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PROSPECTUS
SUPPLEMENT
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Filed
Pursuant to 424(b)(2)
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(To
Prospectus dated October 17, 2008)
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Registration
No.
333-146540
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$475,000,000
Common
Shares
We
have entered into an ATM Equity OfferingSM Sales
Agreement, dated May 7, 2009, with Merrill Lynch, Pierce, Fenner & Smith
Incorporated, or Merrill Lynch, for the offer and sale of up to $475 million of
our common shares. We previously entered into an ATM Equity OfferingSM Sales
Agreement, dated January 28, 2009, with Merrill Lynch, for the offer and sale of
up to $500.0 million of our common shares. We completed the sale of
95,669,595 common shares pursuant to this January 28, 2009 sales agreement,
resulting in net proceeds of approximately $487.5 million after commissions and
before deducting expenses of the offering.
In
accordance with the terms of the sales agreement, we may offer and sell our
common shares at any time and from time to time through Merrill Lynch as our
sales agent. Sales of the common shares, if any, will be made by
means of ordinary brokers’ transactions on The Nasdaq Global Select Market or
otherwise at market prices prevailing at the time of sale, at prices related to
the prevailing market prices, or at negotiated prices.
Our
common stock is listed on The Nasdaq Global Select Market under the symbol
“DRYS.” The last reported sale price of our common stock on The Nasdaq Global
Select Market on May 6, 2009 was $10.70 per share.
Investing
in our common stock involves a high degree of risk.
See
the risk factors on page S-3 of this prospectus supplement, the risk factors
beginning on page 8 in our Report on Form 6-K filed on May 6, 2009, the risk
factors beginning on page 5 in our annual report on Form 20-F/A filed on April
3, 2009, and the risk factors beginning on page 20 of the prospectus dated
October 17, 2008, to read about the risks you should consider before purchasing
our common stock.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
Merrill
Lynch will receive from us a commission equal to 2.125% of the gross sales price
per share for any common shares sold through it as our sales agent under the
sales agreement. Subject to the terms and conditions of the sales
agreement, Merrill Lynch will use its commercially reasonable efforts to sell on
our behalf any common shares to be offered by us under the sales
agreement.
Merrill
Lynch & Co.
The
date of this prospectus supplement is May 7, 2009
This
document is in two parts. The first part is this prospectus supplement, which
describes the specific terms of this offering and the securities offered hereby,
and also adds to and updates information contained in the accompanying base
prospectus and the documents incorporated by reference into this prospectus
supplement and the base prospectus. The second part, the base prospectus, gives
more general information and disclosure. When we refer only to the prospectus,
we are referring to both parts combined, and when we refer to the accompanying
prospectus, we are referring to the base prospectus.
If
the description of this offering varies between this prospectus supplement and
the accompanying prospectus, you should rely on the information in this
prospectus supplement. This prospectus supplement, the accompanying prospectus
and the documents incorporated into each by reference include important
information about us, the common shares being offered and other information you
should know before investing. You should read this prospectus supplement and the
accompanying prospectus together with the additional information described under
the heading, “Where You Can Find Additional Information” in the accompanying
prospectus before investing in our common shares.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
document includes assumptions, expectations, projections, intentions and beliefs
about future events. These statements are intended as “forward-looking
statements.” We caution that assumptions, expectations, projections, intentions
and beliefs about future events may and often do vary from actual results and
the differences can be material. When used in this document, the words
“anticipate,” “estimate,” “project,” “forecast,” “plan,” “potential,” “may,”
“should,” and “expect” reflect forward-looking statements.
Please
note in this document, “we,” “us,” “our,” and “the Company,” all refer to
DryShips Inc. and its subsidiaries.
All
statements in this document that are not statements of historical fact are
forward-looking statements. Forward-looking statements include, but are not
limited to, such matters as:
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future
operating or financial results;
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statements
about planned, pending or recent acquisitions, business strategy and
expected capital spending or operating expenses, including drydocking and
insurance costs;
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our
ability to enter into new contracts for our drilling rigs and drillships,
and future utilization rates and contract rates for drilling rigs and
drillships;
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future
capital expenditures and investments in the construction, acquisition and
refurbishment of drilling rigs and drillships (including the amount and
nature thereof and the timing of completion
thereof);
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statements
about drybulk shipping market trends, including charter rates and factors
affecting supply and demand;
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our
ability to obtain additional
financing;
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expectations
regarding the availability of vessel acquisitions;
and
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anticipated
developments with respect to pending
litigation.
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The
forward-looking statements in this document are based upon various assumptions,
many of which are based, in turn, upon further assumptions, including without
limitation, management’s examination of historical operating trends, data
contained in our records and other data available from third parties. Although
DryShips Inc. believes that these assumptions were reasonable when made, because
these assumptions are inherently subject to significant uncertainties and
contingencies which are difficult or impossible to predict and are beyond our
control, DryShips Inc. cannot assure you that it will achieve or accomplish
these expectations, beliefs or projections described in the forward-looking
statements contained in this document.
S-1
Important
factors that, in our view, could cause actual results to differ materially from
those discussed in the forward-looking statements include the strength of world
economies and currencies, general market conditions, including changes in
charter rates and drybulk vessel, drilling rig and drillship values, failure of
a seller to deliver one or more drilling rigs, drillships or drybulk vessels,
failure of a buyer to accept delivery of a drilling rig, drillship, or vessel,
inability to procure acquisition financing, default by one or more charterers of
our ships, changes in demand for drybulk commodities or oil, changes in demand
that may affect attitudes of time charterers, scheduled and unscheduled
drydocking, changes in DryShips Inc.’s voyage and operating expenses, including
bunker prices, dry-docking and insurance costs, changes in governmental rules
and regulations, potential liability from pending or future litigation, domestic
and international political conditions, potential disruption of shipping routes
due to accidents, international hostilities and political events or acts by
terrorists.
RECENT
DEVELOPMENTS
Acquisition
of Newbuilding Drillships Identified as Hulls 1837 and 1838
On
October 3, 2008, we entered into a share purchase agreement to acquire the
equity interests of DrillShips Holdings Inc., or DrillShips Holdings, which owns
two newbuilding advanced capability drillships for use in ultra deepwater
drilling locations, identified as Hull 1837 and Hull 1838, and is controlled by
clients of our manager, Cardiff, an affiliated company, including affiliates of
Mr. George Economou, our Chairman, Chief Executive Officer and Interim
Chief Financial Officer. The drillships are sister vessels to drillship Hulls
1865 and 1866, which are also being constructed by Samsung Heavy Industries,
with expected delivery dates in July and September 2011, respectively. The
expected cost of construction is approximately $747.5 million per
unit. As of April 30, 2009, $435.9 million has been paid in
construction related expenses for these hulls, including $230 million with the
proceeds of loan financing payments and $205.9 million in equity contributions
by Drillships Holdings.. In connection with the acquisition of these drillships,
we will assume construction-related payment obligations totaling $1.1 billion
and will assume or have incurred total debt obligations of $230
million. We have not yet obtained financing for this $1.1 billion of
construction-related payment obligations due during 2009 to 2011 for Hulls 1837
and 1838, which amounts to approximately 70% of the purchase price of these
drillships.
The
consideration payable to the sellers of DrillShips Holdings for these two ultra
deepwater drillships will be in the form of newly issued shares of our
subsidiary, Primelead Shareholders Inc., or Primelead Shareholders, which owns
the stock of Ocean Rig ASA. Primelead Shareholders will issue to the sellers of
DrillShips Holdings such number of shares that will be equal to 25% of its then
issued and outstanding shares. The percentage of common shares to be issued to
the sellers of DrillShips Holdings was determined based on valuations of the two
newbuilding drillships prepared by third party appraisers. In October
2008, we advanced on behalf of the owning companies of newbuilding Hulls 1837
and 1838 construction-related payment obligations in the aggregate amount of
$5.0 million. In conjunction with these payments, we entered
into an indemnity agreement with these owning companies, pursuant to which such
owning companies undertook to reimburse us for such payments, plus interest at a
fixed rate of five percent, if the spin off of Primelead Shareholders does not
occur.
Due
to the disruptions in the credit markets worldwide and weakness in the energy
sector, we do not expect to complete the spin off until the second half of
2009. We have received the necessary consents from our lenders in
order to complete the acquisition of DrillShips Holdings, and our board of
directors has determined to proceed with this transaction irrespective of
whether the spin off occurs. Accordingly, pursuant to the terms of
the Share Purchase Agreement dated October 3, 2008, filed as Exhibit 10.1 to our
Registration Statement on Form F-3 ASR (Registration No. 333-146540), as amended
by a Post-Effective Amendment No. 1 on October 20, 2008, we intend to close on
the acquisition of DrillShips Holdings during the second quarter of 2009;
however, there can be no assurance that we will complete the spin off during the
second half of 2009. If the spin off is delayed or does not occur, we
will own and operate a fleet of six ultra deep water semi-submersible drilling
rigs, including four newbuildings. We have not yet secured employment
contracts for any of the newbuilding drillships.
S-2
RISK
FACTORS
We
have identified a number of risk factors which you should consider before buying
the securities we may offer using this prospectus. These risk factors are
incorporated by reference into the Registration Statement of which this
prospectus is a part from the Company’s Report on Form 6-K filed on May 6, 2009
and Annual Report on Form 20-F/A filed on April 3, 2009. In addition, you should
also consider carefully the risks set forth below, as well as those under the
heading “Risk Factors” in the base prospectus before investing in the securities
offered hereby. The occurrence of one or more of these risk factors could
adversely affect our results of operations or financial condition.
Investment
in our shares involves a high degree of risk
The
abrupt and dramatic downturn in the drybulk charter market, from which we have
derived the large majority of our revenues, has severely affected the drybulk
shipping industry and has harmed our business. The Baltic Dry Index
fell 94% from a peak of 11,793 in May 2008 to a low of 663 in December 2008. It
has since risen to 2,065 as of May 6, 2009. However, there is no indication that
the drybulk charter market will experience any significant recovery over the
next several months and the market could decline from its current
level. These circumstances, which result from the economic
dislocation worldwide and the disruption of the credit markets, have had a
number of adverse consequences for drybulk shipping, including, among other
things:
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an
absence of financing for vessels;
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no
active secondhand market for the sale of vessels;
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extremely
low charter rates, particularly for vessels employed in the spot
market;
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charterers
seeking to renegotiate the rates for existing time
charters;
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widespread
loan covenant defaults in the drybulk shipping industry;
and
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declaration
of bankruptcy by some operators and shipowners as well as
charterers.
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Our
loan agreements require that we maintain certain financial and other covenants.
The current low drybulk charter rates and drybulk vessel values have affected
our ability to comply with these covenants. A violation of these covenants
constitutes an event of default under our credit facilities, which would, unless
waived by our lenders, provide our lenders with the right to require us to post
additional collateral, enhance our equity and liquidity, increase our interest
payments, pay down our indebtedness to a level where we are in compliance with
our loan covenants, sell vessels in our fleet, reclassify our indebtedness as
current liabilities, accelerate our indebtedness and foreclose their liens on
our vessels, which would impair our ability to continue to conduct our business.
A total of $1.8 billion of indebtedness has been reclassified as current
liabilities in our audited consolidated balance sheet for the year ended
December 31, 2008 included in our annual report on Form 20-F/A for the year
ended December 31, 2008, as a result of the breach of certain covenants
contained in our loan agreements.
As
of March 31, 2009, we had a working capital deficit of $1.28 billion.
Several of our lenders, which collectively held $2.0 billion of our indebtedness
as of March 31, 2009, have notified us that we are in breach of
certain financial and other covenants contained in our loan
agreements. With respect to our $800 million credit facility with
Nordea Bank Finland Plc, or Nordea Bank, as Agent, we have entered into a waiver
and amendment agreement regarding the waiver of certain covenants through August
12, 2009. We expect to enter into a new $300 million credit facility with Nordea
Bank which will be used to refinance the existing $800 million credit facility.
We expect to complete definitive documentation with respect to this new credit
facility in the second quarter of 2009. We have also entered into
agreements with Piraeus Bank dated April 15, 2009, for covenant waivers through
March 31, 2011, and to restructure our loan facilities. Currently, we are in
discussions with our other lenders, which collectively held an aggregate of $1.4
billion of our indebtedness as of March 31, 2009, for waivers and amendments of
certain financial and other covenants contained in our loan
agreements. For more information, see “Item 5.B. Liquidity and
Capital Resources – Breach of Loan Covenants” in our Annual Report on Form 20-F
for the year ended December 31, 2008, filed on April 3, 2009.
S-3
If
we are unable to obtain waivers or covenant amendments from our banks, our
lenders could accelerate our indebtedness and foreclose on our vessels. In
addition, if conditions in the drybulk charter market remain depressed and the
market value of our vessels declines even further, we may seek to restructure
our outstanding indebtedness.
Accordingly,
your investment in our shares could lose most or all of its
value. Please read the risk factors described herein, in the base
prospectus and in the documents incorporated by reference herein.
We
cannot be assured that we will be able to raise equity and debt financing
sufficient to meet our future capital and operating needs.
We
expect that the net proceeds of this offering will be $464.9 million; however we
cannot assure you that we will be able to sell such amount of common
shares. Furthermore, even if we raise these net proceeds, we cannot
be assured that the proceeds will be sufficient to meet our capital and
operating needs, particularly if the charter rates in the drybulk charter market
remain low for a prolonged period of time. Based on an assumed
offering price of $10.70 per share, which was the last reported closing price of
our common shares on the Nasdaq Global Select Market on May 6, 2009, this
offering of $475 million of our common shares would result in an offer and sale
of 44,392,523 common shares. While we have recently sold 95,669,595 common
shares pursuant to prospectus supplements dated January 28, 2009 and
April 2, 2009, and are offering up to $475 million of our common
shares pursuant to this prospectus supplement, we may have to attempt to sell
additional shares in the future to satisfy our capital and operating needs. If
we do not reduce our working capital deficit, lenders may be unwilling to
provide future financing or will provide future financing at significantly
increased rates. If we sell shares in the future, the prices at which we
sell these future shares will vary, and these variations may be
significant. Purchasers of the shares we sell pursuant to future
offerings, as well as our existing shareholders, will experience significant
dilution if we sell these future shares at prices significantly below the price
at which previous shareholders invested.
Investors
may experience significant dilution as a result of this offering.
If
we sell all of the $475 million of our common shares offered pursuant to this
prospectus supplement, we will have 229,152,523 shares of common stock
outstanding, which represents in the aggregate an increase of 24% in our issued
and outstanding shares of common stock. Because the sales of the
shares offered hereby will be made directly into the market or in negotiated
transactions, the prices at which we sell these shares will vary and these
variations may be significant. Purchasers of the shares we sell, as
well as our existing shareholders, will experience significant dilution if we
sell shares at prices significantly below the price at which they
invested.
No
financing has been arranged for the acquisition of the two newbuilding
drillships under construction, Hulls 1837 and 1838, which we intend to acquire
through our subsidiary, Primelead Shareholders, irrespective of whether the spin
off of Primelead Shareholders occurs.
As
discussed above, whether or not the spin off of Primelead Shareholders occurs,
we intend to acquire DrillShips Holdings, an entity controlled by clients of
Cardiff, an affiliated company, including affiliates of Mr. George
Economou, our Chairman, Chief Executive Officer and Interim Chief Financial
Officer, and which owns contracts for construction of Hulls 1837 and 1838, in
exchange for 25% of the then-outstanding shares of Primelead Shareholders.
On October 3, 2008, DrillShips Holdings signed contracts to purchase Hulls 1837
and 1838, for which, as of April 30, 2009, there are $1.1 billion in remaining
construction-related payment obligations. Financing has not been arranged for
these payments. Furthermore, we will assume indebtedness of $230 million in
connection with the acquisition of DrillShips Holdings, which is in addition to
the indebtedness we have incurred, and will incur, to finance our drybulk fleet
and its operations, as well as drillship Hulls 1865 and 1866. Such
additional indebtedness may have a material adverse effect on our ability to
comply with our loan covenants and service our indebtedness, and impact our
profitability and cash flows.
S-4
The
continued steep decline in the price of crude oil may affect the revenues that
we are able to earn from our drilling rigs and the rates we are able to
negotiate for our newbuilding drillships.
The
price of crude oil is volatile and fell sharply despite significant reductions
in crude production announced by OPEC. Changes in crude oil prices often
affect oil exploration and drilling activities that, in turn, drive changes in
the contract rates for oil drilling equipment, such as deep sea oil rigs and
drillships, or, possibly, cause the suspension of exploration and drilling
programs. Such changes and any such suspension could affect the rates which
we receive for these rigs when their contracts expire, with the result that we
would recognize less revenue from their operations. We entered into an
agreement on April 8, 2009 for the Leiv Eiriksson for a three year period with
Petróleo Brasileiro S.A. at a maximum day rate of $583,000, including a bonus
based on operational performance. The contract is expected to commence upon the
expiration of the rig’s current employment at a rate of $511,000, which is set
to expire in September 2009. The contract for the Eirik Raude, which earns
$629,000 per day on average over the contract period, expires in
October 2011. We have not yet secured employment contracts for any of the
four newbuilding drillships that we have agreed to acquire. Were the
spin off of our subsidiary, Primelead Shareholders, not to occur, and if the
price of crude oil were to remain at, or fall further from, its already
depressed levels, we may not be able to negotiate charter agreements for Hulls
1837, 1838, 1865 or 1866 at attractive rates or at all.
We
may be unable to fulfill our obligations under our agreements to acquire three
newbuilding drybulk vessels and to complete the construction of two newbuilding
drybulk vessels that are expected to be delivered to us in 2009 and
2010.
We
currently have contracts to acquire three newbuilding drybulk vessels and to
complete the construction of two newbuilding drybulk vessels, for which we will
be required to procure additional financing of approximately $215.6
million. Specifically, one of these newbuilding vessels is a Capesize
vessel with delivery scheduled in the summer of 2009 and for which we have paid
$24.7 million as of April 30, 2009, and would be required to obtain financing in
the amount of $91.6. The remaining newbuilding vessels are scheduled
to be delivered in 2010.
Our
ability to obtain financing in the current economic environment, particularly
for the acquisition of drybulk vessels, which are experiencing low charter rates
and depressed vessel values, is limited and unless there is an improvement in
our cash flow from operations and we are successful in obtaining debt financing,
we may not be able to complete these transactions and we could lose our deposit
money, which amounts to $80.4 million for the drybulk carriers as of April 30,
2009, and we may incur additional liability and costs.
USE
OF PROCEEDS
We
will use the net proceeds from the sale of securities offered by this prospectus
supplement to opportunistically acquire additional drybulk vessels in the
current market environment, and for working capital, existing capital
expenditures, repayment of indebtedness, general corporate purposes and, as
needed, to continue to enhance our liquidity and to assist us in complying with
our loan covenants.
S-5
CAPITALIZATION
The
following table sets forth our consolidated capitalization as of March 31,
2009:
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on
an actual basis;
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on
an adjusted basis to give effect to (i) the additional drawdown of $2.2
million for newbuilding Hulls 1865 and 1866; (ii) loan installment
payments and loan repayments of $190.8 million made in April 2009; (iii)
our issuance and sale of 24,404,595 common shares pursuant to our
prospectus supplement dated April 2, 2009, resulting in net
proceeds of $116.9 million after deducting issuance costs of $3 million;
and (iv) our issuance of 6,500,000 common shares pursuant to our
cancellation of the purchase agreements for nine Capesize drybulk
carriers;
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on
a further adjusted basis, giving effect to (i) loan commitments already
incurred of $230 million to finance payments made under the newbuilding
contracts for drillships 1837 and 1838, and (ii) our issuance and sale of
$475 million of our common shares pursuant to this prospectus supplement,
or 44,392,523 common shares, at an assumed offering price of $10.70 per
share, which was the last reported closing price of our common stock on
May 6, 2009, resulting in net proceeds of $464.9 million after deducting
estimated issuance costs of $10.1
million.
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S-6
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As
of March 31, 2009
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Actual
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As
Adjusted
(1)
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As
Further
Adjusted
(2) (3)
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(in
thousands of U.S. dollars)
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Cash
and cash equivalents
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$ | 215,578 | $ | 141,703 | $ | 606,609 | ||||||
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Restricted
cash(3)
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$ | 506,837 | $ | 506,837 | $ | 506,837 | ||||||
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Total
debt, including current portion
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$ | 2,888,120 | $ | 2,699,507 | $ | 2,929,507 | ||||||
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Shareholders’
equity
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Preferred
stock, $0.01 par value; 500,000,000 shares authorized, none
issued
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- | - | - | |||||||||
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Common
stock, $0.01 par value; 1,000,000,000 shares authorized, 153,855,405
shares issued and outstanding at March 31, 2009; 184,760,000 shares issued
as adjusted; 229,152,523 shares as further adjusted (4)
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1,539 | 1,848 | 2,292 | |||||||||
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Additional
paid-in capital
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1,630,592 | 1,747,232 | 2,211,694 | |||||||||
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Accumulated
other comprehensive loss
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(41,476 | ) | (41,476 | ) | (41,476 | ) | ||||||
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Retained
Earnings
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65,547 | 65,547 | 65,547 | |||||||||
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Total
shareholders’ equity
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1,656,202 | 1,773,151 | 2,238,057 | |||||||||
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Total
capitalization
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$ | 4,544,322 | $ | 4,472,658 | $ | 5,167,564 | ||||||
(1)
There have been no significant adjustments to our capitalization since May
7, 2009, as so adjusted.
(2)
Assumes a sale price of $10.70 per share, which was the last reported closing
price of our common stock on May 6, 2009.
(3)
Restricted cash represents bank deposits to be used to fund loan installments
coming due and minimum cash deposits required to be maintained with certain
banks under our borrowing arrangements.
(4)
Does not include “out of the money” five-year warrants issued to entities
controlled by our Chairman, Chief Executive Officer and Interim Chief Financial
Officer, George Economou for the purchase of up to 3.5 million common shares
with exercise prices, depending on the relevant tranches, of between $20 and $30
per share.
The
table above includes $177 million in debt incurred in respect of the drillship
newbuilding contracts for Hulls 1865 and 1866, which are owned by the Company,
and $230 million in debt incurred in respect of the newbuilding contracts for
Hulls 1837 and 1838, which have not yet been acquired. However, the table above
does not include $205.9 million in equity payments already made by DrillShips
Holdings to finance payments made under the drillship newbuilding contracts for
Hulls 1837 and 1838, and an additional $1.1 billion of construction-related
payment obligations due in 2009 and afterwards, the financing for which has not
yet been arranged.
S-7
PLAN
OF DISTRIBUTION
We
have entered into a sales agreement with Merrill Lynch under which we may issue
and sell from time to time up to $475 million of our common shares through
Merrill Lynch as our sales agent. The Company issued and sold a total
of 95,669,595 common shares pursuant to its prospectus supplements dated January
28 and April 2, 2009, the net proceeds of which were approximately $487.5
million after commissions and before deducting expenses of the offering. This
prospectus supplement relates to the offer of up to an additional $475 million
of our common shares pursuant to the sales agreement. Sales of our
common shares, if any, will be made by means of ordinary brokers’ transactions
on The Nasdaq Global Select Market, or Nasdaq, otherwise at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
or at negotiated prices. As agent, Merrill Lynch will not engage in any
transactions that stabilize our common shares.
Merrill
Lynch will offer the common shares subject to the terms and conditions of the
sales agreement on a daily basis or as otherwise agreed upon by us and Merrill
Lynch. We will designate the maximum amount and minimum price of common shares
to be sold through Merrill Lynch on a daily basis or otherwise determine such
amounts together with Merrill Lynch. Subject to the terms and conditions of the
sales agreement, Merrill Lynch will use its commercially reasonable efforts to
sell on our behalf all of the designated common shares. We may instruct Merrill
Lynch not to sell common shares if the sales cannot be effected at or above the
price designated by us in any such instruction. We or Merrill Lynch may suspend
the offering of common shares being made through Merrill Lynch under the sales
agreement upon proper notice to the other party.
Merrill
Lynch will receive from us a commission equal to 2.125% of the gross sales price
per share for any common shares sold through it as our sales agent under the
sales agreement. The remaining sales proceeds, after deducting any expenses
payable by us and any transaction fees imposed by any governmental, regulatory,
or self-regulatory organization in connection with the sales, will equal our net
proceeds for the sale of such common shares.
Merrill
Lynch will provide written confirmation to us following the close of trading on
The Nasdaq Global Select Market each day in which common shares are sold by it
for us under the sales agreement. Each confirmation will include the number of
common shares sold on that day, the gross sales price per common share, the net
proceeds to us, and the compensation payable by us to Merrill
Lynch.
Settlement
for sales of common shares will occur, unless the parties agree otherwise, on
the third business day that is also a trading day following the date on which
any sales were made in return for payment of the net proceeds to us. There is no
arrangement for funds to be received in an escrow, trust, or similar
arrangement.
We
will report at least quarterly the number of common shares sold through Merrill
Lynch under the sales agreement, the net proceeds to us, and the compensation
paid by us to Merrill Lynch in connection with the sales of common
shares.
In
connection with the sale of the common shares on our behalf, Merrill Lynch may
be deemed to be an “underwriter” within the meaning of the Securities Act of
1933, as amended, or the Securities Act, and the compensation paid to Merrill
Lynch may be deemed to be underwriting commissions or discounts. We have agreed
in the sales agreement to provide indemnification and contribution to Merrill
Lynch against certain civil liabilities, including liabilities under the
Securities Act.
If
Merrill Lynch or we have reason to believe that the exemptive provisions set
forth in Rule 101(c)(1) of Regulation M under the Securities Exchange Act
of 1934 are not satisfied, that party will promptly notify the other and sales
of common shares under the sales agreement will be suspended until that or other
exemptive provisions have been satisfied in the judgment of Merrill Lynch and
us.
S-8
We
estimate that the total expenses of the offering payable by us, excluding
discounts and commissions payable to Merrill Lynch under the sales agreement,
will be approximately $100,000.
The
offering of common shares pursuant to the sales agreement will terminate upon
the earlier of (1) the sale of up to $475 million of our common shares offered
by this prospectus supplement and the accompanying prospectus and (2) the
termination of the sales agreement by either Merrill Lynch or us.
No
Sales of Similar Securities by our Chairman, Chief Executive Officer and Interim
Chief Financial Officer
Mr.
George Economou, our Chairman, Chief Executive Officer and Interim Chief
Financial Officer, has agreed that for 60 days from the date of this prospectus
supplement (or 60 days from the date of a subsequent prospectus supplement filed
in connection with this offering), he will not sell or transfer any shares of
our common stock without first obtaining the written consent of Merrill
Lynch. Specifically, Mr. Economou has agreed, subject to certain
exceptions, not directly or indirectly, to:
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offer,
pledge, sell or contract to sell any shares of common
stock;
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sell
any option or contract to purchase any shares of common
stock;
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purchase
any option or contract to sell any shares of common
stock;
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grant
any option, right or warrant for the sale of any shares of common
stock;
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lend
or otherwise dispose of or transfer any shares of common
stock;
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request
or demand that we file a registration statement related to the common
stock; or
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enter
into any swap or other agreement that transfers, in whole or in part, the
economic consequence of ownership of any shares of common stock whether
any such swap or transaction is to be settled by delivery of shares or
other securities, in cash or
otherwise.
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These
lock-up provisions apply to our common stock and to securities convertible into
or exchangeable or exercisable for or repayable with our common
stock. These provisions also apply to common stock owned now or
acquired later by such persons or for which such persons later acquire the power
of disposition. In the event that either (a) during the last 17 days
of the 60-day period referred to above, we issue an earnings release or material
news or a material event relating to us occurs or (b) prior to the expiration of
the 60-day restricted period, we announce that we will release earnings results
or become aware that material news or a material event will occur during the
16-day period beginning on the last day of the 60-day restricted period, the
restrictions described above will continue to apply until the expiration of the
18-day period beginning on the issuance of the earnings release or the
occurrence of the material news or material event. The lock-up
provisions do not apply to transfers to immediate family or donees who receive
such securities as bona fide gifts; provided that such transferees agree to
substantially the same transfer restrictions on the securities they
receive.
Registration
Rights
In connection with the
cancellation of our agreement to purchase nine Capesize drybulk carriers, dated
March 6, 2009, we have agreed to register with the Securities and Exchange
Commission (i) the 6.5 million common shares issued pursuant to this
cancellation and (ii) up to 3.5 million common shares issuable upon exercise of
the warrants issued pursuant to this cancellation, for resale promptly following
the expiration of the applicable six month lock up period, to the extent such
common shares and/or common shares issued upon exercise of the warrants are not
eligible to be resold within a 90-day period from the date of such expiration
pursuant to Rule 144 under the Securities Act of 1933, as amended. This
transaction closed on April 8, 2009.
LEGAL
MATTERS
The
validity of the securities offered by this prospectus supplement with respect to
Marshall Islands law and certain other legal matters relating to United States
and Marshall Islands law will be passed upon for us by Seward & Kissel LLP,
New York, New York. The sales agent is being represented by Morgan, Lewis &
Bockius LLP, New York, New York.
S-9
EXPENSES
The
following are the estimated expenses of the issuance and distribution of the
securities offered by this prospectus supplement, all of which will be paid by
us.
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Legal
fees and expenses
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$60,000
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Accounting
fees and expenses
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$30,000
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Miscellaneous
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$10,000
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Total:
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$100,000
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SK
23113 0002 989278 v6
S-10