$500,000,000
Through this
prospectus, we may periodically offer:
(1) our
common shares, which include preferred stock purchase rights;
(2) our
preferred shares;
(3) our debt
securities, which may be guaranteed by one or more of our
subsidiaries;
(5) our
purchase contracts; and
(6) our
units
The
aggregate offering price of all securities issued under this prospectus may not
exceed $500,000,000.
The
prices and other 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 listed on the Nasdaq Global Select Market under the
symbol “EGLE.”
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 sections entitled ‘‘Risk
Factors’’ beginning on page 6 of this prospectus and in our Form 10-K for the
year ended December 31, 2007.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date
of this prospectus is March 2, 2009.
Prospectus
Summary
|
1
|
Risk
Factors
|
6
|
Use
of Proceeds
|
8
|
Forward-Looking
Statements
|
8
|
Ratio
of Earnings to Fixed Charges
|
9
|
Plan
of Distribution
|
10
|
Description
of Capital Stock
|
11
|
Description
of Preferred Shares
|
11
|
Description
of Warrants
|
12
|
Description
of Debt Securities and Guarantees
|
13
|
Description
of Purchase Contracts
|
22
|
Description
of Units
|
23
|
Tax Considerations
|
23
|
Experts
|
32
|
Legal
Matters
|
32
|
Where
You Can Find Additional Information
|
32
|
Incorporation
of Certain Documents By Reference
|
32
|
Disclosure
of Commission Position On Indemnification For Securities Act
Liabilities
|
34
|
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 that we filed with the Securities and Exchange
Commission, or Commission, using a shelf registration process. Under the shelf
registration process, we may sell any combination of the common shares,
preferred shares, debt securities, warrants, purchase contracts and units
described in this prospectus in one or more offerings up to a total
dollar amount of $500,000,000.
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 that 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 Additional Information.’’
In this
prospectus, all references to ‘‘we,’’ ‘‘our,’’ ‘‘us’’ and the ‘‘Company’’ shall
refer to Eagle Bulk Shipping Inc. and, unless the context requires otherwise,
its consolidated subsidiaries.
PROSPECTUS
SUMMARY
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 beginning on page 20 of our Form 10-K for the period ending December 31,
2007 and the more detailed information that appears later in this prospectus or
is contained in any supplements to this prospectus or in the documents that we
incorporate by reference into this prospectus.
Our
Company
Eagle
Bulk Shipping Inc., or the Company, is incorporated under the laws of the
Republic of the Marshall Islands and headquartered in New York, New York. We are
engaged primarily in the ocean transportation of a broad range of major and
minor bulk cargoes, including iron ore, coal, grain, cement and fertilizer,
along worldwide shipping routes. We operate in the Handymax sector of the dry
bulk industry, with particular emphasis on the Supramax class of vessels. We own
and operate a modern fleet of 24 oceangoing vessels with a combined carrying
capacity of 1,240,939 deadweight tons, or dwt, and an average age of
approximately six years. We also have an extensive Supramax vessel newbuilding
program in China and Japan which commenced delivery of the constructed vessels
in 2008 and continues until 2011. We have contracts for the construction of 23
Supramax vessels with a combined carrying capacity of 1,313,300 deadweight tons.
Four newbuildings were delivered into our fleet during 2008 and January of
2009. The program also provides us with options for the construction of eight
Supramax vessels with a combined carrying capacity of 464,000 deadweight tons.
Upon delivery of the last contracted newbuilding vessels in 2011, our total
fleet will consist of 47 vessels with a combined carrying capacity of 2.55
million dwt.
We own
one of the largest fleets of Supramax dry bulk vessels in the world. Supramax
dry bulk vessels range in size from 50,000 to 60,000 dwt. These vessels have the
cargo loading and unloading flexibility of on-board cranes while offering cargo
carrying capacities approaching that of Panamax dry bulk vessels, which range in
size from 60,000 to 100,000 dwt and must rely on port facilities to load and
offload their cargoes. We believe that the cargo handling flexibility and cargo
carrying capacity of the Supramax class vessels make them attractive to
charterers.
We carry
out the commercial and strategic management of our fleet through our
wholly-owned subsidiary, Eagle Shipping International (USA) LLC, a Marshall
Islands limited liability company that was formed in January 2005 and
maintains its principle executive offices in New York, New York. Each of our
vessels is owned by us through a separate wholly-owned Marshall Islands limited
liability company.
We
maintain our principal executive offices at 477 Madison Avenue, New York, New
York 10022. Our telephone number at that address is (212) 785-2500. Our website
address is www.eagleships.com. Information contained on our website does not
constitute part of this prospectus.
Since
December 31, 2007, the following significant events occurred that affected our
fleet and our business:
|
·
|
In
May 2008, we acquired two Supramax vessels, Goldeneye and Redwing, which were
delivered into our fleet in June 2008 and September 2008,
respectively.
|
|
·
|
In
June 2008, we took delivery of the first of our newbuilding vessels, Wren. This vessel is
the first of the series of 22 vessels being built in China under
construction contracts.
|
|
·
|
In
October 2008, we took delivery of our second newbuilding vessel from
China, Woodstar.
|
|
·
|
In
November 2008, we took delivery of our third newbuilding vessel, Crowned Eagle. This
vessel is the first of the series of five vessels being built in
Japan.
|
|
·
|
In
December 2008, we renegotiated our 30 vessel newbuilding program in China
by converting firm construction contracts on eight charter free vessels
into options. The contract deposits on these vessels were redirected as
progress payments towards vessels being constructed for delivery in 2009.
We also deferred delivery of a vessel, Thrush, from September
2009 to November 2010. These changes in the newbuilding program resulted
in a reduction of the Company’s capital expenditure program by a total of
$363 million.
|
|
·
|
In
December 2008, we amended and reduced our revolving credit facility to
$1,350,000,000.
|
|
·
|
In
January 2009, we took delivery of our fourth newbuilding vessel, Crested Eagle. This
vessel is the second of the series of five vessels being built in
Japan.
|
Our
Fleet
The
following table presents certain information about the Company's revenue earning
charters on its operating fleet as of the date of this prospectus:
Vessel
|
Year
Built
|
Dwt
|
Time
Charter Expiration (1)
|
Daily
Time
Charter
Hire
Rate
|
Cardinal
|
2004
|
55,362
|
June
to September 2009
|
$
|
62,000
|
Condor
|
2001
|
50,296
|
May
2010 to July 2010
|
$
|
22,000
|
Falcon
(2)
|
2001
|
51,268
|
April
2010 to June 2010
|
$
|
39,500
|
Griffon
|
1995
|
46,635
|
March
2009
|
$
|
20,075
|
Harrier
(3)
|
2001
|
50,296
|
June
2009 to September 2009
|
$
|
24,000
|
Hawk
I
|
2001
|
50,296
|
April
2009 to June 2009
|
$
|
22,000
|
Heron
(4)
|
2001
|
52,827
|
January
2011 to May 2011
|
$
|
26,375
|
Jaeger
(5)
|
2004
|
52,248
|
October
2009 to January 2010
|
$
|
10,100
|
Kestrel
I
|
2004
|
50,326
|
March
2009 to April 2009
|
$
|
18,000
|
Kite
|
1997
|
47,195
|
September
2009 to January 2010
|
$
|
21,000
|
Merlin
(6)
|
2001
|
50,296
|
December
2010 to March 2011
|
$
|
25,000
|
Osprey
I (7)
|
2002
|
50,206
|
October
2009 to December 2009
|
$
|
25,000
|
Peregrine
|
2001
|
50,913
|
December
2009 to March 2010
|
$
|
8,500
|
Sparrow
|
2000
|
48,225
|
February
2010 to May 2010
|
$
|
34,500
|
Tern
|
2003
|
50,200
|
December
2009 to March 2010
|
$
|
8,500
|
Shrike
|
2003
|
53,343
|
April
2009 to June 2009
May
2010 to August 2010
|
$
|
24,600
25,600
|
Skua
(8)
|
2003
|
53,350
|
May
2009 to August 2009
|
$
|
24,200
|
Kittiwake
|
2002
|
53,146
|
July
2009 to September 2009
|
$
|
56,250
|
Goldeneye
|
2002
|
52,421
|
May
2009 to July 2009
|
$
|
61,000
|
Wren
(9)
|
2008
|
53,349
|
Feb
2012
Feb
2012 to Dec 2018/Apr 2019
|
$
|
24,750
18,000
(with
profit share)
|
Redwing
|
2007
|
53,411
|
August
2009 to October 2009
|
$
|
50,000
|
Woodstar
(10)
|
2008
|
53,390
|
Jan
2014
Jan
2014 to Dec 2018/Apr 2019
|
$
|
18,300
18,000
(with
profit share)
|
Crowned
Eagle
|
2008
|
55,940
|
September
2009 to December 2009
|
$
|
16,000
|
Crested
Eagle
|
2009
|
56,000
|
Jan
2010 to Mar 2010
|
$
|
10,5000
|
(1)
|
The
date range provided represents the earliest and latest date on which the
charterer may redeliver the vessel to the Company upon the termination of
the charter. The time charter hire rates presented are gross daily charter
rates before brokerage commissions, ranging from 1.25% to 6.25%, to third
party ship brokers.
|
(2)
|
The
charterer of the FALCON has an option to extend the charter period by 11
to 13 months at a daily time charter rate of $41,000.
|
(3)
|
The
daily rate for the HARRIER is $27,000 for the first year and $21,000 for
the second year. Revenue recognition is based on an average daily rate of
$24,000.
|
(4)
|
The
charterer of the HERON has an option to extend the charter period by 11 to
13 months at a time charter rate of $27,375 per day. The charterer has a
second option for a further 11 to 13 months at a time charter rate of
$28,375 per day.
|
(5)
|
In
December 2008, the JAEGER commenced a charter for one year at an average
daily rate of approximately $10,100 based on a charter rate of $5,000 per
day for the first 50 days and $11,000 per day for the balance of the
year.
|
(6)
|
The
daily rate for the MERLIN is $27,000 for the first year, $25,000 for the
second year and $23,000 for the third year. Revenue recognition is based
on an average daily rate of $25,000.
|
(7)
|
The
charterer of the OSPREY has an option to extend the charter period by 11
to 13 months at a time charter rate of $25,000 per day.
|
(8)
|
The
charterer of the SKUA has an option to extend the charter period by 11 to
13 months at a daily time charter rate of $25,200.
|
(9)
|
The
WREN has entered into a long-term charter. The charter rate until February
2012 is $24,750 per day. Subsequently, the charter until redelivery in
December 2018 to April 2019 will be profit share based. The base charter
rate will be $18,000 with a 50% profit share for earned rates over $22,000
per day. Revenue recognition for the base rate from commencement of the
charter is based on an average daily base rate of
$20,306.
|
(10)
|
The
WOODSTAR has entered into a long-term charter. The charter rate until
January 2014 is $18,300 per day. Subsequently, the charter until
redelivery in December 2018 to April 2019 will be profit share based. The
base charter rate will be $18,000 with a 50% profit share for earned rates
over $22,000 per day. Revenue recognition for the base rate from
commencement of the charter is based on an average daily base rate of
$18,152.
|
The
following table represents certain information, as of the date of this
prospectus, about the Company’s newbuilding vessels being constructed and their
employment upon delivery:
Vessel
|
Dwt
|
Year
Built-
Expected
Delivery
(1)
|
Time
Charter
Employment
Expiration
(2)
|
Daily
Time
Charter
Hire
Rate
(3)
|
Profit
Share
|
Stellar
Eagle
|
56,000
|
Apr
2009
|
Charter
Free
|
|
—
|
—
|
Golden
Eagle
|
56,000
|
Jan
2010
|
Charter
Free
|
|
—
|
—
|
Imperial
Eagle
|
56,000
|
Feb
2010
|
Charter
Free
|
|
—
|
—
|
Thrush
|
53,100
|
Nov
2010
|
Charter
Free
|
|
—
|
—
|
Thrasher
|
53,100
|
Nov
2009
|
Feb
2016
|
$
|
18,400
|
—
|
|
|
|
Feb
2016 to Dec 2018/Apr 2019
|
$
|
18,000
|
50%
over $22,000
|
Avocet
|
53,100
|
Dec
2009
|
Mar
2016
|
$
|
18,400
|
—
|
|
|
|
Mar
2016 to Dec 2018/Apr 2019
|
$
|
18,000
|
50%
over $22,000
|
Bittern
|
58,000
|
Sep
2009
|
Dec
2014
|
$
|
18,850
|
—
|
|
|
|
Dec
2014 to Dec 2018/Apr 2019
|
$
|
18,000
|
50%
over $22,000
|
Canary
|
58,000
|
Oct
2009
|
Jan
2015
|
$
|
18,850
|
—
|
|
|
|
Jan
2015 to Dec 2018/Apr 2019
|
$
|
18,000
|
50%
over $22,000
|
Crane
|
58,000
|
Nov
2009
|
Feb
2015
|
$
|
18,850
|
—
|
|
|
|
Feb
2015 to Dec 2018/Apr 2019
|
$
|
18,000
|
50%
over $22,000
|
Egret
(4)
|
58,000
|
Dec
2009
|
Sep
2012 to Jan 2013
|
$
|
17,650
|
50%
over $20,000
|
Gannet
(4)
|
58,000
|
Jan
2010
|
Oct
2012 to Feb 2013
|
$
|
17,650
|
50%
over $20,000
|
Grebe
(4)
|
58,000
|
Feb
2010
|
Nov
2012 to Mar 2013
|
$
|
17,650
|
50%
over $20,000
|
Ibis
(4)
|
58,000
|
Mar
2010
|
Dec
2012 to Apr 2013
|
$
|
17,650
|
50%
over $20,000
|
Jay
|
58,000
|
Apr
2010
|
Sep
2015
|
$
|
18,500
|
50%
over $21,500
|
|
|
|
Sep
2015 to Dec 2018/Apr 2019
|
$
|
18,000
|
50%
over $22,000
|
Kingfisher
|
58,000
|
May
2010
|
Oct
2015
|
$
|
18,500
|
50%
over $21,500
|
|
|
|
Oct
2015 to Dec 2018/Apr 2019
|
$
|
18,000
|
50%
over $22,000
|
Martin
|
58,000
|
Jun
2010
|
Dec
2016 to Dec 2017
|
$
|
18,400
|
—
|
Nighthawk
|
58,000
|
Mar
2011
|
Sep
2017 to Sep 2018
|
$
|
18,400
|
—
|
Oriole
|
58,000
|
Jul
2011
|
Jan
2018 to Jan 2019
|
$
|
18,400
|
—
|
Owl
|
58,000
|
Aug
2011
|
Feb
2018 to Feb 2019
|
$
|
18,400
|
—
|
Petrel
(4)
|
58,000
|
Sep
2011
|
Jun
2014 to Oct 2014
|
$
|
17,650
|
50%
over $20,000
|
Puffin
(4)
|
58,000
|
Oct
2011
|
Jul
2014 to Nov 2014
|
$
|
17,650
|
50%
over $20,000
|
Roadrunner
(4)
|
58,000
|
Nov
2011
|
Aug
2014 to Dec 2014
|
$
|
17,650
|
50%
over $20,000
|
Sandpiper
(4)
|
58,000
|
Dec
2011
|
Sep
2014 to Jan 2015
|
$
|
17,650
|
50%
over $20,000
|
Snipe
(5)
|
58,000
|
Jan
2012
|
Charter
Free
|
|
—
|
—
|
Swift
(5)
|
58,000
|
Feb
2012
|
Charter
Free
|
|
—
|
—
|
Raptor
(5)
|
58,000
|
Mar
2012
|
Charter
Free
|
|
—
|
—
|
Saker
(5)
|
58,000
|
Apr
2012
|
Charter
Free
|
|
—
|
—
|
Besra
(5,6)
|
58,000
|
Oct
2010
|
Charter
Free
|
|
—
|
—
|
Cernicalo
(5,6)
|
58,000
|
Jan
2011
|
Charter
Free
|
|
—
|
—
|
Fulmar
(5,6)
|
58,000
|
Jun
2011
|
Charter
Free
|
|
—
|
—
|
Goshawk
(5,6)
|
58,000
|
Sep
2011
|
Charter
Free
|
|
—
|
—
|
(1)
|
Vessel
build and delivery dates are estimates based on guidance received from
shipyard.
|
(2)
|
The
date range represents the earliest and latest date on which the charterer
may redeliver the vessel to us upon the termination of the
charter.
|
(3)
|
The
time charter hire rate presented are gross daily charter rates before
brokerage commissions ranging from 2.25% to 6.25% to third party ship
brokers.
|
(4)
|
The
charterer has an option to extend the charter by two periods of 11 to 13
months each.
|
(5)
|
Options
for construction declared on December 27, 2007.
|
(6)
|
Firm
contracts converted to options in December
2008.
|
The
Securities
We may
use this prospectus to offer up to $500,000,000 of:
|
·
|
our
common shares, including preferred stock purchase
rights;
|
|
·
|
our
debt securities, which may be guaranteed by one or more of our
subsidiaries;
|
|
·
|
our
purchase contracts; and
|
We may
also offer securities of the types listed above that are convertible or
exchangeable into one or more of the securities listed above.
A
prospectus supplement will describe the specific types, amounts, prices, and
detailed terms of any of these securities that we or a selling shareholder may
offer and may describe certain risks 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
We
have identified a number of risk factors below which you should consider before
buying our common shares or our other securities. Additional risk factors are
incorporated by reference into this registration statement from the Company’s
Form 10-K for the period ended December 31, 2007 filed with the Commission on
February 29, 2008. Please see ‘‘Incorporation of Certain Documents by
Reference.’’ In addition, you should also consider carefully the risks set forth
under the heading ‘‘Risk Factors’’ in a prospectus supplement, if any, that will
describe the specific amounts, prices and terms of the offered securities before
investing in any of the securities offered by this prospectus. The occurrence of
one or more of those risk factors could adversely impact our results of
operations or financial condition.
Investment
in our shares involves a high degree of risk.
The
abrupt and dramatic downturn in the drybulk charter market, from which we derive
the large majority of our revenues, has severely affected the drybulk shipping
industry and has harmed our business. The Baltic Dry Index, or the
BDI, fell 94% from May 2008 through December 2008 and we cannot predict charter
rates for 2009. These circumstances, which result from the economic
dislocation worldwide and the disruption of the credit markets, have had a
number of adverse consequences for drybulk shipping, including, among other
things:
|
·
|
an
absence of financing for vessels;
|
|
·
|
no
active second-hand market for the sale of
vessels;
|
|
·
|
extremely
low charter rates, particularly for vessels employed in the spot
market;
|
|
·
|
charterers'
seeking to renegotiate the rates for existing time charters;
and
|
|
·
|
widespread
loan covenant defaults in the drybulk shipping
industry.
|
Accordingly,
your investment in our shares could lose most or all of its
value. Please read the risk factors described herein, in the base
prospectus and in the documents incorporated by reference herein.
The
dry bulk carrier charter market has deteriorated significantly since October
2008, which has adversely affected our revenues, earnings and profitability and
our ability to comply with our loan
covenants.
The Baltic Dry bulk Index, or BDI, declined from a high of 11,793
in May 2008 to a low of 663 in December 2008, which represents a decline of 94%.
The BDI fell over 70% during the month of October alone. Over the
comparable period of May through December 2008, the high and low of the Baltic
Panamax Index and the Baltic Capesize Index represent a decline of 96% and 99%,
respectively. The decline in charter rates is due to various factors, including
the lack of trade financing for purchases of commodities carried by sea, which
has resulted in a significant decline in cargo shipments, and the excess supply
of iron ore in China, which has resulted in falling iron ore prices and
increased stockpiles in Chinese ports. The decline in charter rates
in the dry bulk market also affects the value of our dry bulk vessels, which
follows the trends of dry bulk charter rates, and earnings on our charters, and
similarly, affects our cash flows, liquidity and compliance with the covenants
contained in our loan agreements.
A
further economic slowdown in the Asia Pacific region could exacerbate the effect
of recent slowdowns in the economies of the United States and the European Union
and may have a material adverse effect on our business, financial condition and
results of operations.
We
anticipate a significant number of the port calls made by our vessels will
continue to involve the loading or discharging of dry bulk commodities in ports
in the Asia Pacific region. As a result, negative changes in economic conditions
in any Asia Pacific country, particularly in China, may exacerbate the effect of
recent slowdowns in the economies of the United States and the European Union
and may have a material adverse effect on our business, financial condition and
results of operations, as well as our future prospects. In recent years, China
has been one of the world’s fastest growing economies in terms of gross domestic
product, which has had a significant impact on shipping demand. This rate of
growth declined significantly in the second half of 2008 and it is likely that
China and other countries in the Asia Pacific region will continue to experience
slowed or even negative economic growth in the near future. Moreover, the
current economic slowdown in the economies of the United States, the European
Union and other Asian countries may further adversely affect economic growth in
China and elsewhere. China has recently announced a $586.0 billion stimulus
package aimed in part at increasing investment and consumer spending and
maintaining export growth in response to the recent slowdown in its economic
growth. Our business, financial condition and results of operations, as well as
our future prospects, will likely be materially and adversely affected by a
further economic downturn in any of these countries.
We
are subject to certain risks with respect to our counterparties on contracts,
and failure of such counterparties to meet their obligations could cause us to
suffer losses or otherwise adversely affect our business.
We
enter into, among other things, charter parties with our customers. Such
agreements subject us to counterparty risks. The ability of each of our
counterparties to perform its obligations under a contract with us will depend
on a number of factors that are beyond our control and may include, among other
things, general economic conditions, the condition of the maritime and offshore
industries, the overall financial condition of the counterparty, charter rates
received for specific types of vessels, and various expenses. Consistent with
drybulk shipping industry practice, we have not independently analyzed the
creditworthiness of the charterers. In addition, in depressed market
conditions, our charterers may no longer need a vessel that is currently under
charter or may be able to obtain a comparable vessel at lower
rates. As a result, charterers may seek to renegotiate the terms of
their existing charter parties or avoid their obligations under those
contracts. Should a counterparty fail to honor its obligations under
agreements with us, we could sustain significant losses which could have a
material adverse effect on our business, financial condition, results of
operations and cash flows.
We
cannot assure you that we will be able to refinance indebtedness incurred under
our credit facility.
Our
business strategy contemplates that we repay all or a portion of our acquisition
related debt from time to time with the net proceeds of equity issuances. We
cannot assure you that we will be able to refinance our indebtedness through
equity offerings or otherwise on terms that are acceptable to us or at all. If
we are not able to refinance our indebtedness, we will have to dedicate a
portion of our cash flow from operations to pay the principal and interest of
this indebtedness. We cannot assure you that we will be able to generate cash
flow in amounts that are sufficient for these purposes. If we are not able to
satisfy these obligations, we may have to undertake alternative financing plans
or sell our assets. The actual or perceived credit quality of our charterers,
any defaults by them, and the market value of our fleet, among other things, may
materially affect our ability to obtain alternative financing. In addition, debt
service payments under our credit facility or alternative financing may limit
funds otherwise available for working capital, capital expenditures, payment of
dividends and other purposes. If we are unable to meet our debt obligations, or
if we otherwise default under our credit facility or an alternative financing
arrangement, our lender could declare the debt, together with accrued interest
and fees, to be immediately due and payable and foreclose on our fleet, which
could result in the acceleration of other indebtedness that we may have at such
time and the commencement of similar foreclosure proceedings by other lenders.
In addition, if the recent financial difficulties experienced by financial
institutions worldwide leads to such institutions being unable to meet their
lending commitments, that inability could have a material adverse effect on our
ability to meet our own capital commitment obligations under our newbuilding
contracts and our ability to grow our fleet. If we are not able to
borrow under our credit facility and are unable to find alternative sources of
financing on terms that are acceptable to us or at all, our business, financial
condition, results of operations and cash flows may be materially adversely
affected.
Our
board of directors has determined to suspend the payment of cash dividends
commencing with respect to the fourth quarter of 2008 as a result of market
conditions in the international drybulk shipping industry, and until such market
conditions improve, it is unlikely that we will reinstate the payment of
dividends.
Our board
of directors, beginning with the fourth quarter of 2008, has suspended the
payment of dividends to our common stock holders in order to increase cash flow,
optimize financial flexibility and enhance internal growth. Our
dividend policy will be assessed by the board of directors from time to
time. The declaration and payment of dividends, if any, will always
be subject to the discretion of our board of directors, restrictions contained
in our credit facility and the requirements of Marshall Islands law. Until
market conditions improve, it is unlikely that we will determine to
reinstate the payment of dividends.
USE
OF PROCEEDS
Unless we
specify otherwise in any prospectus supplement, we intend to use the net
proceeds from the sale of securities offered by this prospectus to make vessel
acquisitions and for capital expenditures, repayment of indebtedness, working
capital, and general corporate purposes.
FORWARD-LOOKING
STATEMENTS
Matters
discussed in this document may constitute forward-looking
statements. The Private Securities Litigation Reform Act of 1995
provides safe harbor protections for forward-looking statements in order to
encourage companies to provide prospective information about their
business. Forward-looking statements include statements concerning
plans, objectives, goals, strategies, future events or performance, and
underlying assumptions and other statements, which are other than statements of
historical facts.
We desire
to take advantage of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and are including this cautionary statement in
connection with this safe harbor legislation. This document and any
other written or oral statements made by us or on our behalf may include
forward-looking statements which reflect our current views with respect to
future events and financial performance. The words “believe”,
“anticipate”, “intend”, “estimate”, “forecast”, “project”, “plan”, “potential”,
“will”, “may”, “should”, “expect” and similar expressions identify
forward-looking statements.
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 we believe 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, we cannot assure you that we will achieve or accomplish
these expectations, beliefs or projections.
In
addition to these important factors and matters discussed elsewhere in this
prospectus, and in the documents incorporated by reference in this prospectus,
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
fluctuations in charterhire rates and vessel values, changes in demand in the
drybulk vessel market, changes in the company’s operating expenses, including
bunker prices, drydocking and insurance costs, changes in governmental rules and
regulations or actions taken by regulatory authorities including those that may
limit the commercial useful lives of drybulk vessels, potential liability from
pending or future litigation, general domestic and international political
conditions, potential disruption of shipping routes due to accidents or
political events, and other important factors described from time to time in the
reports we file with the Commission. We caution readers of this
prospectus and any prospectus supplement not to place undue reliance on these
forward-looking statements, which speak only as of their dates. We
undertake no obligation to update or revise any forward-looking
statements.
RATIO
OF EARNINGS TO FIXED CHARGES
The
following table sets forth our ratio of earnings to fixed charges for the
periods indicated:
Period
|
Period
from
January
26, 2005
(inception)
to
December
31, 2005
|
Year
ended
December
31, 2006
|
Year
ended
December
31, 2007
|
Year
ended
December
31, 2008
|
|
|
|
|
|
Ratio
of earnings to fixed charges
|
1.9
|
4.1
|
2.9
|
1.8
|
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:
|
·
|
block
trades, in which a broker-dealer may resell a portion of the block, as
principal, in order to facilitate the
transaction;
|
|
·
|
purchases
by a broker-dealer, as principal, and resale by the broker-dealer for its
account; or
|
|
·
|
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 shares to a broker-dealer, who will then resell or transfer
the common shares under this prospectus. We may enter into hedging transactions
with respect to our securities. For example, we may:
|
·
|
enter
into transactions involving short sales of the common shares by
broker-dealers;
|
|
·
|
sell
common shares short themselves and deliver the shares to close out short
positions;
|
|
·
|
enter
into option or other types of transactions that require us to deliver
common shares to a broker-dealer, who will then resell or transfer the
common shares under this prospectus;
or
|
|
·
|
loan
or pledge the common shares to a broker-dealer, who may sell the loaned
shares or, in the event of default, sell the pledged
shares.
|
We 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 us or
borrowed from us or others to settle those sales or to close out any related
open borrowings of shares, and may use securities received from us in settlement
of those derivatives to close out any related open borrowings of shares. 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 in the distribution of the
securities may be deemed to be underwriters and any commissions received or
profit realized by them on the resale of the securities may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933, as
amended, or the Securities Act. As of the date of this prospectus, we are not a
party to any agreement, arrangement or understanding between any broker or
dealer and us with respect to the offer or sale of the securities pursuant to
this prospectus.
We may
indemnify underwriters, agents and dealers, as applicable, against liabilities
relating to offerings of securities, including liabilities under the Securities
Act, or we may agree to contribute to payments that the underwriters, dealers or
agents may be required to make relating to these liabilities.
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
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 the Nasdaq Global Select Market, the
existing trading market for our common shares, 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 the
registration statement of which this prospectus forms a part.
Pursuant
to a requirement by the Financial Industry Regulatory Authority, or FINRA, the
maximum commission or discount to be received by any FINRA member or independent
broker/dealer may not be greater than eight percent (8%) of the gross proceeds
received by the offeror for the sale of any securities being registered pursuant
to SEC Rule 415 under the Securities Act of 1933, as amended.
DESCRIPTION
OF CAPITAL STOCK
Our
description of capital stock can be found under the headings ‘‘Description of
Capital Stock’’ and ‘‘Description of Registrant’s Securities to be Registered’’
in our registration statements on Form 8-A, (File No. 000-51366) and (File No.
001-33831) as amended, filed with the Commission on June 20, 2005 and
November 13, 2007, respectively. You should read the applicable prospectus
supplement relating to an offering of shares of our common stock, or of
securities convertible, exchangeable or exercisable for shares of our common
stock, for the terms of such offering, including the number of shares of common
stock offered, the initial offering price and market prices and dividend
information relating to our common stock.
DESCRIPTION
OF PREFERRED SHARES
The
material terms of any series of preferred shares that we offer through a
prospectus supplement, as well as any material United States federal income tax
considerations, will be described in that prospectus supplement.
Subject
to shareholder approval, our board of directors has the authority to issue
preferred shares in one or more series and to determine the rights, preferences
and restrictions, with respect to, among other things, dividends, conversion,
voting, redemption, liquidation and the number of shares constituting any
series. The issuance of preferred shares may have the effect of delaying,
deferring or preventing a change in control of us without further action by the
shareholders. The issuance of preferred shares with voting and conversion rights
may adversely affect the voting power of the holders of common
shares.
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:
|
·
|
the
title of such warrants;
|
|
·
|
the
aggregate number of such warrants;
|
|
·
|
the
price or prices at which such warrants will be
issued;
|
|
·
|
the
currency or currencies in which the price of such warrants will be
payable;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
the
date on which the right to exercise such warrants shall commence and the
date on which such right shall
expire;
|
|
·
|
if
applicable, the minimum or maximum amount of such warrants which may be
exercised at any one time;
|
|
·
|
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;
|
|
·
|
if
applicable, the date on and after which such warrants and the related
securities will be separately
transferable;
|
|
·
|
information
with respect to book-entry procedures, if any;
and
|
|
·
|
any
other terms of such warrants, including terms, procedures and limitations
relating to the exchange and exercise of such
warrants.
|
DESCRIPTION
OF DEBT SECURITIES AND GUARANTEES
We may
issue debt securities, which may be convertible 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 the
registration statement of which this prospectus forms a part or a prospectus
supplement, or as an exhibit to a Securities Exchange Act of 1934, as amended,
or Exchange Act, report that will be incorporated by reference to the
registration statement of which this prospectus forms a part 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:
|
·
|
the
designation, aggregate principal amount and authorized
denominations;
|
|
·
|
the
issue price, expressed as a percentage of the aggregate principal
amount;
|
|
·
|
the
interest rate per annum, if any;
|
|
·
|
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;
|
|
·
|
any
optional or mandatory sinking fund provisions or conversion or
exchangeability provisions;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
any
events of default not set forth in this
prospectus;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
any
restrictive covenants or other material terms relating to the offered debt
securities, which may not be inconsistent with the applicable
indenture;
|
|
·
|
whether
the offered debt securities will be issued in the form of global
securities or certificates in registered or bearer
form;
|
|
·
|
any
terms with respect to
subordination;
|
|
·
|
any
listing on any securities exchange or quotation
system;
|
|
·
|
additional
provisions, if any, related to defeasance and discharge of the offered
debt securities;
|
|
·
|
the
applicability of any guarantees;
|
|
·
|
the
amount of discount or premium, if any, with which such securities will be
issued;
|
|
·
|
whether
the debt securities are convertible or exchangeable into common stock or
other of our equity securities and the terms and conditions upon which
such conversion or exchange shall be
effected;
|
|
·
|
if
applicable, a discussion of any material United States federal income tax
considerations; and
|
|
·
|
additional
terms not inconsistent with the terms of the
indenture.
|
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:
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·
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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;
|
|
·
|
all
capitalized lease obligations;
|
|
·
|
all
hedging obligations;
|
|
·
|
all
obligations representing the deferred purchase price of property;
and
|
|
·
|
all
deferrals, renewals, extensions and refundings of obligations of the type
referred to above;
|
but
senior debt does not include:
|
·
|
subordinated
debt securities; and
|
|
·
|
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:
|
·
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the
ability of us or our subsidiaries to incur either secured or unsecured
debt, or both;
|
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·
|
the
ability to make certain payments, dividends, redemptions or
repurchases;
|
|
·
|
our
ability to create dividend and other payment restrictions affecting our
subsidiaries;
|
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·
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our
ability to make investments;
|
|
·
|
mergers
and consolidations by us or our
subsidiaries;
|
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·
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our
ability to enter into transactions with
affiliates;
|
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·
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our
ability to incur liens; and
|
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·
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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:
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|
(1)
|
changes
the amount of securities whose holders must consent to an amendment,
supplement or waiver;
|
|
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|
(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;
|
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|
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(4)
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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);
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(5)
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makes
the principal of or interest, if any, on any security payable in any
currency other than that stated in the security;
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(6)
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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
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(7)
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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. In addition, other terms
as specified in subsequent filings may be modified without the consent of
the holders.
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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:
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default
in any payment of interest when due which continues for 30
days;
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default
in any payment of principal or premium when
due;
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default
in the deposit of any sinking fund payment when
due;
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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;
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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
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events
of bankruptcy, insolvency or
reorganization.
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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 U.S. Internal Revenue
Service (the ‘‘IRS’’) 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:
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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;
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we
in our sole discretion determine that the global securities shall be
exchangeable for certificated debt securities;
or
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there
shall have occurred and be continuing an event of default under the
applicable indenture with respect to the debt securities of that
series.
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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 NASD.
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:
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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;
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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 applicable prospectus
supplement will also describe any material United States federal income tax
considerations.
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
prefunded 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 two or more purchase contracts, warrants, debt securities, preferred shares,
common shares or any combination of such securities. The applicable prospectus
supplement will describe:
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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;
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a
description of the terms of any unit agreement governing the units; and a
description of the provisions for the payment, settlement, transfer or
exchange or the units; and
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if
applicable, a discussion of any material United States federal income tax
considerations.
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TAX
CONSIDERATIONS
The
following is a discussion of the material Marshall Islands and United States
federal income tax considerations relevant to owning common stock by a United
States Holder or a Non-United States Holder, each as defined below. This
discussion does not purport to deal with the tax consequences of owning the
common stock to all categories of investors, some of which (such as financial
institutions, regulated investment companies, real estate investment trusts,
tax-exempt organizations, insurance companies, persons holding our common stock
as part of a hedging, integrated, conversion or constructive sale transaction or
a straddle, traders in securities that have elected the mark-to-market method of
accounting for their securities, persons liable for alternative minimum tax,
persons who are investors in pass-through entities, dealers in securities or
currencies, persons who own 10% or more of our common stock and investors whose
functional currency is not the United States dollar) may be subject to special
rules. This discussion deals only with holders who own the common stock as a
capital asset and purchase stock in this offering. Shareholders are
encouraged to consult their own tax advisors concerning the overall tax
consequences arising in their own particular situation under United States
federal, state, local or foreign law of the ownership of our common
stock.
Marshall
Islands Tax Considerations
In the
opinion of Seward & Kissel LLP, the following are the material Marshall
Islands tax consequences of our activities to us and shareholders of our common
stock. We are incorporated in the Marshall Islands. Under current Marshall
Islands law, we are not subject to tax on income or capital gains, and no
Marshall Islands withholding tax will be imposed upon payments of dividends by
us to our shareholders.
United
States Federal Income Tax Considerations
In the
opinion of Seward & Kissel LLP, our United States counsel, the following are
the material United States federal income tax consequences to us of our
activities and to United States Holders and to Non-United States Holders of our
common stock. The following discussion of United States federal income tax
matters is based on the Internal Revenue Code of 1986, as amended, or the Code,
judicial decisions, administrative pronouncements, and existing and proposed
regulations issued by the United States Department of the Treasury, all of which
are subject to change, possibly with retroactive effect. In addition, the
discussion below is based, in part, on the description of our business as
described in ‘‘Business’’ in this annual report and assumes that we conduct our
business as described in that section.
We have
made, or will make, special United States federal income tax elections in
respect of each of our ship owning or operating subsidiaries that is potentially
subject to tax as a result of deriving income attributable to the transportation
of cargoes to or from the United States. The effect of the special U.S. tax
elections is to ignore or disregard the subsidiaries for which elections have
been made as separate taxable entities and to treat them as part of their
parent, the ‘‘Company.’’ Therefore, for purposes of the following discussion,
the Company, and not the subsidiaries subject to this special election, will be
treated as the owner and operator of the vessels and as receiving the income
therefrom.
United
States Federal Income Taxation of Our Company
Taxation
of Operating Income: In General
The
Company currently earns, and we anticipate that the Company will continue to
earn, substantially all its income from the hiring or leasing of vessels for use
on a time or voyage charter basis or from the performance of services directly
related to those uses, all of which we refer to as ‘‘shipping
income.’’
Unless
exempt from United States federal income taxation under the rules of Section 883
of the Code, or Section 883, as discussed below, a foreign corporation such as
ourselves will be subject to United States federal income taxation on its
‘‘shipping income’’ that is treated as derived from sources within the United
States, to which we refer as ‘‘United States source shipping income.’’ For tax
purposes, ‘‘United States source shipping income’’ includes 50% of shipping
income that is attributable to transportation that begins or ends, but that does
not both begin and end, in the United States.
Shipping
income attributable to transportation exclusively between non-United States
ports will be considered to be 100% derived from sources outside the United
States. Shipping income derived from sources outside the United States will not
be subject to any United States federal income tax.
Shipping
income attributable to transportation exclusively between United States ports is
considered to be 100% derived from United States sources. However, the Company
is not permitted by United States law to engage in the transportation of cargoes
that produces 100% United States source income.
Unless
exempt from tax under Section 883, the Company’s gross United States source
shipping income would be subject to a 4% tax imposed without allowance for
deductions as described below.
Exemption
of Operating Income from United States Federal Income Taxation
Under
Section 883 and the regulations thereunder, a foreign corporation will be exempt
from United States federal income taxation on its United States source shipping
income if:
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it
is organized in a qualified foreign country, which is one that grants an
‘‘equivalent exemption’’ from tax to corporations organized in the United
States in respect of each category of shipping income for
which exemption is being claimed under Section 883 and to which we refer
as the ‘‘Country of Organization Test’’; and
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(2)
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one
of the following tests is met:
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(A)
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more
than 50% of the value of its shares is beneficially owned, directly or
indirectly, by qualified shareholders, which as defined includes
individuals who are ‘‘residents’’ of a qualified foreign country, to which
we refer as the ‘‘50% Ownership Test;’’
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(B)
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its
shares are ‘‘primarily and regularly traded on an established securities
market’’ in a qualified foreign country or in the United States, to which
we refer as the ‘‘Publicly-Traded Test’’; or
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(C)
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it
is a ‘‘controlled foreign corporation’’ and satisfies an ownership test,
to which, collectively, we refer as the ‘‘CFC Test.’’
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The
Republic of the Marshall Islands, the jurisdiction where the Company is
incorporated, has been officially recognized by the IRS as a qualified foreign
country that grants the requisite ‘‘equivalent exemption’’ from tax in respect
of each category of shipping income the Company earns and currently expects to
earn in the future. Therefore, the Company will be exempt from United States
federal income taxation with respect to its United States source shipping income
if it satisfies any one of the 50% Ownership Test, the Publicly-Traded Test, or
the CFC Test.
Both
before and after the issuance of the common stock to which the registration
statement of which this prospectus forms a part relates, we believe that we will
satisfy the Publicly-Traded Test, as discussed below. The Company does not
currently anticipate a circumstance under which it would be able to satisfy the
50% Ownership Test or the CFC Test before or after the issuance of the common
stock to which the registration statement of which this prospectus forms a part
relates.
The
regulations under Section 883 provide, in pertinent part, that shares of a
foreign corporation will be considered to be ‘‘primarily traded’’ on an
established securities market in a country if the number of shares of each class
of shares that are traded during any taxable year on all established securities
markets in that country exceeds the number of shares in each such class that are
traded during that year on established securities markets in any other single
country. The Company’s common stock, which is its sole class of issued and
outstanding shares, are ‘‘primarily traded’’ on the Nasdaq Global Select
Market.
Under the
regulations, the Company’s common stock will be considered to be ‘‘regularly
traded’’ on an established securities market if one or more classes of its
shares representing more than 50% of its outstanding
shares, by both total combined voting power of all classes of shares entitled to
vote and total value, are listed on such market, to which we refer as the
‘‘listing threshold.’’ Since all our common stock is listed on the Nasdaq Global
Select Market, we believe that we satisfy the listing threshold.
It is
further required that with respect to each class of shares relied upon to meet
the listing threshold, (i) such class of shares is traded on the market, other
than in minimal quantities, on at least 60 days during the taxable year or
one-sixth of the days in a short taxable year; and (ii) the aggregate number of
shares of such class of shares traded on such market during the taxable year is
at least 10% of the average number of shares of such class of shares outstanding
during such year or as appropriately adjusted in the case of a short taxable
year. We believe the Company will satisfy the trading frequency and trading
volume tests. Even if this were not the case, the regulations provide that the
trading frequency and trading volume tests will be deemed satisfied if, as is
the case with the Company’s common stock, such class of shares is traded on an
established market in the United States and such shares are regularly quoted by
dealers making a market in such shares.
Notwithstanding
the foregoing, the regulations provide, in pertinent part, that a class of
shares will not be considered to be ‘‘regularly traded’’ on an established
securities market for any taxable year in which 50% or more of the vote and
value of the outstanding shares of such class are owned, actually or
constructively under specified share attribution rules, on more than half the
days during the taxable year by persons who each own 5% or more of the vote and
value of such class of outstanding shares, to which we refer as the ‘‘5 Percent
Override Rule.’’
For
purposes of being able to determine the persons who actually or constructively
own 5% or more of the vote and value of the Company’s common stock, or ‘‘5%
Shareholders,’’ the regulations permit the Company to rely on those persons that
are identified on Schedule 13G and Schedule 13D filings with the Commission, as
owning 5% or more of the Company’s common stock. The regulations further provide
that an investment company which is registered under the Investment Company Act
of 1940, as amended, will not be treated as a 5% Shareholder for such
purposes.
In the
event the 5 Percent Override Rule is triggered, the regulations provide that the
5 Percent Override Rule will nevertheless not apply if the Company can establish
that within the group of 5% Shareholders, there are sufficient qualified
shareholders for purposes of Section 883 to preclude non-qualified shareholders
in such group from owning 50% or more of the Company’s common stock for more
than half the number of days during the taxable year.
The
Company does not believe that it is currently subject to the 5 Percent Override
Rule. Therefore, the Company believes that it currently qualifies for the
Publicly-Traded Test. However, there is no assurance that the Company will
continue to satisfy the Publicly-Traded Test. For example, the Company’s
shareholders could change in the future, and thus the Company could become
subject to the 5 Percent Override Rule.
Taxation
In Absence of Section 883 Exemption
If the
benefits of Section 883 are unavailable, the Company’s United States source
shipping income would be subject to a 4% tax imposed by Section 887 of the Code
on a gross basis, without the benefit of deductions, to the extent that such
income is not considered to be ‘‘effectively connected’’ with the conduct of a
United States trade or business, as described below. Since under the sourcing
rules described above, no more than 50% of the Company’s shipping income would
be treated as being United States source shipping income, the maximum effective
rate of United States federal income tax on our shipping income would never
exceed 2% under the 4% gross basis tax regime.
To the
extent the Company’s United States source shipping income is considered to be
‘‘effectively connected’’ with the conduct of a United States trade or business,
as described below, any such ‘‘effectively connected’’ United States source
shipping income, net of applicable deductions, would be subject to United States
federal income tax, currently imposed at rates of up to 35%. In addition, the
Company may be subject to the 30% ‘‘branch profits’’ tax on earnings effectively
connected with the conduct of such trade or business, as determined after
allowance for certain adjustments, and on certain interest paid or deemed paid
attributable to the conduct of the Company’s United States trade or
business.
The
Company’s United States source shipping income would be considered ‘‘effectively
connected’’ with the conduct of a United States trade or business only
if:
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the
Company has, or is considered to have, a fixed place of business in the
United States involved in the earning of United States source shipping
income; and
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substantially
all of the Company’s United States source shipping income is attributable
to regularly scheduled transportation, such as the operation of a vessel
that follows a published schedule with repeated sailings at regular
intervals between the same points for voyages that begin or end in the
United States.
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The
Company does not intend to have, or permit circumstances that would result in
having, any vessel sailing to or from the United States on a regularly scheduled
basis. Based on the foregoing and on the expected mode of the Company’s shipping
operations and other activities, we believe that none of the Company’s United
States source shipping income will be ‘‘effectively connected’’ with the conduct
of a United States trade or business.
United
States Taxation of Gain on Sale of Vessels
If the
Company qualifies for exemption from tax under Section 883 in respect of the
shipping income derived from the international operation of its vessels, then
gain from the sale of any such vessel should likewise be exempt from tax under
Section 883. If, however, the Company’s shipping income from such vessels does
not for whatever reason qualify for exemption under Section 883 and assuming
that any decision on a vessel sale is made from and attributable to the United
States office of the Company, as we believe likely to be the case as the Company
is currently structured, then any gain derived from the sale of any such vessel
will be treated as derived from United States sources and subject to United
States federal income tax as ‘‘effectively connected’’ income (determined under
rules different from those discussed above) under the above described net income
tax regime.
United
States Federal Income Taxation of United States Holders
As used
herein, the term ‘‘United States Holder’’ means a beneficial owner of common
stock that is an individual United States citizen or resident, a United States
corporation or other United States entity taxable as a corporation, an estate
the income of which is subject to United States federal income taxation
regardless of its source, or a trust if a court within the United States is able
to exercise primary jurisdiction over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust.
If a
partnership holds our common stock, the tax treatment of a partner will
generally depend upon the status of the partner and upon the activities of the
partnership. If you are a partner in a partnership holding our common stock, you
are encouraged to consult your tax advisor.
Distributions
Subject
to the discussion of passive foreign investment companies below, any
distributions made by the Company with respect to its common stock to a United
States Holder will generally constitute dividends to the extent of the Company’s
current or accumulated earnings and profits, as determined under United States
federal income tax principles. Distributions in excess of such earnings and
profits will be treated first as a nontaxable return of capital to the extent of
the United States Holder’s tax basis in his common stock on a dollar-for-dollar
basis and thereafter as capital gain. Because the Company is not a United States
corporation, United States Holders that are corporations will not be entitled to
claim a dividends received deduction with respect to any distributions they
receive from us. Dividends paid with respect to the Company’s common stock will
generally be treated as ‘‘passive category income’’ for purposes of computing
allowable foreign tax credits for United States foreign tax credit
purposes.
Dividends
paid on the Company’s common stock to a United States Holder who is an
individual, trust or estate (a ‘‘United States Non-Corporate Holder’’) will
generally be treated as ‘‘qualified dividend income’’ that is taxable to such
United States Non-Corporate Holder at preferential tax rates (through 2010)
provided that (1) the common stock is readily tradable on an established
securities market in the United States (such as the Nasdaq Global Select Market
on which the Company’s common stock is traded); (2) the Company is not a passive
foreign investment company for the taxable year during which the dividend is
paid or the immediately preceding taxable year (which we do not believe we have
been, are or will be); (3) the United States Non-Corporate Holder has owned the
common stock for more than 60 days in the 121-day period beginning 60 days
before the date on which the common stock becomes ex-dividend; and (4) the
United States Non-Corporate Holder is not under an obligation to make related
payments with respect to positions in substantially similar or related
property.
There is
no assurance that any dividends paid on the Company’s common stock will be
eligible for these preferential rates in the hands of a United States
Non-Corporate Holder, although we believe that they will be so eligible.
Legislation has been previously introduced in the U.S. Congress which, if
enacted in its present form, would preclude our dividends from qualifying for
such preferential rates prospectively from the date of enactment. Any dividends
out of earnings and profits the Company pays which are not eligible for these
preferential rates will be taxed as ordinary income to a United States
Non-Corporate Holder.
Special
rules may apply to any ‘‘extraordinary dividend’’—generally, a dividend in an
amount which is equal to or in excess of 10% of a shareholder’s adjusted basis
in a common share—paid by the Company. If the Company pays an ‘‘extraordinary
dividend’’ on its common stock that is treated as ‘‘qualified dividend income,’’
then any loss derived by a United States Non-Corporate Holder from the sale or
exchange of such common stock will be treated as long-term capital loss to the
extent of such dividend.
Sale,
Exchange or Other Disposition of Common Stock
Assuming
the Company does not constitute a passive foreign investment company for any
taxable year, a United States Holder generally will recognize taxable gain or
loss upon a sale, exchange or other disposition of the Company’s common stock in
an amount equal to the difference between the amount realized by the United
States Holder from such sale, exchange or other disposition and the United
States Holder’s tax basis in such stock. Such gain or loss will be treated as
long-term capital gain or loss if the United States Holder’s holding period is
greater than one year at the time of the sale, exchange or other disposition.
Such capital gain or loss will generally be treated as United States source
income or loss, as applicable, for United States foreign tax credit purposes.
Long-term capital gains of United States Non Corporate
Holders are currently eligible for reduced rates of taxation. A United States
Holder’s ability to deduct capital losses is subject to certain
limitations.
Passive
Foreign Investment Company Status and Significant Tax Consequences
Special
United States federal income tax rules apply to a United States Holder that
holds shares in a foreign corporation classified as a ‘‘passive foreign
investment company’’ for United States federal income tax purposes. In general,
the Company will be treated as a passive foreign investment company with respect
to a United States Holder if, for any taxable year in which such holder holds
the Company’s common stock, either
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at
least 75% of our gross income for such taxable year consists of passive
income (e.g., dividends, interest, capital gains and rents derived other
than in the active conduct of a rental business);
or
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at
least 50% of the average value of our assets during such taxable year
produce, or are held for the production of, passive
income.
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Income
earned, or deemed earned, by the Company in connection with the performance of
services would not constitute passive income. By contrast, rental income would
generally constitute ‘‘passive income’’ unless the Company was treated under
specific rules as deriving its rental income in the active conduct of a trade or
business.
Based on
the Company’s current operations and future projections, we do not believe that
the Company has been or is, nor do we expect the Company to become, a passive
foreign investment company with respect to any taxable year. Although there is
no legal authority directly on point, our belief is based principally on the
position that, for purposes of determining whether the Company is a passive
foreign investment company, the gross income it derives from its time chartering
and voyage chartering activities should constitute services income, rather than
rental income. Accordingly, such income should not constitute passive income,
and the assets that the Company owns and operates in connection with the
production of such income, in particular, the vessels, should not constitute
passive assets for purposes of determining whether the Company is a passive
foreign investment company. We believe there is substantial legal authority
supporting our position consisting of case law and IRS pronouncements concerning
the characterization of income derived from time charters and voyage charters as
services income for other tax purposes. In addition, we have obtained
an opinion from our counsel, Seward & Kissel LLP, that, based upon the
Company’s operations as described herein, its income from time charters and
voyage charters should not be treated as passive income for purposes of
determining whether it is a passive foreign investment company. However, in the absence
of any legal authority specifically relating to the statutory provisions
governing passive foreign investment companies, the IRS or a court could
disagree with our position. In addition, although the Company intends to conduct
its affairs in a manner to avoid being classified as a passive foreign
investment company with respect to any taxable year, we cannot assure you that
the nature of its operations will not change in the future.
As
discussed more fully below, if the Company were to be treated as a passive
foreign investment company for any taxable year, a United States Holder would be
subject to different taxation rules depending on whether the United States
Holder makes an election to treat the Company as a ‘‘Qualified Electing Fund,’’
which election we refer to as a ‘‘QEF election.’’ As an alternative to making a
QEF election, a United States Holder should be able to make a ‘‘mark-to-market’’
election with respect to the Company’s common stock, as discussed
below.
Taxation
of United States Holders Making a Timely QEF Election
If a
United States Holder makes a timely QEF election, which United States Holder we
refer to as an ‘‘Electing Holder,’’ the Electing Holder must report for United
States federal income tax purposes its pro rata share of the Company’s ordinary
earnings and net capital gain, if any, for each taxable year of the Company for
which it is a passive foreign investment company that ends with or within the
taxable year of the Electing Holder, regardless of whether or not distributions
were received from the Company by the Electing Holder. No portion of any such
inclusions of ordinary earnings will be treated as ‘‘qualified dividend
income.’’ Net capital gain inclusions of United States Non-Corporate Holders
would be eligible for preferential capital gains tax rates. The Electing
Holder’s adjusted tax basis in the common stock will be increased to reflect
taxed but undistributed earnings and profits. Distributions of earnings and
profits that had been previously taxed will result in a corresponding reduction
in the adjusted tax basis in the common stock and will not be taxed again once
distributed. An Electing Holder would not, however, be entitled to a deduction
for its pro rata share of any losses that the Company incurs with respect to any
year. An Electing Holder would generally recognize capital gain or loss on the
sale, exchange or other disposition of the Company’s common stock. A United
States Holder would make a timely QEF election for shares of the Company by
filing one copy of IRS Form 8621 with his United States federal income tax
return for the first year in which he held such shares when the Company was a
passive foreign investment company. If the Company were to be treated as a
passive foreign investment company for any taxable year, the Company would
provide each United States Holder with all necessary information in order to
make the QEF election described above.
Taxation
of United States Holders Making a ‘‘Mark-to-Market’’ Election
Alternatively,
if the Company were to be treated as a passive foreign investment company for
any taxable year and, as we anticipate, its shares are treated as ‘‘marketable
stock,’’ a United States Holder would be allowed to make a ‘‘mark-to-market’’
election with respect to the Company’s common stock, provided the United States
Holder completes and files IRS Form 8621 in accordance with the relevant
instructions and related Treasury regulations. If that election is made, the
United States Holder generally would include as ordinary income in each taxable
year the excess, if any, of the fair market value of the common stock at the end
of the taxable year over such holder’s adjusted tax basis in the common stock.
The United States Holder would also be permitted an ordinary loss in respect of
the excess, if any, of the United States Holder’s adjusted tax basis in the
common stock over its fair market value at the end of the taxable year, but only
to the extent of the net amount previously included in income as a result of the
mark-to-market election. A United States Holder’s tax basis in his common stock
would be adjusted to reflect any such income or loss amount. Gain realized on
the sale, exchange or other disposition of the Company’s common stock would be
treated as ordinary income, and any loss realized on the sale, exchange or other
disposition of the common would be treated as ordinary loss to the extent that
such loss does not exceed the net mark-to-market gains previously included by
the United States Holder. No income inclusions under this election will be
treated as ‘‘qualified dividend income.’’
Taxation
of United States Holders Not Making a Timely QEF or Mark-to-Market
Election
Finally,
if the Company were to be treated as a passive foreign investment company for
any taxable year, a United States Holder who does not make either a QEF election
or a ‘‘mark-to-market’’ election for that year, whom we refer to as a
‘‘Non-Electing Holder,’’ would be subject to special rules with respect to (1)
any excess distribution (i.e., the portion of any distributions received by the
Non-Electing Holder on the common stock in a taxable year in excess of 125% of
the average annual distributions received by the Non-Electing Holder in the
three preceding taxable years, or, if shorter, the Non-Electing Holder’s holding
period for the common stock), and (2) any gain realized on the sale, exchange or
other disposition of the Company’s common stock. Under these special
rules:
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the
excess distribution or gain would be allocated ratably over the
Non-Electing Holder’s aggregate holding period for the common stock;
and
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the
amount allocated to the current taxable year, and any taxable year prior
to the first taxable year in which the Company was a passive foreign
investment company, would be taxed as ordinary income and would not be
‘‘qualified dividend income’’; and
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the
amount allocated to each of the other taxable years would be subject to
tax at the highest rate of tax in effect for the applicable class of
taxpayer for that year, and an interest charge for the deemed deferral
benefit would be imposed with respect to the resulting tax attributable to
each such other taxable year.
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These
special rules would not apply to a qualified pension, profit sharing or other
retirement trust or other tax-exempt organization that did not borrow money or
otherwise utilize leverage in connection with its acquisition of the Company’s
common stock. If the Company is a passive foreign investment company and a
Non-Electing Holder who is an individual dies while owning the Company’s common
stock, such holder’s successor generally would not receive a step-up in tax
basis with respect to such shares.
United
States Federal Income Taxation of ‘‘Non-United States Holders’’
A
beneficial owner of common stock (other than a partnership) that is not a United
States Holder is referred to herein as a ‘‘Non-United States
Holder.’’
If a
partnership holds our common stock, the tax treatment of a partner will
generally depend upon the status of the partner and upon the activities of the
partnership. If you are a partner in a partnership holding our common stock, you
are encouraged to consult your tax advisor.
Dividends
on Common Stock
Non-United
States Holders generally will not be subject to United States federal income tax
or withholding tax on dividends received from the Company with respect to its
common stock, unless that income is effectively connected with the Non-United
States Holder’s conduct of a trade or business in the United States. If the
Non-United States Holder is entitled to the benefits of a United States income
tax treaty with respect to those dividends, that income is taxable only if it is
attributable to a permanent establishment maintained by the Non-United States
Holder in the United States.
Sale,
Exchange or Other Disposition of Common Stock
Non-United
States Holders generally will not be subject to United States federal income tax
or withholding tax on any gain realized upon the sale, exchange or other
disposition of the Company’s common stock, unless:
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the
gain is effectively connected with the Non-United States Holder’s conduct
of a trade or business in the United States (and, if the Non-United States
Holder is entitled to the benefits of an income tax treaty with respect to
that gain, that gain is attributable to a permanent establishment
maintained by the Non-United States Holder in the United States);
or
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the
Non-United States Holder is an individual who is present in the United
States for 183 days or more during the taxable year of disposition
and other conditions are met.
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If the Non-United
States Holder is engaged in a United States trade or business for United States
federal income tax purposes, the income from the common stock, including
dividends and the gain from the sale, exchange or other disposition of the
shares, that is effectively connected with the conduct of that trade or business
will generally be subject to regular United States federal income tax in the
same manner as discussed in the previous section relating to the taxation of
United States Holders. In addition, if you are a corporate Non-United States
Holder, your earnings and profits that are attributable to the effectively
connected income, which are subject to certain adjustments, may be subject to an
additional branch profits tax at a rate of 30%, or at a lower rate as may be
specified by an applicable income tax treaty.
Backup
Withholding and Information Reporting
In
general, dividend payments, or other taxable distributions, made within the
United States to you will be subject to information reporting requirements if
you are a non-corporate United States Holder. Such payments or distributions may
also be subject to backup withholding tax if you are a non-corporate United
States Holder and you:
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fail
to provide an accurate taxpayer identification
number;
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are
notified by the IRS that you have failed to report all interest or
dividends required to be shown on your federal income tax returns;
or
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in
certain circumstances, fail to comply with applicable certification
requirements.
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Non-United
States Holders may be required to establish their exemption from information
reporting and backup withholding by certifying their status on IRS Form W-8BEN,
W-8ECI or W-8IMY, as applicable.
If you
are a Non-United States Holder and you sell your common stock to or through a
United States office of a broker, the payment of the proceeds is subject to both
United States backup withholding and information reporting unless you certify
that you are a non-United States person, under penalties of perjury, or you
otherwise establish an exemption. If you sell your common stock through a
non-United States office of a non-United States broker and the sales proceeds
are paid to you outside the United States, then information reporting and backup
withholding generally will not apply to that payment. However, United States
information reporting requirements, but not backup withholding, will apply to a
payment of sales proceeds, even if that payment is made to you outside the
United States, if you sell your common stock through a non-United States office
of a broker that is a United States person or has some other contacts with the
United States. Such information reporting requirements will not apply, however,
if the broker has documentary evidence in its records that you are a non-United
States person and certain other conditions are met, or you otherwise establish
an exemption.
Backup
withholding tax is not an additional tax. Rather, you generally may obtain a
refund of any amounts withheld under backup withholding rules that exceed your
income tax liability by filing a refund claim with the IRS.
EXPERTS
Ernst
& Young LLP, independent registered public accounting firm, has audited our
consolidated financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 2007, and the effectiveness of our internal control
over financial reporting as of December 31, 2007, as set forth in their reports,
which are incorporated by reference in this prospectus and elsewhere in
the registration statement. Our financial statements and our
management’s assessment are incorporated by reference in reliance on Ernst &
Young LLP’s reports, given on their authority as experts in accounting and
auditing.
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. Certain other matters relating to United
States Federal income tax considerations have also been passed upon for us by
Seward & Kissel LLP, New York, New York.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We file
annual and special reports within the Commission. You may read and copy any
document that we file at the Public Reference Room 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.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The
Commission 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 Commission 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. In all cases, you
should rely on the later information over different information included in this
prospectus or the prospectus supplement. 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:
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Annual
Report on Form 10-K for the year ended December 31, 2007, filed
with the Commission on February 29,
2008;
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Our
Quarterly Report on Form 10-Q for the quarter ended
March 31, 2008, filed with the Commission on May 8, 2008, our
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2008, filed with the Commission on August 8, 2008 and
our Quarterly Report for the quarter ended September 30, 2008, filed with
the Commission on November 7, 2008;
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Our
‘‘Description of Capital Stock’’ contained in our registration statement
on Form 8-A, (File No. 000-51366) as amended, filed with the Commission on
June 20, 2005;
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Our
‘‘Description of Registrant’s Securities to be Registered’’ contained in
our registration statement on Form 8-A, (File No. 001-33831), filed with
the Commission on
November 13, 2007;
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Our
Current Reports filed with the Commission on March 27, 2008, May 21, 2008,
June 20, 2008, June 23, 2008, July 7, 2008, December 23,
2008;
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Our
Definitive Proxy Statement for the 2008 Annual Meeting of Stockholders,
filed on April, 10, 2008; and
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All
documents we file with the Commission pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act 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.
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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.
Notwithstanding
the foregoing, no information is incorporated by reference in this prospectus or
any prospectus supplement where such information under applicable Forms and
regulations of the Commission is not deemed to be ‘‘filed’’ under Section 18 of
the Exchange Act or otherwise subject to the liabilities of that section, unless
we indicate in the report or filing containing such information that the
information is to be considered ‘‘filed’’ under the Exchange Act or is to be
incorporated by reference in this prospectus or any prospectus supplement. You
may access our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, and amendments to those documents filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the
Commission free of charge at the Commission’s website or our website at
www.eagleships.com soon as reasonably practicable after such material is
electronically filed with, or furnished to, the Commission. The reference to our
website does not constitute incorporation by reference of the information
contained in our website. We do not consider information contained on, or that
can be accessed through, our website to be part of this prospectus or the
related registration statement. You may request a free copy of the above
mentioned filings or any subsequent filing we incorporated by reference to this
prospectus by writing or telephoning us at the following address:
DISCLOSURE
OF COMMISSION POSITION ON
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The
Business Corporation Act (the ‘‘BCA’’) of the Marshall Islands authorizes
corporations to limit or eliminate the personal liability of directors and
officers to corporations and their shareholders for monetary damages for
breaches of directors’ fiduciary duties. Our bylaws include a provision that
eliminates the personal liability of directors for monetary damages for actions
taken as a director to the fullest extent permitted by law.
Our
bylaws provide that we must indemnify our directors and officers to the fullest
extent authorized by law. We are also expressly authorized to advance certain
expenses (including attorneys’ fees and disbursements and court costs) to our
directors and offices and carry directors’ and officers’ insurance providing
indemnification for our directors, officers and certain employees for some
liabilities.
We
believe that these indemnification provisions and insurance are useful to
attract and retain qualified directors and executive offices.
The
limitation of liability and indemnification provisions in our amended and
restated articles of incorporation and bylaws may discourage shareholders 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 shareholders. In addition, your
investment may be adversely affected to the extent we pay the costs of
settlement and damage awards against directors and officers pursuant to these
indemnification provisions.
There is
currently no pending material litigation or proceeding involving any of our
directors, officers or employees for which indemnification is
sought
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of each Registrant
pursuant to the foregoing provisions, or otherwise, each Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by a Registrant of expenses incurred or paid
by a director, officer or controlling person of a Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, that
Registrant will, unless in the opinion of its counsel the claim has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.