Registration Statement No. 333 -
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM F-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DRYSHIPS INC.
(Exact name of registrant as specified in its charter)
Republic of the Marshall Islands N/A
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
DryShips Inc. Seward & Kissel LLP
80 Kiffissias Avenue Attention: Gary J. Wolfe, Esq.
Amaroussion 15125 One Battery Park Plaza
Athens, Greece New York, New York 10004
(30) 210 80 90 570 (212) 574-1200
(Address and telephone number of (Name, address and telephone
Registrant's principal executive number of agent for service)
offices)
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Copies to:
Gary J. Wolfe, Esq.
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
(212) 574-1200
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Approximate date of commencement of proposed sale to the public: From time
to time after this registration statement becomes effective as determined by
market conditions and other factors.
If only securities being registered on the Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a registration statement pursuant to General Instruction I.C. or
a post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. [x]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.C. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities
Act, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Amount to be
Title of Each Class of Registered/Proposed
Securities to be Maximum Aggregate Amount of
Registered Offering Price Registration Fee
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Common Shares, par
value $ 0.01 per share
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Preferred Shares, par
value $ 0.01 per share
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Debt Securities
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Guarantees
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Warrants
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Purchase Contracts
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Units
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Total Indeterminate $ 0 (1)
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(1) An indeterminate aggregate initial offering price or number of securities
of each identified class is being registered as may from time to time be
offered at indeterminate prices. Also includes such indeterminate amount of
debt securities and number of preferred shares and common shares as may be
issued upon conversion or exchange for any other debt securities or
preferred shares that provide for conversion or exchange into other
securities. In connection with the securities offered hereby, the
Registrant is deferring payment of all of the registration fees and will
"pay-as-you-go" registration fees in accordance with Rule 456(b) and Rule
457(r).
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The information in this prospectus is not complete and may be changed. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
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Subject to completion, dated October 5, 2007
DRYSHIPS INC.
[GRAPHIC OMITTED]
Through this prospectus, we may periodically offer:
(1) our common stock,
(2) our preferred shares,
(3) our debt securities, which may be guaranteed by one or more of our
subsidiaries,
(4) our warrants,
(5) our purchase contracts, and
(6) our units.
The prices and terms of the securities that we will offer will be
determined at the time of their offering and will be described in a supplement
to this prospectus.
Our common shares are currently quoted on The Nasdaq Global Market under
the symbol "DRYS."
The securities issued under this prospectus may be offered directly or
through underwriters, agents or dealers. The names of any underwriters, agents
or dealers will be included in a supplement to this prospectus.
An investment in these securities involves risks. See the section entitled
"Risk Factors" beginning on page 5.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these securities, or
determined if this prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
The date of this prospectus is , 2007
TABLE OF CONTENTS
Page
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PROSPECTUS SUMMARY.............................................................1
RISK FACTORS...................................................................5
USE OF PROCEEDS...............................................................18
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS.....................18
RATIO OF EARNINGS TO FIXED CHARGES............................................20
CAPITALIZATION................................................................21
PLAN OF DISTRIBUTION..........................................................21
ENFORCEMENT OF CIVIL LIABILITIES..............................................22
DESCRIPTION OF CAPITAL STOCK..................................................23
DESCRIPTION OF PREFERRED SHARES...............................................26
DESCRIPTION OF WARRANTS.......................................................27
DESCRIPTION OF DEBT SECURITIES................................................28
DESCRIPTION OF PURCHASE CONTRACTS.............................................37
DESCRIPTION OF UNITS..........................................................37
EXPENSES......................................................................38
LEGAL MATTERS.................................................................38
EXPERTS.......................................................................38
WHERE YOU CAN FIND ADDITIONAL INFORMATION.....................................38
Unless otherwise indicated, all dollar references in this prospectus are to
U.S. dollars and financial information presented in this prospectus that is
derived from financial statements incorporated by reference is prepared in
accordance with accounting principles generally accepted in the United States.
This prospectus is part of a registration statement we filed with the
Securities Exchange Commission, or the Commission, using a shelf registration
process. Under the shelf registration process, we may sell the common shares,
preferred shares, debt securities (and related guarantees), warrants, purchase
contracts and units described in this prospectus in one or more offerings. This
prospectus provides you with a general description of the securities we may
offer. Each time we offer securities, we will provide you with a prospectus
supplement that will describe the specific amounts, prices and terms of the
offered securities. The prospectus supplement may also add, update or change the
information contained in this prospectus. You should read carefully both this
prospectus and any prospectus supplement, together with the additional
information described below.
This prospectus does not contain all the information provided in the
registration statement we filed with the Commission. For further information
about us or the securities offered hereby, you should refer to that registration
statement, which you can obtain from the Commission as described below under
"Where You Can Find More Information".
This section summarizes some of the information that is contained later in
this prospectus or in other documents incorporated by reference into this
prospectus. As an investor or prospective investor, you should review carefully
the risk factors and the more detailed information that appears later in this
prospectus or is contained in the documents that we incorporate by reference
into this prospectus.
PROSPECTUS SUMMARY
Unless the context otherwise requires, as used in this prospectus, the
terms "Company," "we," "us," and "our" refer to DryShips Inc. and all of its
subsidiaries, and "DryShips Inc." refers only to DryShips Inc. and not to its
subsidiaries.
We use the term deadweight tonne, or dwt, in describing the size of
vessels. Dwt, expressed in metric tons each of which is equivalent to 1,000
kilograms, refers to the maximum weight of cargo and supplies that a vessel can
carry.
Our Company
We are a Marshall Islands corporation with our principal executive offices
in Athens, Greece. We were incorporated in September 2004. As of October 5,
2007, we own and operate, through our subsidiaries, 41 drybulk carriers, 35 of
which we have acquired following our initial public offering in February 2005.
Since our inception in 2004, we have increased the size and carrying capacity of
our fleet from six vessels and approximately 514,890 dwt to 41 vessels of
approximately 3,747,092 dwt.
Our affiliate, Cardiff Marine Inc., or Cardiff, manages our vessels under
separate ship management agreements.
On February 3, 2005, our common stock began trading on The Nasdaq National
Market under the symbol "DRYS" in connection with our initial public offering.
The net proceeds of our initial public offering, which were approximately $251.3
million, were used to finance the acquisition of 21 vessels, consisting of three
Capesize drybulk carriers, 16 Panamax drybulk carriers and two Handymax drybulk
carriers. The total cost of these acquisitions was approximately $847.6 million.
As of October 5, 2007, we own and operate a fleet of 41 vessels consisting
of eight Capesize drybulk carriers, including three newbuilding Capesize drybulk
carriers, 30 Panamax drybulk carriers including two newbuilding Panamax drybulk
carriers, two newbuilding Kamsarmax drybulk carriers and one Handysize drybulk
carrier. Our fleet principally carries a variety of drybulk commodities
including major bulks such as coal, iron ore, and grains, and minor bulks such
as bauxite, phosphate, fertilizers and steel products. The average age of the
vessels in our fleet is 8.5 years.
We employ our vessels in the spot charter market, under period time
charters and in drybulk carrier pools. Three of the Panamax drybulk carriers in
our fleet are currently operated in a Panamax drybulk carrier pool. Pools have
the size and scope to combine spot market voyages, time charters and contracts
of affreightment with freight forward agreements for hedging purposes and to
perform more efficient vessel scheduling thereby increasing fleet utilization.
Fourteen of our vessels are currently on time charter.
All of our vessels are managed by Cardiff, a Liberian corporation with
offices in Greece. We are under common control with Cardiff.
As of October 5, 2007, our fleet is comprised of the following vessels:
Current
Built DWT Type Employment Gross Rate Earliest Latest
Capesize:
Manasota 2004 171,061 Capesize TC $55,000 Prompt Nov-07
Alameda 2001 170,269 Capesize TC $73,000 Jan-08 Mar-08
Samsara 1996 150,393 Capesize TC $55,500 Prompt Nov-07
Netadola 1993 149,475 Capesize TC $52,500 Prompt Nov-07
Brisbane 1995 151,066 Capesize Spot $93,000 Prompt Prompt
9.0 792,264 5
Panamax:
Bargara 2002 74,832 Panamax Spot $75,300 Dec-07 Dec-07
Capitola 2001 74,832 Panamax Spot $50,000 Prompt Prompt
Catalina 2005 74,432 Panamax Spot $63,125 Prompt Prompt
Coronado 2000 75,706 Panamax Spot $53,750 Prompt Prompt
Ecola 2001 73,931 Panamax Spot $48,500 Prompt Prompt
Formentera 1996 70,002 Panamax Spot $42,000 Prompt Prompt
Heinrich Oldendorff 2001 73,931 Panamax BB $28,000 Apr-08 Jun-09
Iguana 1996 70,349 Panamax TC $28,000 Prompt Nov-07
La Jolla 1997 72,126 Panamax TC $46,000 Prompt Dec-07
Lacerta 1994 71,862 Panamax Baumarine $59,176
Lanzarote 1996 73,008 Panamax TC $43,750 Prompt Nov-07
Ligari 2004 75,583 Panamax TC $31,550 Prompt Nov-07
Maganari 2001 75,941 Panamax TC $18,400 Apr-08 Jul-08
Majorca 2005 74,364 Panamax Spot $72,000 Nov-07 Nov-07
Marbella 2000 72,561 Panamax Spot $61,000 Prompt Prompt
Mendocino 2002 76,623 Panamax TC $37,500 Prompt Dec-07
Menorca 1997 71,662 Panamax Spot $75,000 Nov-07 Nov-07
Ocean Crystal 1999 73,688 Panamax TC $40,000 Prompt Nov-07
Padre 2004 73,601 Panamax TC $30,000 Prompt Nov-07
Paragon 1995 71,259 Panamax Spot $64,000 Prompt Prompt
Primera 1998 72,495 Panamax Spot $49,500 Prompt Prompt
Redondo 2000 74,716 Panamax Spot $55,000 Prompt Prompt
Solana 1995 75,100 Panamax Spot $64,250 Prompt Prompt
Sonoma 2001 74,786 Panamax Baumarine $60,941
Tonga 1984 66,798 Panamax Spot $53,000 Prompt Prompt
Toro 1995 73,034 Panamax Baumarine $58,742
Waikiki 1995 75,473 Panamax TC $36,750 Jan-08 Mar-08
Xanadu 1999 72,270 Panamax Spot $69,000 Prompt Prompt
8.2 2,054,965 28
Handymax:
Matira 1994 45,863 Handymax TC $32,300 Prompt Dec-07
13.0 45,863 1
Newbuildings:
TBN 2009 180,000 Capesize
TBN 2009 180,000 Capesize
TBN 2010 180,000 Capesize
TBN 2010 82,000 Kamsarmax
TBN 2010 82,000 Kamsarmax
TBN 2009 75,000 Panamax
TBN 2010 75,000 Panamax
854,000 7
Total Fleet 8.5 3,747,092 41
1. For spot vessels the TCE rate is for the current voyage.
2. For vessels trading in the Baumarine pool the TCE rate is the Pool's
estimate for earnings in the month of September.
3. The MV Heinrich Oldendorff is employed under a bareboat charter.
4. The quoted rates are not indications of future earnings and the Company
gives no assurance or guarrantee of future rates.
Our Business Strategy
We focus our business strategy on providing reliable seaborne
transportation services for drybulk cargoes at a competitive cost. We believe we
can achieve our business objectives and increase shareholder value through our
business strategy. The elements of our business strategy consist of:
o Fleet Expansion Through Second Hand Vessel Acquisitions. We intend to
grow our fleet through timely and selective acquisitions of drybulk
carriers. We will seek to identify potential second hand vessel acquisition
candidates among all size categories of drybulk carriers in order to gain a
worldwide presence in the drybulk carrier market with a fleet capable of
servicing virtually all major ports and routes used for the seaborne
transportation of key commodities and raw materials. We believe that
second-hand vessels when operated in a cost efficient manner provide better
value to shareholders as compared to more expensive newbuilding vessels. We
therefore expect to maintain an average fleet age of between 10 to 20
years.
o Diversified Fleet Profile. We intend to develop a diversified fleet of
drybulk carriers in all size categories: Capesize, Panamax, Handymax and
Handysize. Larger drybulk carriers, such as Capesize and Panamax vessels,
have historically experienced a greater degree of freight rate volatility,
while smaller drybulk carriers, such as Handymax and Handysize vessels,
enjoy greater charter rate stability. Furthermore, a diversified drybulk
carrier fleet will enable us to serve our customers in both major and minor
bulk trades. Our vessels are able to trade worldwide in a multitude of
trade routes carrying a wide range of cargoes for a number of industries.
Capesize and Panamax drybulk carriers carry predominantly coal and iron ore
for energy and steel production as well as grain for feedstocks. Handymax
and Handysize drybulk carriers carry iron and steel products, fertilizers,
minerals, forest products, ores, bauxite, alumina, cement and other
construction materials. These raw materials and products are used as
production inputs in a number of industries. We will transport these
various cargoes on several geographical routes thereby reducing our
dependency on any one cargo, trade route or industry and maximizing fleet
utilization.
o Combined Fleet Employment. As we expand our fleet of drybulk carriers, we
will actively and strategically employ our fleet between spot charters,
which generally last for periods of ten days to four months, and fixed
employment contracts, including time or bareboat charters, which can last
up to several years. We will also continue to participate in drybulk
carrier pools. Drybulk carriers operating in the spot market may generate
increased or decreased profit margins during periods of improvement or
deterioration in freight (or charter) rates, while drybulk carriers
operating on fixed employment contracts provide more predictable cash
flows. We may also enter into freight forward agreements in order to hedge
our exposure to market volatility.
Corporate Structure
Subsequent to our formation in September 2004, we issued 15,400,000 shares
of our common stock to the Entrepreneurial Spirit Foundation, or the Foundation,
as consideration for the contribution to us of all of the issued and outstanding
capital stock of six of our subsidiaries. These subsidiaries owned six vessels
in our initial fleet, namely Shibumi, Flecha, Striggla, Mostoles, Panormos and
Lacerta. All the vessels have been sold except Lacerta.
Prior to our initial public offering, the Foundation transferred 2,772,000
shares to Advice Investments S.A. and 1,848,000 shares to Magic Management Inc.
In February 2005, we issued 14,950,000 shares of common stock in connection
with our initial public offering.
On February 14, 2006, the Foundation transferred its shares to its
wholly-owned subsidiary, Elios Investments Inc., a corporation organized under
the laws of the Republic of the Marshall Islands ("Elios Investments").
Mr. Economou, our Chairman and Chief Executive Officer, has been active in
shipping since 1976 and formed Cardiff in 1991. Cardiff is responsible for all
technical and commercial management functions of our fleet. We believe that
Cardiff has established a reputation in the international drybulk shipping
industry for operating and maintaining a fleet with high standards of
performance, reliability and safety. We are under common control with Cardiff.
Cardiff is controlled by the Foundation, which in turn, is controlled by Mr.
Economou.
Cardiff provides comprehensive ship management services including technical
supervision, such as repairs, maintenance and inspections, safety and quality,
crewing and training, as well as supply provisioning. Cardiff's commercial
management services include operations, chartering, sale and purchase,
post-fixture administration, accounting, freight invoicing and insurance.
Cardiff completed early implementation of the International Maritime
Organization's, or IMO, International Management Code for the Safe Operation of
Ships and Pollution Prevention, or ISM Code, in 1996. Cardiff has obtained
documents of compliance for its office and safety management certificates for
its vessels as required by the ISM Code and has been ISO 14001 certified since
2003, in recognition of its commitment to overall quality.
We maintain our principal executive offices at 80 Kifissias Avenue,
Amaroussion 15125, Athens, Greece. Our telephone number at that address is (011)
(30) (210) 809 0570.
The Securities We May Offer
We may use this prospectus to offer our:
o common stock,
o preferred shares,
o debt securities,
o warrants,
o purchase contracts, and
o units.
Our debt securities may be guaranteed pursuant to guarantees by our
subsidiaries.
A prospectus supplement will describe the specific types, amounts, prices,
and detailed terms of any of these offered securities and may describe certain
risks in addition to those set forth below associated with an investment in the
securities. Terms used in the prospectus supplement will have the meanings
described in this prospectus, unless otherwise specified.
RISK FACTORS
You should consider carefully the following factors, as well as the other
information set forth in this prospectus, before making an investment decision.
You should also consider carefully the risks set forth under the heading "Risk
Factors" in any prospectus supplement before investing in the securities offered
thereby. Some of the following risks relate principally to the industry in which
we operate and our business in general. Other risks relate principally to the
securities market and ownership of our stock. Any of the risk factors could
significantly and negatively affect our business, financial condition or
operating results and the trading price of our stock. You could lose all or part
of your investment.
Industry Specific Risk Factors
Charterhire rates for drybulk carriers are volatile and may decrease in the
future, which would adversely affect our earnings
The drybulk shipping industry is cyclical with attendant volatility in
charterhire rates and profitability. The degree of charterhire rate volatility
among different types of drybulk carriers has varied widely. Charterhire rates
for Panamax and Capesize drybulk carriers have declined from their historically
high levels. Because we generally charter our vessels pursuant to short-term
time charters, we are exposed to changes in spot market rates for drybulk
carriers and such changes may affect our earnings and the value of our drybulk
carriers at any given time. We may be unable to successfully charter our vessels
in the future or renew existing charters at rates sufficient to allow us to meet
our obligations or to pay dividends to our stockholders. Because the factors
affecting the supply and demand for vessels are outside of our control and are
unpredictable, the nature, timing, direction and degree of changes in industry
conditions are also unpredictable.
Factors that influence demand for vessel capacity include:
o demand for and production of drybulk products;
o global and regional economic and political conditions;
o the distance drybulk is to be moved by sea; and
o changes in seaborne and other transportation patterns.
The factors that influence the supply of vessel capacity include:
o the number of new building deliveries;
o port and canal congestion;
o the scrapping rate of older vessels;
o vessel casualties; and
o the number of vessels that are out of service.
We anticipate that the future demand for our drybulk carriers will be
dependent upon continued economic growth in the world's economies, including
China and India, seasonal and regional changes in demand, changes in the
capacity of the global drybulk carrier fleet and the sources and supply of
drybulk cargo to be transported by sea. The capacity of the global drybulk
carrier fleet seems likely to increase and economic growth may not continue.
Adverse economic, political, social or other developments could have a material
adverse effect on our business and operating results.
The market values of our vessels may decrease, which could limit the amount of
funds that we can borrow under our credit facility
The fair market values of our vessels have generally experienced high
volatility. The market prices for secondhand Panamax and Capesize drybulk
carriers have declined from historically high levels. You should expect the
market value of our vessels to fluctuate depending on general economic and
market conditions affecting the shipping industry and prevailing charterhire
rates, competition from other shipping companies and other modes of
transportation, types, sizes and age of vessels, applicable governmental
regulations and the cost of newbuildings. If the market value of our fleet
declines, we may not be able to draw down the full amount of our credit facility
and we may not be able to obtain other financing or incur debt on terms that are
acceptable to us or at all.
The market values of our vessels may decrease, which could cause us to breach
covenants in our credit facility and adversely affect our operating results
If the market values of our vessels, which have declined from historically
high levels, decrease further, we may breach some of the covenants contained in
the financing agreements relating to our indebtedness at the time, including
covenants in our credit facility. Under our Credit Facility, the Company is
required to hold bank deposits which are used to fund the loan installments when
due. The funds may only be used for purposes of loan repayments and are shown on
the Company's balance sheet as restricted cash. Restricted cash also includes
additional minimum cash deposits required to be maintained with certain banks
under our borrowing arrangements.
If we do breach such covenants and we are unable to remedy the relevant
breach, our lenders could accelerate our debt and foreclose on our fleet. In
addition, if the book value of a vessel is impaired due to unfavorable market
conditions or a vessel is sold at a price below its book value, we would incur a
loss that could adversely affect our operating results.
World events could affect our results of operations and financial condition
Terrorist attacks such as those in New York on September 11, 2001 and in
London on July 7, 2005 and the continuing response of the United States to these
attacks, as well as the threat of future terrorist attacks in the United States
or elsewhere, continues to cause uncertainty in the world's financial markets
and may affect our business, operating results and financial condition. The
continuing conflict in Iraq may lead to additional acts of terrorism and armed
conflict around the world, which may contribute to further economic instability
in the global financial markets. These uncertainties could also adversely affect
our ability to obtain additional financing on terms acceptable to us or at all.
In the past, political conflicts have also resulted in attacks on vessels,
mining of waterways and other efforts to disrupt international shipping,
particularly in the Arabian Gulf region. Acts of terrorism and piracy have also
affected vessels trading in regions such as the South China Sea. Any of these
occurrences could have a material adverse impact on our operating results,
revenues and costs.
Terrorist attacks, such as the October 2002 attack on the VLCC Limburg, a
vessel not related to us, may in the future also negatively affect our
operations and financial condition and directly impact our vessels or our
customers. Future terrorist attacks could result in increased volatility of the
financial markets in the United States and globally and could result in an
economic recession affecting the United States or the entire world. Any of these
occurrences could have a material adverse impact on our revenues and costs.
Our operating results are subject to seasonal fluctuations, which could
adversely affect our operating results and the amount of available cash with
which we can pay dividends
We operate our vessels in markets that have historically exhibited seasonal
variations in demand and, as a result, in charterhire rates. This seasonality
may result in quarter-to-quarter volatility in our operating results, which
could affect the amount of dividends that we pay to our stockholders from
quarter to quarter. The drybulk carrier market is typically stronger in the fall
and winter months in anticipation of increased consumption of coal and other raw
materials in the northern hemisphere during the winter months. In addition,
unpredictable weather patterns in these months tend to disrupt vessel scheduling
and supplies of certain commodities. As a result, our revenues have historically
been weaker during the fiscal quarters ended June 30 and September 30, and,
conversely, our revenues have historically been stronger in fiscal quarters
ended December 31 and March 31. Seasonal fluctuations in demand could materially
affect our operating results and cash available for distribution to our
stockholders as dividends.
Rising fuel prices may adversely affect our profits
Fuel is a significant, if not the largest, expense in our shipping
operations when vessels are not under period charter. Changes in the price of
fuel may adversely affect our profitability. The price and supply of fuel is
unpredictable and fluctuates based on events outside our control, including
geopolitical developments, supply and demand for oil and gas, actions by OPEC
and other oil and gas producers, war and unrest in oil producing countries and
regions, regional production patterns and environmental concerns. Further, fuel
may become much more expensive in the future, which may reduce the profitability
and competitiveness of our business versus other forms of transportation, such
as truck or rail.
We are subject to international safety regulations and the failure to comply
with these regulations may subject us to increased liability, may adversely
affect our insurance coverage and may result in a denial of access to, or
detention in, certain ports
The operation of our vessels is affected by the requirements set forth in
the United Nations' International Maritime Organization's International
Management Code for the Safe Operation of Ships and Pollution Prevention, or
"ISM Code." The ISM Code requires shipowners, ship managers and bareboat
charterers to develop and maintain an extensive "Safety Management System" that
includes the adoption of a safety and environmental protection policy setting
forth instructions and procedures for safe operation and describing procedures
for dealing with emergencies. The failure of a shipowner or bareboat charterer
to comply with the ISM Code may subject it to increased liability, may
invalidate existing insurance or decrease available insurance coverage for the
affected vessels and may result in a denial of access to, or detention in,
certain ports. If we are subject to increased liability for noncompliance or if
our insurance coverage is adversely impacted as a result of noncompliance, we
may have less cash available for distribution to our stockholders as dividends.
If any of our vessels are denied access to, or are detained in, certain ports,
this may decrease our revenues.
Increased inspection procedures and tighter import and export controls could
increase costs and disrupt our business
International shipping is subject to various security and customs
inspection and related procedures in countries of origin and destination.
Inspection procedures may result in the seizure of contents of our vessels,
delays in the loading, offloading or delivery and the levying of customs duties,
fines or other penalties against us.
It is possible that changes to inspection procedures could impose
additional financial and legal obligations on us. Furthermore, changes to
inspection procedures could also impose additional costs and obligations on our
customers and may, in certain cases, render the shipment of certain types of
cargo uneconomical or impractical. Any such changes or developments may have a
material adverse effect on our business, financial condition and results of
operations.
Maritime claimants could arrest one or more of our vessels, which could
interrupt our cash flow
Crew members, suppliers of goods and services to a vessel, shippers of
cargo and other parties may be entitled to a maritime lien against a vessel for
unsatisfied debts, claims or damages. In many jurisdictions, a claimant may seek
to obtain security for its claim by arresting a vessel through foreclosure
proceedings. The arrest or attachment of one or more of our vessels could
interrupt our cash flow and require us to pay large sums of money to have the
arrest or attachment lifted. In addition, in some jurisdictions, such as South
Africa, under the "sister ship" theory of liability, a claimant may arrest both
the vessel which is subject to the claimant's maritime lien and any "associated"
vessel, which is any vessel owned or controlled by the same owner. Claimants
could attempt to assert "sister ship" liability against one vessel in our fleet
for claims relating to another of our vessels.
Governments could requisition our vessels during a period of war or emergency,
resulting in a loss of earnings
A government could requisition one or more of our vessels for title or for
hire. Requisition for title occurs when a government takes control of a vessel
and becomes her owner, while requisition for hire occurs when a government takes
control of a vessel and effectively becomes her charterer at dictated charter
rates. Generally, requisitions occur during periods of war or emergency,
although governments may elect to requisition vessels in other circumstances.
Although we would be entitled to compensation in the event of a requisition of
one or more of our vessels, the amount and timing of payment would be uncertain.
Government requisition of one or more of our vessels may negatively impact our
revenues and reduce the amount of cash we have available for distribution as
dividends to our stockholders.
Company Specific Risk Factors
We are dependent on short-term time charters in a volatile shipping industry and
a decline in charterhire rates would affect our results of operations and
ability to pay dividends
We charter our vessels primarily pursuant to short-term time charters. The
short-term time charter market is highly competitive and spot market charterhire
rates (which affect time charter rates) may fluctuate significantly based upon
available charters and the supply of, and demand for, seaborne shipping
capacity. While our focus on the short-term time charter market may enable us to
benefit in periods of increasing charterhire rates, we must consistently renew
our charters and this dependence makes us vulnerable to declining charter rates.
As a result of the volatility in the drybulk carrier charter market, we may not
be able to employ our vessels upon the termination of their existing charters at
their current charterhire rates. The drybulk carrier charter market is volatile,
and in the past short-term time charter and spot market charter rates for
drybulk carriers have declined below operating costs of vessels. We cannot
assure you that future charterhire rates will enable us to operate our vessels
profitably or to pay you dividends.
Our earnings may be adversely affected if we are not able to take advantage of
favorable charter rates
We charter our dry bulk carriers to customers primarily pursuant to spot
market voyage charters or short-term time charters, which generally last from
several days to several weeks, and time charters, which can last up to several
years. We may in the future extend the charter periods for additional vessels in
our fleet. Our vessels that are committed to longer-term charters may not be
available for employment on short-term charters during periods of increasing
short-term charter hire rates when these charters may be more profitable than
long-term charters.
An economic slowdown in the Asia Pacific region could materially reduce the
amount and/or profitability of our business
A significant number of the port calls made by our vessels involve the
loading or discharging of raw materials and semi-finished products in ports in
the Asia Pacific region. As a result, a negative change in economic conditions
in any Asia Pacific country, particularly in China, may have an adverse effect
on our business, financial position and results of operations, as well as our
future prospects. In particular, in recent years, China has been one of the
world's fastest growing economies in terms of gross domestic product. Such
growth may not be sustained and the Chinese economy may experience contraction
in the future. Moreover, any slowdown in the economies of the United States of
America, the European Union or certain Asian countries may adversely effect
economic growth in China and elsewhere. Our business, financial position and
results of operations, as well as our future prospects, will likely be
materially and adversely affected by an economic downturn in any of these
countries.
Investment in derivative instruments such as freight forward agreements could
result in losses
From time to time, we may take positions in derivative instruments
including freight forward agreements, or FFAs. FFAs and other derivative
instruments may be used to hedge a vessel owner's exposure to the charter market
by providing for the sale of a contracted charter rate along a specified route
and period of time. Upon settlement, if the contracted charter rate is less than
the average of the rates, as reported by an identified index, for the specified
route and period, the seller of the FFA is required to pay the buyer an amount
equal to the difference between the contracted rate and the settlement rate,
multiplied by the number of days in the specified period. Conversely, if the
contracted rate is greater than the settlement rate, the buyer is required to
pay the seller the settlement sum. If we take positions in FFAs or other
derivative instruments and do not correctly anticipate charter rate movements
over the specified route and time period, we could suffer losses in the settling
or termination of the FFA. This could adversely affect our results of operations
and cash flows.
We depend entirely on Cardiff to manage and charter our fleet
We currently have two employees, our Chief Executive Officer who also acts
as the Interim Chief Financial Officer, and our Internal Auditor. Following the
resignation of our Chief Financial Officer on May 29, 2007, we are seeking to
employ a Chief Financial Officer. We have no plans to hire additional employees.
We subcontract the commercial and technical management of our fleet, including
crewing, maintenance and repair to Cardiff Marine Inc. ("Cardiff"), an
affiliated company. 70% of the issued and outstanding capital stock of Cardiff
is owned by a foundation which is controlled by Mr. Economou, our Chairman and
Chief Executive Officer, and a director of our Company. The remaining 30% of the
issued and outstanding capital stock of Cardiff is owned by a company controlled
by the sister of Mr. Economou. The loss of Cardiff's services or its failure to
perform its obligations to us could materially and adversely affect the results
of our operations. Although we may have rights against Cardiff if it defaults on
its obligations to us, you will have no recourse against Cardiff. Further, we
are required to seek approval from our lenders to change our manager.
Cardiff is a privately held company and there is little or no publicly available
information about it
The ability of Cardiff to continue providing services for our benefit will
depend in part on its own financial strength. Circumstances beyond our control
could impair Cardiff's financial strength, and because it is privately held it
is unlikely that information about its financial strength would become public
unless Cardiff began to default on its obligations. As a result, an investor in
our shares might have little advance warning of problems affecting Cardiff, even
though these problems could have a material adverse effect on us.
Our Chairman and Chief Executive Officer has affiliations with Cardiff which
could create conflicts of interest
Our majority shareholder is controlled by Mr. George Economou who controls
two companies that, in aggregate, own 34.3% of us and a foundation that owns 70%
of Cardiff. Mr. Economou is also our Chairman and Chief Executive Officer,
Interim Chief Financial Officer and a director of our Company. These
responsibilities and relationships could create conflicts of interest between
us, on the one hand, and Cardiff, on the other hand. These conflicts may arise
in connection with the chartering, purchase, sale and operations of the vessels
in our fleet versus drybulk carriers managed by other companies affiliated with
Cardiff and Mr. Economou. In particular, Cardiff may give preferential treatment
to vessels that are beneficially owned by related parties because Mr. Economou
and members of his family may receive greater economic benefits.
Companies affiliated with Cardiff own and may acquire vessels that compete with
our fleet which may create conflicts of interest between Cardiff as our fleet
manager and us
McCallister Shipping S.A., Erato Owning Company Limited and Glorious Marine
Co. Ltd. are companies affiliated with Cardiff that each owns a Capesize drybulk
carrier. Mentor Owning Company Limited and Iris Owing Company Limited are
companies affiliated with Cardiff that each owns a Handymax drybulk carrier. The
five vessels owned by those companies, or the "Bareboat Charter Vessels", are
currently employed under bareboat charters that end in the period from June 2007
to September 2014. Subject to the obligations of Mr. Economou set forth in a
letter agreement between him and the Company to use commercially reasonable
efforts to cause the sale of the Bareboat Charter Vessels, and to give us a
right of first refusal to acquire them, when the Bareboat Charter Vessels are
redelivered to the owners, they may be managed by Cardiff in competition with
our fleet. In addition, Cardiff's affiliates may acquire additional drybulk
carriers in the future, subject to a right of first refusal that Mr. Economou
has granted to us in that letter agreement. Furthermore, Panatrade Shipping and
Management S.A., Calypso Marine Corp., Oil Transport Investments Limited,
Innovative Investments Limited and Ambassador Shipping Corporation, companies
affiliated with Cardiff, each own a Capesize drybulk carrier. These vessels also
could be in competition with our fleet and Cardiff and other companies
affiliated with Cardiff might be faced with conflicts of interest with respect
to their own interests and their obligations to us. Cardiff may give
preferential treatment to other companies affiliated with it, which may
adversely affect our results of operations.
We may not be able to pay dividends
Our current dividend policy is to declare quarterly distributions to
stockholders of $0.20 per share by each January, April, July and October. The
timing and amount of dividends will depend on our earnings, financial condition,
cash requirements and availability, restrictions in our loan agreements, the
provisions of Marshall Islands law affecting the payment of dividends and other
factors. The declaration and payment of dividends, if any, will always be
subject to the discretion of our board of directors. The timing and amount of
any dividends declared will depend on, among other things, our earnings,
financial condition and cash requirements and availability, our ability to
obtain debt and equity financing on acceptable terms as contemplated by our
growth strategy and provisions of Marshall Islands law affecting the payment of
dividends. The international drybulk shipping industry is highly volatile, and
we cannot predict with certainty the amount of cash, if any, that will be
available for distribution as dividends in any period. Also, there may be a high
degree of variability from period to period in the amount of cash that is
available for the payment of dividends.
We may incur expenses or liabilities or be subject to other circumstances in the
future that reduce or eliminate the amount of cash that we have available for
distribution as dividends, including as a result of the risks described in this
prospectus. Our growth strategy contemplates that we will finance the
acquisition of additional vessels through a combination of debt and equity
financing on terms acceptable to us. If financing is not available to us on
acceptable terms, our board of directors may determine to finance or refinance
acquisitions with cash from operations, which would reduce or even eliminate the
amount of cash available for the payment of dividends.
Marshall Islands law generally prohibits the payment of dividends other than
from surplus (retained earnings and the excess of consideration received for the
sale of shares above the par value of the shares) or while a company is
insolvent or would be rendered insolvent by the payment of such a dividend. We
may not have sufficient surplus in the future to pay dividends. We may be unable
to pay dividends in the amounts contemplated by our dividend policy, or at all.
We may have difficulty managing our planned growth properly
We intend to continue to grow our fleet. Our future growth will primarily
depend on our ability to:
o locate and acquire suitable vessels;
o identify and consummate acquisitions or joint ventures;
o enhance our customer base;
o manage our expansion; and
o obtain required financing on acceptable terms.
Growing any business by acquisition presents numerous risks, such as
undisclosed liabilities and obligations, the possibility that indemnification
agreements will be unenforceable or insufficient to cover potential losses and
difficulties associated with imposing common standards, controls, procedures and
policies, obtaining additional qualified personnel, managing relationships with
customers and integrating newly acquired assets and operations into existing
infrastructure. We may be unable to successfully execute our growth plans or we
may incur significant expenses and losses in connection with our future growth
which would have an adverse impact on our financial condition and results of
operations.
Our credit facilities impose operating and financial restrictions on us. These
restrictions limit our ability to, among other things:
o pay dividends or make capital expenditures if we do not repay amounts drawn
under the credit facilities, if there is a default under the credit
facilities or if the payment of the dividend or capital expenditure would
result in a default or breach of a loan covenant;
incur additional indebtedness, including through the issuance of guarantees;
o change the flag, class or management of our vessels;
o create liens on our assets;
o sell our vessels;
o merge or consolidate with, or transfer all or substantially all our assets
to, another person; and/or
o enter into a new line of business.
Therefore, we may need to seek permission from our lenders in order to engage in
some corporate actions. Our lenders' interests may be different from ours and we
may be unable to obtain our lender's permission when needed. This may limit our
ability to pay dividends to you, finance our future operations, make
acquisitions or pursue business opportunities.
Our loan agreements may prohibit or impose certain conditions on the payment of
dividends
Under our credit facility we are restricted in our payments of dividends.
For example, we agreed that we would not pay dividends in 2006 in excess of
$18.0 million; however we were permitted to request our lender's consent for
additional dividend payments. Thereafter, we have agreed not to pay dividends in
any year that exceed 50% of our net income for that year, as evidenced by the
relevant annual audited financial statements. On November 15, 2006 we requested
and received consent from our lender for the payment of third quarter dividends
of $7.0 million, which exceeded the $18.0 million threshold for 2006.
Purchasing and operating secondhand vessels may result in increased operating
costs and reduced fleet utilization
While we have the right to inspect previously owned vessels prior to our
purchase of them and we intend to inspect all secondhand vessels that we acquire
in the future, such an inspection does not provide us with the same knowledge
about their condition that we would have if these vessels had been built for and
operated exclusively by us. A secondhand vessel may have conditions or defects
that we were not aware of when we bought the vessel and which may require us to
incur costly repairs to the vessel. These repairs may require us to put a vessel
into drydock which would reduce our fleet utilization. Furthermore, we usually
do not receive the benefit of warranties on secondhand vessels.
In the highly competitive international shipping industry, we may not be able to
compete for charters with new entrants or established companies with greater
resources and as a result, we may be unable to employ our vessels profitably
We employ our vessels in a highly competitive market that is capital
intensive and highly fragmented. Competition arises primarily from other vessel
owners, some of whom have substantially greater resources than we do.
Competition for the transportation of drybulk cargo by sea is intense and
depends on price, location, size, age, condition and the acceptability of the
vessel and its operators to the charterers. Due in part to the highly fragmented
market, competitors with greater resources could enter the drybulk shipping
industry and operate larger fleets through consolidations or acquisitions and
may be able to offer lower charter rates and higher quality vessels than we are
able to offer. If we are unable to successfully compete with other drybulk
shipping companies, this would have an adverse impact on our results of
operations.
We may be unable to attract and retain key management personnel and other
employees in the shipping industry, which may negatively impact the
effectiveness of our management and results of operations
Our success depends to a significant extent upon the abilities and efforts
of our management team. The loss of any of these individuals, difficulty in
hiring and retaining personnel could adversely affect our business prospects,
financial condition and results of operations. We have entered into employment
contracts with our Chairman and Chief Executive Officer, George Economou, and
our former Chief Financial Officer, Gregory Zikos. Mr. Zikos resigned on May 29,
2007 and Mr. Economou has been appointed interim Chief Financial Officer. Our
success will depend upon our ability to retain key members of our management
team and to hire new members as may be necessary. The loss of any of these
individuals could adversely affect our business prospects and financial
condition. Difficulty in hiring and retaining replacement personnel could have a
similar effect. We do not currently, nor do we intend to, maintain "key man"
life insurance on any of our officers.
Risks associated with operating ocean-going vessels could affect our business
and reputation, which could adversely affect our revenues and stock price
The operation of ocean-going vessels carries inherent risks. These risks
include the possibility of:
o marine disaster;
o environmental accidents;
o cargo and property losses or damage;
o business interruptions caused by mechanical failure, human error, war,
terrorism, political action in various countries, labor strikes or
adverse weather conditions; and/or piracy.
The involvement of our vessels in an environmental disaster may harm our
reputation as a safe and reliable vessel owner and operator. Any of these
circumstances or events could increase our costs or lower our revenues.
The shipping industry has inherent operational risks that may not be adequately
covered by our insurance
We procure insurance for our fleet against risks commonly insured against
by vessel owners and operators. Our current insurance includes hull and
machinery insurance, war risks insurance and protection and indemnity insurance
(which includes environmental damage and pollution insurance). We can give no
assurance that we are adequately insured against all risks or that our insurers
will pay a particular claim. Even if our insurance coverage is adequate to cover
our losses, we may not be able to timely obtain a replacement vessel in the
event of a loss. Furthermore, in the future, we may not be able to obtain
adequate insurance coverage at reasonable rates for our fleet. We may also be
subject to calls, or premiums, in amounts based not only on our own claim
records but also the claim records of all other members of the protection and
indemnity associations through which we receive indemnity insurance coverage for
tort liability. Our insurance policies also contain deductibles, limitations and
exclusions which, although we believe are standard in the shipping industry, may
nevertheless increase our costs.
The operation of drybulk carriers has certain unique operational risks
The operation of certain ship types, such as drybulk carriers, has certain
unique risks. With a drybulk carrier, the cargo itself and its interaction with
the ship can be a risk factor. By their nature, drybulk cargoes are often heavy,
dense, easily shifted, and react badly to water exposure. In addition, drybulk
carriers are often subjected to battering treatment during unloading operations
with grabs, jackhammers (to pry encrusted cargoes out of the hold), and small
bulldozers. This treatment may cause damage to the vessel. Vessels damaged due
to treatment during unloading procedures may be more susceptible to breach to
the sea. Hull breaches in drybulk carriers may lead to the flooding of the
vessels holds. If a drybulk carrier suffers flooding in its forward holds, the
bulk cargo may become so dense and waterlogged that its pressure may buckle the
vessels bulkheads leading to the loss of a vessel. If we are unable to
adequately maintain our vessels we may be unable to prevent these events. Any of
these circumstances or events could negatively impact our business, financial
condition, results of operations and ability to pay dividends. In addition, the
loss of any of our vessels could harm our reputation as a safe and reliable
vessel owner and operator.
If our vessels fail to maintain their class certification and/or fail any annual
survey, intermediate survey, dry-docking or special survey, that vessel would be
unable to carry cargo, thereby reducing our revenues and profitability and
violating certain covenants under our credit facility
The hull and machinery of every commercial vessel must be classed by a
classification society authorized by its country of registry. The classification
society certifies that a vessel is safe and seaworthy in accordance with the
applicable rules and regulations of the country of registry of the vessel and
the Safety of Life at Sea Convention ("SOLAS"). All of our vessels are certified
as being "in class" by all the major Classification Societies (e.g., American
Bureau of Shipping, Lloyd's Register of Shipping).
A vessel must undergo annual surveys, intermediate surveys, dry-dockings
and special surveys. In lieu of a special survey, a vessel's machinery may be on
a continuous survey cycle, under which the machinery would be surveyed
periodically over a five-year period. Every vessel is also required to be
dry-docked every two to three years for inspection of the underwater parts of
such vessel.
If any vessel does not maintain its class and/or fails any annual survey,
intermediate survey, dry-docking or special survey, the vessel will be unable to
carry cargo between ports and will be unemployable and uninsurable which could
cause us to be in violation of certain covenants in our credit facility. Any
such inability to carry cargo or be employed, or any such violation of
covenants, could have a material adverse impact on our financial condition and
results of operations. That status could cause us to be in violation of certain
covenants in our credit facility.
The aging of our fleet may result in increased operating costs in the future,
which could adversely affect our earnings
In general, the cost of maintaining a vessel in good operating condition
increases with the age of the vessel. As of October 5, 2007, the 41 vessels in
our fleet had an average age of 8.5 years. As our fleet ages, we will incur
increased costs. Older vessels are typically less fuel efficient and more costly
to maintain than more recently constructed vessels due to improvements in engine
technology. Cargo insurance rates increase with the age of a vessel, making
older vessels less desirable to charterers. Governmental regulations and safety
or other equipment standards related to the age of vessels may also require
expenditures for alterations or the addition of new equipment to our vessels and
may restrict the type of activities in which our vessels may engage. We cannot
assure you that, as our vessels age, market conditions will justify those
expenditures or enable us to operate our vessels profitably during the remainder
of their useful lives.
Because we generate all of our revenues in dollars but incur a significant
portion of our expenses in other currencies, exchange rate fluctuations could
have an adverse impact on our results of operations
We generate all of our revenues in dollars but we incur a portion of our
expenses in currencies other than the dollar. This difference could lead to
fluctuations in net income due to changes in the value of the dollar relative to
the other currencies, in particular the Euro. Expenses incurred in foreign
currencies against which the dollar falls in value can increase, decreasing our
revenues. For example, during 2006, the value of the dollar declined by
approximately 11% as compared to the Euro. Further declines in the value of the
dollar could lead to higher expenses payable by us.
We may have to pay tax on United States source income, which would reduce our
earnings.
Under the United States Internal Revenue Code of 1986, or the Code, 50% of
the gross shipping income of a vessel owning or chartering corporation, such as
ourselves and our subsidiaries, that is attributable to transportation that
begins or ends, but that does not both begin and end, in the United States is
characterized as United States source shipping income and such income is subject
to a 4% United States federal income tax without allowance for any deductions,
unless that corporation qualifies for exemption from tax under Section 883 of
the Code and the Treasury Regulations promulgated thereunder in August of 2003
and effective for calendar year taxpayers such as us on January 1, 2005.
For the fiscal year 2006, the Company qualified for the exemption from U.S.
tax on its international shipping operation based on its satisfaction of the
Country of Organization test and the Publicly Traded Test, in each case in
accordance with the applicable regulations.
If we or our subsidiaries are not entitled to this exemption under Section
883 for any taxable year, we or our subsidiaries would be subject for those
years to a 4% United States federal income tax on our U.S.-source shipping
income. The imposition of this taxation could have a negative effect on our
business and would result in decreased earnings available for distribution to
our shareholders. For the 2006 taxable year, we estimate that our maximum United
States federal income tax liability would be $0.4 million if we were to be
subject to this taxation.
Our vessels may suffer damage and we may face unexpected drydocking costs, which
could adversely affect our cash flow and financial condition
If our vessels suffer damage, they may need to be repaired at a drydocking
facility. The costs of drydock repairs are unpredictable and can be substantial.
The loss of earnings while our vessels are being repaired and repositioned, as
well as the actual cost of these repairs, would decrease our earnings and reduce
the amount of cash that we have available for dividends. We may not have
insurance that is sufficient to cover all or any of these costs or losses and
may have to pay drydocking costs not covered by our insurance.
We are a holding company, and we depend on the ability of our subsidiaries to
distribute funds to us in order to satisfy our financial obligations and to make
dividend payments
We are a holding company and our subsidiaries conduct all of our operations
and own all of our operating assets. We have no significant assets other than
the equity interests in our subsidiaries. As a result, our ability to make
dividend payments depends on our subsidiaries and their ability to distribute
funds to us. If we are unable to obtain funds from our subsidiaries, our board
of directors may exercise its discretion not to declare or pay dividends. We do
not intend to obtain funds from other sources to pay dividends. In addition, the
declaration and payment of dividends will depend on the provisions of Marshall
Islands law affecting the payment of dividends. Marshall Islands law generally
prohibits the payment of dividends if the company is insolvent or would be
rendered insolvent upon payment of such dividend and dividends may be declared
and paid out of our operating surplus; but in this case, there is no such
surplus. Dividends may be declared or paid out of net profits for the fiscal
year in which the dividend is declared and for the preceding fiscal year. Our
ability to pay dividends will also be subject to our satisfaction of certain
financial covenants contained in our credit facilities. We may be unable to pay
dividends in the anticipated amounts or at all.
As we expand our business, we may need to improve our operating and financial
systems and will need to recruit suitable employees and crew for our vessels
Our current operating and financial systems may not be adequate as we
expand the size of our fleet and our attempts to improve those systems may be
ineffective. In addition, as we expand our fleet, we will need to recruit
suitable additional seafarers and shoreside administrative and management
personnel. We may be unable to hire suitable employees as we expand our fleet.
If we or our crewing agent encounters business or financial difficulties, we may
not be able to adequately staff our vessels. If we are unable to grow our
financial and operating systems or to recruit suitable employees as we expand
our fleet, our financial performance may be adversely affected and, among other
things, the amount of cash available for distribution as dividends to our
shareholders may be reduced.
Risks Relating to Our Common Stock
There is no guarantee of a continuing public market for you to resell our common
stock
Our common shares commenced trading on the Nasdaq National Market, now the
Nasdaq Global Market, in February 2005. We cannot assure you that an active and
liquid public market for our common shares will continue. The price of our
common stock may be volatile and may fluctuate due to factors such as:
o actual or anticipated fluctuations in our quarterly and annual results and
those of other public companies in our industry;
o mergers and strategic alliances in the drybulk shipping industry;
o market conditions in the drybulk shipping industry and the general state of
the securities markets;
o changes in government regulation;
o shortfalls in our operating results from levels forecast by securities
analysts; and
o announcements concerning us or our competitors.
You may not be able to sell your shares of our common stock in the future at the
price that you paid for them or at all.
We are incorporated in the Republic of the Marshall Islands, which does not have
a well-developed body of corporate law and as a result, shareholders may have
fewer rights and protections under Marshall Islands law than under a typical
jurisdiction in the United States
Our corporate affairs are governed by our amended and restated articles of
incorporation and bylaws and by the Marshall Islands Business Corporations Act,
or "BCA." The provisions of the BCA resemble provisions of the corporation laws
of a number of states in the United States. However, there have been few
judicial cases in the Republic of the Marshall Islands interpreting the BCA. The
rights and fiduciary responsibilities of directors under the law of the Republic
of the Marshall Islands are not as clearly established as the rights and
fiduciary responsibilities of directors under statutes or judicial precedent in
existence in certain United States jurisdictions. Shareholder rights may differ
as well. While the BCA does specifically incorporate the non-statutory law, or
judicial case law, of the State of Delaware and other states with substantially
similar legislative provisions, our public shareholders may have more difficulty
in protecting their interests in the face of actions by management, directors or
controlling shareholders than would shareholders of a corporation incorporated
in a United States jurisdiction.
A small number of our stockholders effectively control the outcome of matters on
which our stockholders are entitled to vote
Entities affiliated with Mr. Economou, our Chairman, Chief Executive
Officer and interim Chief Financial Officer currently own, directly or
indirectly, approximately 34.3% of our outstanding common stock. While those
stockholders have no agreement, arrangement or understanding relating to the
voting of their shares of our common stock, they will effectively control the
outcome of matters on which our stockholders are entitled to vote, including the
election of directors and other significant corporate actions. The interests of
these stockholders may be different from your interests.
Future sales of our common stock could cause the market price of our common
stock to decline
Sales of a substantial number of shares of our common stock in the public
market, or the perception that these sales could occur, may depress the market
price for our common stock. These sales could also impair our ability to raise
additional capital through the sale of our equity securities in the future.
We may issue additional shares of our common stock in the future and our
stockholders may elect to sell large numbers of shares held by them from time to
time. Our amended and restated articles of incorporation authorize us to issue
75,000,000 common shares with par value $0.01 per share of which 35,490,097
shares are outstanding.
Anti-takeover provisions in our organizational documents could make it difficult
for our stockholders to replace or remove our current board of directors or have
the effect of discouraging, delaying or preventing a merger or acquisition,
which could adversely affect the market price of our common stock.
Several provisions of our amended and restated articles of incorporation
and bylaws could make it difficult for our stockholders to change the
composition of our board of directors in any one year, preventing them from
changing the composition of management. In addition, the same provisions may
discourage, delay or prevent a merger or acquisition that stockholders may
consider favorable.
These provisions include:
o authorizing our board of directors to issue "blank check" preferred stock
without stockholder approval;
o providing for a classified board of directors with staggered, three year
terms;
o prohibiting cumulative voting in the election of directors;
o authorizing the removal of directors only for cause and only upon the
affirmative vote of the holders of a majority of the outstanding shares of
our common stock entitled to vote for the directors;
o prohibiting stockholder action by written consent;
o limiting the persons who may call special meetings of stockholders; and
o establishing advance notice requirements for nominations for election to
our board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings.
USE OF PROCEEDS
Unless we specify otherwise in any prospectus supplement, we will use the
net proceeds from the sale of securities offered by this prospectus for capital
expenditures, repayment of indebtedness, working capital, to make vessel
acquisitions and for general corporate purposes.
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.
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:
o future operating or financial results;
o statements about planned, pending or recent acquisitions,
business strategy and expected capital spending or operating
expenses, including drydocking and insurance costs;
o statements about drybulk shipping market trends, including
charter rates and factors affecting supply and demand;
o our ability to obtain additional financing;
o expectations regarding the availability of vessel acquisitions;
and
o anticipated developments with respect to pending litigation.
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 report.
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 vessel values, failure of a seller to deliver one
or more vessels, failure of a buyer to accept delivery of a vessel, inability to
procure acquisition financing, default by one or more charterers of our ships,
changes in demand for drybulk commodities, 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.
When used in this document, the words "anticipate," "estimate," "project,"
"forecast," "plan," "potential," "will," "may," "should," and "expect" reflect
forward-looking statements.
RATIO OF EARNINGS TO FIXED CHARGES
Effective November 1, 2004, we changed our fiscal reporting year-end from
October 31st to December 31st. The following table sets forth our unaudited
ratio of earnings to fixed charges for the fiscal years ended October 31, 2002,
2003 and 2004, the two-month period ended December 31, 2004, the fiscal years
ended December 31, 2005 and 2006 and the six month period ended June 30,
2007(1).
2-month 6-month
period Year Year period
Year Ended October 31, Ended Ended Ended Ended
-------------------------- December December December June
2002 2003 2004 31, 2004 31, 2005 31, 2006 30, 2007
----- ------ ------- -------- -------- -------- --------
(in thousands of US dollars)
Earnings
Net Income/(loss) $-611 $7,189 $39,113 $ 10,713 $111,017 $ 56,731 $176,638
Add: Fixed charges
less interest capitalized 951 896 1,410 368 20,341 41,149 23,730
Less: Capitalized
interest -110 -450
----- ------ ------- ------- -------- -------- --------
Total Earnings $ 340 $8,085 $40,523 $11,081 $131,358 $ 97,770 $199,918
----- ------ ------- ------- -------- -------- --------
Fixed Charges
Interest expense and
capitalized interest 913 758 1,278 257 19,797 37,364 22,315
Amortization and
write-off of capitalized
expenses relating to
indebtedness 38 138 132 111 544 3,785 1,415
----- ------ ------- ------- -------- -------- --------
Total Fixed Charges $ 951 $ 896 $ 1,410 $ 368 $ 20,341 $ 41,149 $ 23,730
----- ------ ------- ------- -------- -------- --------
Ratio of Earnings to
Fixed Charges 0.4x 9.0x 28.7x 30.1x 6.5x 2.4x 8.4x
Dollar Amount of
Deficiency in Earnings
to Fixed Charges $ 611 n/a n/a n/a n/a n/a n/a
(1) We have not issued any preferred stock as of the date of this prospectus.
----------
For purposes of computing the consolidated ratio of earnings to fixed charges,
earnings consist of net income plus interest expense and amortization and
write-off of capitalized expenses relating to indebtedness. Fixed charges
consist of interest expense and amortization and write-off of capitalized
expenses relating to indebtedness and the interest element of rentals.
CAPITALIZATION
A prospectus supplement will include information on the Company's consolidated
capitalization.
PLAN OF DISTRIBUTION
We may sell or distribute the securities included in this prospectus
through underwriters, through agents, to dealers, in private transactions, at
market prices prevailing at the time of sale, at prices related to the
prevailing market prices, or at negotiated prices.
In addition, we may sell some or all of the securities included in this
prospectus through:
o a block trade in which a broker-dealer may resell a portion of
the block, as principal, in order to facilitate the transaction;
o purchases by a broker-dealer, as principal, and resale by the
broker-dealer for its account; or
o ordinary brokerage transactions and transactions in which a
broker solicits purchasers.
In addition, we may enter into option or other types of transactions that
require us to deliver common stock to a broker-dealer, who will then resell or
transfer the common stock under this prospectus.
We may enter into hedging transactions with respect to our securities. For
example, we may:
o enter into transactions involving short sales of our common stock
by broker-dealers;
o sell shares of common stock short themselves and deliver the
shares to close out short positions;
o enter into option or other types of transactions that require us
to deliver shares of common stock to a broker-dealer, who will
then resell or transfer the shares under this prospectus; or
o loan or pledge shares of common stock to a broker-dealer, who may
sell the loaned shares or, in the event of default, sell the
pledged shares.
The Company may enter into derivative transactions with third parties, or
sell securities not covered by this prospectus to third parties in privately
negotiated transactions. If the applicable prospectus supplement indicates, in
connection with those derivatives, the third parties may sell securities covered
by this prospectus and the applicable prospectus supplement, including in short
sale transactions. If so, the third party may use securities pledged by the
Company or borrowed from the Company or others to settle those sales or to close
out any related open borrowings of stock, and may use securities received from
the Company in settlement of those derivatives to close out any related open
borrowings of stock. The third party in such sale transactions will be an
underwriter and, if not identified in this prospectus, will be identified in the
applicable prospectus supplement (or a post-effective amendment). In addition,
we may otherwise loan or pledge securities to a financial institution or other
third party that in turn may sell the securities short using this prospectus.
Such financial institution or other third party may transfer its economic short
position to investors in our securities or in connection with a concurrent
offering of other securities.
Any broker-dealers or other persons acting on our behalf that participate
with us in the distribution of the shares may be deemed to be underwriters and
any commissions received or profit realized by them on the resale of the shares
may be deemed to be underwriting discounts and commissions under the Securities
Act of 1933, as amended, or the Securities Act.
At the time that any particular offering of securities is made, to the
extent required by the Securities Act, a prospectus supplement will be
distributed, setting forth the terms of the offering, including the aggregate
number of securities being offered, the purchase price of the securities, the
initial offering price of the securities, the names of any underwriters, dealers
or agents, any discounts, commissions and other items constituting compensation
from us and any discounts, commissions or concessions allowed or reallowed or
paid to dealers.
Underwriters and agents in any distribution contemplated hereby, including
but not limited to at-the-market equity offerings, may from time to time include
Cantor Fitzgerald & Co. Underwriters or agents could make sales in privately
negotiated transactions and/or any other method permitted by law, including
sales deemed to be an at-the-market offering as defined in Rule 415 promulgated
under the Securities Act, which includes sales made directly on or through
Nasdaq, the existing trading market for our common stock, or sales made to or
through a market maker other than on an exchange.
We will bear costs relating to all of the securities being registered under
this Registration Statement.
Pursuant to a requirement by the National Association of Securities
Dealers, Inc., or NASD, the maximum commission or discount to be received by any
NASD member or independent broker/dealer may not be greater than eight percent
(8%) of the gross proceeds received by us for the sale of any securities being
registered pursuant to SEC Rule 415 under the Securities Act.
ENFORCEMENT OF CIVIL LIABILITIES
DryShips Inc. is a Marshall Islands company and our executive offices are
located outside of the U.S. in Athens, Greece. A majority of our directors,
officers and the experts named in the prospectus reside outside the U.S. In
addition, a substantial portion of our assets and the assets of our directors,
officers and experts are located outside of the U.S. As a result, you may have
difficulty serving legal process within the U.S. upon us or any of these
persons. You may also have difficulty enforcing, both in and outside the U.S.,
judgments you may obtain in U.S. courts against us or these persons in any
action, including actions based upon the civil liability provisions of U.S.
federal or state securities laws.
Furthermore, there is substantial doubt that the courts of the Marshall
Islands or Greece would enter judgments in original actions brought in those
courts predicated on U.S. federal or state securities laws.
DESCRIPTION OF CAPITAL STOCK
Authorized and Outstanding Capital Stock
Under our articles of incorporation, our authorized capital stock consists
of 75,000,000 shares of common stock, par value $.01 per share, of which
35,490,097 shares are issued and outstanding as of October 5, 2007, and
30,000,000 shares of preferred stock, none of which were issued as of October 5,
2007. All of our shares of stock are in registered form.
Share History
In October 2004, we issued 15,400,000 shares of our common stock to the
Entrepreneurial Spirit Foundation, or the Foundation, as consideration for the
contribution to us of all of the issued and outstanding capital stock of six of
our subsidiaries. The Foundation is a foundation organized under the laws of
Lichtenstein and is controlled by our Chairman and Chief Executive Officer Mr.
George Economou. Subsequent to the issuance of the 15,400,000 shares discussed
above, 2,772,000 shares of common stock were transferred from the Foundation to
Advice Investments S.A., a corporation organized under the Republic of Liberia,
all the issued and outstanding capital stock of which is owned by Ms. Elisavet
Manola of Athens, Greece, the ex-wife of Mr. Economou. The Foundation
transferred 1,848,000 shares of common stock to Magic Management Inc., all of
the issued and outstanding capital stock of which is owned by Ms. Rika Vosniadou
of Athens, Greece, the ex-wife of Mr. Economou. In February 2005, we issued
14,950,000 shares of common stock in connection with our initial public
offering. The net proceeds of the initial public offering were $251.3 million.
On February 14, 2006, the Foundation transferred all of its shares to its
wholly-owned subsidiary, Elios Investments.
On May 10, 2006, the company filed its universal shelf registration
statement and related prospectus for the issuance of 5,000,000 of common shares.
From May 2006 through August 2006, 4,650,000 shares of common stock with a par
value $0.01 were issued. The net proceeds after underwriting commissions of 2.5%
and other issuance fees were $56.5 million.
Our shareholders voted to adopt a resolution at our annual general
shareholders' meeting on July 11, 2006, which increased the aggregate number of
shares of common stock that the Company is authorized to issue from 45,000,000
registered shares with par value of $0.01 to 75,000,000 registered shares with
par value $0.01.
On October 24, 2006, the Company's Board of Directors agreed to the request
of the Company's major shareholders (Elios Investments Inc., Advice Investments
S.A. and Magic Management Inc.) following the declaration of our $0.20 quarterly
dividend per share in September 2006, to receive their dividend payment in the
form of our common shares in lieu of cash. One of these shareholders, Elios
Investments Inc., is controlled by our Chairman and Chief Executive Officer, Mr.
George Economou. In addition, the Board of Directors also agreed on that date to
the request of a company related to Mr. Economou to accept repayment of the
outstanding balance of a seller's credit in respect of a vessel purchased by us
(as discussed in Note 3(e) of our consolidated financial statements included in
our annual report on Form 20-F for the fiscal year ended December 31, 2006) in
our common shares. As a result of the agreement, an aggregate of $3,080,000 in
dividends and the seller's credit together with interest amounting to $3,327,000
were settled with 235,585 and 254,512 of our common shares, respectively. The
price used as consideration for issuance of the above common shares was equal to
the average closing price of our common stock on the Nasdaq Global Market over
the 8 trading days ended October 24, 2006, which was $13.07 per share.
In December 2006, the Company filed a registration statement on Form F-3 on
behalf of the Company's major shareholders registering for resale an aggregate
of 15,890,097 of our common shares.
Description of Common Stock
Each outstanding share of common stock entitles the holder to one vote on
all matters submitted to a vote of stockholders. Subject to preferences that may
be applicable to any outstanding shares of preferred stock, holders of shares of
common stock are entitled to receive ratably all dividends, if any, declared by
our board of directors out of funds legally available for dividends. Holders of
common stock do not have conversion, redemption or preemptive rights to
subscribe to any of our securities. All outstanding shares of common stock are,
and the shares to be sold in this offering when issued and paid for will be,
fully paid and non-assessable. The rights, preferences and privileges of holders
of common stock are subject to the rights of the holders of any shares of
preferred stock which we may issue in the future. Our common stock is quoted on
The Nasdaq Global Market under the symbol "DRYS."
Our Articles of Incorporation and Bylaws
Our purpose, as stated in Section B of our Articles of Incorporation, is to
engage in any lawful act or activity for which corporations may now or hereafter
be organized under the Marshall Islands Business Corporations Act. Our articles
of incorporation and bylaws do not impose any limitations on the ownership
rights of our shareholders.
Directors
Our directors are elected by a plurality of the votes cast by stockholders
entitled to vote in an election. Our articles of incorporation provide that
cumulative voting shall not be used to elect directors. Our board of directors
must consist of at least three members. The exact number of directors is fixed
by a vote of at least 66 2/3% of the entire board. Our by laws provide for a
staggered board of directors whereby directors shall be divided into three
classes: Class A, Class B and Class C which shall be as nearly equal in number
as possible. Shareholders, acting as at a duly constituted meeting, or by
unanimous written consent of all shareholders, initially designated directors as
Class A, Class B or Class C. Class A directors served for a term expiring at the
2005 annual meeting of shareholders. Directors designated as Class B directors
served for a term expiring at the 2006 annual meeting. Directors designated
Class C directors served for a term expiring at the 2007 annual meeting. At
annual meetings for each initial term, directors to replace those whose terms
expire at such annual meetings will be elected to hold office until the third
succeeding annual meeting. Each director serves his respective term of office
until his successor has been elected and qualified, except in the event of his
death, resignation, removal or the earlier termination of his term of office.
Our board of directors has the authority to fix the amounts which shall be
payable to the members of the board of directors for attendance at any meeting
or for services rendered to us.
Stockholder Meetings
Under our bylaws, annual stockholder meetings will be held at a time and
place selected by our board of directors. The meetings may be held in or outside
of the Marshall Islands. Special meetings may be called by the board of
directors, chairman of the board or by the president. Our board of directors may
set a record date between 15 and 60 days before the date of any meeting to
determine the stockholders that will be eligible to receive notice and vote at
the meeting.
Dissenters' Rights of Appraisal and Payment
Under the BCA, our stockholders have the right to dissent from various
corporate actions, including any merger or consolidation, sale of all or
substantially all of our assets not made in the usual course of our business,
and receive payment of the fair value of their shares. In the event of any
further amendment of our amended and restated articles of incorporation, a
stockholder also has the right to dissent and receive payment for his or her
shares if the amendment alters certain rights in respect of those shares. The
dissenting stockholder must follow the procedures set forth in the BCA to
receive payment. In the event that we and any dissenting stockholder fail to
agree on a price for the shares, the BCA procedures involve, among other things,
the institution of proceedings in the high court of the Republic of the Marshall
Islands or in any appropriate court in any jurisdiction in which the Company's
shares are primarily traded on a local or national securities exchange.
Stockholders' Derivative Actions
Under the BCA, any of our stockholders may bring an action in our name to
procure a judgment in our favor, also known as a derivative action, provided
that the stockholder bringing the action is a holder of common stock both at the
time the derivative action is commenced and at the time of the transaction to
which the action relates.
Indemnification of Officers and Directors
Our bylaws includes a provision that entitles any director or officer of
the Corporation to be indemnified by the Corporation upon the same terms, under
the same conditions and to the same extent as authorized by the BCA if he acted
in good faith and in a manner reasonably believed to be in and not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
We are also authorized to carry directors' and officers' insurance as a
protection against any liability asserted against our directors and officers
acting in their capacity as directors and officers regardless of whether the
Company would have the power to indemnify such director or officer against such
liability by law or under the provisions of our by laws. We believe that these
indemnification provisions and insurance are useful to attract and retain
qualified directors and executive officers.
The indemnification provisions in our bylaws may discourage stockholders
from bringing a lawsuit against directors for breach of their fiduciary duty.
These provisions may also have the effect of reducing the likelihood of
derivative litigation against directors and officers, even though such an
action, if successful, might otherwise benefit us and our stockholders. There is
currently no pending material litigation or proceeding involving any of our
directors, officers or employees for which indemnification is sought.
Anti-takeover Provisions of our Charter Documents.
Several provisions of our articles of incorporation and by-laws may have
anti-takeover effects. These provisions are intended to avoid costly takeover
battles, lessen our vulnerability to a hostile change of control and enhance the
ability of our board of directors to maximize stockholder value in connection
with any unsolicited offer to acquire us. However, these anti-takeover
provisions, which are summarized below, could also discourage, delay or prevent
(1) the merger or acquisition of our company by means of a tender offer, a proxy
contest or otherwise, that a stockholder may consider in its best interest and
(2) the removal of incumbent officers and directors.
Blank Check Preferred Stock
Under the terms of our articles of incorporation, our board of directors has
authority, without any further vote or action by our stockholders, to issue up
to 30.0 million shares of blank check preferred stock. Our board of directors
may issue shares of preferred stock on terms calculated to discourage, delay or
prevent a change of control of our company or the removal of our management.
Classified Board of Directors
Our articles of incorporation provide for a board of directors serving
staggered, three-year terms. Approximately one-third of our board of directors
will be elected each year. The classified board provision could discourage a
third party from making a tender offer for our shares or attempting to obtain
control of our company. It could also delay stockholders who do not agree with
the policies of the board of directors from removing a majority of the board of
directors for two years.
Election and Removal of Directors
Our articles of incorporation prohibit cumulative voting in the election of
directors. Our by-laws require shareholders to give advance written notice of
nominations for the election of directors. Our by-laws also provide that our
directors may be removed only for cause and only upon affirmative vote of the
holders of at least 66 2/3% of the outstanding voting shares of the Company.
These provisions may discourage, delay or prevent the removal of incumbent
officers and directors.
Limited Actions by Stockholders
Our by-laws provide that if a quorum is present, and except as otherwise
expressly provided by law, the affirmative vote of a majority of the shares of
stock represented at the meeting shall be the act of the shareholders.
Shareholders may act by way of written consent in accordance with the provisions
of Section 67 of the BCA.
Advance Notice Requirements for Shareholder Proposals and Director Nominations
Our bylaws provide that shareholders seeking to nominate candidates for
election as directors or to bring business before an annual meeting of
shareholders must provide timely notice of their proposal in writing to the
corporate secretary. Generally, to be timely, a shareholder's notice must be
received at our principal executive offices not less than 150 days nor more than
180 days prior to the one year anniversary of the preceding year's annual
meeting. Our bylaws also specify requirements as to the form and content of a
shareholder's notice. These provisions may impede shareholders' ability to bring
matters before an annual meeting of shareholders or make nominations for
directors at an annual meeting of shareholders.
Dividends
While we cannot assure you that we will continue to do so, and subject to the
limitations discussed below, we currently intend to pay regular cash dividends
on our common stock on a quarterly basis. We paid a quarterly dividend of $0.20
per share to holders of our common stock since our initial public offering in
February 2005. Under our credit facility we are restricted in our payments of
dividends. During 2006 dividend payments were not permitted to exceed $18.0
million. For any dividends declared or paid in excess of this amount in 2006,
the Company obtained a related written consent from its lenders. Thereafter
dividend payments are not to exceed 50% of net income as evidenced by the
relevant annual audited financial statements.
Declaration and payment of any dividend is subject to the discretion of our
board of directors. The timing and amount of dividend payments will be dependent
upon our earnings, financial condition, cash requirements and availability,
restrictions in our loan agreements, the terms of the debt securities we offer,
the provisions of applicable law affecting the payment of distributions to
shareholders and other factors. Because we are a holding company with no
material assets other than the stock of our subsidiaries, our ability to pay
dividends will depend on the earnings and cash flow of our subsidiaries and
their ability to pay dividends to us. The laws governing us and our subsidiaries
generally prohibit the payment of dividends other than from surplus or while a
company is insolvent or would be rendered insolvent.
DESCRIPTION OF PREFERRED SHARES
Under the terms of our articles of incorporation, our board of directors
has authority, without any further vote or action by our shareholders, to issue
up to 30,000,000 shares of blank check preferred stock. Our board of directors
may issue shares of preferred stock on terms calculated to discourage, delay or
prevent a change of control of our company or the removal of our management. The
material terms of any series of preferred shares that we offer through a
prospectus supplement will be described in that prospectus supplement. Our board
of directors is authorized to provide for the issuance of preferred shares in
one or more series with designations as may be stated in the resolution or
resolutions providing for the issue of such preferred shares. At the time that
any series of our preferred shares are authorized, our board of directors will
fix the dividend rights, any conversion rights, any voting rights, redemption
provisions, liquidation preferences and any other rights, preferences,
privileges and restrictions of that series, as well as the number of shares
constituting that series and their designation. Our board of directors could,
without shareholder approval, cause us to issue preferred stock which has
voting, conversion and other rights that could adversely affect the holders of
our ordinary shares or make it more difficult to effect a change in control. Our
preferred shares could be used to dilute the share ownership of persons seeking
to obtain control of us and thereby hinder a possible takeover attempt which, if
our shareholders were offered a premium over the market value of their shares,
might be viewed as being beneficial to our shareholders. In addition, our
preferred shares could be issued with voting, conversion and other rights and
preferences which would adversely affect the voting power and other rights of
holders of our ordinary shares. The material terms of any series of preferred
shares that we offer through a prospectus supplement will be described in that
prospectus supplement.
DESCRIPTION OF WARRANTS
We may issue warrants to purchase our debt or equity securities or
securities of third parties or other rights, including rights to receive payment
in cash or securities based on the value, rate or price of one or more specified
commodities, currencies, securities or indices, or any combination of the
foregoing. Warrants may be issued independently or together with any other
securities and may be attached to, or separate from, such securities. Each
series of warrants will be issued under a separate warrant agreement to be
entered into between us and a warrant agent. The terms of any warrants to be
issued and a description of the material provisions of the applicable warrant
agreement will be set forth in the applicable prospectus supplement.
The applicable prospectus supplement will describe the following terms of
any warrants in respect of which this prospectus is being delivered:
o the title of such warrants;
o the aggregate number of such warrants;
o the price or prices at which such warrants will be issued;
o the currency or currencies, in which the price of such warrants
will be payable;
o the securities or other rights, including rights to receive
payment in cash or securities based on the value, rate or price
of one or more specified commodities, currencies, securities or
indices, or any combination of the foregoing, purchasable upon
exercise of such warrants;
o the price at which and the currency or currencies, in which the
securities or other rights purchasable upon exercise of such
warrants may be purchased;
o the date on which the right to exercise such warrants shall
commence and the date on which such right shall expire;
o if applicable, the minimum or maximum amount of such warrants
which may be exercised at any one time;
o if applicable, the designation and terms of the securities with
which such warrants are issued and the number of such warrants
issued with each such security;
o if applicable, the date on and after which such warrants and the
related securities will be separately transferable;
o information with respect to book-entry procedures, if any;
o if applicable, a discussion of any material United States Federal
income tax considerations; and
o any other terms of such warrants, including terms, procedures and
limitations relating to the exchange and exercise of such
warrants.
DESCRIPTION OF DEBT SECURITIES
We may issue debt securities from time to time in one or more series, under
one or more indentures, each dated as of a date on or prior to the issuance of
the debt securities to which it relates. We may issue senior debt securities and
subordinated debt securities pursuant to separate indentures, a senior indenture
and a subordinated indenture, respectively, in each case between us and the
trustee named in the indenture. These indentures will be filed either as
exhibits to an amendment to this Registration Statement or a prospectus
supplement, or as an exhibit to a Securities Exchange Act of 1934, or Exchange
Act, report that will be incorporated by reference to the Registration Statement
or a prospectus supplement. We will refer to any or all of these reports as
"subsequent filings". The senior indenture and the subordinated indenture, as
amended or supplemented from time to time, are sometimes referred to
individually as an "indenture" and collectively as the "indentures". Each
indenture will be subject to and governed by the Trust Indenture Act. The
aggregate principal amount of debt securities which may be issued under each
indenture will be unlimited and each indenture will contain the specific terms
of any series of debt securities or provide that those terms must be set forth
in or determined pursuant to, an authorizing resolution, as defined in the
applicable prospectus supplement, and/or a supplemental indenture, if any,
relating to such series.
Certain of our subsidiaries may guarantee the debt securities we offer.
Those guarantees may or may not be secured by liens, mortgages, and security
interests in the assets of those subsidiaries. The terms and conditions of any
such subsidiary guarantees, and a description of any such liens, mortgages or
security interests, will be set forth in the prospectus supplement that will
accompany this prospectus.
Our statements below relating to the debt securities and the indentures are
summaries of their anticipated provisions, are not complete and are subject to,
and are qualified in their entirety by reference to, all of the provisions of
the applicable indenture and any applicable U.S. federal income tax
consideration as well as any applicable modifications of or additions to the
general terms described below in the applicable prospectus supplement or
supplemental indenture.
General
Neither indenture limits the amount of debt securities which may be issued,
and each indenture provides that debt securities may be issued up to the
aggregate principal amount from time to time. The debt securities may be issued
in one or more series. The senior debt securities will be unsecured and will
rank on a parity with all of our other unsecured and unsubordinated
indebtedness. Each series of subordinated debt securities will be unsecured and
subordinated to all present and future senior indebtedness of debt securities
will be described in an accompanying prospectus supplement.
You should read the subsequent filings relating to the particular series of
debt securities for the following terms of the offered debt securities:
o the designation, aggregate principal amount and authorized
denominations;
o the issue price, expressed as a percentage of the aggregate
principal amount;
o the maturity date;
o the interest rate per annum, if any;
o if the offered debt securities provide for interest payments, the
date from which interest will accrue, the dates on which interest
will be payable, the date on which payment of interest will
commence and the regular record dates for interest payment dates;
o any optional or mandatory sinking fund provisions or conversion
or exchangeability provisions;
o the date, if any, after which and the price or prices at which
the offered debt securities may be optionally redeemed or must be
mandatorily redeemed and any other terms and provisions of
optional or mandatory redemptions;
o if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which offered debt securities of
the series will be issuable;
o if other than the full principal amount, the portion of the
principal amount of offered debt securities of the series which
will be payable upon acceleration or provable in bankruptcy;
o any events of default not set forth in this prospectus;
o the currency or currencies, including composite currencies, in
which principal, premium and interest will be payable, if other
than the currency of the United States of America;
o if principal, premium or interest is payable, at our election or
at the election of any holder, in a currency other than that in
which the offered debt securities of the series are stated to be
payable, the period or periods within which, and the terms and
conditions upon which, the election may be made;
o whether interest will be payable in cash or additional securities
at our or the holder's option and the terms and conditions upon
which the election may be made;
o if denominated in a currency or currencies other than the
currency of the United States of America, the equivalent price in
the currency of the United States of America for purposes of
determining the voting rights of holders of those debt securities
under the applicable indenture;
o if the amount of payments of principal, premium or interest may
be determined with reference to an index, formula or other method
based on a coin or currency other than that in which the offered
debt securities of the series are stated to be payable, the
manner in which the amounts will be determined;
o any restrictive covenants or other material terms relating to the
offered debt securities, which may not be inconsistent with the
applicable indenture;
o whether the offered debt securities will be issued in the form of
global securities or certificates in registered or bearer form;
o any terms with respect to subordination;
o any listing on any securities exchange or quotation system;
o additional provisions, if any, related to defeasance and
discharge of the offered debt securities; and
o the applicability of any guarantees.
Unless otherwise indicated in subsequent filings with the Commission
relating to the indenture, principal, premium and interest will be payable and
the debt securities will be transferable at the corporate trust office of the
applicable trustee. Unless other arrangements are made or set forth in
subsequent filings or a supplemental indenture, principal, premium and interest
will be paid by checks mailed to the holders at their registered addresses.
Unless otherwise indicated in subsequent filings with the Commission, the
debt securities will be issued only in fully registered form without coupons, in
denominations of $1,000 or any integral multiple thereof. No service charge will
be made for any transfer or exchange of the debt securities, but we may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection with these debt securities.
Some or all of the debt securities may be issued as discounted debt
securities, bearing no interest or interest at a rate which at the time of
issuance is below market rates, to be sold at a substantial discount below the
stated principal amount. United States federal income consequences and other
special considerations applicable to any discounted securities will be described
in subsequent filings with the Commission relating to those securities.
We refer you to applicable subsequent filings with respect to any deletions
or additions or modifications from the description contained in this prospectus.
Senior Debt
We will issue senior debt securities under the senior debt indenture. These
senior debt securities will rank on an equal basis with all our other unsecured
debt except subordinated debt.
Subordinated Debt
We will issue subordinated debt securities under the subordinated debt
indenture. Subordinated debt will rank subordinate and junior in right of
payment, to the extent set forth in the subordinated debt indenture, to all our
senior debt (both secured and unsecured).
In general, the holders of all senior debt are first entitled to receive
payment of the full amount unpaid on senior debt before the holders of any of
the subordinated debt securities are entitled to receive a payment on account of
the principal or interest on the indebtedness evidenced by the subordinated debt
securities in certain events.
If we default in the payment of any principal of, or premium, if any, or
interest on any senior debt when it becomes due and payable after any applicable
grace period, then, unless and until the default is cured or waived or ceases to
exist, we cannot make a payment on account of or redeem or otherwise acquire the
subordinated debt securities.
If there is any insolvency, bankruptcy, liquidation or other similar
proceeding relating to us or our property, then all senior debt must be paid in
full before any payment may be made to any holders of subordinated debt
securities.
Furthermore, if we default in the payment of the principal of and accrued
interest on any subordinated debt securities that is declared due and payable
upon an event of default under the subordinated debt indenture, holders of all
our senior debt will first be entitled to receive payment in full in cash before
holders of such subordinated debt can receive any payments.
Senior debt means:
o the principal, premium, if any, interest and any other amounts
owing in respect of our indebtedness for money borrowed and
indebtedness evidenced by securities, notes, debentures, bonds or
other similar instruments issued by us, including the senior debt
securities or letters of credit;
o all capitalized lease obligations;
o all hedging obligations;
o all obligations representing the deferred purchase price of
property; and
o all deferrals, renewals, extensions and refundings of obligations
of the type referred to above;
o but senior debt does not include:
o subordinated debt securities; and
o any indebtedness that by its terms is subordinated to, or ranks
on an equal basis with, our subordinated debt securities.
Covenants
Any series of offered debt securities may have covenants in addition to or
differing from those included in the applicable indenture which will be
described in subsequent filings prepared in connection with the offering of such
securities, limiting or restricting, among other things:
o the ability of us or our subsidiaries to incur either secured or
unsecured debt, or both;
o the ability to make certain payments, dividends, redemptions or
repurchases;
o our ability to create dividend and other payment restrictions
affecting our subsidiaries;
o our ability to make investments;
o mergers and consolidations by us or our subsidiaries;
o sales of assets by us;
o our ability to enter into transactions with affiliates;
o our ability to incur liens; and
o sale and leaseback transactions.
Modification of the Indentures
Each indenture and the rights of the respective holders may be modified by
us only with the consent of holders of not less than a majority in aggregate
principal amount of the outstanding debt securities of all series under the
respective indenture affected by the modification, taken together as a class.
But no modification that:
(1) changes the amount of securities whose holders must consent to an
amendment, supplement or waiver;
(2) reduces the rate of or changes the interest payment time on any security or
alters its redemption provisions (other than any alteration to any such
section which would not materially adversely affect the legal rights of any
holder under the indenture) or the price at which we are required to offer
to purchase the securities;
(3) reduces the principal or changes the maturity of any security or reduce the
amount of, or postpone the date fixed for, the payment of any sinking fund
or analogous obligation;
(4) waives a default or event of default in the payment of the principal of or
interest, if any, on any security (except a rescission of acceleration of
the securities of any series by the holders of at least a majority in
principal amount of the outstanding securities of that series and a waiver
of the payment default that resulted from such acceleration);
(5) makes the principal of or interest, if any, on any security payable in any
currency other than that stated in the Security;
(6) makes any change with respect to holders' rights to receive principal and
interest, the terms pursuant to which defaults can be waived, certain
modifications affecting shareholders or certain currency-related issues; or
(7) waives a redemption payment with respect to any Security or change any of
the provisions with respect to the redemption of any securities
will be effective against any holder without his consent. Other terms as
specified in subsequent filings may be modified without the consent of the
holders.
Events of Default
Each indenture defines an event of default for the debt securities of any
series as being any one of the following events:
o default in any payment of interest when due which continues for
30 days;
o default in any payment of principal or premium when due;
o default in the deposit of any sinking fund payment when due;
o default in the performance of any covenant in the debt securities
or the applicable indenture which continues for 60 days after we
receive notice of the default;
o default under a bond, debenture, note or other evidence of
indebtedness for borrowed money by us or our subsidiaries (to the
extent we are directly responsible or liable therefor) having a
principal amount in excess of a minimum amount set forth in the
applicable subsequent filing, whether such indebtedness now
exists or is hereafter created, which default shall have resulted
in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise have become due and
payable, without such acceleration having been rescinded or
annulled or cured within 30 days after we receive notice of the
default; and
o events of bankruptcy, insolvency or reorganization.
An event of default of one series of debt securities does not necessarily
constitute an event of default with respect to any other series of debt
securities.
There may be such other or different events of default as described in an
applicable subsequent filing with respect to any class or series of offered debt
securities.
In case an event of default occurs and continues for the debt securities of
any series, the applicable trustee or the holders of not less than 25% in
aggregate principal amount of the debt securities then outstanding of that
series may declare the principal and accrued but unpaid interest of the debt
securities of that series to be due and payable. Any event of default for the
debt securities of any series which has been cured may be waived by the holders
of a majority in aggregate principal amount of the debt securities of that
series then outstanding.
Each indenture requires us to file annually after debt securities are
issued under that indenture with the applicable trustee a written statement
signed by two of our officers as to the absence of material defaults under the
terms of that indenture. Each indenture provides that the applicable trustee may
withhold notice to the holders of any default if it considers it in the interest
of the holders to do so, except notice of a default in payment of principal,
premium or interest.
Subject to the duties of the trustee in case an event of default occurs and
continues, each indenture provides that the trustee is under no obligation to
exercise any of its rights or powers under that indenture at the request, order
or direction of holders unless the holders have offered to the trustee
reasonable indemnity. Subject to these provisions for indemnification and the
rights of the trustee, each indenture provides that the holders of a majority in
principal amount of the debt securities of any series then outstanding have the
right 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 as long as the exercise of that right does not conflict with any law
or the indenture.
Defeasance and Discharge
The terms of each indenture provide us with the option to be discharged
from any and all obligations in respect of the debt securities issued thereunder
upon the deposit with the trustee, in trust, of money or U.S. government
obligations, or both, which through the payment of interest and principal in
accordance with their terms will provide money in an amount sufficient to pay
any installment of principal, premium and interest on, and any mandatory sinking
fund payments in respect of, the debt securities on the stated maturity of the
payments in accordance with the terms of the debt securities and the indenture
governing the debt securities. This right may only be exercised if, among other
things, we have received from, or there has been published by, the United States
Internal Revenue Service a ruling to the effect that such a discharge will not
be deemed, or result in, a taxable event with respect to holders. This discharge
would not apply to our obligations to register the transfer or exchange of debt
securities, to replace stolen, lost or mutilated debt securities, to maintain
paying agencies and hold moneys for payment in trust.
Defeasance of Certain Covenants
The terms of the debt securities provide us with the right to omit
complying with specified covenants and that specified events of default
described in a subsequent filing will not apply. In order to exercise this
right, we will be required to deposit with the trustee money or U.S. government
obligations, or both, which through the payment of interest and principal will
provide money in an amount sufficient to pay principal, premium, if any, and
interest on, and any mandatory sinking fund payments in respect of, the debt
securities on the stated maturity of such payments in accordance with the terms
of the debt securities and the indenture governing such debt securities. We will
also be required to deliver to the trustee an opinion of counsel to the effect
that we have received from, or there has been published by, the IRS a ruling to
the effect that the deposit and related covenant defeasance will not cause the
holders of such series to recognize income, gain or loss for federal income tax
purposes.
A subsequent filing may further describe the provisions, if any, of any
particular series of offered debt securities permitting a discharge defeasance.
Subsidiary Guarantees
Certain of our subsidiaries may guarantee the debt securities we offer. In
that case, the terms and conditions of the subsidiary guarantees will be set
forth in the applicable prospectus supplement. Unless we indicate differently in
the applicable prospectus supplement, if any of our subsidiaries guarantee any
of our debt securities that are subordinated to any of our senior indebtedness,
then the subsidiary guarantees will be subordinated to the senior indebtedness
of such subsidiary to the same extent as our debt securities are subordinated to
our senior indebtedness.
Global Securities
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on behalf
of, a depository identified in an applicable subsequent filing and registered in
the name of the depository or a nominee for the depository. In such a case, one
or more global securities will be issued in a denomination or aggregate
denominations equal to the portion of the aggregate principal amount of
outstanding debt securities of the series to be represented by the global
security or securities. Unless and until it is exchanged in whole or in part for
debt securities in definitive certificated form, a global security may not be
transferred except as a whole by the depository for the global security to a
nominee of the depository or by a nominee of the depository to the depository or
another nominee of the depository or by the depository or any nominee to a
successor depository for that series or a nominee of the successor depository
and except in the circumstances described in an applicable subsequent filing.
We expect that the following provisions will apply to depository
arrangements for any portion of a series of debt securities to be represented by
a global security. Any additional or different terms of the depository
arrangement will be described in an applicable subsequent filing.
Upon the issuance of any global security, and the deposit of that global
security with or on behalf of the depository for the global security, the
depository will credit, on its book-entry registration and transfer system, the
principal amounts of the debt securities represented by that global security to
the accounts of institutions that have accounts with the depository or its
nominee. The accounts to be credited will be designated by the underwriters or
agents engaging in the distribution of the debt securities or by us, if the debt
securities are offered and sold directly by us. Ownership of beneficial
interests in a global security will be limited to participating institutions or
persons that may hold interest through such participating institutions.
Ownership of beneficial interests by participating institutions in the global
security will be shown on, and the transfer of the beneficial interests will be
effected only through, records maintained by the depository for the global
security or by its nominee. Ownership of beneficial interests in the global
security by persons that hold through participating institutions will be shown
on, and the transfer of the beneficial interests within the participating
institutions will be effected only through, records maintained by those
participating institutions. The laws of some jurisdictions may require that
purchasers of securities take physical delivery of the securities in
certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in the global securities.
So long as the depository for a global security, or its nominee, is the
registered owner of that global security, the depository or its nominee, as the
case may be, will be considered the sole owner or holder of the debt securities
represented by the global security for all purposes under the applicable
indenture. Unless otherwise specified in an applicable subsequent filing and
except as specified below, owners of beneficial interests in the global security
will not be entitled to have debt securities of the series represented by the
global security registered in their names, will not receive or be entitled to
receive physical delivery of debt securities of the series in certificated form
and will not be considered the holders thereof for any purposes under the
indenture. Accordingly, each person owning a beneficial interest in the global
security must rely on the procedures of the depository and, if such person is
not a participating institution, on the procedures of the participating
institution through which the person owns its interest, to exercise any rights
of a holder under the indenture.
The depository may grant proxies and otherwise authorize participating
institutions to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action which a holder is entitled to give or
take under the applicable indenture. We understand that, under existing industry
practices, if we request any action of holders or any owner of a beneficial
interest in the global security desires to give any notice or take any action a
holder is entitled to give or take under the applicable indenture, the
depository would authorize the participating institutions to give the notice or
take the action, and participating institutions would authorize beneficial
owners owning through such participating institutions to give the notice or take
the action or would otherwise act upon the instructions of beneficial owners
owning through them.
Unless otherwise specified in an applicable subsequent filings, payments of
principal, premium and interest on debt securities represented by global
security registered in the name of a depository or its nominee will be made by
us to the depository or its nominee, as the case may be, as the registered owner
of the global security.
We expect that the depository for any debt securities represented by a
global security, upon receipt of any payment of principal, premium or interest,
will credit participating institutions' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the global security as shown on the records of the depository. We also expect
that payments by participating institutions to owners of beneficial interests in
the global security held through those participating institutions will be
governed by standing instructions and customary practices, as is now the case
with the securities held for the accounts of customers registered in street
names, and will be the responsibility of those participating institutions. None
of us, the trustees or any agent of ours or the trustees will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in a global security, or for
maintaining, supervising or reviewing any records relating to those beneficial
interests.
Unless otherwise specified in the applicable subsequent filings, a global
security of any series will be exchangeable for certificated debt securities of
the same series only if:
o the depository for such global securities notifies us that it is
unwilling or unable to continue as depository or such depository
ceases to be a clearing agency registered under the Exchange Act
and, in either case, a successor depository is not appointed by
us within 90 days after we receive the notice or become aware of
the ineligibility;
o we in our sole discretion determine that the global securities
shall be exchangeable for certificated debt securities; or
o there shall have occurred and be continuing an event of default
under the applicable indenture with respect to the debt
securities of that series.
Upon any exchange, owners of beneficial interests in the global security or
securities will be entitled to physical delivery of individual debt securities
in certificated form of like tenor and terms equal in principal amount to their
beneficial interests, and to have the debt securities in certificated form
registered in the names of the beneficial owners, which names are expected to be
provided by the depository's relevant participating institutions to the
applicable trustee.
In the event that the Depository Trust Company, or DTC, acts as depository
for the global securities of any series, the global securities will be issued as
fully registered securities registered in the name of Cede & Co., DTC's
partnership nominee.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participating institutions deposit with DTC. DTC also
facilitates the settlement among participating institutions of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participating institutions'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct participating institutions include securities brokers and
dealers, banks, trust companies, clearing corporations and other organizations.
DTC is owned by a number of its direct participating institutions and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others, such as securities brokers and dealers and banks and trust
companies that clear through or maintain a custodial relationship with a direct
participating institution, either directly or indirectly. The rules applicable
to DTC and its participating institutions are on file with the Commission.
To facilitate subsequent transfers, the debt securities may be registered
in the name of DTC's nominee, Cede & Co. The deposit of the debt securities with
DTC and their registration in the name of Cede & Co. will effect no change in
beneficial ownership. DTC has no knowledge of the actual beneficial owners of
the debt securities. DTC's records reflect only the identity of the direct
participating institutions to whose accounts debt securities are credited, which
may or may not be the beneficial owners. The participating institutions remain
responsible for keeping account of their holdings on behalf of their customers.
Delivery of notices and other communications by DTC to direct participating
institutions, by direct participating institutions to indirect participating
institutions, and by direct participating institutions and indirect
participating institutions to beneficial owners of debt securities are governed
by arrangements among them, subject to any statutory or regulatory requirements
as may be in effect.
Neither DTC nor Cede & Co. consents or votes with respect to the debt
securities. Under its usual procedures, DTC mails a proxy to the issuer as soon
as possible after the record date. The proxy assigns Cede & Co.'s consenting or
voting rights to those direct participating institution to whose accounts the
debt securities are credited on the record date.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the debt securities of a series represented by global securities are
being redeemed, DTC's practice is to determine by lot the amount of the interest
of each direct participating institutions in that issue to be redeemed.
To the extent that any debt securities provide for repayment or repurchase
at the option of the holders thereof, a beneficial owner shall give notice of
any option to elect to have its interest in the global security repaid by us,
through its participating institution, to the applicable trustee, and shall
effect delivery of the interest in a global security by causing the direct
participating institution to transfer the direct participating institution's
interest in the global security or securities representing the interest, on
DTC's records, to the applicable trustee. The requirement for physical delivery
of debt securities in connection with a demand for repayment or repurchase will
be deemed satisfied when the ownership rights in the global security or
securities representing the debt securities are transferred by direct
participating institutions on DTC's records.
DTC may discontinue providing its services as securities depository for the
debt securities at any time. Under such circumstances, in the event that a
successor securities depository is not appointed, debt security certificates are
required to be printed and delivered as described above.
We may decide to discontinue use of the system of book-entry transfers
through the securities depository. In that event, debt security certificates
will be printed and delivered as described above.
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that we believe to be reliable, but we take no
responsibility for its accuracy.
DESCRIPTION OF PURCHASE CONTRACTS
We may issue purchase contracts for the purchase or sale of:
o debt or equity securities issued by us or securities of third
parties, a basket of such securities, an index or indices of such
securities or any combination of the above as specified in the
applicable prospectus supplement;
o currencies; or
o commodities.
Each purchase contract will entitle the holder thereof to purchase or sell,
and obligate us to sell or purchase, on specified dates, such securities,
currencies or commodities at a specified purchase price, which may be based on a
formula, all as set forth in the applicable prospectus supplement. We may,
however, satisfy our obligations, if any, with respect to any purchase contract
by delivering the cash value of such purchase contract or the cash value of the
property otherwise deliverable or, in the case of purchase contracts on
underlying currencies, by delivering the underlying currencies, as set forth in
the applicable prospectus supplement. The applicable prospectus supplement will
also specify the methods by which the holders may purchase or sell such
securities, currencies or commodities and any acceleration, cancellation or
termination provisions or other provisions relating to the settlement of a
purchase contract.
The purchase contracts may require us to make periodic payments to the
holders thereof or vice versa, which payments may be deferred to the extent set
forth in the applicable prospectus supplement, and those payments may be
unsecured or pre-funded on some basis. The purchase contracts may require the
holders thereof to secure their obligations in a specified manner to be
described in the applicable prospectus supplement. Alternatively, purchase
contracts may require holders to satisfy their obligations thereunder when the
purchase contracts are issued. Our obligation to settle such pre-paid purchase
contracts on the relevant settlement date may constitute indebtedness.
Accordingly, pre-paid purchase contracts will be issued under either the senior
indenture or the subordinated indenture.
DESCRIPTION OF UNITS
As specified in the applicable prospectus supplement, we may issue units
consisting of one or more purchase contracts, warrants, debt securities,
preferred shares, common shares or any combination of such securities. The
applicable prospectus supplement will describe:
o the terms of the units and of the purchase contracts, warrants,
debt securities, preferred shares and common shares comprising
the units, including whether and under what circumstances the
securities comprising the units may be traded separately;
o a description of the terms of any unit agreement governing the
units; and
o a description of the provisions for the payment, settlement,
transfer or exchange or the units.
EXPENSES
The following are the estimated expenses of the issuance and distribution
of the securities being registered under the Registration Statement of which
this prospectus forms a part, all of which will be paid by us.
SEC registration fee $________*
Blue sky fees and expenses $________*
Printing and engraving expenses $________*
Legal fees and expenses $________*
Rating agency fees $________*
Accounting fees and expenses $________*
Indenture trustee fees and experts $________*
Transfer agent and registrar $________*
Miscellaneous $________*
----------
Total $________*
==========
* To be provided by a prospectus supplement or as an exhibit to Report on Form
6-K that is incorporated by reference into this prospectus.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be passed
upon for us by Seward & Kissel LLP, New York, New York with respect to matters
of U.S. and Marshall Islands law.
EXPERTS
The consolidated financial statements of DryShips Inc. appearing in
DryShips Inc.'s Annual Report on Form 20-F for the year ended December 31, 2006,
have been audited by Ernst & Young (Hellas) Certified Auditors Accountants S.A.,
independent registered public accounting firm, as set forth in their report
thereon, included therein, and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
As required by the Securities Act of 1933, we filed a registration
statement relating to the securities offered by this prospectus with the
Commission. This prospectus is a part of that registration statement, which
includes additional information.
Government Filings
We file annual and special reports within the Commission. You may read and
copy any document that we file at the public reference facilities maintained by
the Commission at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may
obtain information on the operation of the public reference room by calling 1
(800) SEC-0330, and you may obtain copies at prescribed rates from the Public
Reference Section of the Commission at its principal office in Washington, D.C.
20549. The Commission maintains a website (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission.
Information Incorporated by Reference
The SEC allows us to "incorporate by reference" information that we file
with it. This means that we can disclose important information to you by
referring you to those filed documents. The information incorporated by
reference is considered to be a part of this prospectus, and information that we
file later with the SEC prior to the termination of this offering will also be
considered to be part of this prospectus and will automatically update and
supersede previously filed information, including information contained in this
document.
We incorporate by reference the documents listed below and any future
filings made with the Commission under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
o Annual Report on Form 20-F for the year ended December 31, 2006, filed
with the Commission on June 13, 2007 which contains audited
consolidated financial statements for the most recent fiscal year for
which those statements have been filed;
o The description of our securities contained in our Registration
Statement on Form F-1, (File No. 333-122008) as amended, filed with
the SEC on January 13, 2005 and any amendment or report filed for the
purpose of updating that description; and
o Our reports on Form 6-K filed with the Commission on July 16, 2007,
July 19, 2007 and September 12, 2007.
We are also incorporating by reference all subsequent annual reports on
Form 20-F that we file with the Commission and certain Reports on Form 6-K that
we furnish to the Commission after the date of this prospectus (if they state
that they are incorporated by reference into this prospectus) until we file a
post-effective amendment indicating that the offering of the securities made by
this prospectus has been terminated. In all cases, you should rely on the later
information over different information included in this prospectus or the
prospectus supplement.
You should rely only on the information contained or incorporated by
reference in this prospectus and any accompanying prospectus supplement. We have
not, and any underwriters have not, authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus and any accompanying prospectus
supplement as well as the information we previously filed with the Commission
and incorporated by reference, is accurate as of the dates on the front cover of
those documents only. Our business, financial condition and results of
operations and prospects may have changed since those dates.
You may request a free copy of the above mentioned filing or any subsequent
filing we incorporated by reference to this prospectus by writing or telephoning
us at the following address:
DryShips Inc.
Attn: George Economou
80 Kifissias Avenue
Amaroussion GR 151 25
(011) (30) 210 80 90 570
Information Provided by the Company
We will furnish holders of our common stock with annual reports containing
audited financial statements and a report by our independent registered public
accounting firm. The audited financial statements will be prepared in accordance
with U.S. generally accepted accounting principles. As a "foreign private
issuer," we are exempt from the rules under the Securities Exchange Act
prescribing the furnishing and content of proxy statements to shareholders.
While we furnish proxy statements to shareholders in accordance with the rules
of the Nasdaq Global Market, those proxy statements do not conform to Schedule
14A of the proxy rules promulgated under the Securities Exchange Act. In
addition, as a "foreign private issuer," our officers and directors are exempt
from the rules under the Securities Exchange Act relating to short swing profit
reporting and liability.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
================================================================================
Item 8. Indemnification of Directors and Officers.
(1) The By-Laws of the Registrant provide that any person who is or was a
director or officer of the Registrant, or is or was serving at the
request of the Registrant as a director or officer of another
partnership, joint venture, trust or other enterprise shall be
entitled to be indemnified by the Registrant upon the same terms,
under the same conditions, and to the same extent as authorized by
Section 60 of the Business Corporation Act of the Republic of The
Marshall Islands, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of
the Registrant, and, with respect to any criminal action or
proceeding, had reasonable cause to believe his conduct was unlawful.
Section 60 of the Associations Law of the Republic of the Marshall Islands
provides as follows:
Indemnification of directors and officers.
(1) Actions not by or in right of the corporation. A corporation shall
have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea
of no contest, or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the bests
interests of the corporation, and, with respect to any criminal action
or proceedings, had reasonable cause to believe that his conduct was
unlawful.
(2) Actions by or in right of the corporation. A corporation shall have
the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a
director or officer of the corporation, or is or was serving at the
request of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him or
in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except
that no indemnification shall be made in respect of any claims, issue
or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to
the corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem
proper.
(3) When director or officer successful. To the extent that a director or
officer of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (1) or (2) of this section, or in the defense of a claim,
issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(4) Payment of expenses in advance. Expenses incurred in defending a civil
or criminal action, suit or proceeding may be paid in advance of the
final disposition of such action, suit or proceeding as authorized by
the board of directors in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to
be indemnified by the corporation as authorized in this section.
(5) Indemnification pursuant to other rights. The indemnification and
advancement of expenses provided by, or granted pursuant to, the other
subsections of this section shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another capacity
while holding such office.
(6) Continuation of indemnification. The indemnification and advancement
of expenses provided by, or granted pursuant to, this section shall,
unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a director, officer, employee or agent
and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(7) Insurance. A corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director or officer
of the corporation or is or was serving at the request of the
corporation as a director or officer against any liability asserted
against him and incurred by him in such capacity whether or not the
corporation would have the power to indemnify him against such
liability under the provisions of this section.
Item 9. Exhibits
Exhibit
Number Description
--------------------------------------------------------------------------------
1.1 Form of Sales Agreement*
1.2 Underwriting Agreement (for equity securities)*
1.3 Underwriting Agreement (for debt securities)*
4.1 Form of Common Stock Certificate**
4.2 Preferred Share Certificate*
4.3 Form of Debt Securities Indenture
5.1 Form of Opinion of Seward & Kissel LLP, United States and
Marshall Islands counsel to the Company as to the validity of the
common stock, preferred stock, debt securities, warrants,
purchase contracts and units
8.1 Form of Opinion of Seward & Kissel LLP, with respect to certain
tax matters
23.1 Consent of Seward & Kissel LLP (included in Exhibit 5.1)
23.2 Consent of Independent Registered Public Accounting Firm
24 Power of Attorney (contained in signature page)
25.1 T-1 Statement of Eligibility (senior indenture)*
25.2 T-1 Statement of Eligibility (subordinated indenture)*
* To be filed either as an amendment or as an exhibit to a report filed
pursuant to the Securities Exchange Act of 1934 of the Registrant and
incorporated by reference into this Registration Statement.
** Incorporated herein by reference to Exhibit 4 to the Registration Statement
of DryShips Inc. on Form F-1, Registration No. 333-122008 filed with the
SEC on January 31, 2005.
Item 10. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement,
unless the information required to be included is to contained in
reports filed with or furnished to the Commission that are
incorporated by reference in this Registration Statement or is
contained in a form of prospectus filed pursuant to Rule 424(b)
under the Securities Act that is part of this Registration
Statement,
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) To file a post-effective amendment to the registration statement
to include any financial statements required by Item 8.A. of Form
20-F at the start of any delayed offering or throughout a
continuous offering. Financial statements and information
otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial
statements required pursuant to this paragraph (a)(4) and other
information necessary to ensure that all other information in the
prospectus is at least as current as the date of those financial
statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment
need not be filed to include financial statements and information
required by Section 10(a)(3) of the Securities Act of 1933 or
Rule 3-19 under the Securities Act of 1933 if such financial
statements and information are contained in periodic reports
filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Form F-3.
(5) Each prospectus filed by the registrant pursuant to Rule
424(b)(3) shall be deemed to be part of this Registration
Statement as of the date the filed prospectus was deemed part of
and included in this Registration Statement.
(6) Each prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5), or (b)(7) as part of this Registration Statement for the
purpose of providing the information required by section 10(a) of
the Securities Act of 1933 shall be deemed to be part of and
included in this Registration Statement as of the earlier of the
date such form of prospectus is first used after effectiveness or
the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in Rule 430B,
for liability purposes of the issuer and any person that is at
that date an underwriter, such date shall be deemed to be a new
effective date of the registration statement relating to the
securities in the registration statement to which that prospectus
relates, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof. Provided,
however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in
a document incorporated or deemed incorporated by reference into
the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or
modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made
in any such document immediately prior to such effective date.
(7) The undersigned registrant undertakes that in a primary offering
of securities of the undersigned registrant pursuant to this
Registration Statement, regardless of the underwriting method
used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell
such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed
pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or
used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating
to the offering containing material information about the
undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering
made by the undersigned registrant to the purchaser.
(8) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(9) The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3
or Rule 14c-3 under the Securities Exchange Act of 1934; and,
where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus,
to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to
provide such interim financial information.
(10) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the
trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act in accordance with the rules an regulations
prescribed by the Commission under Section 305(b)(2) of the Trust
Indenture Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Athens, Country of Greece, on October 5, 2007.
DRYSHIPS INC.
/s/ GEORGE ECONOMOU
-------------------
By: George Economou
Title: Chairman, President, Chief Executive Officer
and Interim Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of George Economou, Gary J. Wolfe
and Robert E. Lustrin his true and lawful attorney-in-fact and agent, with full
powers of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully for all intents
and purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on October
5, 2007 in the capacities indicated.
Signature Title Date
-------------- ---------- ---------
/s/ GEORGE ECONOMOU Director, Chairman, President, October 5, 2007
-------------------------- Chief Executive Officer and
George Economou Interim Chief Financial Officer
(Principal Executive Officer and
Principal Financial Officer)
/s/ ARISTEIDIS IOANNIDIS Director October 5, 2007
--------------------------
Aristeidis Ioannidis
/s/ ANGELOS PAPOULIAS Director October 5, 2007
--------------------------
Angelos Papoulias
/s/ GEORGE DEMATHAS Director October 5, 2007
--------------------------
George Demathas
/s/ GEORGE XIRADAKIS Director October 5, 2007
--------------------------
George Xiradakis
AUTHORIZED UNITED STATES REPRESENTATIVE
Pursuant to the requirement of the Securities Act of 1933, the undersigned, the
duly authorized representative in the United States of the aforementioned
Registrant, has signed this Registration Statement in the City of Newark,
State of Delaware, on October 5, 2007.
PUGLISI & ASSOCIATES
/s/ GREGORY F. LAVELLE
-------------------------------
By: Gregory F. Lavelle
EXHIBIT INDEX
Exhibit
Number Description
--------------------------------------------------------------------------------
1.1 Form of Sales Agreement*
1.2 Underwriting Agreement (for equity securities)*
1.3 Underwriting Agreement (for debt securities)*
4.1 Form of Common Stock Certificate**
4.2 Preferred Share Certificate*
4.3 Form of Debt Securities Indenture
5.1 Form of Opinion of Seward & Kissel LLP, United States and
Marshall Islands counsel to the Company, as to the validity of
the common stock, preferred stock, debt securities, warrants,
purchase contracts and units
8.1 Form of Opinion of Seward & Kissel LLP, with respect to certain
tax matters
23.1 Consent of Seward & Kissel LLP (included in Exhibit 5.1)
23.2 Consent of Independent Registered Public Accounting Firm
24 Power of Attorney (contained in signature page)
25.1 T-1 Statement of Eligibility (senior indenture)*
25.2 T-1 Statement of Eligibility (subordinated indenture)*
* To be filed either as an amendment or as an exhibit to a report filed
pursuant to the Securities Exchange Act of 1934 of the Registrant and
incorporated by reference into this Registration Statement.
** Incorporated herein by reference to Exhibit 4 to the Registration Statement
of DryShips Inc. on Form F-1, Registration No. 333-122008 filed with the
SEC on January 31, 2005.
SK 23113 0002 815224