 26,
2001, April 27, 2001, June 29, 2001 and September 21, 2001 with the SEC.
Any statement contained in this prospectus or in a document incorporated or
deemed to be incorporated by reference in this prospectus shall be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any other document subsequently
filed with the SEC which is or is deemed to be incorporated by reference in this
prospectus modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
We will provide without charge to you, upon your written or oral request a
copy of any or all of the documents incorporated by reference in this
prospectus, not including the exhibits to these documents, unless such exhibits
are specifically incorporated by reference in these documents. Requests for such
copies should be directed to Investor Relations, Carnival Corporation, 3655 N.W.
87th Avenue, Miami, Florida 33178-2428. Except as provided above, no other
information, including information on our web site, is incorporated by reference
into this prospectus.
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SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION INCLUDED ELSEWHERE OR INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. BECAUSE THIS IS A SUMMARY, IT MAY NOT CONTAIN ALL THE INFORMATION
THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, AS WELL AS
THE INFORMATION INCORPORATED BY REFERENCE, BEFORE MAKING AN INVESTMENT DECISION.
SOME OF THE STATEMENTS IN THIS "SUMMARY" ARE FORWARD-LOOKING STATEMENTS. PLEASE
SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" FOR MORE INFORMATION
REGARDING THESE STATEMENTS. IN THIS PROSPECTUS, THE TERMS "WE," "US" AND "OUR"
REFER TO CARNIVAL CORPORATION, A PANAMANIAN CORPORATION, AND ITS CONSOLIDATED
SUBSIDIARIES.
CARNIVAL CORPORATION
We are the world's largest multiple-night cruise company based on the number
of passengers carried, revenues generated and available capacity. We offer a
broad range of cruise products, serving the contemporary cruise market through
Carnival Cruise Lines and Costa Cruises, the premium market through Holland
America Line and the luxury market through Cunard Line, Seabourn Cruise Line and
Windstar Cruises. In total, we own and operate 43 cruise ships with an aggregate
capacity of 59,288 passengers based on two passengers per cabin. The fifteen
Carnival Cruise Lines ships have an aggregate capacity of 31,122 passengers with
itineraries primarily in the Caribbean and the Mexican Riviera. The eight Costa
ships have an aggregate capacity of 10,222 passengers with itineraries primarily
in Europe, the Caribbean and South America. The ten Holland America ships have
an aggregate capacity of 13,348 passengers, with itineraries primarily in the
Caribbean, Europe and Alaska. Windstar operates four luxury, sail-powered ships
with an aggregate capacity of 756 passengers, primarily in the Caribbean, Europe
and Central America. The four Seabourn ships have an aggregate capacity of 1,382
passengers and the two Cunard ships have an aggregate capacity of 2,458
passengers, each with worldwide itineraries.
We have signed agreements with three shipyards providing for the
construction of additional cruise ships as set forth in the following table:
EXPECTED ESTIMATED TOTAL
SERVICE PASSENGER COST ($ IN
SHIP DATE(1) SHIPYARD CAPACITY(2) MILLIONS)(3)
---- -------- ---------------------------- ----------- ---------------
CARNIVAL CRUISE LINES
Carnival Pride................. 1/02 Masa-Yards(4) 2,124 $ 375
Carnival Legend................ 8/02 Masa-Yards(4) 2,124 375
Carnival Conquest.............. 12/02 Fincantieri 2,974 500
Carnival Glory................. 8/03 Fincantieri 2,974 500
Carnival Miracle............... 4/04 Masa-Yards(4) 2,124 375
Carnival Valor................. 11/04 Fincantieri(4) 2,974 500
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TOTAL CARNIVAL................. 15,294 2,625
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HOLLAND AMERICA LINE
Zuiderdam...................... 11/02 Fincantieri(4) 1,848 410
Oosterdam...................... 7/03 Fincantieri(4) 1,848 410
Newbuild....................... 2/04 Fincantieri(4) 1,848 410
Newbuild....................... 10/04 Fincantieri(4) 1,848 410
Newbuild....................... 6/05 Fincantieri(4) 1,848 410
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TOTAL HOLLAND AMERICA LINE..... 9,240 2,050
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EXPECTED ESTIMATED TOTAL
SERVICE PASSENGER COST ($ IN
SHIP DATE(1) SHIPYARD CAPACITY(2) MILLIONS)(3)
---- -------- ---------------------------- ----------- ---------------
COSTA CRUISES
Costa Mediterranea............. 7/03 Masa-Yards(5) 2,114 340
Costa Fortuna.................. 1/04 Fincantieri(6) 2,720 395
Costa Magica................... 12/04 Fincantieri(6) 2,720 395
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TOTAL COSTA CRUISES............ 7,554 1,130
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CUNARD LINE
Queen Mary 2................... 12/03 Chantiers de l'Atlantique(4) 2,620 780
------ ------
TOTAL CUNARD LINE.............. 2,620 780
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TOTAL.......................... 34,708 $6,585
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(1) The expected service date is the date the ship is currently expected to
begin revenue generating activities.
(2) In accordance with cruise industry practice, passenger capacity is
calculated based on two passengers per cabin even though some cabins can
accommodate three or four passengers.
(3) Estimated total cost of the completed ship includes the contract price with
the shipyard, design and engineering fees, capitalized interest, various
owner supplied items and construction oversight costs.
(4) These construction contracts are denominated in either German marks, Italian
lira or euros and have been fixed into U.S. dollars through the utilization
of forward foreign currency contracts.
(5) This construction contract is denominated in German marks which has a fixed
exchange rate with Costa's functional currency, which is the Italian lira.
The estimated total cost has been translated into U.S. dollars using the
August 31, 2001 exchange rate.
(6) These construction contracts are denominated in Italian lira, and the
estimated total costs have been translated into U.S. dollars using the
August 31, 2001 exchange rate.
We also operate a tour business through Holland America Tours, which markets
sightseeing tours both separately and as part of its cruise/tour packages.
Holland America Tours operates 12 hotels in Alaska and the Canadian Yukon, two
luxury dayboats offering tours to the glaciers of Alaska and the Yukon River,
over 300 motor coaches used for sightseeing and charters in the states of
Washington and Alaska and 13 private domed rail cars which are run on the Alaska
railroad between Anchorage and Fairbanks.
We were incorporated under the laws of the Republic of Panama in November
1974. Our executive offices are located at 3655 N.W. 87th Avenue, Miami, Florida
33178-2428, telephone number (305) 599-2600.
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SECURITIES BEING OFFERED
This prospectus covers the sale of $600,000,000 aggregate principal amount
of debentures and 15,400,000 shares of our common stock, plus such indeterminate
number of additional shares of common stock that may be issued form time to time
upon conversion of the debentures by reason of adjustment to the conversion
price or upon repurchase or redemption, in each case in certain circumstances
described in this prospectus.
We issued and sold $600,000,000 aggregate principal amount of debentures, on
April 25, 2001, in a private offering to Merrill Lynch & Co., as the initial
purchaser. These debentures were simultaneously resold by the initial purchaser
in transactions exempt from registration requirements of the Securities Act to
persons reasonably believed by the initial purchaser to be "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act).
The shares of common stock may be offered by the selling securityholders
following the conversion of the debentures.
TERMS OF THE DEBENTURES
Principal...................... $600,000,000 aggregate principal amount in $1,000
denominations.
Maturity....................... April 15, 2021.
Interest....................... 2% per year on the principal amount, payable semi-annually
in arrears on April 15 and October 15 of each year,
beginning October 15, 2001.
Conversion Rights.............. For each $1,000 principal amount of debenture surrendered
for conversion, if specified conditions are satisfied, a
holder will receive 25.5467 shares of our common stock. Upon
conversion, we will have the right to deliver, in lieu of
our common stock, cash or a combination of cash and common
stock. If we elect to pay holders cash for their debentures,
the payment will be based on the average sale price of our
common stock for the five consecutive trading days
immediately following either:
- the date of our notice of our election to deliver
cash, which we must give within two business days after
receiving a conversion notice, unless we have earlier
given notice of redemption as described in this
prospectus; or
- the conversion date, if we have given notice of
redemption specifying that we intend to deliver cash
upon conversion thereafter.
The conversion rate may be adjusted for certain reasons
specified in the indenture. Upon conversion, a holder will
not receive any cash payment representing accrued interest
(unless such debenture or portion thereof has been called
for redemption on a redemption date that occurs between a
regular record date and the third business day after the
interest payment date to which it relates). Instead,
interest will be deemed paid by the shares of common stock
received by the holder on conversion. See "Description of
Debentures--Conversion Rights."
6
Commencing after May 31, 2001, holders may surrender
debentures for conversion into shares of common stock in any
fiscal quarter (and only during such fiscal quarter), if, as
of the last day of the preceding fiscal quarter, the closing
sale price of our common stock for at least 20 trading days
in a period of 30 consecutive trading days ending on the
last trading day of such preceding fiscal quarter is more
than $43.05 (110% of the conversion price) per share of
common stock. Our fiscal quarters end on the last day of
February, May, August and November. The initial conversion
price will equal $39.14 per share (subject to adjustment).
Debentures or portions of debentures in integral multiples
of $1,000 principal amount called for redemption may be
surrendered for conversion until the close of business on
the redemption date, even if the debentures are not
otherwise convertible. In addition, if we make a significant
distribution to our shareholders or if we are a party to
certain consolidations, mergers or binding share exchanges,
debentures may be surrendered for conversion as provided in
"Description of Debentures--Conversion Rights." The ability
to surrender debentures for conversion will expire at the
close of business on the business day immediately preceding
April 15, 2021, unless they have previously been called for
redemption or repurchased. See "Certain Panamanian and
United States Federal Income Tax Consequences" and
"Description of Debentures--Conversion Rights--Conversion
Rights Upon Notice of Redemption."
Ranking........................ The debentures will be unsecured and unsubordinated
obligations and will rank equal in right of payment to all
our existing and future unsecured and unsubordinated
indebtedness. However, the debentures will be effectively
subordinated to all existing and future obligations of our
subsidiaries. As of August 31, 2001, we had approximately
$2.66 billion of total indebtedness outstanding, which
includes approximately $1.21 billion indebtedness of our
consolidated subsidiaries. See "Capitalization."
Sinking Fund................... None.
Redemption of Debentures at Our
Option....................... We may redeem all or a portion of the debentures for cash at
any time on or after April 15, 2008 at a price equal to 100%
of the principal amount of the debentures to be redeemed
plus accrued and unpaid interest to, but excluding, the
redemption date. Holders may convert their debentures after
they are called for redemption at any time prior to the
close of business on the redemption date. Our notice of
redemption will inform the holders of our election to
deliver shares of our common stock or to pay cash or a
combination of cash and common stock. See "Description of
Debentures--Redemption of Debentures at Our Option."
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Purchase of Debentures by Us at
Option of Holder............. Holders may require us to purchase all or a portion of the
their debentures on any April 15 occurring in the years
2005, 2008 and 2011 at a price equal to 100% of the
principal amount of the debentures to be purchased plus
accrued and unpaid interest to, but excluding, such purchase
date. We may choose to pay the purchase price in cash,
shares of common stock or a combination of cash and shares
of common stock. After receiving notice of such choice, you
may withdraw your election. We may also add additional
purchase dates on which holders may require us to purchase
all or a portion of their debentures. See "Description of
Debentures--Purchase of Debentures by Us at the Option of
the Holder."
Change in Control.............. Upon a change in control (as defined in the indenture
governing the debentures) of our company occurring at any
time on or before April 15, 2008, each holder may require us
to purchase all or a portion of such holder's debentures for
cash at a price equal to 100% of the principal amount of the
debentures to be purchased plus accrued and unpaid interest
to, but excluding, the date of purchase. See "Description of
Debentures--Change in Control Permits Purchase of Debentures
by Us at the Option of the Holder."
Ownership Limitation on
Debentures................... In order to permit us to retain our status as a publicly
traded corporation under the proposed Treasury regulations
to Section 883 of the Code, debentures generally may not be
transferred if the transfer would result in ownership,
including debentures and other convertible securities on an
as-converted basis, by one person or group of related
persons by virtue of the attribution provisions of the Code,
of more than 4.9% of our common stock. See "Description of
Debentures--Ownership Limitation on Debentures."
Use of Proceeds................ The selling securityholders will receive all of the proceeds
from the sale of the securities sold under this prospectus.
We will not receive any of the proceeds from sales by the
selling securityholders of the offered securities.
DTC Eligibility................ The debentures were issued in book-entry form and are
represented by one or more permanent global certificates
deposited with a custodian for and registered in the name of
a nominee of DTC in New York, New York. Beneficial interests
in any such securities are shown on, and transfers are
effected only through, records maintained by DTC and its
direct and indirect participants and any such interest may
not be exchanged for certificated securities, except in
limited circumstances. See "Description of
Debentures--Book-Entry System."
8
Shelf Registration Statement... Under the registration rights agreement, dated April 25,
2001, between Merrill Lynch & Co. and us, we have agreed to
use commercially reasonable efforts to cause a shelf
registration statement to become effective within 180 days
after the date of original issuance of the debentures. We
are required to keep such shelf registration statement
effective until the earlier of (i) the sale pursuant to the
shelf registration statement of all of the debentures and
the shares of common stock issuable upon conversion of the
debentures, which together we refer to as "registrable
securities," and (ii) the expiration of the holding period
applicable to such securities held by non-affiliates of ours
under Rule 144(k) under the Securities Act, or any successor
provision and (iii) the second anniversary of the effective
date of the shelf registration statement, subject to certain
permitted exceptions. See "Description of
Debentures--Registration Rights."
We are permitted to suspend the use of this prospectus under
certain circumstances. We agreed to pay predetermined
liquidated damages to selling securityholders if this
prospectus is unavailable for periods in excess to those
described elsewhere in this prospectus. Purchasers of the
registrable securities offered by means of this prospectus
will not have any rights under the registration rights
agreement, although once sold under this registration
statement the registrable securities should be freely
tradable except by purchasers who are our "affiliates" or
are "underwriters" of the registrable securities for
purposes of the Securities Act.
Trading Symbol for our Common
Stock........................ Our common stock is traded on the New York Stock Exchange
under the symbol "CCL."
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE SPECIFIC RISK FACTORS SET FORTH BELOW AS
WELL AS THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS BEFORE DECIDING TO INVEST IN THE DEBENTURES AND OUR COMMON STOCK.
SOME FACTORS IN THIS SECTION ARE "FORWARD-LOOKING STATEMENTS." FOR A DISCUSSION
OF THOSE STATEMENTS AND OF OTHER FACTORS FOR INVESTORS TO CONSIDER, SEE "SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS."
RISKS RELATED TO OUR BUSINESS
DEMAND FOR CRUISES COULD BE REDUCED AND, AS A RESULT, OUR NET REVENUE YIELDS MAY
BE ADVERSELY AFFECTED.
Demand for cruises may be affected by a number of factors. For example, our
sales are dependent on the underlying economic strength of the countries in
which we operate. Adverse economic conditions can reduce the level of disposable
income of consumers available for vacations. In addition, armed conflicts or
political instability in areas where our ships cruise can adversely affect
demand for our cruises to those areas. Also, acts of terrorism could have an
adverse effect on tourism, travel and the availability of air service and other
forms of transportation. In particular, the September 11, 2001 attacks on the
World Trade Center and the Pentagon have impacted negatively our operating
results in the short term. However, given the uncertainty regarding the future
impact of these events on tourism and travel, we are unable to reasonably
estimate the impact of these events on our future operations at this time.
Finally, adverse incidents involving cruise ships and adverse media
publicity concerning the cruise industry in general can impact demand. The
operation of cruise ships involves the risk of accidents and other incidents
which may bring into question passenger safety and adversely affect future
industry performance. While we make passenger safety a high priority in the
design and operation of our ships, accidents and other incidents involving
cruise ships could adversely affect our future sales and profitability. Any
reduction in demand may have a negative impact on our net revenue yields, which
would also have a negative impact on our net income.
OVERCAPACITY WITHIN THE CRUISE BUSINESS COULD HAVE A NEGATIVE IMPACT ON OUR NET
REVENUE YIELDS.
Cruising capacity has grown in recent years and we expect it to continue to
increase over the next five years as all of the major cruise companies are
expected to introduce new ships into service. In order to utilize new capacity,
the cruise industry must increase its share of the overall vacation market. Any
future imbalances between cruise industry supply and demand could have a
negative impact on our net revenue yields, which would also have a negative
impact on our net income.
ENVIRONMENTAL AND HEALTH AND SAFETY LEGISLATION COULD INCREASE OPERATING COSTS.
Some environmental groups have lobbied for more stringent regulation of
cruise ships. Some groups also have generated negative publicity about the
cruise industry and its environmental impact. As a result, governmental
authorities around the world may enact new environmental and health and safety
legislation. For instance, the United States Environmental Protection Agency is
considering new laws and rules to manage cruise ship waste. Stricter
environmental and health and safety regulations could increase the cost of
compliance and adversely affect the cruise industry.
WE FACE SIGNIFICANT COMPETITION FROM BOTH CRUISE LINES AND OTHER VACATION
OPERATORS.
We operate in the vacation market. We compete for consumer disposable
leisure-time dollars with both other cruise operators and a wide array of
vacation operators, including numerous land destinations and timeshare vacation
operators located throughout the world. These operators attempt to obtain a
competitive advantage by lowering prices and by improving their products by
offering different vacation experiences, itineraries and locations. Our
principal competitors include Royal Caribbean Cruise Ltd., which owns Royal
Caribbean International and Celebrity Cruises, P&O Princess
10
Cruises plc, which owns Princess Cruises, P&O Cruises and Aida Cruises, and
Norwegian Cruise Line and Orient Lines, which are both owned by Star Cruises
plc. In the event that we do not compete effectively with other cruise companies
and other vacation operators, our market share could decrease and our net
revenue yields could be adversely affected.
HIGHER FUEL PRICES COULD RAISE OUR COSTS.
The cost of fuel is subject to many economic and political factors which are
beyond our control. An increase in fuel prices could adversely affect our
financial results because we may not be able to increase the prices on our
cruise vacations to recover any increased costs.
CONDUCTING BUSINESS INTERNATIONALLY MAY RESULT IN INCREASED COSTS.
We operate our business internationally, and we plan to continue to develop
our international presence, especially in Europe. Operating internationally
exposes us to a number of risks. Examples include currency fluctuations,
interest rate movements, increases in duties and taxes, political uncertainty,
and changes in laws and policies affecting cruising, vacation or maritime
businesses or the governing operations of foreign-based companies. If we are
unable to address these risks adequately, our financial results could be
adversely affected.
DELAYS OR FAULTS IN SHIP CONSTRUCTION COULD REDUCE OUR PROFITABILITY.
Cruise ships are large and complicated vessels, and building them involves
risks similar to those encountered in similar sophisticated construction
projects, including delays in delivery and faulty construction. Delays or faults
in ship construction may result in delays or cancellations of scheduled cruises,
necessitate unscheduled repairs and drydocking of the ship and increase our
shipbuilding costs and/or expenses. Industrial action, insolvency of shipyards
or other events could also delay or indefinitely postpone the delivery of new
ships. These events, in turn, could, to the extent they are not covered by
contractual provisions or insurance, adversely affect our financial results.
THE INABILITY OF QUALIFIED SHIPYARDS TO BUILD OUR SHIPS COULD REDUCE OUR FUTURE
PROFITABILITY.
We believe that there are a limited number of shipyards in the world capable
of the quality construction of large passenger cruise ships. We currently have
contracts with three of these shipyards for the construction of 15 ships to
enter service over the next four years. Our primary competitors also have
contracts to construct new cruise ships. If we elect to build additional ships
in the future, which we expect to do, there is no assurance that any of these
shipyards will have the available capacity to build additional new ships for us
at the times desired by us or that the shipyards will agree to build additional
ships at a cost acceptable to us. Additionally, there is no assurance that ships
under contract for construction will be delivered. These events, in turn, could
adversely affect our financial results.
RISKS RELATING TO OUR CORPORATE STRUCTURE
A CHANGE OF OUR TAX STATUS UNDER THE U. S. INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), MAY HAVE AN ADVERSE EFFECT ON OUR NET INCOME AND
SHAREHOLDERS.
We are a foreign corporation engaged in a trade or business in the United
States, and our ship-owning subsidiaries are foreign corporations that, in many
cases, depending upon the itineraries of their ships, receive income from
sources within the United States. To the best of our knowledge, we believe that,
under Section 883 of the Code and applicable income tax treaties, our income and
the income of our ship-owning subsidiaries, in each case derived from or
incidental to the international operation of a ship or ships, is currently
exempt from United States federal income tax. We believe that substantially all
of our income, with the exception of the United States source income from the
transportation, hotel and tour business of Holland America Tours, and the income
of our ship-owning subsidiaries, is derived from or incidental to the
international operation of a ship or ships within the meaning of Section 883 and
applicable income tax treaties.
11
We believe that we and many of our ship-owning subsidiaries currently
qualify for the Section 883 exemption since each of us is incorporated in
qualifying jurisdictions and our common stock is primarily and regularly traded
on an established securities market in the United States. To date, however, no
final Treasury regulations or other definitive interpretations of the relevant
portions of Section 883 have been promulgated, although regulations have been
proposed. See the risk factor immediately below for a discussion of the proposed
regulations under Section 883. Those regulations or official interpretations
could differ materially from our interpretation of this Code provision and, even
in the absence of differing regulations or official interpretations, the
Internal Revenue Service might successfully challenge our interpretation. In
addition, the provisions of Section 883 are subject to change at any time by
legislation. Moreover, changes could occur in the future with respect to the
identity, residence, or holdings of our direct or indirect shareholders that
could affect our and our subsidiaries' eligibility for the Section 883
exemption. Accordingly, it is possible that we and our subsidiaries will not be
exempt from United States federal income tax on United States-source shipping
income. If we and our ship-owning subsidiaries were not entitled to the benefit
of Section 883, we would be subject to United States federal income taxation on
a portion of our income, which would reduce our net income.
We believe that the income of some of our ship-owning subsidiaries currently
qualifies for exemption from United States income tax under bilateral income tax
treaties. These treaties may be cancelled by either country or replaced with a
new agreement that treats shipping income differently than under the agreements
currently in force. If these subsidiaries do not qualify for benefits under the
existing treaties or the existing treaties are cancelled or materially modified
in a manner adverse to our interests and the subsidiaries do not qualify for the
Section 883 exemption, the ship-owning subsidiaries would be subject to United
States federal income taxation on a portion of their income, which would reduce
our net income.
FAILURE TO COMPLY WITH THE PROPOSED TREASURY REGULATIONS COULD HAVE A NEGATIVE
IMPACT ON OUR NET INCOME AND STOCK PRICE. ALSO, IN ORDER TO COMPLY WITH PROPOSED
TREASURY REGULATIONS, YOUR ABILITY TO ACQUIRE OR TRANSFER OUR COMMON STOCK AND
THE DEBENTURES IS RESTRICTED.
On February 8, 2000, the United States Treasury Department issued proposed
Treasury regulations to Section 883 of the Code, relating to income derived by
foreign corporations from the international operation of ships and aircraft. The
proposed regulations provide, in general, that a corporation organized in a
qualified foreign country and engaged in the international operation of ships or
aircraft shall exclude qualified income from gross income for purposes of United
States federal income taxation provided that the corporation can satisfy certain
ownership requirements, including, among other things, that its stock is
publicly traded. A publicly traded corporation will satisfy this requirement if
more than 50% of its stock is owned by persons who each own less than 5% of the
value of the outstanding shares of the corporation's capital stock. To the best
of our knowledge, after due investigation, we believe that we currently qualify
as a publicly traded corporation under these proposed regulations. However,
because various members of the Arison family and certain trusts established for
their benefit currently own approximately 46.9% of our common stock, there is
the potential that another shareholder could acquire 5% or more of our common
stock, which could jeopardize our qualification as a publicly traded
corporation. If, in the future, we were to fail to qualify as a publicly traded
corporation, we would be subject to United States federal income tax on our
income associated with our cruise operations in the United States. In such
event, our net income and stock price would be negatively impacted.
As a precautionary matter, we amended our second amended and restated
articles of incorporation to ensure that we will continue to qualify as a
publicly traded corporation under the proposed regulations. This amendment
provides that no one person or group of related persons, other than certain
members of the Arison family and certain trusts established for their benefit,
may own or be deemed to own by virtue of the attribution provisions of the Code
more than 4.9% of our common stock, whether measured by vote, value or number of
shares. Any shares of our common stock acquired
12
in violation of this provision will be transferred to a trust and, at the
direction of our board of directors, sold to a person whose shareholding does
not violate that provision. No profit for the purported transferee may be
realized from any such sale. In addition, under specified circumstances, the
trust may transfer the common stock at a loss to the purported transferee.
Because the debentures are convertible into common stock, the transfer of the
debentures will be subject to similar restrictions. See "Description of
Debentures--Ownership Limitation on Debentures." These transfer restrictions may
also have the effect of delaying or preventing a change in our control or other
transactions in which the shareholders might receive a premium for their shares
of our common stock over the then prevailing market price or which the
shareholders might believe to be otherwise in their best interest.
A GROUP OF PRINCIPAL SHAREHOLDERS EFFECTIVELY CONTROLS US AND HAS THE POWER TO
CAUSE OR PREVENT A CHANGE OF CONTROL.
A group of shareholders comprising certain members of the Arison family,
including Micky Arison, our chairman and chief executive officer, and trusts
established for their benefit, beneficially own, as of the date of this
prospectus, a total of approximately 46.9% of our outstanding common stock. As a
result, this group of shareholders has the power to substantially influence the
election of directors and our affairs and policies without the consent of our
other shareholders. In addition, this group has the power to prevent or cause a
change in control.
WE ARE NOT A U. S. CORPORATION, AND OUR SHAREHOLDERS MAY BE SUBJECT TO THE
UNCERTAINTIES OF A FOREIGN LEGAL SYSTEM IN PROTECTING THEIR INTERESTS.
Our corporate affairs are governed by our second amended and restated
articles of incorporation and by-laws and by the corporate laws of Panama. Thus,
our public shareholders may have more difficulty in protecting their interests
in the face of actions by the management, directors or controlling shareholders
than would shareholders of a corporation incorporated in a United States
jurisdiction.
RISKS RELATING TO THE DEBENTURES AND OUR COMMON STOCK
AN ACTIVE TRADING MARKET FOR THE DEBENTURES MAY NOT DEVELOP.
The debentures are a new issue of securities for which there is currently no
public market and no active trading market might ever develop. If the debentures
are traded, they may trade at a discount from their initial offering price,
depending on prevailing interest rates, the market for similar securities, the
price of our shares of common stock, our performance and other factors. In
addition, we do not know whether an active trading market will develop for the
debentures. To the extent that an active trading market does not develop, the
liquidity and trading prices for the debentures may be harmed.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
IN CONTROL REPURCHASE OPTION OR THE REPURCHASE AT THE OPTION OF THE HOLDER
PROVISION IN THE DEBENTURES.
Upon the occurrence of specific kinds of change in control events occurring
on or before April 15, 2008, and on the 2005, 2008 and 2011 purchase dates, we
may be required to repurchase all outstanding debentures. However, it is
possible that we will not have sufficient funds at such time to make the
required repurchase of debentures in cash or that restrictions in our debt
instruments will not allow such repurchases. See "Description of
Debentures--Purchase of Debentures by Us at the Option of the Holder" and
"--Change in Control Permits Purchase of Debentures by the Company at the Option
of the Holder."
THE HOLDERS OF OUR COMMON STOCK MAY EXPERIENCE A DILUTION IN THE VALUE OF THEIR
EQUITY INTEREST AS A RESULT OF THE ISSUANCE AND SALE OF ADDITIONAL SHARES OF OUR
COMMON STOCK.
A substantial number of shares of our common stock were issued by us in
private transactions not involving a public offering and are therefore treated
as "restricted securities" for purposes of Rule 144 under the Securities Act or
are held by our affiliates and, therefore, treated as "restricted securities" or
"control securities." Some members of the Arison family and related entities
beneficially own
13
approximately 46.9% of our outstanding common stock. No predictions can be made
as to the effect, if any, that the issuance and availability for future market
sales of shares of our common stock will have on the market price of our common
stock prevailing from time to time. Sales of substantial amounts of our common
stock (including shares issued upon the exercise of stock options), or the
perception that such sales could occur, could materially adversely affect the
prevailing market price for our common stock and could impair our future ability
to raise capital through an offering of equity securities.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. We have tried, wherever possible, to identify such statements by using
words such as "anticipate," "assume," "believe," "expect," "intend," "plan" and
words and terms of similar substance in connection with any discussion of future
operating or financial performance. These forward-looking statements, including
those which may impact the forecasting of our net revenue yields, involve known
and unknown risks, uncertainties and other factors, which may cause our actual
results, performances or achievements to be materially different from any future
results, performances or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
- general economic and business conditions which may impact levels of
disposable income of consumers and the net revenue yields for our cruise
products;
- consumer demand for cruises;
- effects on consumer demand of armed conflicts, political instability,
terrorism, the availability of air service and adverse media publicity;
- increases in cruise industry capacity;
- cruise and other vacation industry competition;
- continued availability of attractive port destinations;
- changes in tax laws and regulations;
- our ability to implement our shipbuilding program and to continue to
expand our business outside the North American market;
- our ability to attract and retain shipboard crew;
- changes in foreign currency rates, food, fuel and commodity prices and
interest rates;
- delivery of new ships on schedule and at the contracted prices;
- weather patterns;
- unscheduled ship repairs and drydocking;
- incidents involving cruise ships;
- impact of pending or threatened litigation; and
- changes in laws and regulations applicable to us.
We caution the reader that these risks may not be exhaustive. We operate in
a continually changing business environment, and new risks emerge from time to
time. We cannot predict such risks nor can we assess the impact, if any, of such
risks on our business or the extent to which any risk, or combination of risks
may cause actual results to differ from those projected in any forward-looking
statements. Accordingly, forward-looking statements should not be relied upon as
a prediction of actual results. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
14
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the fiscal years ended November 30, 2000, 1999, 1998, 1997 and 1996 and for the
nine months ended August 31, 2001 and 2000. Earnings include net income,
adjusted for income taxes, minority interest and income from affiliated
operations net of dividends received, plus fixed charges and exclude capitalized
interest. Fixed charges include gross interest expense, amortization of deferred
financing expenses and an amount equivalent to interest included in rental
charges. We have assumed that one-third of rental expense is representative of
the interest factor.
NINE MONTHS
ENDED
AUGUST 31, YEARS ENDED NOVEMBER 30,
------------------- ----------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- --------
Ratio of earnings to fixed charges.............. 8.3x 13.6x 11.5x 11.3x 8.8x 9.0x 6.4x
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is traded on the New York Stock Exchange under the symbol
"CCL". The high and low of our common stock sales prices for the periods
indicated were as follows:
HIGH LOW
-------- --------
FISCAL 2001
First Quarter............................................. $34.938 $21.938
Second Quarter............................................ $33.400 $23.600
Third Quarter............................................. $33.740 $25.890
Fourth Quarter (through October 2, 2001).................. $31.470 $16.950
FISCAL 2000
First Quarter............................................. $50.563 $27.625
Second Quarter............................................ $28.813 $21.875
Third Quarter............................................. $27.313 $18.625
Fourth Quarter............................................ $25.750 $19.688
FISCAL 1999
First Quarter............................................. $49.125 $34.875
Second Quarter............................................ $53.500 $38.500
Third Quarter............................................. $50.500 $39.750
Fourth Quarter............................................ $51.875 $38.125
As of October 2, 2001, there were approximately 4,586 holders of record of
our common stock.
We declared cash dividends on all of our common stock in the amount of $.09
per share in each of the first three quarters of fiscal 1999 and $.105 for each
subsequent quarter through and including the third quarter of fiscal 2001.
Payment of future dividends on the common stock will depend upon, among other
factors, our earnings, financial condition and capital requirements. We may also
declare special dividends to all shareholders in the event that members of the
Arison family and certain related entities, as a result of any future income tax
audit, are required to pay additional income taxes by reason of their ownership
of the common stock.
The Republic of Panama does not currently have tax treaties with any other
country. Under current law, we believe that distributions to our shareholders,
other than residents of Panama or other business entities conducting business in
Panama, are not subject to taxation under the laws of the Republic of Panama.
Dividends that we pay to United States citizens, residents, corporations and to
foreign corporations doing business in the United States, to the extent treated
as "effectively connected" income, will be taxable as ordinary income for United
States federal income tax purposes to the extent of our current or accumulated
earnings and profits, but generally will not qualify for any dividends-received
deduction.
The payment and amount of any dividend is within the discretion of our board
of directors, and it is possible that the amount of any dividend may vary from
the levels discussed above.
15
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for the fiscal
years ended November 30, 2000, 1999, 1998, 1997 and 1996, and as of the end of
each such fiscal year are derived from our audited financial statements and
should be read in conjunction with those financial statements and the related
notes. The selected financial data presented below for the nine month periods
ended August 31, 2001 and 2000, are derived from our unaudited financial
statements and should be read in conjunction with those financial statements and
related notes.
NINE MONTHS ENDED
AUGUST 31, YEARS ENDED NOVEMBER 30,
----------------------- --------------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT AND OTHER
DATA(3):
Revenues..................... $3,576,649 $2,928,216 $3,778,542 $3,497,470 $3,009,306 $2,447,468 $2,212,572
Operating income before
income from affiliated
operations................. 816,218 778,756 945,130 943,941 819,792 660,979 551,461
Operating income............. 772,194 774,395 982,958 1,019,699 896,524 714,070 597,428
Net income................... 809,888(4) 771,663 965,458 1,027,240 835,885 666,050 566,302
Earnings per share(1):
Basic...................... $ 1.39 $ 1.28 $ 1.61 $ 1.68 $ 1.40 $ 1.12 $ 0.98
Diluted.................... 1.38 1.27 1.60 1.66 1.40 1.12 0.96
Dividends declared per
share(1)................... 0.315 0.315 0.420 0.375 0.315 0.240 0.190
Capital expenditures......... 713,328 882,460 1,003,348 872,984 1,150,413 497,657 901,905
Passenger cruise days........ 16,591 12,533 16,750 14,947 13,009 11,908 10,583
Occupancy percentage(2)...... 107.0% 106.1% 105.4% 104.3% 106.3% 108.3% 107.6%
AS OF AUGUST 31, AS OF NOVEMBER 30,
------------------------ --------------------------------------------------------------
2001(3) 2000 2000(3) 1999 1998 1997 1996
----------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Total assets......... $11,275,806 $8,592,170 $9,831,320 $8,286,355 $7,179,323 $5,426,775 $5,101,888
Long-term debt
(excluding portion
due within one
year).............. 2,478,482 1,475,831 2,099,077 867,515 1,563,014 1,015,294 1,316,632
Total shareholders'
equity............. 6,546,416 5,769,186 5,870,617 5,931,247 4,285,476 3,605,098 3,030,884
--------------------------
(1) All per share amounts have been adjusted as of such date to reflect a
two-for-one stock split effective June 12, 1998.
(2) In accordance with cruise industry practice, occupancy percentage is
calculated based upon two passengers per cabin even though some cabins can
accommodate three or four passengers. The percentages in excess of 100%
indicate that more than two passengers occupied some cabins.
(3) Since June 1997, we owned 50% of Costa. On September 29, 2000, we completed
the acquisition of the remaining 50% interest in Costa. We accounted for
this transaction using the purchase accounting method. Prior to the fiscal
2000 acquisition, we accounted for our 50% interest in Costa using the
equity method. Commencing in fiscal 2001, Costa's results of operations have
been consolidated on a current month basis in the same manner as our other
wholly-owned subsidiaries. Our November 30, 2000 and August 31, 2001
consolidated balance sheets include Costa's balance sheet. See Note 3 to our
financial statements for the year ended November 30, 2000.
(4) Our net income for the nine months ended August 31, 2001 includes an
impairment loss of approximately $101 million and a non-operating net gain
of approximately $100 million from the sale of our investment in Airtours,
plc. See Notes 8 and 9 to our Financial Statements for the nine months ended
August 31, 2001.
16
CAPITALIZATION
The following table sets forth our capitalization as of August 31, 2001.
AS OF AUGUST 31, 2001
-----------------------
(in thousands, except
per share data)
Long-term debt(1):
2% convertible senior debentures due 2021................... $ 600,000
Unsecured debentures and notes, bearing interest at rates
ranging from 6.15% to 7.7%, due through 2028.............. 848,749
Euro note, secured by one ship, bearing interest at euribor
plus 0.5% (4.8% at August 31, 2001), due through 2008..... 128,554
Unsecured euro notes, bearing interest at rates ranging from
euribor plus 0.19% to euribor plus 1.0% (4.7% to 5.4% at
August 31, 2001), due 2001, 2005 and 2006(2).............. 780,743
Unsecured euro notes, bearing interest at 5.57%, due in
2006...................................................... 272,074
Other....................................................... 30,210
-----------
Total long-term debt...................................... 2,660,330
Less portion due within one year.......................... (181,848)
-----------
Total long-term debt (excluding portion due within one
year)................................................... 2,478,482
Shareholders' equity:
Common stock; $.01 par value; 960,000 shares authorized;
620,006 shares issued..................................... 6,200
Additional paid-in capital.................................. 1,805,050
Retained earnings........................................... 5,501,532
Unearned stock compensation................................. (13,590)
Accumulated other comprehensive loss........................ (25,139)
Treasury stock; 33,848 shares at cost....................... (727,637)
-----------
Total shareholders' equity................................ 6,546,416
-----------
Total capitalization (excluding portion of long-term debt
due within one year).................................... $ 9,024,898
===========
------------------------
(1) All borrowings are in U.S. dollars unless otherwise noted. Euro denominated
notes have been translated to U.S. dollars at August 31, 2001 exchange rate.
(2) In May 2001, we entered into a five-year $235 million unsecured euro
denominated revolving credit facility, of which $207 million was available
at August 31, 2001. We intend to refinance a $70 million unsecured euro
note, due in 2001, with proceeds from this revolver and, accordingly, have
classified this $70 million of outstanding debt as long-term in the
August 31, 2001 balance sheet.
17
USE OF PROCEEDS
The selling securityholders will receive all of the proceeds from the sale
of the securities sold under this prospectus. We will not receive any of the
proceeds from sales by the selling securityholders of the offered securities.
SELLING SECURITYHOLDERS
The following table provides, as of October 2, 2001, the name of each
selling securityholder, the principal amount of debentures held by such selling
securityholder, the number of shares of common stock owned by such
securityholder prior to its purchase of debentures and the common stock issuable
upon conversion of the debentures (based upon the initial conversion price).
This information has been obtained from the selling securityholders. Selling
securityholders representing an amount of up to an additional $211,452,000
aggregate principal amount of debentures will be added to the table after the
effectiveness of the registration statement of which this prospectus is a part.
(2)
PRINCIPAL
AMOUNT OF (3) (4) (5)
DEBENTURES PERCENT OF COMMON STOCK COMMON STOCK
(1) BENEFICIALLY TOTAL ISSUABLE UPON OWNED PRIOR TO
SELLING OWNED AND OUTSTANDING CONVERSION OF CONVERSION OF
SECURITYHOLDER OFFERED DEBENTURES THE DEBENTURES DEBENTURES*
--------------------------------- ------------- -------------- ----------------- -----------------
First Union Securities, Inc.
/Bank Trading.................. $29,500,000 4.92% 753,628 0
First Union National Bank........ 500,000 0.08% 12,773 0
Nomura Securities International,
Inc............................ 15,000,000 2.50% 383,201 497,292
CIBC World Markets............... 5,000,000 0.83% 127,734 0
JMG Triton Offshore Fd Ltd....... 17,250,000 2.88% 440,681 0
OZ Master Fund, Ltd.............. 4,534,000 0.76% 115,829 0
Lexington (IMA) Limited.......... 139,000 0.02% 3,551 0
Absolute Return Fund, Ltd........ 327,000 0.05% 8,354 0
TD Securities (USA) Inc.......... 20,000,000 3.33% 510,934 0
Peoples Benefit Life Insurance
Company TEAMSTERS.............. 5,000,000 0.83% 127,734 0
Retail Clerks Pension Trust #2... 1,500,000 0.25% 38,320 0
GM Employees Global Group Pension
Trust (Abs Return Portfolio)... 1,500,000 0.25% 38,320 0
St. Albans Partners Ltd.......... 5,000,000 0.83% 127,734 0
Yield Strategies Fund II, LP..... 3,250,000 0.54% 83,027 0
Bank America Pension Plan........ 3,000,000 0.50% 76,640 0
Circlet (IMA) Limited............ 2,000,000 0.33% 51,093 0
Duckbill & Co.................... 1,750,000 0.29% 44,707 0
General Motors Welfare Benefit
Trust (VEBA)................... 3,000,000 0.50% 76,640 0
KBC Financial Products USA
Inc............................ 8,000,000 1.33% 204,374 0
Royal Bank of Canada............. 7,000,000 1.17% 178,827 225,705
18
(2)
PRINCIPAL
AMOUNT OF (3) (4) (5)
DEBENTURES PERCENT OF COMMON STOCK COMMON STOCK
(1) BENEFICIALLY TOTAL ISSUABLE UPON OWNED PRIOR TO
SELLING OWNED AND OUTSTANDING CONVERSION OF CONVERSION OF
SECURITYHOLDER OFFERED DEBENTURES THE DEBENTURES DEBENTURES*
--------------------------------- ------------- -------------- ----------------- -----------------
UBS O'Connor LLC f/b/o UBS Global
Equity Arbitrage Master Ltd.... 500,000 0.08% 12,773 0
Banc of America Securities LLC... 9,793,000 1.63% 250,179 0
Worldwide Transactions Ltd....... 420,000 0.07% 10,729 0
Deutsche Banc Alex Brown Inc..... 17,500,000 2.92% 447,067 0
Delta Airlines Master Trust...... 2,400,000 0.40% 61,312 0
Vopak USA, Inc. Retirement
Plan........................... 375,000 0.06% 9,580 0
Port Authority of Allegheny
County Retirement and
Disability Allowance Plan for
the Employees Represented by
Local 85 of the Amalgamated
Transit Union.................. 1,450,000 0.24% 37,043 0
The Dow Chemical Company
Employees' Retirement Plan..... 2,700,000 0.45% 68,976 0
City of Knoxville Pension
System......................... 285,000 0.05% 7,281 0
State of Florida, Office of the
Treasurer...................... 1,500,000 0.25% 38,320 0
Consulting Group Capital Markets
Funds.......................... 520,000 0.09% 13,284 0
CALAMOS-Registered Trademark-
Convertible Portfolio--
CALAMOS-Registered Trademark-
Advisors Trust................. 130,000 0.02% 3,321 0
Knoxville Utilities Board
Retirement System.............. 195,000 0.03% 4,982 0
Boilermaker--Blacksmith Pension
Trust.......................... 1,375,000 0.23% 35,127 0
Aventis Pension Master Trust..... 220,000 0.04% 5,620 0
Louisiana Workers' Compensation
Corporation.................... 385,000 0.06% 9,835 0
Clarica Life Insurance
Co.--U.S....................... 350,000 0.06% 8,941 0
Delta Pilots Disability and
Survivorship Trust............. 470,000 0.08% 12,007 0
Drury University................. 45,000 0.01% 1,150 0
SCI Endowment Care Common Trust
Fund--
National Fiduciary Services.... 230,000 0.04% 5,876 0
SCI Endowment Care Common Trust
Fund--
Suntrust....................... 95,000 0.02% 2,427 0
Union Carbide Retirement
Account........................ 1,750,000 0.29% 44,707 0
19
(2)
PRINCIPAL
AMOUNT OF (3) (4) (5)
DEBENTURES PERCENT OF COMMON STOCK COMMON STOCK
(1) BENEFICIALLY TOTAL ISSUABLE UPON OWNED PRIOR TO
SELLING OWNED AND OUTSTANDING CONVERSION OF CONVERSION OF
SECURITYHOLDER OFFERED DEBENTURES THE DEBENTURES DEBENTURES*
--------------------------------- ------------- -------------- ----------------- -----------------
United Food and Commercial
Workers Local 1262 and
Employers Pension Fund......... 650,000 0.11% 16,605 0
City of Albany Pension Plan...... 125,000 0.02% 3,193 0
Greek Catholic Union............. 20,000 ** 511 0
Greek Catholic Union II.......... 20,000 ** 511 0
H.K. Porter Company, Inc......... 35,000 0.01% 894 0
Kettering Medical Center Funded
Depreciation Account........... 80,000 0.01% 2,044 0
SPT.............................. 1,100,000 0.18% 28,101 0
The Fondren Foundation........... 85,000 0.01% 2,171 0
CALAMOS-Registered Trademark-
Convertible Fund--
CALAMOS-Registered Trademark-
Investment Trust............... 3,000,000 0.50% 76,640 0
CALAMOS-Registered Trademark-
Convertible Growth and Income
Fund--CALAMOS-Registered Trademark-
Investment Trust............... 1,275,000 0.21% 32,572 0
CALAMOS-Registered Trademark-
Market Neutral Fund--
CALAMOS-Registered Trademark-
Investment Trust............... 5,400,000 0.90% 137,952 0
CALAMOS-Registered Trademark-
Global Convertible Fund--
CALAMOS-Registered Trademark-
Investment Trust............... 140,000 0.02% 3,577 0
GLG Market Neutral Fund.......... 1,000,000 0.17% 25,547 0
Leonardo, L.P.................... 20,000,000 3.33% 510,934 0
Black Diamond Offshore Ltd....... 1,723,000 0.29% 44,017 0
Double Black Diamond Offshore
LDC............................ 8,875,000 1.48% 226,727 0
Black Diamond Capital I, Ltd..... 482,000 0.08% 12,314 0
Aristeia Partners, L.P........... 3,600,000 0.60% 91,968 0
Aristeia International,
Limited........................ 9,900,000 1.65% 252,912 0
Allstate Life Insurance
Company........................ 2,700,000 0.45% 68,976 0
Allstate Insurance Company....... 550,000 0.09% 14,051 0
UBS AG London Branch............. 40,000,000 6.67% 1,021,868 0
Jersey (IMA) Ltd................. 1,750,000 0.29% 44,707 0
Libertyview Funds, L.P........... 8,250,000 1.38% 210,760 0
JMG Capital Partners, LP......... 12,250,000 2.04% 312,947 0
Southern Farm Bureau Life
Insurance...................... 125,000 0.02% 3,193 0
Starvest Managed Portfolio....... 15,000 ** 383 0
Kerr-McGee Corporation........... 115,000 0.02% 2,938 0
20
(2)
PRINCIPAL
AMOUNT OF (3) (4) (5)
DEBENTURES PERCENT OF COMMON STOCK COMMON STOCK
(1) BENEFICIALLY TOTAL ISSUABLE UPON OWNED PRIOR TO
SELLING OWNED AND OUTSTANDING CONVERSION OF CONVERSION OF
SECURITYHOLDER OFFERED DEBENTURES THE DEBENTURES DEBENTURES*
--------------------------------- ------------- -------------- ----------------- -----------------
State of Florida Division of
Treasury....................... 460,000 0.08% 11,751 0
State of Mississippi Health Care
Trust Fund..................... 185,000 0.03% 4,726 0
William Blair & Co. LLC.......... 2,225,000 0.37% 56,841 0
Lehman Brothers Inc.............. 2,000,000 0.33% 51,093 0
Global Bermuda Limited
Partnership.................... 4,200,000 0.70% 107,296 0
Lakershore International Ltd..... 13,800,000 2.30% 352,544 0
White River Securities L.L.C..... 10,112,000 1.69% 258,328 0
Bear, Stearns & Co. Inc.......... 8,113,000 1.35% 207,260 0
Jefferies & Company, Inc......... 500,000 0.08% 12,773 0
First Union Securities, Inc...... 5,000,000 0.83% 127,734 0
Credit Suisse First Boston
Corporation.................... 14,000,000 2.33% 357,654 0
Wolverine Trading, L.P........... 3,000,000 0.50% 76,640 0
Julius Baer Multibond
Convertbond.................... 750,000 0.13% 19,160 0
Susquehanna Capital Group........ 23,000,000 3.83% 587,574 0
Radian Guaranty Inc. ............ 1,000,000 0.17% 25,547 0
Radian Asset Guaranty............ 1,000,000 0.17% 25,547 0
--------------------------
* Assuming the sale of all debentures and common stock issuable upon
conversion of the debentures, selling securityholders will not hold any
debentures and will hold the number of our common stock set forth in column
(5) "Common Stock Owned Prior to Conversion of Debentures". At that time, no
selling securityholder will hold more than 1% of our outstanding common
stock.
** Less than 0.01%.
Except as described below, none of the selling securityholders listed above
has, or within the past three years had, any position, office or any material
relationship with us or any of our affiliates. Because the selling
securityholders may offer all or some portion of the above-referenced securities
under this prospectus or otherwise, no estimate can be given as to the amount of
percentage that will be held by the selling securityholders upon termination of
any sale. In addition, the selling securityholders identified above may have
sold, transferred or otherwise disposed of all or a portion of such securities
since April 25, 2001 in transactions exempt from the registration requirements
of the Securities Act.
Mr. Uzi Zucker, one of our directors, is a Senior Managing Director of Bear,
Stearns & Co. Inc. Bear Stearns was one of the investment banking firms serving
as our agent in connection with our common stock repurchase program. It is
expected that Bear Stearns may continue to provide us with investment banking
and consulting services when we so request it.
Generally, only selling securityholders identified in the foregoing table
who beneficially own the securities set forth opposite their respective names in
columns (2) and (5) may sell offered securities under the registration statement
of which this prospectus forms a part. We may from time to time include
additional selling securityholders in supplements to this prospectus.
21
PLAN OF DISTRIBUTION
The debentures and underlying common stock, which we will refer to as
offered securities, are being registered to permit the resale of such securities
by the holders of them from time to time after the date of this prospectus. We
will not receive any of the proceeds from the sale by the selling
securityholders of the debentures and common stock. We will bear the fees and
expenses incurred in connection with our obligation to register the debentures
and underlying common stock. These fees and expenses include registration and
filing fees, printing and duplication expenses, fee and disbursement of our
counsel, as well as reasonable fees and disbursement of the indenture's trustee,
its counsel and the registrar and transfer agent. However, the selling
securityholders will pay all underwriting discounts and selling commissions, if
any, and their own legal expenses.
The selling securityholders may sell the debentures and common stock from
time to time, at market prices prevailing at the time of sale, at prices related
to market prices, at fixed prices, prices subject to change or at negotiated
prices, by a variety of methods including the following:
- in market transactions;
- in privately negotiated transactions;
- through broker-dealers, which may act as agents or principals;
- in a block trade in which a broker-dealer will attempt to sell a block of
securities as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- if we agree to it prior to the distribution, through one or more
underwriters on a firm commitment or best-efforts basis;
- directly to one or more purchasers;
- through agents;
- in any combination of the above; or
- by any other legally available means.
In effecting sales, brokers or dealers engaged by the selling
securityholders may arrange for other brokers or dealers to participate.
Broker-dealer transactions may include:
- purchases of the debentures and common stock by a broker-dealer as
principal and resales of them by the broker-dealer for its account
pursuant to this prospectus;
- ordinary brokerage transactions; or
- transactions in which the broker-dealer solicits purchasers.
- If a material arrangement with any underwriter, broker, dealer or other
agent is entered into for the sale of any debentures and common stock
through a secondary distribution or a purchase by a broker or dealer, or
if other material changes are made in the plan of distribution of the
debentures and common stock, a prospectus supplement will be filed, if
necessary, under the Securities Act disclosing the material terms and
conditions of such arrangement. The underwriter or underwriters with
respect to an underwritten offering of debentures and common stock and the
other material terms and conditions of the underwriting will be set forth
in a prospectus supplement relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters
will be set forth on the cover of the prospectus supplement. In connection
with the sale of debentures and common stock, underwriters will receive
compensation in the form of underwriting discounts or commissions and may
also receive commissions from purchasers of debentures and underlying
common stock for whom they may act as agent. Underwriters may sell to or
through dealers, and such dealers may receive
22
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act
as agent.
In addition, any securities covered by this prospectus which can be sold
under Rule 144 under the Securities Act may be sold under Rule 144 rather than
in a registered offering contemplated by this prospectus.
The selling securityholders and any underwriters, broker-dealers or agents
participating in the distribution of the securities may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of the debentures and/or common stock by the selling securityholders and
any commissions received by any such underwriters, broker-dealers or agents may
be deemed to be underwriting commissions under the Securities Act.
The selling securityholders and any other person participating in the
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations under the Exchange Act, including without limitation,
Regulation M, which may limit the timing of purchases and sales of any of the
debentures and common stock by the selling securityholders and any other
relevant person. Furthermore, Regulation M may restrict the ability of any
person engaged in the distribution of the debentures and common stock to engage
in market-making activities with respect to the particular debentures and common
stock being distributed. All of the above may affect the marketability of the
debentures and common stock and the ability of any person or entity to engage in
market-making activities with respect to the debentures and common stock.
Under the securities laws of certain states, the debentures and underlying
common stock may be sold in those states only through registered or licensed
brokers or dealers. In addition, in certain states the debentures and common
stock may not be sold unless the debentures and common stock have been
registered or qualified for sale in the state or an exemption from registration
or qualification is available and is complied with.
We have agreed to indemnify the selling securityholders against certain
civil liabilities, including certain liabilities arising under the Securities
Act, and the selling securityholders will be entitled to contribution from us in
connection with those liabilities. The selling securityholders will indemnify us
against certain civil liabilities, including liabilities arising under the
Securities Act, and will be entitled to contribution from the selling
securityholders in connection with those liabilities.
We are permitted to suspend the use of this prospectus under certain
circumstances relating to pending corporate developments, public filings with
the SEC and similar events for a period not to exceed 60 days in any three-month
period and not to exceed an aggregate of 90 days in any 12-month period.
However, if the duration of such suspension exceeds any of the periods
above-mentioned, we have agreed to pay liquidated damages. Please refer to the
section entitled "Description of Debentures--Registration Rights."
The outstanding common stock is listed for trading on the New York Stock
Exchange under the symbol "CCL." We do not intend to apply for listing of the
debentures on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System. Accordingly, we
cannot assure you about the development of liquidity or any trading market for
the debentures. Please refer to the section entitled "Risk Factors."
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DESCRIPTION OF DEBENTURES
We have issued the debentures pursuant to the indenture dated as of April
25, 2001, between us and US Bank Trust National Association, as trustee, as
supplemented by a first supplemental indenture dated April 25, 2001, governing
the debentures. We refer to the indenture, as so supplemented, as the
"indenture."
The following summary does not purport to be complete, and is subject to,
and is qualified in its entirety by reference to, all of the provisions of the
debentures and the indenture. We urge you to read the indenture and the form of
the debentures, which you may obtain from us upon request. As used in this
description, all references to "our company," "we," "us" or "our" mean Carnival
Corporation, excluding, unless otherwise expressly stated or the context
otherwise requires, its subsidiaries.
GENERAL
The debentures:
- were issued only in registered form without coupons in denominations of
$1,000 and any integral multiple of $1,000 above that amount;
- were limited to $600,000,000 aggregate principal amount;
- mature on April 15, 2021; and
- accrue interest at a rate of 2.00% per year from April 25, 2001 or from
the most recent interest payment date to which interest has been paid or
duly provided, payable semi-annually in arrears on April 15 and October 15
of each year, beginning October 15, 2001.
Interest is paid to the person in whose name a debenture is registered at
the close of business on April 1 or October 1, as the case may be, immediately
preceding the relevant interest payment date. Interest on the debentures is
computed on the basis of a 360-day year composed of twelve 30-day months.
If any interest payment date, maturity date, redemption date or purchase
date of a debenture falls on a day that is not a business day, the required
payment of principal and interest is made on the next succeeding business day as
if made on the date that the payment was due and no interest will accrue on that
payment for the period from and after that interest payment date, maturity date,
redemption date or purchase date, as the case may be, to the date of that
payment on the next succeeding business day. The term "business day" means, with
respect to any debenture, any day other than a Saturday, a Sunday or a day on
which banking institutions in The City of New York are authorized or required by
law, regulation or executive order to close.
The debentures are redeemable prior to maturity only on or after April 15,
2008, as described below under "--Redemption of Debentures at Our Option" and do
not have the benefit of a sinking fund. Principal of and interest on the
debentures will be payable at the office of the paying agent, which initially
will be an office or agency of the trustee, or an office or agency maintained
for such purpose, in the Borough of Manhattan, The City of New York. If certain
conditions have been satisfied, the debentures may be presented for conversion
at the office of the conversion agent, and for registration of transfer or
exchange at the office of the registrar, each such agent initially being the
trustee. No service charge is made for any registration of transfer or exchange
of debentures, but we may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
Maturity, conversion, purchase by us at the option of a holder or redemption
of a debenture will cause interest to cease to accrue on such debenture. We may
not reissue a debenture that has matured or been converted, purchased by us at
the option of a holder, redeemed or otherwise cancelled, except for registration
of transfer, exchange or replacement of such debenture.
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RANKING OF DEBENTURES
The debentures are unsecured and unsubordinated obligations. The debentures
rank equal in right of payment to all of our existing and future unsecured and
unsubordinated indebtedness. However, the debentures are effectively
subordinated to all existing and future obligations of our subsidiaries.
As of August 31, 2001, we had approximately $2.66 billion of total
indebtedness outstanding, which includes approximately $1.21 billion
indebtedness of our consolidated subsidiaries. See "Capitalization."
CONVERSION RIGHTS
The initial conversion rate is 25.5467 shares of common stock per $1,000
principal amount of debentures, subject to adjustment upon the occurrence of
certain events described below. A holder of a debenture otherwise entitled to a
fractional share will receive cash in an amount equal to the value of such
fractional share based on the sale price, as defined below, on the trading day
immediately preceding the conversion date. Upon a conversion, we will have the
right to deliver cash or a combination of cash and common stock, as described
below.
CONVERSION RIGHTS BASED ON COMMON STOCK PRICE. Commencing after May 21,
2001, holders may surrender debentures for conversion into shares of common
stock in any fiscal quarter (and only during such fiscal quarter), if, as of the
last day of the preceding fiscal quarter, the closing sale price of our common
stock for at least 20 trading days in a period of 30 consecutive trading days
ending on the last trading day of such preceding fiscal quarter is more than
$43.05 (110% of the conversion price per share of common stock). Our fiscal
quarters end on the last day of February, May, August and November. The initial
conversion price per share equals $39.14, subject to adjustment as described
below.
"Trading Day" means a day during which trading in securities generally
occurs on the New York Stock Exchange or, if the common stock is not listed on
the New York Stock Exchange, on the principal other national or regional
securities exchange on which the common stock is then listed or, if the common
stock is not listed on a national or regional securities exchange, on the
National Association of Securities Dealers Automated Quotation System or, if the
common stock is not quoted on the National Association of Securities Dealers
Automated Quotation System, on the principal other market on which the common
stock is then traded.
CONVERSION RIGHTS UPON NOTICE OF REDEMPTION. A holder may surrender for
conversion a debenture called for redemption at any time prior to the close of
business on the redemption date, even if it is not otherwise convertible at such
time. A debenture for which a holder has delivered a purchase notice or a change
in control purchase notice as described below requiring us to purchase the
debenture may be surrendered for conversion only if such notice is withdrawn in
accordance with the indenture.
CONVERSION RIGHTS UPON OCCURRENCE OF CERTAIN CORPORATE TRANSACTIONS. If we
are party to a consolidation, merger or binding share exchange pursuant to which
our shares of common stock would be converted into cash, securities or other
property, the debentures may be surrendered for conversion at any time from and
after the date which is 15 days prior to the anticipated effective date of the
transaction until 15 days after the actual date of such transaction and, at the
effective time, the right to convert a debenture into shares of common stock
will be changed into a right to convert it into the kind and amount of cash,
securities or other property of our company or another person which the holder
would have received if the holder had converted the holder's debenture
immediately prior to the transaction. If such transaction also constitutes a
change in control, the holder will be able to require us to purchase all or a
portion of such holder's debentures as described under "--Change in Control
Permits Purchase of Debentures by Us at the Option of the Holder."
In the event we elect to make a distribution described in the third or
fourth bullet of the paragraph under the caption, "--Conversion Rate Adjustment"
below describing adjustments to the
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conversion rate which, in the case of the fourth bullet, has a per share value
equal to more than 15% of the sale price of our shares of common stock on the
day preceding the declaration date for such distribution, we will be required to
give notice to the holders of debentures at least 20 days prior to the
ex-dividend date for such distribution and, upon the giving of such notice, the
debentures may be surrendered for conversion at any time until the close of
business on the business day prior to the ex-dividend date or until we announce
that such distribution will not take place.
Notwithstanding anything to the contrary, no debentures may be surrendered
for conversion pursuant to the first paragraph under this caption and no
corporate transaction requiring an adjustment to the conversion price will be
deemed to have occurred by reason of the completion of a merger, consolidation
or other transaction effected with one of our affiliates for the purpose of:
- changing our jurisdiction of organization; or
- effecting a corporate reorganization, including, without limitation, the
implementation of a holding company structure.
On conversion of debentures, a holder will not receive any cash payment of
interest (unless such debentures or portions thereof have been called for
redemption on a redemption date that occurs between a regular record date and
the third business day after the interest payment date to which it relates). Our
delivery to the holder of the full number of shares of common stock into which
the debenture is convertible, together with any cash payment for such holder's
fractional shares, or cash or a combination of cash and common stock in lieu
thereof, will be deemed:
- to satisfy our obligation to pay the principal amount at maturity of the
debenture; and
- to satisfy our obligation to pay accrued interest attributable to the
period from the most recent interest payment date through the conversion
date.
As a result, interest is deemed to be paid in full rather than cancelled,
extinguished or forfeited.
Notwithstanding the above, if debentures are converted after a record date
but prior to the next succeeding interest payment date, holders of such
debentures at the close of business on the record date will receive the interest
payable on such debentures on the corresponding interest payment date
notwithstanding the conversion. Such debentures, upon surrender for conversion,
must be accompanied by funds equal to the amount of interest payable on the
principal amount of debentures so converted, unless such debentures have been
called for redemption on a redemption date that occurs between a regular record
date and the third business day after the interest payment date to which it
relates, in which case no such payment shall be required.
A certificate for the number of full shares of common stock into which any
debentures are converted, together with any cash payment for fractional shares,
will be delivered through the conversion agent as soon as practicable following
the conversion date. For a discussion of the tax treatment of a holder receiving
shares of common stock upon conversion, see "Certain Panamanian and United
States Federal Income Tax Consequences--Sale or Exchange of Debentures or Shares
of Common Stock" and "--Conversion of Debentures."
In lieu of delivery of shares of our common stock upon notice of conversion
of any debentures (for all or any portion of the debentures), we may elect to
pay holders surrendering debentures an amount in cash per debenture (or a
portion of a debenture) equal to the average sale price of our common stock for
the five consecutive trading days immediately following (a) the date of our
notice of our election to deliver cash as described below if we have not given
notice of redemption, or (b) the conversion date, in the case of conversion
following our notice of redemption specifying that we intend to deliver cash
upon conversion, in either case multiplied by the conversion rate in effect on
that date. We will inform the holders through the trustee no later than two
business days following the conversion date of our election to deliver shares of
our common stock or to pay cash in lieu of delivery of the shares, unless we
have already informed holders of our election in connection with our optional
redemption of the debentures as described under "--Redemption of Debentures at
Our Option." If we
26
elect to deliver all of such payment in shares of our common stock, the shares
will be delivered through the conversion agent no later than the fifth business
day following the conversion date. If we elect to pay all or portion of such
payment in cash, the payment, including any delivery of our common stock, will
be made to holders surrendering debentures no later than the tenth business day
following the applicable conversion date. If an event of default, as described
under "--Events of Default; Waiver and Notice" below (other than a default in a
cash payment upon conversion of the debentures), has occurred and is continuing,
we may not pay cash upon conversion of any debentures or portion of the
debenture (other than cash for fractional shares).
To convert a debenture into shares of common stock, a holder must:
- complete and manually sign the conversion notice on the back of the
debenture or complete and manually sign a facsimile of the conversion
notice and deliver the conversion notice to the conversion agent;
- surrender the debenture to the conversion agent;
- if required by the conversion agent, furnish appropriate endorsements and
transfer documents; and
- if required, pay all transfer or similar taxes.
Pursuant to the indenture, the date on which all of the foregoing
requirements have been satisfied is the conversion date.
CONVERSION RATE ADJUSTMENT. The conversion rate will be adjusted for:
- dividends or distributions on our shares of common stock payable in shares
of our common stock or other capital stock;
- subdivisions, combinations or certain reclassifications of shares of our
common stock;
- distributions to all holders of shares of common stock of certain rights
to purchase shares of common stock for a period expiring within 60 days at
less than the sale price at the time; and
- distributions to all holders of our shares of common stock of our assets
(including shares of capital stock, of or similar equity interests in,
subsidiary or other business unit of ours) or debt securities or certain
rights to purchase our securities (excluding cash dividends or other cash
distributions from current or retained earnings other than, with respect
to any consecutive 12-month period, the amount, if any, by which the
aggregate amount of all cash dividends on the common stock occurring
during such 12-month period exceeds on a per share basis 7.5% of the sale
price of the shares of common stock on the day preceding the date of
declaration of such dividend or other distribution).
In the event that we pay a dividend or make a distribution on shares of our
common stock consisting of capital stock of, or similar equity interests in, a
subsidiary or other business unit of ours, the conversion rate will be adjusted
based on the market value of the securities so distributed relative to the
market value of our common stock, in each case based on the average sale prices
of those securities for the 10 trading days commencing on and including the
fifth trading day after the date on which "ex-dividend trading" commences for
such dividend or distribution on the New York Stock Exchange or such other
national or regional exchange or market on which the securities are then listed
or quoted.
No adjustment to the conversion rate or the ability of a holder of a
debenture to convert will be made if we provide that holders of debentures will
participate in the transaction without conversion or in certain other cases.
The indenture permits us to increase the conversion rate from time to time.
In the event of:
27
- a taxable distribution to holders of shares of common stock which results
in an adjustment of the conversion rate; or
- an increase in the conversion rate at our discretion,
the holders of the debentures may, in certain circumstances, be deemed to have
received a distribution subject to federal income tax as a dividend. See
"Certain Panamanian and United States Federal Income Tax
Consequences--Constructive Dividends."
Upon determination that debenture holders are or will be entitled to convert
their debentures into shares of common stock in accordance with the foregoing
provisions, we will issue a press release and publish such information on our
website on the World Wide Web.
REDEMPTION OF DEBENTURES AT OUR OPTION
Prior to April 15, 2008, the debentures will not be redeemable at our
option. Beginning on April 15, 2008, we may redeem the debentures for cash at
any time as a whole, or from time to time in part, at a price equal to 100% of
the principal amount of the debentures to be redeemed plus accrued and unpaid
interest to, but excluding, the date of redemption. We will give not less than
30 days nor more than 60 days notice of redemption by mail to holders of the
debentures. The notice of redemption will inform the holders of our election to
deliver shares of our common stock or to pay cash or a combination of cash and
common stock.
If we decide to redeem fewer than all of the outstanding debentures, the
trustee will select the debentures to be redeemed in principal amounts of $1,000
or integral multiples of $1,000. In this case, the trustee may select the
debentures by lot, pro rata, or by another method the trustee considers fair and
appropriate.
If the trustee selects a portion of your debentures for partial redemption
and you convert a portion of your debentures, the converted portion will be
deemed to be the portion selected for redemption.
PURCHASE OF DEBENTURES BY US AT THE OPTION OF THE HOLDER
You have the right to require us to purchase your debentures on any April 15
occurring in the years 2005, 2008 and 2011. We are required to purchase, at a
purchase price equal to 100% of the principal amount thereof plus accrued and
unpaid interest to, but excluding, the purchase date, any outstanding debenture
for which a written purchase notice has been properly delivered by the holder to
the paying agent and not withdrawn, subject to certain additional conditions. We
may also add additional dates on which you may require us to purchase all or a
portion of your debentures. However, we cannot assure you that we will add any
purchase dates. You may submit your debentures for purchase to the paying agent
at any time from the opening of business on the date that is 20 business days
prior to the purchase date until the close of business on the purchase date.
Also, our ability to satisfy our purchase obligations may be affected by the
factors described in "Risk Factors" under the heading "We may not have the
ability to raise the funds necessary to finance the change in control repurchase
option or the repurchase at the option of the holder provision in the
debentures."
We may, at our option, elect to pay the purchase price in cash or shares of
common stock, or any combination thereof. For a discussion of the tax treatment
of a holder receiving cash, shares of common stock or any combination thereof,
see "Certain Panamanian and United States Federal Income Tax Considerations."
We are required to give notice on a date not less than 20 business days
prior to the purchase date to all holders at their addresses shown in the
register of the registrar, and to beneficial owners as required by applicable
law, stating among other things:
- whether we will pay the purchase price of the debentures in cash or shares
of common stock or any combination thereof, and specifying the percentages
of each;
28
- if we elect to pay in shares of common stock, the method of calculating
the market price of the common stock; and
- the procedures that holders must follow to require us to purchase their
debentures.
Your purchase notice electing to require us to purchase your debentures must
state:
- if certificated debentures have been issued, the debenture certificate
numbers, or if not, such information as may be required under appropriate
DTC procedures;
- the portion of the principal amount of debentures to be purchased, in
integral multiples of $1,000;
- that we are to purchase the debentures pursuant to the applicable
provisions of the debentures and the indenture; and
- in the event we elect, pursuant to the notice that we are required to
give, to pay the purchase price in shares of common stock, in whole or in
part, but the purchase price is ultimately to be paid to the holder
entirely in cash because any of the conditions to payment of the purchase
price or portion of the purchase price in shares of common stock is not
satisfied prior to the close of business on the purchase date, as
described below, whether the holder elects:
1. to withdraw the purchase notice as to some or all of the debentures
to which it relates; or
2. to receive cash in respect of the entire purchase price for all
debentures or portions of debentures subject to such purchase notice.
If you fail to indicate your choice with respect to the election described
in the final bullet point above, you will be deemed to have elected to receive
cash in respect of the entire purchase price for all debentures subject to the
purchase notice in these circumstances. For a discussion of the tax treatment of
a holder receiving cash instead of shares of common stock, see "Certain
Panamanian and United States Federal Income Tax Considerations--Sale or Exchange
of Debentures or Shares of Common Stock" and "--Conversion of Debentures."
You may withdraw any purchase notice by a written notice of withdrawal
delivered to the paying agent prior to the close of business on the purchase
date. The notice of withdrawal must state:
- the principal amount of the withdrawn debentures;
- if certificated debentures have been issued, the certificate numbers of
the withdrawn debentures, or if not, such information as may be required
under appropriate DTC procedures; and
- the principal amount, if any, of debentures that remain subject to your
purchase notice.
If we elect to pay the purchase price, in whole or in part, in shares of
common stock, the number of shares to be delivered by us will be equal to the
portion of the purchase price to be paid in shares of common stock divided by
the market price of one share of common stock. We will pay cash based on the
market price for all fractional shares in the event we elect to deliver shares
of common stock in payment, in whole or in part, of the purchase price.
The "market price" means the average of the sale prices of the common stock
for the five trading day period ending on the third business day (if the third
business day prior to the purchase date is a trading day or, if not, then on the
last trading day prior to the third business day) prior to the purchase date,
appropriately adjusted to take into account the occurrence, during the period
commencing on the first of such trading days during such five trading day period
and ending on such purchase date, of certain events with respect to the common
stock that would result in an adjustment of the conversion rate.
29
The "sale price" of the common stock on any date means the closing sale
price per share (or if no closing sale price is reported, the average of the bid
and ask prices or, if more than one in either case, the average of the average
bid and the average ask prices) on such date as reported in composite
transactions for the principal United States securities exchange on which the
common stock is traded or, if the common stock is not listed on a United States
national or regional securities exchange, as reported by the National
Association of Securities Dealers Automated Quotation System or by the National
Quotation Bureau Incorporated.
Because the market price of the common stock is determined prior to the
purchase date, holders of debentures bear the market risk with respect to the
value of the common stock to be received from the date such market price is
determined to the purchase date. We may pay the purchase price or any portion of
the purchase price in shares of common stock only if the information necessary
to calculate the market price is published in a daily newspaper of national
circulation or is otherwise readily publicly available.
Upon determination of the actual number of shares of common stock to be
issued for each $1,000 principal amount of debentures in accordance with the
foregoing provisions, we will publish such information on our Web site on the
World Wide Web or through such other public medium as we may use at that time.
Our right to purchase debentures, in whole or in part, with shares of common
stock is subject to our satisfying various conditions, including:
- the listing of such shares of common stock on the principal United States
securities exchange on which the common stock is then listed or, if not so
listed, on Nasdaq;
- the registration of the shares of common stock under the Securities Act
and the Exchange Act, if required; and
- any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such qualification
and registration.
If such conditions are not satisfied with respect to a holder prior to the
close of business on the purchase date, we will pay the purchase price of the
debentures of the holder entirely in cash. See "Certain Panamanian and United
States Federal Income Tax Considerations--Sale, Exchange, Conversion or
Redemption." We may not change the form or components or percentages of
components of consideration to be paid for the debentures once we have given the
notice that we are required to give to holders of debentures, except as
described in the first sentence of this paragraph.
Our ability to purchase debentures with cash may be limited by the terms of
our then existing borrowing agreements. The indenture prohibits us from
purchasing debentures for cash in connection with the holders' purchase right if
any event of default under the indenture has occurred and is continuing, except
a default in the payment of the purchase price with respect to the debentures.
A holder must either effect book-entry transfer or deliver the debentures to
be purchased, together with necessary endorsements, to the office of the paying
agent after delivery of the purchase notice to receive payment of the purchase
price. You will receive payment in cash on the later of the purchase date or the
time of book-entry transfer or the delivery of the debenture. If the paying
agent holds money or securities sufficient to pay the purchase price of the
debenture on the business day following the purchase date, then, immediately
after the purchase date:
- the debenture will cease to be outstanding;
- interest will cease to accrue; and
- all other rights of the holder will terminate.
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This is the case whether or not book-entry transfer of the debenture is made
or whether or not the debenture is delivered to the paying agent.
We will comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act that may be applicable at the time. We
will file Schedule TO or any other schedule under the Exchange Act required in
connection with any offer by us to purchase the debentures at your option.
CHANGE IN CONTROL PERMITS PURCHASE OF DEBENTURES BY US AT THE OPTION OF THE
HOLDER
In the event of a change in control, which occurs on or before April 15,
2008, you will have the right, at your option, subject to the terms and
conditions of the indenture, to require us to purchase for cash any or all of
your debentures in integral multiples of $1,000 principal amount. We will
purchase the debentures at a price equal to 100% of the principal amount of the
debentures to be purchased plus accrued and unpaid interest to, but excluding,
the change in control purchase date.
We are required to purchase the debentures as of the date that is 35
business days after the occurrence of such change in control (a "change in
control purchase date").
A change of control occurs in the following situations:
- any person or group, other than our subsidiaries, any of our or their
employee benefit plans or permitted holders, after the first issuance of
debentures files a Schedule TO or a Schedule 13D (or any successors to
those Schedules) stating that it has become and actually is the beneficial
owner of our voting stock representing more than 50% of the total voting
power of all of our classes of voting stock entitled to vote generally in
the election of the members of our board of directors; or
- permitted holders file a Schedule TO or a Schedule 13D (or any successors
to those Schedules) stating that they have become and actually are
beneficial owners of our voting stock representing more than 80%, in the
aggregate, of the voting power of all of our classes of voting stock
entitled to vote generally in the election of the members of our board of
directors; or
- we consolidate with or merge with or into another person (other than a
subsidiary), we sell, convey, transfer or lease our properties and assets
substantially as an entirety to any person (other than a subsidiary), or
any person (other than a subsidiary) consolidates with or merges with or
into our company, and our outstanding common stock is reclassified into,
exchanged for or converted into the right to receive any other property or
security, provided that none of these circumstances will be a change in
control if the persons that beneficially own our voting stock immediately
prior to a transaction beneficially own, in substantially the same
proportion, shares with a majority of the total voting power of all
outstanding voting securities of the surviving or transferee person that
are entitled to vote generally in the election of that person's board of
directors.
For purposes of this provision, a "permitted holder" means each of Marilyn
B. Arison, Micky Meir Arison, Shari Arison, Michael Arison or their spouses,
children or lineal descendants of Marilyn B. Arison, Micky Meir Arison, Shari
Arison, Michael Arison or their spouses, any trust established for the benefit
of any Arison family member mentioned in this paragraph, or any "person" (as
such term is used in Section 13(d) or 14(d) of the Exchange Act), directly or
indirectly, controlling, controlled by or under common control with any Arison
family member mentioned in this paragraph or any trust established for the
benefit of any such Arison family member or any charitable trust or non-profit
entity established by a permitted holder.
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Notwithstanding anything to the contrary, the completion of a merger,
consolidation or other transaction effected with one of our affiliates for the
purpose of:
- changing our jurisdiction of organization; or
- effecting a corporate reorganization, including, without limitation, the
implementation of a holding company structure
shall not be deemed to be a "change of control."
Within 15 business days after the occurrence of a change in control, we are
obligated to mail to the trustee and to all holders of debentures at their
addresses shown in the register of the registrar and to beneficial owners as
required by applicable law a notice regarding the change in control, stating,
among other things:
- the events causing a change in control;
- the date of such change in control;
- the last date on which the purchase right may be exercised;
- the change in control purchase price;
- the change in control purchase date;
- the name and address of the paying agent and the conversion agent;
- the conversion rate and any adjustments to the conversion rate;
- that debentures with respect to which a change in control purchase notice
is given by the holder may be converted only if the change in control
purchase notice has been withdrawn in accordance with the terms of the
debentures and the indenture; and
- the procedures that holders must follow to exercise these rights.
To exercise this right, you must deliver a written notice to the paying
agent prior to the close of business on the business day immediately before the
change in control purchase date. The required purchase notice upon a change in
control must state:
- if certificated debentures have been issued, the debenture certificate
numbers, or if not, must comply with appropriate DTC procedures;
- the portion of the principal amount of debentures to be purchased, in
integral multiples of $1,000; and
- that we are to purchase such debentures pursuant to the applicable
provisions of the debentures and the indenture.
You may withdraw any change in control purchase notice by a written notice
of withdrawal delivered to the paying agent prior to the close of business on
the business day before the change in control purchase date. The notice of
withdrawal must state:
- the principal amount of the withdrawn debentures, in integral multiples of
$1,000;
- if certificated debentures have been issued, the certificate numbers of
the withdrawn debentures, or if not, must comply with appropriate DTC
procedures; and
- the principal amount, if any, of debentures that remain subject to your
change in control purchase notice.
A holder must either effect book-entry transfer or deliver the debentures to
be purchased, together with necessary endorsements, to the office of the paying
agent after delivery of the change in control
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purchase notice to receive payment of the change in control purchase price. You
will receive payment in cash on the change in control purchase date or the time
of book-entry transfer or the delivery of the debenture. If the paying agent
holds money or securities sufficient to pay the change in control purchase price
of the debenture on the business day following the change in control purchase
date, then, immediately after the change in control purchase date:
- the debenture will cease to be outstanding;
- interest will cease to accrue; and
- all other rights of the holder will terminate.
This will be the case whether or not book-entry transfer of the debenture is
made or whether or not the debenture is delivered to the paying agent.
We will comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act that may be applicable at the time. We
will file Schedule TO or any other schedule under the Exchange Act required in
connection with any offer by us to purchase the debentures at your option.
The change in control purchase feature of the debentures may in certain
circumstances make more difficult or discourage a takeover of us. The change in
control purchase feature, however, is not the result of our knowledge of any
specific effort:
- to accumulate shares of common stock;
- to obtain control of us by means of a merger, tender offer, solicitation
or otherwise; or
- by management to adopt a series of anti-takeover provisions.
Instead, the terms of the change in control purchase feature resulted from
negotiations between Merrill Lynch and us.
We could, in the future, enter into certain transactions, including certain
recapitalizations, that would not constitute a change in control with respect to
the change in control purchase feature of the debentures but that would increase
the amount of our (or our subsidiaries') outstanding indebtedness.
No debentures may be purchased by us at the option of holders upon a change
in control if there has occurred and is continuing an event of default with
respect to the debentures, other than a default in the payment of the change in
control purchase price with respect to the debentures.
For purposes of defining a change of control:
- the term "person" and the term "group" have the meanings given by Sections
13(d) and 14(d) of the Exchange Act or any successor provisions;
- the term "group" includes any group acting for the purpose of acquiring,
holding or disposing of securities within the meaning of Rule 13d-5(b)(1)
under the Exchange Act or any successor provision; and
- the term "beneficial owner" is determined in accordance with Rules 13d-3
and 13d-5 under the Exchange Act or any successor provision, except that a
person will be deemed to have beneficial ownership of all shares that
person has the right to acquire irrespective of whether that right is
exercisable immediately or only after the passage of time.
OWNERSHIP LIMITATION ON DEBENTURES
In order to permit us to retain our status as a publicly traded corporation
under the proposed Treasury Regulations to Section 883 of the Code, debentures
may not be transferred if the transfer
33
would result in ownership by one person or group of related persons by virtue of
the attribution provisions of the Code, other than certain members of the Arison
family and certain trusts established for their benefit, of more than 4.9% of
our common stock, whether measured by vote, value or number of shares. The
calculation of a holder's stockholdings assumes the conversion of the debentures
and other convertible securities issued by us held by that person or group. See
"Description of Capital Stock--Common Stock--Transfer Restrictions" for a
discussion of the attribution provisions. If a person attempts to acquire
debentures in violation of the 4.9% ownership limitation, the putative transfer
to that person would be void, and the intended transferee would acquire no
rights to the debentures. For purposes of this 4.9% limitation, a "transfer"
will include any sale, transfer, gift, assignment, devise or other disposition,
whether voluntary or involuntary, whether of record, constructively or
beneficially, and whether by operation of law or otherwise.
If a prohibited transfer of debentures results in the ownership of
debentures and shares of common stock by any shareholder in violation of the
4.9% limit or would cause us to be subject to United States federal shipping or
aircraft income tax, those debentures the ownership of which is in excess of the
4.9% limit or would cause us to be subject to United States federal shipping or
aircraft income tax will automatically be designated as "excess debentures."
Our board of directors may waive the 4.9% limit or transfer restrictions in
any specific instance if evidence satisfactory to our board of directors and our
tax counsel is presented that such ownership will not jeopardize our status as
exempt from United States income taxation on gross income from the international
operation of a ship or ships, within the meaning of Section 883 of the Code. The
board of directors may also terminate the limit and transfer restrictions
generally at any time for any reason.
Excess debentures will be transferred to a trust. The trustee of the trust
will be appointed by us and will be independent of us and the purported holder
of the excess debentures. The beneficiary of such trust will be one or more
charitable organizations selected by the trustee of such trust. The trust will
be deemed to own the debentures for the beneficiary of such trust on the day
prior to the date of the putative violative transfer.
At the direction of our board of the directors, the trustee of such trust
will transfer the excess debentures held in trust to a person or persons
(including us) whose ownership of such excess debentures will not violate the
4.9% limit or otherwise cause us to become subject to United States shipping
income tax within 180 days after the later of the transfer or other event that
resulted in such excess debentures or we become aware of such transfer or event.
If such a transfer is made, the interest of the charitable beneficiary will
terminate, the designation of such shares as excess debentures will cease and
the prohibited holder of the excess debentures will receive the payment that
reflects a price per debenture for such excess debentures equal to the lesser of
(i) the price received by the trustee of such trust for the sale or other
disposition of the debentures held in trust, and (ii) the price paid by the
prohibited transferee for the debentures, or, if the prohibited transferee did
not give value for such debentures, the market price of the debentures on the
date of the event that resulted in the excess debentures. A prohibited
transferee or holder of the excess debentures will not be permitted to receive
an amount that reflects any appreciation in the excess debentures during the
period that such excess debentures were outstanding. Any amount received in
excess of the amount permitted to be received by the prohibited transferee or
holder of the excess debentures must be turned over to the charitable
beneficiary of the trust.
If the foregoing restrictions are determined to be void or invalid by virtue
of any legal decision, statute, rule or regulation, then the intended transferee
or holder of any excess debentures may be deemed, at our option, to have acted
as an agent on our behalf in acquiring or holding such excess debentures and to
hold such excess debentures on our behalf.
We have the right to purchase any excess debentures held by the trust for a
period of 90 days from the later of (i) the date the transfer or other event
resulting in excess debentures has occurred and
34
(ii) the date the board of directors determines in good faith that a transfer or
other event resulting in excess debentures has occurred. The price per excess
debenture to be paid by us will be equal to the lesser of (i) the price per
debenture paid in the transaction that created such excess debentures (or, in
the case of certain other events, the market price per debenture for the excess
debentures on the date of such event), or (ii) the lowest market price for the
excess debentures at any time after their designation as excess debentures and
prior to the date we accept such offer.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The indenture provides that we may not consolidate with or merge into any
other entity or convey or transfer our properties and assets substantially as an
entirety to any entity, unless:
- the successor or transferee entity is a corporation, limited liability
company trust or partnership organized under the laws of the United States
or any State of the United States or the District of Columbia or the
Republic of Panama or any other country recognized by the United States and
all political subdivisions of such countries;
- the successor or transferee entity, if other than us, expressly assumes by
a supplemental indenture executed and delivered to the trustee, in form
reasonably satisfactory to the trustee, the due and punctual payment of the
principal of, any premium on and any interest on, all the outstanding
debentures and the performance of every covenant in the indenture to be
performed or observed by us and provides for conversion rights in
accordance with applicable provisions of the indenture;
- immediately after giving effect to the transaction, no Event of Default,
as defined in the indenture, and no event which, after notice or lapse of
time or both, would become an Event of Default, has happened and is
continuing; and
- we have delivered to the trustee an officers' certificate and an opinion
of counsel, each in the form required by the indenture and stating that
such consolidation, merger, conveyance or transfer and such supplemental
indenture comply with the foregoing provisions relating to such
transaction.
In case of any such consolidation, merger, conveyance or transfer, the
successor entity will succeed to and be substituted for us as obligor on the
debentures, with the same effect as if it had been named in the indenture as our
company.
EVENTS OF DEFAULT; WAIVER AND NOTICE
An event of default is defined in the indenture as:
(a) default for 30 days in payment of any interest on the debentures or
in payment of any Liquidated Damages under the registration rights agreement
described below;
(b) default in payment of principal of or any premium on the debentures
at maturity, redemption price, purchase price or change in control purchase
price, when the same becomes due and payable;
(c) default in the payment (after any applicable grace period) of any
indebtedness for money borrowed by our company or a Subsidiary in excess of
$30 million in aggregate principal amount (excluding such indebtedness of
any Subsidiary other than a Significant Subsidiary, all the indebtedness of
which Subsidiary is nonrecourse to our company or any other Subsidiary) or
default on such indebtedness that results in the acceleration of such
indebtedness prior to its express maturity, if such indebtedness is not
discharged, or such acceleration is not annulled, by the end of a period of
30 days after written notice to us by the trustee or to us and the trustee
by the holders of at least 25% in principal amount of the outstanding
debentures;
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(d) default by us in the performance of any other covenant contained in
the indenture for the benefit of the debentures that has not been remedied
by the end of a period of 60 days after notice is given as specified in the
indenture; and
(e) certain events of bankruptcy, insolvency and reorganization of our
company or a Significant Subsidiary.
When we refer to a "Significant Subsidiary," we mean any Subsidiary, the Net
Worth of which represents more than 10% of the Consolidated Net Worth of our
company and our Subsidiaries. The terms "Subsidiary," "Net Worth" and
"Consolidated Net Worth" are defined in the indenture.
The indenture provides that:
- if an event of default described in clause (a), (b), (c) or (d) above has
occurred and is continuing, either the trustee or the holders of not less
than 25% in aggregate principal amount of the debentures may declare the
principal of the debentures and the interest accrued thereon to be due and
payable immediately;
- upon certain conditions such declarations may be annulled and past
defaults (except for defaults in the payment of principal of, any premium
on or interest on, the debentures and in compliance with certain covenants)
may be waived by the holders of a majority in aggregate principal amount of
the debentures then outstanding.
- if an event of default described in clause (e) occurs and is continuing,
then the principal amount of all debentures issued under the indenture and
then outstanding and all accrued interest thereon shall become and be due
and payable immediately, without any declaration or other act by the
trustee or any other holder.
Under the indenture the trustee must give to the holders of debentures
notice of all uncured defaults known to it with respect to the debentures within
90 days after such a default occurs (the term default to include the events
specified above without notice or grace periods); provided that, except in the
case of default in the payment of principal of, any premium on or interest on,
any of the debentures, the trustee will be protected in withholding such notice
if it in good faith determines that the withholding of such notice is in the
interests of the holders of the debentures.
No holder of any debentures may institute any action under the indenture
unless:
- such holder has given the trustee written notice of a continuing event of
default with respect to the debentures;
- the holders of not less than 25% in aggregate principal amount of the
debentures then outstanding have requested the trustee to institute
proceedings in respect of such event of default;
- such holder or holders have offered the trustee such reasonable indemnity
as the trustee may require;
- the trustee has failed to institute an action for 60 days thereafter; and
- no inconsistent direction has been given to the trustee during such 60-day
period by the holders of a majority in aggregate principal amount of
debentures.
The holders of a majority in aggregate principal amount of the debentures
affected and then outstanding will have the right, subject to certain
limitations, to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee or exercising any trust or power
conferred on the trustee with respect to the debentures. The indenture provides
that, if an event of default occurs and is continuing, the trustee, in
exercising its rights and powers under the indenture, will be required to use
the degree of care of a prudent man in the conduct of his own affairs. The
36
indenture further provides that the trustee shall not be required to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties under the indenture unless it has reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is reasonably assured to it.
We must furnish to the trustee within 120 days after the end of each fiscal
year a statement of our company signed by one of the officers of our company to
the effect that a review of our activities during such year and of our
performance under the indenture and the terms of the debentures has been made,
and, to the knowledge of the signatories based on such review, we have complied
with all conditions and covenants of the indenture or, if we are in default,
specifying such default.
For the purposes of determining whether the holders of the requisite
principal amount of debentures have taken any action herein described, the
principal amount of debentures will be deemed to be the portion of such
principal amount that would be due and payable at the time of the taking of such
action upon a declaration of acceleration of maturity thereof.
MODIFICATION OF THE INDENTURE
We and the trustee may, without the consent of the holders of the debt
securities issued under the indenture, enter into supplemental indentures for,
among others, one or more of the following purposes:
- to evidence the succession of another corporation to our company, and the
assumption by such successor of our obligations under the indenture and the
debentures;
- to add covenants of our company, or surrender any rights of our company,
or add any rights for the benefit of the holders of debentures;
- to cure any ambiguity, omission, defect or inconsistency in such
indenture;
- to establish the form or terms of any other series of debt securities,
including any subordinated securities;
- to evidence and provide for the acceptance of any successor trustee with
respect to the debentures or one or more other series of debt securities or
to facilitate the administration of the trusts thereunder by one or more
trustees in accordance with such indenture; and
- to provide any additional events of default.
With certain exceptions, the indenture or the rights of the holders of the
debentures may be modified by us and the trustee with the consent of the holders
of a majority in aggregate principal amount of the debentures then outstanding,
but no such modification may be made without the consent of the holder of each
outstanding debenture affected thereby that would:
- change the maturity of any payment of principal of, or any premium on, or
any installment of interest on any debenture, or reduce the principal
amount thereof or the rate of interest or any premium thereon, or change
any place of payment where, or the coin or currency in which, any debenture
or any premium or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
maturity thereof (or, in the case of redemption or repayment, on or after
the redemption date or the repayment date, as the case may be) or adversely
affect the conversion or repurchase provisions in the indenture;
- reduce the percentage in principal amount of the outstanding debentures,
the consent of whose holders is required for any such modification, or the
consent of whose holders is required for any waiver of compliance with
certain provisions of the indenture or certain defaults thereunder and
their consequences provided for in the indenture; or
- modify any of the provisions of certain sections of the indenture,
including the provisions summarized in this paragraph, except to increase
any such percentage or to provide that certain other provisions of the
indenture cannot be modified or waived without the consent of the holder of
each outstanding debenture affected thereby.
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DISCHARGE OF THE INDENTURE
We may satisfy and discharge our obligations under the indenture by
delivering to the trustee for cancellation all outstanding debentures or by
depositing with the trustee, the paying agent or the conversion agent, if
applicable, after the debentures have become due and payable, whether at stated
maturity, or any redemption date, or any purchase date, or a change in control
purchase date, or upon conversion or otherwise, cash or common stock (as
applicable under the terms of the indenture) sufficient to pay all of the
outstanding debentures and paying all other sums payable under the indenture by
our company.
GOVERNING LAW
The indenture and the debentures are governed by and construed in accordance
with the laws of the State of New York.
BOOK-ENTRY SYSTEM
The debentures that were sold to qualified institutional buyers are
evidenced by global securities, which were deposited with, or on behalf of, DTC
and registered in the name of Cede & Co. as DTC's nominee. Except as set forth
below, the global securities may be transferred, in whole or in part, only to
another DTC nominee or to a successor of DTC or its nominee.
After a sale of debentures under this shelf registration statement,
debentures that were held as beneficial interests in the global securities with
DTC will remain as beneficial interests in the global securities.
Persons may hold their interests in the global securities directly through
DTC if they are participants in DTC, or indirectly through organizations that
are participants in DTC. Transfers between participants will be effected in
accordance with DTC rules and will be settled in clearing house funds.
Persons who are not DTC participants may own interests in the global
securities only through DTC participants or certain banks, brokers, dealers,
trust companies and other parties that clear through or maintain a custodial
relationship with a DTC participant. So long as Cede & Co., as the nominee of
DTC, is the registered owner of the global securities, we will consider Cede &
Co. for all purposes to be the sole holder of the global securities. Except as
provided in this section or as described in "Exchange of Beneficial Interests in
the Global Securities for Certificated Debentures," owners of beneficial
interests in the global securities will not have certificates registered in
their names, will not receive physical delivery of certificates in definitive
registered form, and will not be considered the holders of the debentures.
We will pay interest on and the redemption price or repurchase price of the
global securities to Cede & Co., as the registered owner, by wire transfer of
immediately available funds on each interest payment, redemption or repurchase
date. We and the trustee have no responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in the global securities.
DTC has informed us that its practice is to credit participants' accounts on
the payment date with payments in amounts proportionate to their beneficial
interests in the global securities, unless it has reason to believe that it will
not receive payment. Only the DTC participants are responsible for payments to
owners of beneficial interests held through them.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain banks, a person having a beneficial
interest in the principal amount
38
represented by the global securities may be unable to pledge its interest to
persons or entities that do not participate in the DTC system, due to the lack
of a physical certificate evidencing its interest.
We are not responsible for the performance by DTC or its participants or
indirect participants of their obligations. The trustee is also not responsible
for such performance. DTC has advised us that it will take any action permitted
to be taken by a holder of debentures, only at the direction of one or more
participants with an interest in a global security, and only with respect to the
principal amount as to which the participants have given it a direction.
DTC has advised us that it is a limited purpose trust company organized
under the laws of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "clearing
agency" registered under the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participants and to facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes to the accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations such as the initial purchasers of
the debentures. Certain participants (or their representatives), together with
other entities, own DTC. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through,
or maintain a custodial relationship with, a participant, either directly or
indirectly.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in global security among participants, it has no obligation to
perform or continue to perform these procedures. These procedures may be
discontinued at any time.
EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL SECURITY FOR CERTIFICATED
DEBENTURES
A global security is exchangeable for definitive convertible debentures in
registered certificated form if DTC notifies us that it is unwilling or unable
to continue as depositary for the global security and we fail to appoint a
successor depositary within 90 days or if we, at any time and in our sole
discretion, decide not to have the debentures represented by global securities.
PAYMENT OF ADDITIONAL AMOUNTS
Any amounts payable on the debentures will be paid without deduction or
withholding for any taxes, levies, imposts or other governmental charges
imposed, assessed, levied or collected by or for the account of the Republic of
Panama or any of its political subdivisions or taxing authorities or by or for
the account of the jurisdiction of incorporation (other than the United States)
of a successor corporation to us, to the extent that such taxes first become
applicable as a result of the successor corporation becoming the obligor on the
debentures ("foreign taxes"). In addition, if deduction or withholding of any
foreign taxes is ever required by the Republic of Panama or any of its political
subdivisions or taxing authorities (or the jurisdiction of incorporation (other
than the United States) of a successor corporation to us), we will (if the
holders or beneficial owners of the relevant debentures comply with any relevant
administrative requirements) pay any additional amounts ("additional amounts")
required to make the net amounts paid to the holders of the debentures or the
trustee under the indenture, as the case may be, after such deduction or
withholding, equal to the amounts of principal, premium, if any, interest, if
any, and sinking fund or analogous payments, if any, to which those holders or
the trustee are entitled. We are not required to pay additional amounts in
respect of the following taxes ("excluded taxes"):
- any present or future foreign taxes which would not have been so imposed,
assessed, levied or collected if the holder or beneficial owner of the
relevant debenture were not or had not been a domiciliary, national or
resident of, or engaging or having been engaged in business or maintaining
or having maintained a permanent establishment or being or having been
physically
39
present in, the Republic of Panama (or the jurisdiction of incorporation of
a successor corporation to us) or any such political subdivision of such
jurisdiction or otherwise having or having had some connection with any
such jurisdiction other than holding or owning a debenture, or collecting
principal and interest, if any, on, or the enforcement of, a debenture;
- any present or future foreign taxes which would not have been so imposed,
assessed, levied or collected but for the fact that, where presentation is
required, the relevant debenture was presented more than thirty days after
the date the payment became due or was provided for, whichever is later; or
- any present or future foreign taxes which would not have been so imposed,
assessed, levied or collected but for the failure to comply with any
certification, identification or other reporting requirements concerning
the nationality, residence, identity or connection with the Republic of
Panama (or the jurisdiction of incorporation of a successor corporation to
us) or any of its political subdivisions of the holder or beneficial owner
of the relevant debenture, if compliance is required by statute or by rules
or regulations of any such jurisdiction as a condition to relief or
exemption from foreign taxes.
We or any successor to us, as the case may be, will indemnify and hold
harmless each holder of the debentures and upon written request reimburse each
holder for the amount of:
- any foreign taxes levied or imposed and paid by the holder of the
debentures (other than excluded taxes) as a result of payments made with
respect to the debentures;
- any liability (including penalties, interest and expenses) arising from or
in connection with the levying or imposing of any foreign taxes; and
- any foreign taxes levied or imposed with respect to payment of additional
amounts or any reimbursement pursuant to this list.
We or our successor, as the case may be, will also (1) make such withholding
or deduction and (2) remit the full amount deducted or withheld, to the relevant
authority in accordance with applicable law. We or any successor to us, as the
case may be, will furnish the trustee within 30 days after the date the payment
of any foreign taxes is due, certified copies of tax receipts evidencing the
payment by us or any successor to us, as the case may be. The trustee will
forward copies of the tax receipts to the holders of the debentures.
At least 30 days prior to each date on which any payment under or with
respect to the debentures is due and payable, if we will be obligated to pay
additional amounts with respect to those payments, we will deliver to the
trustee an officers' certificate stating that additional amounts will be
payable, stating the amounts that will be payable, and setting forth any other
information necessary to enable the trustee to pay the additional amounts to
holders of the debentures on the payment date.
REDEMPTION OR ASSUMPTION OF DEBENTURES UPON CHANGES OR AMENDMENT TO LAWS
If as the result of any change in or any amendment to the laws, including
any regulations and any applicable double taxation treaty or convention, of the
Republic of Panama (or any jurisdiction of incorporation of a successor
corporation to us other than the United States), or of any of its political
subdivisions or taxing authorities affecting taxation, or any change in an
application or interpretation of those laws, which change, amendment,
application or interpretation becomes effective on or after the original
issuance date of the debentures (or, in certain circumstances, the later date on
which a corporation becomes a successor corporation to us), we determine based
upon an opinion of independent counsel of recognized standing that (i) we would
be required to pay additional amounts on the next succeeding date for the
payment thereof, or (ii) any taxes would be imposed (whether by way of
deduction, withholding or otherwise) by the Republic of Panama (or the
jurisdiction of
40
incorporation, other than the United States, of a successor corporation to us)
or by any of its political subdivisions or taxing authorities, upon or with
respect to any principal, premium, if any, interest, if any, or sinking fund or
analogous payments, if any, then we may, at our option, on giving not less than
30 nor more than 60 days irrevocable notice, redeem the debentures in whole at
any time at a redemption price equal to 100% of the principal amount plus
accrued interest to the date fixed for redemption. No notice of redemption may
be given more than 90 days prior to the earliest date on which we would be
obligated to pay the additional amounts or the tax would be imposed, as the case
may be. Also, at the time that the notice of redemption is given, the obligation
to pay additional amounts or tax, as the case may be, must be in effect.
In the event that the debentures are called for redemption pursuant to the
terms of this provision, the holders of debentures shall have all rights,
including rights to conversion and to the receipt of interest upon conversion,
which such holders would have had if the debentures had been called for
redemption by us pursuant to our rights to redeem the debentures at any time on
or after April 15, 2008.
REGISTRATION RIGHTS
The summary herein of certain provisions of the registration rights
agreement is subject to, and is qualified in its entirety by reference to, all
the provisions of the registration rights agreement, which is incorporated by
reference into the registration statement of which this prospectus forms a part.
We entered into a registration rights agreement with Merrill Lynch pursuant to
which we agreed to file with the SEC, at our expense and for the benefit of the
holders, a shelf registration statement covering resale of the debentures and
the shares of common stock issuable upon conversion of the debentures, within 90
days after the date of original issuance of the debentures. We will use
reasonable best efforts to cause the shelf registration statement to become
effective as promptly as practicable but in any event within 180 days of such
date of original issuance, and to keep the shelf registration statement
effective until the earlier of (i) the transfer pursuant to Rule 144 under the
Securities Act or the sale pursuant to the shelf registration statement of all
the securities registered thereunder, (ii) the expiration of the holding period
applicable to such securities held by persons that are not affiliates of ours
under Rule 144(k) under the Securities Act or any successor provision and (iii)
the second anniversary of the effective date of the registration statement,
subject to certain permitted exceptions. We are permitted to suspend the use of
this prospectus under certain circumstances relating to pending corporate
developments, public filings with the SEC and similar events for a period not to
exceed 60 days in any three-month period and not to exceed an aggregate of 90
days in any 12-month period. We agreed to pay predetermined liquidated damages
as described herein ("Liquidated Damages") to holders of transfer restricted
debentures and holders of transfer restricted common stock issued upon
conversion of the debentures, if a shelf registration statement is not timely
filed or made effective or if the prospectus is unavailable for the periods in
excess of those permitted above. Such Liquidated Damages shall accrue until such
failure to file or become effective or unavailability is cured, (i) in respect
of any debentures at a rate per year equal to 0.25% for the first 90 day period
after the occurrence of such event and 0.50% thereafter of the principal amount
thereof and, (ii) in respect of any shares of common stock issued upon
conversion, at a rate per year equal to 0.25% for the first 90 day period and
0.50% thereafter of the then Applicable Conversion Price (as defined below). So
long as the failure to file or become effective or unavailability continues, we
will pay Liquidated Damages in cash on April 15 and October 15 of each year to
the holder of record of the transfer restricted debentures or shares of common
stock on the immediately preceding April 1 or October 1. When such registration
default is cured, accrued and unpaid Liquidated Damages will be paid in cash to
the record holder as of the date of such cure.
A holder who sells debentures or shares of common stock issued upon
conversion of the debentures pursuant to the shelf registration statement must
complete and deliver to us a notice and
41
questionnaire, at least 10 business days prior to any distribution of the
securities so offered. A holder generally is required to be named as a selling
securityholder in the prospectus or in any Supplements to such prospectus, at
the time of effectiveness, deliver a prospectus to purchasers and be bound by
certain provisions of the registration rights agreement that are applicable to
such holder, including certain indemnification provisions, and will be subject
to certain civil liability provisions under the Securities Act. If the holder of
offered securities is not a named selling securityholder in this prospectus at
the time of effectiveness of the shelf registration statement, we will prepare
and file, if required, as promptly as practicable after the receipt of such
holder's questionnaire, amendments to the shelf registration statement and/or
supplements to the prospectus as are necessary to permit such holder to deliver
this prospectus, including any supplements, to purchasers of the offered
securities, subject to our right to suspend the use of this prospectus as
described above. We will pay all of our expenses relating to the shelf
registration statement, provide copies of such prospectus to each holder that
has notified us of its acquisition of debentures or shares of common stock
issued upon conversion of the debentures, notify each such holder when the shelf
registration statement has become effective and take certain other actions as
are required to permit, subject to the foregoing, unrestricted resales of the
debentures and the shares of common stock issued upon conversion of the
debentures.
The term "Applicable Conversion Price" means, as of any date of
determination, the principal amount of each debenture as of such date of
determination divided by the conversion rate in effect as of such date of
determination or, if no debentures are then outstanding, the conversion rate
that would be in effect were debentures then outstanding.
42
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of 960,000,000 shares of common stock
and 40,000,000 shares of preferred stock. On October 2, 2001, there were
586,164,247 shares of common stock and no shares of preferred stock outstanding.
The following description is qualified in all respects by reference to our
second amended and restated articles of incorporation.
COMMON STOCK
VOTING. Holders of common stock vote as a single class on all matters
submitted to a vote of the shareholders, with each share of common stock
entitled to one vote. In the annual election of directors, the holders of common
stock are not entitled to vote cumulatively.
DIVIDENDS. The holders of the common stock are entitled to receive such
dividends, if any, as may be declared by our board of directors in its
discretion out of funds legally available to be paid as dividends. Panamanian
law permits the payment of dividends to the extent of our retained earnings.
TRANSFER RESTRICTIONS. On February 8, 2000, the United States Treasury
Department issued proposed Treasury Regulations to Section 883 of the Code
relating to income derived by foreign corporations from the international
operation of a ship or ships (which includes certain cruise ship and aircraft
income). The proposed regulations provide, in general, that a foreign
corporation organized in a qualified foreign country and engaged in the
international operation of ships and aircraft shall exclude such income from
gross income for purposes of federal income taxation provided that the
corporation can satisfy certain ownership requirements, including, among other
things, that its stock be publicly traded. A corporation's stock that is
otherwise publicly traded will fail to satisfy this requirement if it is closely
held, i.e., that 50% or more of its stock is owned by persons who each own 5% or
more of the value of the outstanding shares of the corporation's stock.
To the best of our knowledge, after due investigation, we currently qualify
as a publicly traded corporation under the proposed regulations. However,
because certain members of the Arison family and certain trusts established for
their benefit own approximately 46.9% of our common stock, there is the
potential that another shareholder could acquire 5% or more of our common stock
which could jeopardize our qualification as a publicly traded corporation. If we
in the future were to fail to qualify as a publicly traded corporation, we would
be subject to United States income tax on income associated with our cruise
operations in the United States. As a precautionary matter, in 2000, we amended
our articles of incorporation to ensure that we will continue to qualify as a
publicly traded corporation under the proposed regulations.
Our articles have been amended to provide that no one person or group of
related persons, other than certain members of the Arison family and certain
trusts established for their benefit, may own, or be deemed to own by virtue of
the attribution provisions of the Code, more than 4.9% of our common stock,
whether measured by vote, value or number. In addition, the articles generally
restrict the transfer of any shares of our common stock if such transfer would
cause us to be subject to United States shipping income tax. In general, the
attribution rules under the Code applicable in determining whether a person is a
5% shareholder under the proposed regulations attribute stock:
- among specified members of the same family,
- to shareholders owning 50% or more of a corporation from that corporation,
- among corporations that are members of the same controlled group,
- among grantors, beneficiaries and fiduciaries of trusts, and
- to partners of a partnership from that partnership.
For purposes of this 4.9% limit, a "transfer" will include any sale,
transfer, gift, assignment, devise or other disposition, whether voluntary or
involuntary, whether of record, constructively or beneficially, and whether by
operation of law or otherwise. The 4.9% limit will not apply to certain members
of the
43
Arison family and certain trusts established for their benefit. These
shareholders will be permitted to transfer their shares of our common stock
without complying with the limit so long as transfer does not cause us to be
subject to United States income tax on shipping operations.
Our second amended and restated articles of incorporation provide that the
board of directors may waive the 4.9% limit or transfer restrictions (in any
specific instance) if evidence satisfactory to our board of directors and our
tax counsel is presented that such ownership will not jeopardize our status as
exempt from United States income taxation on gross income from the international
operation of a ship or ships, within the meaning of Section 883 of the Code. The
board of directors may also terminate the limit and transfer restrictions
generally at any time for any reason.
If a purported transfer or other event (including owning shares of common
stock in excess of the 4.9% limit on the effective date of the proposed
amendment) results in the ownership of common stock by any shareholder in
violation of the 4.9% limit (or causes us to be subject to United States income
tax on shipping operations), such shares of common stock in excess of the 4.9%
limit or which would cause us to be subject to United States shipping income tax
will automatically be designated as "excess shares" to the extent necessary to
ensure that the purported transfer or other event does not result in ownership
of common stock in violation of the 4.9% limit (or causes us to become subject
to United States income tax on shipping operations) and any proposed transfer
that would result in such an event would be void. Any purported transferee or
other purported holder of excess shares will be required to give us written
notice of a purported transfer or other event that would result in excess
shares. The purported transferee or holders of such excess shares shall have no
rights in such excess shares, other than a right to the payments described
below.
Excess shares will not be treasury stock but rather will continue to be
issued and outstanding shares of our common stock. While outstanding, excess
shares will be transferred to a trust. The trustee of such trust will be
appointed by us and will be independent of us and the purported holder of the
excess shares. The beneficiary of such trust will be one or more charitable
organizations selected by the trustee. The trustee will be entitled to vote the
excess shares on behalf of the beneficiary. If, after the purported transfer or
other event resulting in excess shares and prior to the discovery by us of such
transfer or other event, dividends or distributions are paid with respect to
such excess shares, such dividends or distributions will be repaid to the
trustee upon demand for payment to the charitable beneficiary. All dividends
received or other income declared by the trust will be paid to the charitable
beneficiary. Upon our liquidation, dissolution or winding up, the purported
transferee or other purported holder will receive a payment that reflects a
price per share for such excess shares generally equal to the lesser of (i) in
the case of excess shares resulting from a purported transfer, the price per
share paid in the transaction that created such excess shares (or, in the case
of certain other events, the market price per share for the excess shares on the
date of such event), or (ii) in the case of excess shares resulting from an
event other than a purported transfer, the market price for the excess shares on
the date of such event.
At the direction of the board of the directors, the trustee will transfer
the excess shares held in trust to a person or persons (including us) whose
ownership of such excess shares will not violate the 4.9% limit or otherwise
cause us to become subject to United States shipping income tax within 180 days
after the later of the transfer or other event that resulted in such excess
shares or we become aware of such transfer or event. If such a transfer is made,
the interest of the charitable beneficiary will terminate, the designation of
such shares as excess shares will cease and the purported holder of the excess
shares will receive the payment described below. The purported transferee or
holder of the excess shares will receive a payment that reflects a price per
share for such excess shares equal to the lesser of (i) the price per share
received by the trustee and (ii) the price per share such purported transferee
or holder paid in the purported transfer that resulted in the excess shares (or,
if the purported transferee or holder did not give value for such excess shares
(through a gift, devise or other event) a price per share equal to the market
price on the date of the purported transfer or other event that resulted in the
excess shares). A purported transferee or holder of the excess shares will not
be
44
permitted to receive an amount that reflects any appreciation in the excess
shares during the period that such excess shares were outstanding. Any amount
received in excess of the amount permitted to be received by the purported
transferee or holder of the excess shares must be turned over to the charitable
beneficiary of the trust.
If the foregoing restrictions are determined to be void or invalid by virtue
of any legal decision, statute, rule or regulation, then the intended transferee
or holder of any excess shares may be deemed, at our option, to have acted as an
agent on our behalf in acquiring or holding such excess shares and to hold such
excess shares on our behalf.
We will have the right to purchase any excess shares held by the trust for a
period of 90 days from the later of (i) the date the transfer or other event
resulting in excess shares has occurred and (ii) the date the board of directors
determines in good faith that a transfer or other event resulting in excess
shares has occurred. The price per excess share to be paid by us will be equal
to the lesser of (i) the price per share paid in the transaction that created
such excess shares (or, in the case of certain other events, the market price
per share for the excess shares on the date of such event), or (ii) the lowest
market price for the excess shares at any time after their designation as excess
shares and prior to the date we accept such offer.
These provisions in our second amended and restated articles of
incorporation could have the effect of delaying, deferring or preventing a
change in our control or other transaction in which our shareholders might
receive a premium for their shares of common stock over the then-prevailing
market price or which such holders might believe to be otherwise in their best
interests. To the extent that the proposed regulations are either not adopted or
are adopted in form which, in the opinion of our board of directors, does not
require the proposed amendment to ensure that we will maintain its income tax
exemption for its shipping income, our board of directors may determine, in its
sole discretion, to terminate the 4.9% limit and the transfer restrictions in
the amendment.
TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar for our
common stock is First Union National Bank.
OTHER PROVISIONS. Upon liquidation or dissolution, the holders of shares of
common stock are entitled to receive on a proportionate basis all of our assets
remaining for distribution to common stockholders. The common stock has no
preemptive or other subscription rights and there are no other conversion rights
or redemption or sinking fund provisions with respect to the shares. All shares
of common stock that are currently outstanding are fully paid for and may not be
assessed.
Neither Panamanian law nor our by-laws limit the right of non-resident or
foreign owners to hold or vote shares of the common stock. While no tax treaty
currently exists between the Republic of Panama and the United States, under
current law we believe that distributions to our shareholders other than
residents of Panama or other business entities conducting business in Panama,
are not subject to taxation under the laws of the Republic of Panama.
Under Panamanian law, our directors may vote by proxy.
PREFERRED STOCK
Our board of directors may issue, without further authorization from our
stockholders, up to 40,000,000 shares of preferred stock in one or more series.
Our board of directors may determine, at the time of creating each series, the
distinctive designation of, and the number of shares in, the series, its
dividend rate, the number of votes, if any, allocated to each share of the
series, the price and terms on which the shares may be redeemed, the terms of
any applicable sinking fund, the amount payable upon liquidation, dissolution or
winding up, the conversion rights, if any, and any other rights, preferences and
priorities of the shares as our board of directors may be permitted to fix under
the laws of the Republic of Panama in effect at the time the series is created.
The issuance of preferred stock could adversely affect the voting power of
holders of common stock and could delay, defer or prevent a change in control.
45
CERTAIN PANAMANIAN AND UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES
PANAMA
Under current Panamanian law, because we conduct all of our operations
outside of Panama, no Panamanian taxes or withholding will be imposed on
payments to holders of our securities.
UNITED STATES
The following is a general summary of certain United States federal income
tax consequences that may be relevant to an investment in the debentures but
does not purport to be a complete analysis of all of the potential tax
considerations that you may need to consider before investing based on your
particular circumstances. This discussion is based on existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated thereunder, judicial decisions and administrative rulings and
practice, all of which are subject to change with possible retroactive effect.
This summary applies to you only if you hold the debentures and common stock as
capital assets within the meaning of the Code. This summary does not discuss any
estate, gift, state, local or foreign tax considerations and does not address
all federal income tax consequences applicable to all categories of investors,
some of which may be subject to special rules, such as life insurance companies,
tax-exempt organizations, dealers in securities or currency, regulated
investment companies, banks or other financial institutions, partnerships, S
corporations and other flow-through entities for federal income tax purposes,
holders subject to the alternative minimum tax, expatriates, investors whose
functional currency is not the U.S. dollar and investors who hold the debentures
as part of a hedge, straddle or conversion transaction. In addition, this
summary deals only with debentures acquired in this offering at their original
issue price within the meaning of Section 1273 of the Code and does not discuss
the tax considerations applicable to subsequent purchasers of the debentures,
including the "market discount" and "acquisition premium" rules of the Code. We
have not obtained, nor do we intend to obtain, any ruling from the Internal
Revenue Service (the "IRS") with respect to the statements made and the
conclusions reached in the following summary, and we can not assure you that the
IRS will agree with these statements and conclusions. The summary assumes that
the debentures will be treated as indebtedness and as securities for federal tax
purposes. This summary does not discuss the consequences to you of any
transaction that would constitute a Change in Control, as defined in
"Description of Debentures" above, including but not limited to the tax
consequences of adjustments to the debentures in the event of a consolidation,
merger or other corporate transaction.
IF YOU ARE CONSIDERING THE PURCHASE OF THE DEBENTURES, YOU SHOULD CONSULT
YOUR OWN TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE UNITED STATES
FEDERAL TAX LAWS TO YOUR PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR
UNDER ANY APPLICABLE TAX TREATY.
This summary applies to you if you are a U.S. Holder. For purposes of this
summary, the term "U.S. Holder" means a beneficial owner of debentures or common
stock that is:
- a citizen or resident of the United States;
- a corporation, partnership or other entity created or organized in or
under the laws of the United States or any State thereof (including the
District of Columbia) or a partnership otherwise treated as a United States
person under applicable Treasury Regulations;
- an estate the income of which is subject to United States federal income
taxation regardless of its source; and
- a trust if (a) a court within the United States is able to exercise
primary supervision over the administration of the trust and (b) one or
more persons have the authority to control all
46
substantial decisions of the trust; or an electing trust in existence on
August 20, 1996 to the extent provided in Treasury Regulations.
If a partnership holds debentures or common stock, the tax treatment of a
partner will generally depend upon the status of the partner and upon the
activities of the partnership. If you are a partner in that partnership, you
should consult your own tax advisor.
INTEREST ON DEBENTURES. You generally will be required to recognize
ordinary income when interest on the debentures is paid or accrued, in
accordance with your regular method of tax accounting, for United States federal
income tax purposes. In certain circumstances. we may be obligated to pay you
amounts in excess of stated interest or principal on the debentures. For
example, we would have to pay liquidated damages to you in certain circumstances
described in "Description of the Debentures--Registration Rights of Holders of
the Debentures." According to Treasury Regulations, the possibility of
liquidated damages being paid to you will not affect the amount of interest
income you recognize, in advance of the payment of any liquidated damages, if
there is only a remote chance as of the date the debentures were issued that you
will receive liquidated damages. We believe that the likelihood that we will pay
liquidated damages is remote. Therefore, we do not intend to treat the potential
payment of liquidated damages as part of the yield to maturity of any
debentures. Our determination that these contingencies are incidental or remote
is binding on you unless you disclose your contrary position in the manner
required by applicable Treasury Regulations. Our determination is not, however,
binding on the IRS. In the event a contingency occurs, it would affect the
amount and timing of the income that you must recognize. If we pay liquidated
damages on the debentures, you will be required to recognize additional interest
income.
CONSTRUCTIVE DIVIDENDS. Certain corporate transactions, such as
distributions of assets to holders of our common stock, may be treated as deemed
distributions to you if the conversion price of the debentures is adjusted to
reflect those transactions. Other adjustments to the conversion price of the
debentures may also be treated as deemed distributions to you. Such deemed
distributions will be taxable as a dividend, return of capital or capital gain
in accordance with the rules discussed below under "Dividends on Common Stock"
and you may recognize income as a result even though you receive no cash or
property.
SALE OR EXCHANGE OF DEBENTURES OR SHARES OF COMMON STOCK. You generally
will recognize gain or loss upon the sale, exchange, redemption, retirement or
other disposition of debentures (other than a conversion) measured by the
difference between (i) the amount of cash proceeds and the fair market value of
any property you receive (except to the extent attributable to accrued interest,
which will generally be taxable as ordinary income), and (ii) your adjusted tax
basis in the debentures. In general, if you hold common stock into which the
debentures have been converted, you will recognize gain or loss upon the sale,
exchange or other disposition of the common stock measured by the difference
between (i) the amount of cash and the fair market value of any property you
receive, and (ii) your adjusted basis in the common stock. (For a discussion of
the basis and holding period of shares of common stock, see "--Conversion of
Debentures," below.) Gain or loss on the disposition of debentures or common
stock will generally be capital gain or loss and will be long-term gain or loss
if the debentures or shares of common stock have been held for more than one
year at the time of such disposition.
CONVERSION OF DEBENTURES. You generally will not recognize gain or loss on
the conversion of the debentures solely into common stock, except with respect
to cash received in lieu of fractional shares and except for common stock
attributable to accrued interest which may be taxable as interest as discussed
above. Except for common stock attributable to any accrued interest, your tax
basis in the shares of common stock received upon conversion of the debentures
will be equal to your adjusted tax basis in the debentures exchanged therefor
(less any portion thereof allocable to cash received in lieu of a fractional
share of common stock). Except for common stock attributable to any accrued
interest,
47
the holding period of the common stock will generally include the period during
which you held the debentures prior to conversion. Under the current ruling
policy of the IRS, cash received in lieu of a fractional share of common stock
should generally be treated as a payment in exchange for such fractional share
rather than as a dividend. You generally will recognize gain or loss on the
receipt of cash paid in lieu of such fractional shares equal to the difference
between the amount of cash received and the amount of tax basis allocable to the
fractional shares. To the extent that the common stock you receive on conversion
is attributable to accrued interest on the debentures, you will recognize
ordinary income in accordance with your regular method of accounting for federal
income tax purposes. Your tax basis in the common stock attributable to accrued
interest generally should equal the value of the common stock on the date of
conversion and your holding period in the common stock will not include the
period during which you held the debentures prior to conversion.
DIVIDENDS ON COMMON STOCK. Distributions on shares of our common stock will
constitute dividends and be taxed as ordinary income for United States federal
income tax purposes to the extent of our current or accumulated earnings and
profits as determined under United States federal income tax principles.
Dividends paid to those of you that are United States corporations will not
qualify for the dividends-received deduction. To the extent that you receive
distributions on shares of common stock that would otherwise constitute
dividends for United States federal income tax purposes but that exceed our
current and accumulated earnings and profits, such distributions will be treated
first as a non-taxable return of capital reducing your adjusted tax basis in the
shares of common stock. Any such distributions in excess of your adjusted tax
basis in the shares of common stock will generally be treated as capital gain.
A failure to fully adjust the conversion price of the debentures to reflect
a stock dividend or other event increasing the proportionate interest of holders
of our common stock in our earnings and profits or assets could, in some
circumstances, be deemed to result in the payment of a taxable dividend to the
holders of our common stock.
NON-U.S. HOLDERS
If you are not a U.S. holder, payments to you of interest on the debentures
generally will not be subject to U.S. federal withholding tax if the interest
qualifies as "portfolio interest." Interest on the debentures paid to you
generally will qualify as portfolio interest if:
- the interest is not contingent interest;
- you do not actually or constructively own 10 percent or more of the total
voting power of all of our voting stock and are not a "controlled foreign
corporation" with respect to which we are a "related person" within the
meaning of the Code; and
- you certify under penalty of perjury on an appropriate form that you are
not a U.S. person.
The gross amount of payments of interest on a debenture that do not qualify
for the portfolio interest exception and that are not effectively connected with
your conduct of a trade or business in the United States will be subject to
withholding tax at the rate of 30 percent unless a tax treaty applies to reduce
or eliminate that withholding. If payments of interest are effectively connected
with your conduct of a trade or business in the United States, the interest will
be subject to the U.S. federal income tax that applies to U.S. persons generally
(and with respect to corporate holders under certain circumstances, the branch
profits tax). In order to claim the benefit of a tax treaty or to claim
exemption from withholding because the income is effectively connected with your
conduct of a trade or business in the United States, you must provide a properly
executed IRS Form W-8BEN or W-8ECI (or such successor form as the IRS
designates), as applicable, prior to the payment of interest. These forms must
be periodically updated. If you wish to claim a treaty benefit for a payment
made after December 31, 2000, you may be required to obtain a U.S. taxpayer
identification number and to
48
provide certain documentary evidence issued by non-U.S. governmental authorities
in order to prove your residence in the foreign country.
Subject to the discussion below of information reporting and backup
withholding, if you are not a U.S. holder, any gain you realize on a sale or
exchange of a debenture will not be subject to U.S. federal income tax,
including withholding tax, unless (i) such gain is effectively connected with
your conduct of a trade or business in the United States or (ii) if you are an
individual, you are present in the United States for 183 days or more in the
taxable year of sale, and you meet certain other conditions.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Information reporting and backup withholding may apply to payments of
interest or dividends on or the proceeds of the sale or other disposition of the
debentures or shares of common stock made by us with respect to certain
noncorporate U.S. Holders. If you are a noncorporate U.S. Holder, you generally
will be subject to backup withholding at a rate of 31% unless you supply a
taxpayer identification number, certified under penalties of perjury, as well as
certain other information, or otherwise establish, in the manner prescribed by
law, an exemption from backup withholding. Any amount withheld under backup
withholding is allowable as a credit against federal income tax, upon furnishing
the required information.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON YOUR
PARTICULAR SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES TO YOU OF THE OWNERSHIP AND DISPOSITION OF THE DEBENTURES
AND COMMON STOCK, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES OR OTHER TAX
LAWS.
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EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K for the year ended November 30, 2000 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent certified public accountants, given on the authority of said firm as
experts in auditing and accounting.
LEGAL MATTERS
The validity of the offered debentures has been passed upon by Paul, Weiss,
Rifkind, Wharton & Garrison, New York, New York. The validity of the shares of
the offered common stock has been passed upon by Tapia Linares y Alfaro, Panama
City, Republic of Panama.
James M. Dubin, a partner of Paul, Weiss, Rifkind, Wharton & Garrison and
one of our directors, is the sole stockholder of three corporations which act as
trustees or protectors of various trusts established for the benefit of members
of the Arison family. In this capacity, Mr. Dubin has shared voting or
dispositive rights for approximately 25.3% of our outstanding common stock.
Paul, Weiss, Rifkind, Wharton & Garrison also serves as counsel to Micky Arison,
our chairman and chief executive officer, Shari Arison, one of our directors,
and other Arison family members and trusts.
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