EAGLE BULK SHIPPING INC. 5,400,000 Shares Common Stock ($0.01 par value per share) UNDERWRITING AGREEMENT February 28, 2007
EXECUTION
COPY
5,400,000 Shares
Common
Stock
($0.01 par
value per share)
February
28, 2007
February
28, 2007
UBS
Securities LLC
000
Xxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000-0000
Ladies
and Gentlemen:
Eagle
Bulk Shipping Inc., a Xxxxxxxx Islands corporation (the
“Company”), proposes to sell to UBS Securities LLC (the
“Underwriter”) an aggregate of 5,400,000 shares (the
“Initial Shares”) of common stock, $.01 par value (the
“Common Stock”), of the Company). In addition, solely for
the purpose of covering over-allotments, the Company proposes to
grant to the Underwriter the option to purchase up to 810,000 shares
of Common Stock (the “Additional Shares”). The Initial
Shares and the Additional Shares are hereinafter collectively
sometimes referred to as the “Shares.” The Shares are
described in the Prospectus which is referred to below.
The
Company has prepared and filed, in accordance with the provisions of
the Securities Act of 1933, as amended, and the rules and regulations
thereunder (collectively, the “Act”), with the Securities
and Exchange Commission (the “Commission”) a registration
statement on Form S-3 (File No. 333-139745) including a prospectus,
which registration statement incorporates by reference documents
which the Company has filed, or will file, in accordance with the
provisions of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (collectively, the
“Exchange
Act”).
Amendments to such registration statement, if necessary or
appropriate, have been similarly prepared and filed with the
Commission in accordance with the Act. Such registration statement,
as so amended, has become effective under the Act.
Except
where the context otherwise requires, “Registration
Statement,”
as used herein, means the registration statement, as amended at the
time of such registration statement’s effectiveness for purposes
of Section 11 of the Act, as such section applies to the Underwriter
(the “Effective
Time”),
including (i) all documents filed as a part thereof or incorporated
or deemed to be incorporated by reference therein, (ii) any
information contained or incorporated by reference in a prospectus
filed with the Commission pursuant to Rule 424(b) under the Act, to
the extent such information is deemed, pursuant to Rule 430A, Rule
430B or Rule 430C under the Act, to be part of the registration
statement at the Effective Time, and (iii) any registration statement
filed to register the offer and sale of Shares pursuant to Rule
462(b) under the Act.
The
Company has furnished to you, for use by the Underwriter and by
dealers in connection with the offering of the Shares, copies of one
or more preliminary prospectus supplements, and the documents
incorporated by reference therein, relating to the Shares. Except
where the context otherwise requires, “Pre-Pricing
Prospectus,”
as used herein, means each such preliminary prospectus supplement, in
the form so furnished, including any
basic
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prospectus
(whether or not in preliminary form) furnished to you by the Company
and attached to or used with such preliminary prospectus
supplement.
Except where the context otherwise requires, “Basic
Prospectus,”
as used herein, means any such basic prospectus and any basic
prospectus furnished to you by the Company and attached to or used
with the Prospectus Supplement (as defined below).
Except
where the context otherwise requires, “Prospectus
Supplement,”
as used herein, means the final prospectus supplement, relating to
the Shares, filed by the Company with the Commission pursuant to Rule
424(b) under the Act on or before the second business day after the
date hereof (or such earlier time as may be required under the Act),
in the form furnished by the Company to you for use by the
Underwriter and by dealers in connection with the offering of the
Shares.
Except
where the context otherwise requires, “Prospectus,”
as used herein, means the Prospectus Supplement together with the
Basic Prospectus attached to or used with the Prospectus
Supplement.
“Permitted
Free Writing Prospectuses,”
as used herein, means any document that is (i) required to be filed
with the Commission by the Company or (ii) exempt from filing
pursuant to Rule 433(d)(5)(i) because it contains a description of
the Shares or the offering that does not reflect the final terms,
listed on Schedule
C
attached hereto. The Underwriter has not offered or sold and will not
offer or sell, without the Company’s consent, any Shares by
means of any “free writing prospectus” (as defined in Rule
405 under the Act) that is required to be filed by the Underwriter
with the Commission pursuant to Rule 433 under the Act or that is
exempt from filing pursuant to Rule 433(d)(5)(i) because it contains
a description of the Shares or the offering that does not reflect the
final terms, other than a Permitted Free Writing
Prospectus.
“Disclosure
Package,”
as used herein, means any Pre-Pricing Prospectus or Basic Prospectus,
in either case together with the Permitted Free Writing Prospectus
identified on Schedule
C hereto.
Any
reference herein to the Registration Statement, any Basic Prospectus,
any Pre-Pricing Prospectus, the Prospectus Supplement, the Prospectus
or any Permitted Free Writing Prospectus shall be deemed to refer to
and include the documents, if any, incorporated by reference, or
deemed to be incorporated by reference, therein (the
“Incorporated
Documents”),
including, unless the context otherwise requires, the documents, if
any, filed as exhibits to such Incorporated Documents. Any reference
herein to the terms “amend,”
“amendment”
or “supplement”
with respect to the Registration Statement, any Basic Prospectus, any
Pre-Pricing Prospectus, the Prospectus Supplement, the Prospectus or
any Permitted Free Writing Prospectus shall be deemed to refer to and
include the filing of any document under the Exchange Act on or after
the initial effective date of the Registration Statement, or the date
of such Basic Prospectus, such Pre-Pricing Prospectus, the Prospectus
Supplement, the Prospectus
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or
such Permitted Free Writing Prospectus, as the case may be, and
deemed to be incorporated therein by reference.
As
used in this Agreement, “business
day”
shall mean a day on which the New York Stock Exchange (the
“NYSE”)
is open for trading. The terms “herein,”
“hereof,” “hereto,” “hereinafter” and
similar terms, as used in this Agreement, shall in each case refer to
this Agreement as a whole and not to any particular section,
paragraph, sentence or other subdivision of this Agreement. The term
“or,” as used herein, is not exclusive.
The
Company and the Underwriter agree as follows:
1. Sale
and Purchase.
Upon the basis of the representations and warranties and subject to
the terms and conditions herein set forth, the Company agrees to sell
to the Underwriter and the Underwriter agrees to purchase from the
Company the number of Shares set forth opposite the name of the
Underwriter in Schedule A
attached hereto at a purchase price of $18.50 per Share. The Company
is advised by you that the Underwriter intends (i) to make a public
offering of the Shares as soon after the effectiveness of this
Agreement as in your judgment is advisable and (ii) initially to
offer the Shares upon the terms set forth in the Prospectus. You may
from time to time increase or decrease the public offering price
after the initial public offering to such extent as you may
determine.
In
addition, the Company hereby grants to the Underwriter the option to
purchase, and upon the basis of the representations and warranties
and subject to the terms and conditions herein set forth, the
Underwriter shall have the right to purchase from the Company all or
a portion of the Additional Shares as may be necessary to cover
over-allotments made in connection with the offering of the Shares by
the Company, at the same purchase price per share to be paid by the
Underwriter to the Company for the Shares. This option may be
exercised by the Underwriter at any time and from time to time on or
before the thirtieth day following the date of the Prospectus
Supplement, by written notice to the Company. Such notice shall set
forth the aggregate number of Additional Shares as to which the
option is being exercised, and the date and time when the Additional
Shares are to be delivered (such date and time being herein referred
to as the “additional time of purchase”); provided,
however,
that the additional time of purchase shall not be earlier than the
“time of purchase” (as defined below) nor earlier than the
second business day after the date on which the option shall have
been exercised nor later than the tenth business day after the date
on which the option shall have been exercised.
2. Payment
and Delivery.
Payment of the purchase price for the Initial Shares shall be made to
the Company by Federal Funds wire transfer, against delivery of the
certificates for the Initial Shares to you through the facilities of
The Depository Trust Company (“DTC”) for the account of the
Underwriter. Such payment and delivery shall be made at
10:00 A.M., New York City time, on March 6, 2007 (unless another
time shall be agreed to by you and the Company) (hereinafter
sometimes called the “time of purchase”). Electronic
transfer of the Firm Shares shall be made to you at the time of
purchase in such names and in such denominations as you shall
specify.
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Payment
of the purchase price for the Additional Shares shall be made to the
Company by Federal Funds wire transfer, against delivery of the
certificates for the Additional Shares to you through the facilities
of DTC for the account of the Underwriter. Such payment and delivery
shall be made at 10:00 A.M., New York City time, on the date
when the Additional Shares are to be delivered. Electronic transfer
of the Additional Shares shall be made to you at the time of purchase
in such names and in such denominations as you shall
specify.
Deliveries
of the documents described in Section 7 hereof with respect to the
purchase of the Shares shall be made at the offices of Xxxxxx &
Xxxxxx, LLP, Xxx Xxxxxxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, at
9:00 A.M., New York City time, on the date of the closing of the
purchase of the Shares.
3. Representations
and Warranties of the Company.
The Company represents and warrants to and agrees with the
Underwriter that:
(a) the
Registration Statement has heretofore become effective under the Act
or, with respect to any registration statement to be filed to
register the offer and sale of Shares pursuant to Rule 462(b) under
the Act, will be filed with the Commission and become effective under
the Act no later than 10:00 P.M., New York City time, on the date of
determination of the public offering price for the Shares; no stop
order of the Commission preventing or suspending the use of any Basic
Prospectus, any Pre-Pricing Prospectus, the Prospectus Supplement,
the Prospectus or any Permitted Free Writing Prospectus, or the
effectiveness of the Registration Statement, has been issued, and no
proceedings for such purpose have been instituted or, to the
Company’s knowledge, are contemplated by the
Commission;
(b) the
Registration Statement complied when it became effective, complies as
of the date hereof and, as amended or supplemented, at the time of
purchase, any additional time of purchase and at all times during
which a prospectus is required by the Act to be delivered (whether
physically or through compliance with Rule 172 under the Act or any
similar rule) in connection with any sale of Shares, will comply, in
all material respects, with the requirements of the Act; the
conditions to the use of Form “S-3” in connection with the
offering and sale of the Shares as contemplated hereby have been
satisfied; the Registration Statement meets, and the offering and
sale of the Shares as contemplated hereby complies with, the
requirements of Rule 415 under the Act; the Registration Statement
did not, as of the Effective Time, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
each Pre-Pricing Prospectus complied, at the time it was filed with
the Commission, and complies as of the date hereof, in all material
respects with the requirements of the Act; at no time during the
period that begins on the earlier of the date of such Pre-Pricing
Prospectus and the date such Pre-Pricing Prospectus was filed with
the Commission and ends at the time of purchase or, as the case may
be, the applicable additional time of purchase, if any, did or will
any Pre-Pricing Prospectus, as then amended or supplemented, include
an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light
of the circumstances
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under
which they were made, not misleading, and at no time during such
period did or will any Pre-Pricing Prospectus, as then amended or
supplemented, together with any combination of one or more of the
then issued Permitted Free Writing Prospectuses, if any, include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; each
Basic Prospectus complied or will comply, as of its date and the date
it was or will be filed with the Commission, complies as of the date
hereof (if filed with the Commission on or prior to the date hereof)
and, at the time of purchase, any additional time of purchase and at
all times during which a prospectus is required by the Act to be
delivered (whether physically or through compliance with Rule 172
under the Act or any similar rule) in connection with any sale of
Shares, will comply, in all material respects, with the requirements
of the Act; at no time during the period that begins on the earlier
of the date of such Basic Prospectus and the date such Basic
Prospectus was filed with the Commission and ends at the time of
purchase or any additional time of purchase did or will any Basic
Prospectus, as then amended or supplemented, include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and at
no time during such period did or will any Basic Prospectus, as then
amended or supplemented, together with any combination of one or more
of the then issued Permitted Free Writing Prospectuses, if any,
include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; each of the Prospectus Supplement and the Prospectus will
comply, as of the date that it is filed with the Commission, the date
of the Prospectus Supplement, the time of purchase, any additional
time of purchase and at all times during which a prospectus is
required by the Act to be delivered (whether physically or through
compliance with Rule 172 under the Act or any similar rule) in
connection with any sale of Shares, in all material respects, with
the requirements of the Act (in the case of the Prospectus,
including, without limitation, Section 10(a) of the Act); at no time
during the period that begins on the earlier of the date of the
Prospectus Supplement and the date the Prospectus Supplement is filed
with the Commission and ends at the later of the time of purchase or,
as the case may be, the applicable additional time of purchase, if
any, and the end of the period during which a prospectus is required
by the Act to be delivered (whether physically or through compliance
with Rule 172 under the Act or any similar rule) in connection with
any sale of Shares did or will any Prospectus Supplement or the
Prospectus, as then amended or supplemented, include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; at no
time during the period that begins on the date of such Permitted Free
Writing Prospectus and ends at the time of purchase did or will any
Permitted Free Writing Prospectus include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided,
however,
that the Company makes no representation or warranty in this Section
with respect to any statement contained in the Registration
Statement, any Pre-Pricing Prospectus, the Prospectus or any
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Permitted
Free Writing Prospectus in reliance upon and in conformity with
information concerning the Underwriter and furnished in writing by or
on behalf of the Underwriter through you to the Company expressly for
use in the Registration Statement, such Pre-Pricing Prospectus, the
Prospectus or such Permitted Free Writing Prospectus; each
Incorporated Document, at the time such document was filed with the
Commission or at the time such document became effective, as
applicable, complied, in all material respects, with the requirements
of the Exchange Act and did not include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(c) prior
to the execution of this Agreement, the Company has not, directly or
indirectly, offered or sold any Shares by means of any
“prospectus” (within the meaning of the Act) or used any
“prospectus” (within the meaning of the Act) in connection
with the offer or sale of the Shares, in each case other than the
Pre-Pricing Prospectuses and the Permitted Free Writing Prospectuses,
if any; the Company is not and will continue not to be an
“ineligible issuer” (as defined in Rule 405 under the Act)
for purposes of Rules 164 and 433 under the Act with respect to the
offering of the Shares contemplated by the Registration;
(d) as
of the date of this Agreement, the Company has an authorized and
outstanding capitalization as set forth in the section of the
Registration Statement and the Prospectus entitled
“Capitalization”; all of the issued and outstanding shares
of capital stock, including the Common Stock, of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable, have been issued in compliance with all federal and
state securities laws and were not issued in violation of any
preemptive right, resale right, right of first refusal or similar
right; no further approval or authority of the stockholders or the
Board of Directors of the Company are required for the issuance and
sale of the Shares; and the Shares are duly listed, and admitted and
authorized for trading, subject to official notice of issuance and
evidence of satisfactory distribution, on the National Association of
Securities Dealers Automated Quotation National Market System
(“NASDAQ”);
(e) the
Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the Xxxxxxxx Islands,
with full corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Registration
Statement, the Disclosure Package and the Prospectus to execute and
deliver this Agreement and to issue, sell and deliver the Shares as
contemplated herein;
(f) the
Company is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where the ownership or
leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified and
in good standing would not, individually or in the aggregate, have a
material adverse effect on the business, properties, financial
condition, results of operation or
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prospects
of the Company and the Subsidiaries (as hereinafter defined) taken as
a whole (a “Material Adverse Effect”);
(g) the
Company has no subsidiaries (as defined under the Act) other than the
Subsidiaries named in Schedule B hereto
(collectively, the “Subsidiaries”); the Company owns all of
the issued and outstanding capital stock of each of the Subsidiaries;
other than the capital stock of the Subsidiaries, the Company does
not own, directly or indirectly, any shares of stock or any other
equity or long-term debt securities of any corporation or have any
equity interest in any firm, partnership, joint venture, association
or other entity; complete and correct copies of all articles of
incorporation, bylaws, certificates of formation, limited liability
company agreements and other organizational documents of the Company
and the Subsidiaries and all amendments thereto have been delivered
to you, and except as set forth in the exhibits to the Registration
Statement no changes therein will be made on or after the date hereof
and on or prior to the time of purchase or, if later, any additional
time of purchase; each Subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, with full corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement, the Disclosure
Package and the Prospectus; each Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to be so qualified and in good standing would not,
individually or in the aggregate, have a Material Adverse Effect;
each Subsidiary is in compliance in all respects with the laws,
orders, rules, regulations and directives issued or administered by
such jurisdictions, except where the failure to be in compliance
would not, individually or in the aggregate, have a Material Adverse
Effect; all of the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully
paid and non-assessable, have been issued in compliance with all
applicable securities laws, were not issued in violation of any
preemptive right, resale right, right of first refusal or similar
right and are owned by the Company subject to no security interest,
other encumbrance or adverse claims; and no options, warrants or
other rights to purchase, agreements or other obligations to issue or
other rights to convert any obligation into shares of capital stock
or ownership interests in the Subsidiaries are
outstanding;
(h) the
Shares have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein, will be duly
and validly issued, fully paid and non-assessable and free of
statutory and contractual preemptive rights, resale rights, rights of
first refusal and similar rights; and the Shares, when issued and
delivered against payment therefor as provided herein, will be free
of any restriction upon the voting or transfer thereof pursuant to
the Company’s articles of incorporation or bylaws or other
governing documents or any agreement or other instrument to which the
Company or any of the Subsidiaries is a party or by which any of them
or any of their respective properties may be bound or affected;
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(i) the
capital stock of the Company, including the Shares, conforms in all
material respects to the description thereof contained in the
Registration Statement, the Disclosure Package and the Prospectus and
the certificates for the Shares are in due and proper form and the
holders of the Shares will not be subject to personal liability by
reason of being such holders;
(j) this
Agreement has been duly authorized, executed and delivered by the
Company;
(k) neither
the Company nor any of the Subsidiaries is in breach or violation of
or in default under (nor has any event occurred which with notice,
lapse of time or both would result in any breach or violation of,
constitute a default under or give the holder of any indebtedness (or
a person acting on such holder’s behalf) the right to require
the repurchase, redemption or repayment of all or a part of such
indebtedness under) (A) its respective articles of incorporation,
bylaws, certificate of formation, limited liability company agreement
or other organizational documents, or (B) any indenture, mortgage,
deed of trust, bank loan or credit agreement or other evidence of
indebtedness, or any license, lease, contract or other agreement or
instrument to which the Company or any of the Subsidiaries is a party
or by which any of them or any of their respective properties may be
bound or affected, or (C) any federal, state, local or foreign law,
regulation or rule, or (D) any rule or regulation of any
self-regulatory organization or other non-governmental regulatory
authority (including, without limitation, the rules and regulations
of the NASDAQ), or (E) any decree, judgment or order applicable to
the Company or any of the Subsidiaries or any of their respective
properties; except, in each case, for such breaches, violations or
defaults that would not, individually or in the aggregate, have a
Material Adverse Effect;
(l) the
execution, delivery and performance of this Agreement, the issuance
and sale of the Shares by the Company pursuant hereto and the
consummation of the transactions contemplated hereby will not
conflict with, result in any breach or violation of or constitute a
default under (nor constitute any event which with notice, lapse of
time or both would result in any breach or violation of or constitute
a default under or give the holder of any indebtedness (or a person
acting on such holder’s behalf) the right to require the
repurchase, redemption or repayment of all or a part of such
indebtedness under) (or result in the creation or imposition of a
lien, charge or encumbrance on any property or assets of the Company
or any Subsidiary pursuant to) (A) articles of incorporation, bylaws,
certificate of formation, limited liability company agreement or
other organizational document of the Company or any of the
Subsidiaries, (B) any indenture, mortgage, deed of trust, bank loan
or credit agreement or other evidence of indebtedness, or any
license, lease, contract or other agreement or instrument to which
the Company or any of the Subsidiaries is a party or by which any of
them or any of their respective properties may be bound or affected,
(C) any federal, state, local or foreign law, regulation or rule, (D)
any rule or regulation of any self-regulatory organization or other
non-governmental regulatory authority (including, without limitation,
the rules and regulations of the NASDAQ, or (E)
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any
decree, judgment or order applicable to the Company or any of the
Subsidiaries or any of their respective properties, except, in the
case of clause (B), for such breaches, violations or defaults that
would not, individually or in the aggregate, have a Material Adverse
Effect;
(m) no
approval, authorization, consent or order of or filing with any
federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency, or of or with any
self-regulatory organization or other non-governmental regulatory
authority (including, without limitation, the NASDAQ), or approval of
the stockholders of the Company, is required in connection with the
issuance and sale of the Shares to be sold by the Company pursuant
hereto or the consummation by the Company of the transactions
contemplated hereby other than registration of the Shares under the
Act, which has been effected, any other approvals, authorizations,
consents, orders or filing that have been obtained or made and are in
full force and effect and any necessary qualification under the
securities or blue sky laws of the various jurisdictions in which the
Shares are being offered by the Underwriter or under the rules and
regulations of the National Association of Securities Dealers, Inc.
(the “NASD”);
(n) except
as set forth in the Registration Statement, the Disclosure Package
and the Prospectus (i) no person has the right, contractual or
otherwise, to cause the Company to issue or sell to it any shares of
Common Stock or shares of any other capital stock or other equity
interests of the Company, (ii) no person has any preemptive
rights, resale rights, rights of first refusal or other rights to
purchase any shares of Common Stock or shares of any other capital
stock of or other equity interests in the Company, and (iii) no
person has the right to act as an underwriter or as a financial
advisor to the Company in connection with the offer and sale of the
Shares, in the case of each of the foregoing clauses (i), (ii) and
(iii), whether as a result of the filing or effectiveness of the
Registration Statement or the sale of the Shares as contemplated
thereby or otherwise; no person has the right, contractual or
otherwise, to cause the Company to register under the Act any shares
of Common Stock or shares of any other capital stock of or other
equity interests in the Company, or to include any such shares or
interests in the Registration Statement or the offering contemplated
thereby, whether as a result of the filing or effectiveness of the
Registration Statement or the sale of the Shares as contemplated
thereby or otherwise;
(o) each
of the Company and the Subsidiaries has all necessary licenses,
authorizations, consents and approvals and has made all necessary
filings required under any federal, state, local or foreign law,
regulation or rule, and has obtained all necessary licenses,
authorizations, consents and approvals from other persons, in order
to conduct its respective business, except where the failure to have
such licenses, authorizations, consents and approvals or to make such
filings would not, individually or in the aggregate, have a Material
Adverse Effect; neither the Company nor any of the Subsidiaries is in
violation of, or in default under, or has received notice of any
proceedings relating to revocation or modification of, any such
license, authorization, consent or approval or any federal, state,
local or foreign law, regulation or rule or any decree, order or
judgment applicable to the
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Company
or any of the Subsidiaries, except where such violation, default,
revocation or modification would not, individually or in the
aggregate, have a Material Adverse Effect;
(p) all
legal or governmental proceedings, affiliate transactions,
off-balance sheet transactions (including, without limitation,
transactions related to, and the existence of, “variable
interest entities” within the meaning of Financial Accounting
Standards Board Interpretation No. 46), contracts, licenses,
agreements, properties, leases or documents of a character required
to be described in the Registration Statement, the Disclosure Package
or the Prospectus or to be filed as an exhibit to the Registration
Statement have been so described or filed as required;
(q) there
are no actions, suits, claims, investigations or proceedings pending
or threatened or contemplated to which the Company or any of the
Subsidiaries or any of their respective directors or officers is or
would be a party or of which any of their respective properties is or
would be subject at law or in equity, before or by any federal,
state, local or foreign governmental or regulatory commission, board,
body, authority or agency, or before or by any self-regulatory
organization or other non-governmental regulatory authority
(including, without limitation, the rules and regulations of the
NASDAQ), except any such action, suit, claim, investigation or
proceeding which would not result in a judgment, decree or order
having, individually or in the aggregate, a Material Adverse Effect
or prevent consummation of the transactions contemplated
hereby;
(r) Ernst
& Young LLP, whose audit report on the consolidated financial
statements of the Company and the Subsidiaries is included or
incorporated by reference in the Registration Statement, the
Disclosure Package and the Prospectus, are independent registered
public accountants as required by the Act and by the rules of the
Public Company Accounting Oversight Board;
(s) the
audited and unaudited financial statements included or incorporated
by reference in the Registration Statement, the Disclosure Package
and the Prospectus, together with the related notes and schedules,
present fairly the consolidated financial position of the Company and
the Subsidiaries as of the dates indicated and the consolidated
results of operations and cash flows of the Company and the
Subsidiaries for the periods specified and have been prepared in
compliance with the requirements of the Act and in conformity with
generally accepted accounting principles applied on a consistent
basis during the periods involved; the other financial and
statistical data set forth in the Registration Statement, the
Pre-Pricing Prospectuses, the Prospectus and the Permitted Free
Writing Prospectuses, if any, are accurately and fairly presented and
prepared on a basis consistent with the financial statements and
books and records of the Company; there are no financial statements
(historical or pro forma) that are required to be included in the
Registration Statement, any Pre-Pricing Prospectuses or the
Prospectus (including, without limitation, as required by Rules 3-12
or 3-05 or Article 11 of Regulation S-X under the Act) that are not
included or incorporated by reference as required; the Company and
the Subsidiaries do not have any material liabilities or obligations,
direct or contingent (including any off-balance sheet
UBS
Securities LLC
February
28, 2007
Page 11
obligations),
not disclosed in the Registration Statement, each Pre-Pricing
Prospectus and the Prospectus;
(t) subsequent
to the respective dates as of which information is given in the
Registration Statement, the Disclosure Package and the Prospectus,
there has not been (i) any material adverse change, or any
development involving a prospective material adverse change, in the
business, properties, management, financial condition or results of
operations of the Company and the Subsidiaries taken as a whole, (ii)
any transaction which is material to the Company and the Subsidiaries
taken as a whole, (iii) any obligation, direct or contingent
(including any off-balance sheet obligations), incurred by the
Company or the Subsidiaries, which is material to the Company and the
Subsidiaries taken as a whole, (iv) any change in the capital stock
or outstanding indebtedness of the Company or the Subsidiaries or (v)
any dividend or distribution of any kind declared, paid or made on
the capital stock of the Company;
(u) the
Company has obtained for the benefit of the Underwriter the agreement
(a “Lock-Up Agreement”), in the form set forth as
Exhibit
A
hereto, of each of its directors and officers named in Exhibit
A-1
hereto;
(v) the
Company is not and, after giving effect to the offering and sale of
the Shares , will not be an “investment company” or an
entity “controlled” by an “investment company,”
as such terms are defined in the Investment Company Act of 1940, as
amended (the “Investment Company Act”) or a “passive
foreign investment company” or a “controlled foreign
corporation” as such terms are defined in the Internal Revenue
Code of 1986, as amended (the “Internal Revenue
Code”);
(w) the
Company and each of the Subsidiaries has good and marketable title to
all property (real and personal) described the Registration
Statement, the Disclosure Package and the Prospectus as being owned
by each of them, free and clear of all liens, claims, security
interests or other encumbrances; and all the property described in
the Registration Statement, the Disclosure Package and the Prospectus
as being held under lease by the Company or a Subsidiary is held
thereby under valid, subsisting and enforceable leases;
(x) neither
the Company nor any of the Subsidiaries is engaged in any unfair
labor practice (as defined in the National Labor Relations Act);
except for matters which would not, individually or in the aggregate,
have a Material Adverse Effect, (i) there is (A) no unfair
labor practice complaint pending or, to the Company’s knowledge
after due inquiry, threatened against the Company or any of the
Subsidiaries before the National Labor Relations Board, and no
grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending or threatened,
(B) no strike, labor dispute, slowdown or stoppage pending or,
to the Company’s knowledge, threatened against the Company or
any of the Subsidiaries and (C) no union representation dispute
currently existing concerning the employees of the Company or any of
the Subsidiaries, and (ii) to the Company’s knowledge,
there has been no violation of any federal, state, local or foreign
UBS
Securities LLC
February
28, 2007
Page 12
law
relating to discrimination in the hiring, promotion or pay of
employees, any applicable wage or hour laws or any provision of the
Employee Retirement Income Security Act of 1974 (“ERISA”)
or the rules and regulations promulgated thereunder concerning the
employees of the Company or any of the Subsidiaries;
(y) the
Company and the Subsidiaries and their properties, assets and
operations are in compliance with, and hold all permits,
authorizations and approvals required under, Environmental Laws (as
defined below), except to the extent that failure to so comply or to
hold such permits, authorizations or approvals would not,
individually or in the aggregate, have a Material Adverse Effect;
except as described in the Registration Statement, the Disclosure
Package and the Prospectus, there are no past or present events,
conditions, circumstances, activities, practices, actions, omissions
or plans that could reasonably be expected to give rise to any
material costs or liabilities to the Company or the Subsidiaries
under, or to interfere with or prevent compliance by the Company or
the Subsidiaries with, Environmental Laws; except as would not,
individually or in the aggregate, have a Material Adverse Effect,
neither the Company nor any of the Subsidiaries (i) is the subject of
any investigation, (ii) has received any notice or claim, (iii) is a
party to or affected by any pending or threatened action, suit or
proceeding, (iv) is bound by any judgment, decree or order or (v) has
entered into any agreement, in each case relating to any alleged
violation of any Environmental Law or any actual or alleged release
or threatened release or cleanup at any location of any Hazardous
Materials (as defined below) (as used herein, “Environmental
Law” means any federal, state, local or foreign law, statute,
ordinance, rule, regulation, order, decree, judgment, injunction,
permit, license, authorization or other binding requirement or common
law (including any applicable regulations and standards adopted by
the International Maritime Organization) relating to health, safety
or the protection, cleanup or restoration of the environment or
natural resources, including those relating to the distribution,
processing, generation, treatment, storage, disposal, transportation,
other handling or release or threatened release of Hazardous
Materials, and “Hazardous Materials” means any material
(including, without limitation, pollutants, contaminants, hazardous
or toxic substances or wastes) that is regulated by or may give rise
to liability under any Environmental Law);
(z) in
the ordinary course of its business, the Company and each of the
Subsidiaries conducts a periodic review of the effect of the
Environmental Laws on its business, operations and properties, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for cleanup, closure of properties or
compliance with the Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any
potential liabilities to third parties);
(aa) all
tax returns required to be filed by the Company and each of the
Subsidiaries have been filed, and all taxes and other assessments of
a similar nature (whether imposed directly or through withholding)
including any interest, additions to tax or penalties applicable
thereto due or claimed to be due from such entities have been paid,
UBS
Securities LLC
February
28, 2007
Page 13
other
than those being contested in good faith and for which adequate
reserves have been provided;
(bb) the
Company and each of the Subsidiaries maintains insurance or a
membership in a mutual protection and indemnity association covering
its properties, operations, personnel and businesses as the Company
deems adequate; such insurance or membership insures against such
losses and risks to an extent which the Company deems is adequate in
accordance with customary industry practice; all such insurance is
fully in force on the date hereof and will be fully in force at the
time of purchase and any additional time of purchase; there are no
material claims by the Company or any Subsidiary under any insurance
policy or instrument as to which any insurance company or mutual
protection and indemnity association is denying liability or
defending under a reservation of rights clause; neither the Company
nor any of the Subsidiaries is currently required to make any
payment, or is aware of any facts that would require the Company or
any Subsidiary to make any payment, in respect of a call by, or a
contribution to, any mutual protection and indemnity association; and
neither the Company nor any Subsidiary has reason to believe that it
will not be able to renew any such insurance or membership in a
mutual protection and indemnity association as and when such
insurance or membership expires or is terminated;
(cc) since
the date of the last audited financial statements included
in the Registration Statement, the Disclosure Package and the
Prospectus, (i) there has not been a material loss (whether actual or
constructive or partial or total) of or to any of the vessels that
are described in the Registration Statement, the Disclosure Package
and the Prospectus as owned or to be acquired by the Company or any
Subsidiary, (ii) no such vessel has been arrested or requisitioned
for title or hire and (iii) neither the Company nor any of the
Subsidiaries has sustained any material loss or interference with its
respective business from fire, explosion, flood or other calamity or
from any labor dispute or court or governmental action, order or
decree;
(dd) the
Company has not sent or received any communication regarding the
termination, amendment, modification or waiver of, or intent not to
renew, or intent not to consummate any transaction contemplated by,
any of the material contracts or agreements referred to or described
in the Disclosure Package and the Prospectus, or referred to or
described in, or filed as an exhibit to, the Registration Statement,
and no such termination, amendment, modification, waiver, non-renewal
or intention not to consummate has been threatened by the Company or,
to the Company’s knowledge after due inquiry, any other party to
any such material contract or agreement;
(ee) the
Company and each of the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with
management’s general or specific authorization;
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance
with management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with
UBS
Securities LLC
February
28, 2007
Page 14
existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences;
(ff) the
Company has established and maintains and evaluates “disclosure
controls and procedures” (as such term is defined in Rule 13a-15
and 15d-15 under the Exchange Act) and “internal control over
financial reporting” (as such term is defined in Rule 13a-15 and
15d-15 under the Exchange Act); such disclosure controls and
procedures are designed to ensure that material information relating
to the Company, including its consolidated subsidiaries, is made
known to the Company’s Chief Executive Officer and Chief
Financial Officer by others within those entities, and such
disclosure controls and procedures are effective to perform the
functions for which they were established; the Company’s
auditors and the Audit Committee of the Board of Directors of the
Company have been advised of: (i) any significant deficiencies in the
design or operation of internal controls which could adversely affect
the Company’s ability to record, process, summarize, and report
financial data; and (ii) any fraud, whether or not material, that
involves management or other employees who have a role in the
Company’s internal controls; any material weaknesses in internal
controls have been identified for the Company’s auditors; since
the date of the most recent evaluation of such disclosure controls
and procedures, there have been no significant changes in internal
controls or in other factors that could significantly affect internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses; and the Company has taken all
necessary actions to ensure that, upon effectiveness of the
Registration Statement, the Company and the Subsidiaries and their
respective officers and directors, in their capacities as such, will
be in compliance in all material respects with the provisions of the
Xxxxxxxx-Xxxxx Act of 2002 (the “Xxxxxxxx-Xxxxx Act”) and
the rules and regulations promulgated thereunder;
(gg) the
Company has not, directly or indirectly, including through any of the
Subsidiaries extended credit, arranged to extend credit, or renewed
any extension of credit, in the form of a personal loan, to or for
any director or executive officer of the Company, or to or for any
family member or affiliate of any director or executive officer of
the Company;
(hh) each
“forward-looking statement” (within the meaning of Section
27A of the Act or Section 21E of the Exchange Act) contained or
incorporated by reference in the Registration Statement, the
Disclosure Package and the Prospectus has been made or reaffirmed
with a reasonable basis and has been disclosed in good
faith;
(ii) any
statistical and market-related data included or incorporated by
reference in the Registration Statement, the Disclosure Package and
the Prospectus are based on or derived from sources that the Company
believes to be reliable and accurate, and the Company has obtained
the written consent to the use of such data from such sources to the
extent required;
(jj) neither
the Company nor any of the Subsidiaries nor, to the knowledge of the
Company, any director, officer, agent, employee or affiliate of the
Company or any of the Subsidiaries is aware of or has taken any
action, directly or indirectly, that would result in a
UBS
Securities LLC
February
28, 2007
Page 15
violation
by such persons of the Foreign Corrupt Practices Act of 1977, as
amended, and the rules and regulations thereunder (the “Foreign
Corrupt Practices Act”); and the Company, the Subsidiaries and,
to the knowledge of the Company, its affiliates have conducted their
businesses in compliance with the Foreign Corrupt Practices Act and
have instituted and maintain policies and procedures designed to
ensure, and which are reasonably expected to continue to ensure,
continued compliance therewith;
(kk) the
operations of the Company and the Subsidiaries are and have been
conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering
statutes and the rules and regulations thereunder and any related or
similar rules, regulations or guidelines, issued, administered or
enforced by any governmental agency to which such operations are
subject (collectively, the “Money Laundering Laws”); and no
action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator or non-governmental
authority involving the Company or any of the Subsidiaries with
respect to the Money Laundering Laws is pending or, to the best
knowledge of the Company, threatened;
(ll) neither
the Company nor any of the Subsidiaries nor, to the knowledge of the
Company, any director, officer, agent, employee or affiliate of the
Company or any of the Subsidiaries is currently subject to any United
States sanctions administered by the Office of Foreign Assets Control
of the United States Treasury Department (“OFAC”); and the
Company will not directly or indirectly use the proceeds of the
offering, or lend, contribute or otherwise make available such
proceeds to any Subsidiary, joint venture partner or other person or
entity, for the purpose of financing the activities of any person
currently subject to any United States sanctions administered by
OFAC;
(mm) except
as described in the Registration Statement, the Disclosure Package
and the Prospectus, no Subsidiary is currently prohibited, directly
or indirectly, from paying any dividends to the Company, from making
any other distribution on such Subsidiary’s capital stock, from
repaying to the Company any loans or advances to such Subsidiary from
the Company or from transferring any of such Subsidiary’s
property or assets to the Company or any other Subsidiary of the
Company, except as described in the Registration Statement, the
Disclosure Package and the Prospectus; all dividends and other
distributions declared and payable on the shares of Common Stock of
the Company and on the capital stock of each Subsidiary may under the
current laws and regulations of the Xxxxxxxx Islands be paid in
United States dollars and freely transferred out of the Xxxxxxxx
Islands; and all such dividends and other distributions are not
subject to withholding or other taxes under the current laws and
regulations of the Xxxxxxxx Islands and are otherwise free and clear
of any withholding, stamp, transfer, excise or other tax and may be
declared and paid without the necessity of obtaining any consents,
approvals, authorizations, orders, licenses, registrations,
clearances and qualifications of or with any court or governmental
agency or body or any stock exchange authorities in the Xxxxxxxx
Islands;
UBS
Securities LLC
February
28, 2007
Page 16
(nn) the
issuance and sale of the Shares to be sold by the Company pursuant
hereto will not cause any holder of any shares of capital stock,
securities convertible into or exchangeable or exercisable for
capital stock or options, warrants or other rights to purchase
capital stock or any other securities of the Company to have any
right to acquire any shares of preferred stock of the
Company;
(oo) the
Company is in compliance with the Marketplace Rules of the NASDAQ,
including, without limitation, the requirements for initial and
continued designation of the Common Stock as a NASDAQ
security;
(pp) except
pursuant to this Agreement, neither the Company nor any of the
Subsidiaries has incurred any liability for any finder’s or
broker’s fee or agent’s commission in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby or by the Registration Statement,
the Disclosure Package and the Prospectus;
(qq) neither
the Company nor any of the Subsidiaries nor any of their respective
directors, officers or affiliates has taken, directly or indirectly,
any action designed, or which has constituted or might reasonably be
expected to cause or result in, under the Exchange Act or otherwise,
the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;
and
(rr) to
the Company’s knowledge, there are no affiliations or
associations between (i) any member of the NASD and (ii) the Company
or any of the Company’s officers, directors or 5% or greater
securityholders or any beneficial owner of the Company’s
unregistered equity securities that were acquired at any time on or
after the 180th day immediately preceding the date the Registration
Statement was initially filed with the Commission, except as set
forth in the Registration Statement, the Disclosure Package and the
Prospectus; and
(ss) no
stamp duty, stock exchange tax, value-added tax, withholding tax or
any other similar duty or tax is payable in the United States, the
Xxxxxxxx Islands, or any other jurisdiction in which either the
Company or any of its Subsidiaries is engaged in business for tax
purposes, (including, in each case, any political subdivision thereof
or any authority thereof having power to tax), in connection with the
execution, delivery or performance of this Agreement by the Company
or the issuance, sale or delivery of the Shares by the Company to the
Underwriters or the initial resales of the Shares by the Underwriters
in the manner contemplated by this Agreement, the Registration
Statement, the Disclosure Package and the Prospectus.
In
addition, any certificate signed by any officer of the Company or any
of the Subsidiaries and delivered to the Underwriter or counsel for
the Underwriter in connection with the offering of the Shares shall
be deemed to be a representation and warranty by the Company or
Subsidiary, as the case may be, as to matters covered thereby, to
each Underwriter.
UBS
Securities LLC
February
28, 2007
Page 17
4. Certain
Covenants of the Company.
The Company hereby agrees with the Underwriter:
(a) to
furnish such information as may be required and otherwise to
cooperate in qualifying the Shares for offering and sale under the
securities or blue sky laws of such states or other jurisdictions as
you may reasonably designate and to maintain such qualifications in
effect so long as you may reasonably request for the distribution of
the Shares; provided,
however,
that the Company shall not be required to qualify as a foreign
corporation or to consent to the service of process under the laws of
any such jurisdiction (except service of process with respect to the
offering and sale of the Shares); and to promptly advise you of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for offer or sale in
any jurisdiction or the initiation or threatening of any proceeding
for such purpose;
(b) to
make available to the Underwriter in New York City, as soon as
practicable after this Agreement becomes effective, and thereafter
from time to time to furnish to the Underwriter, as many copies of
the Prospectus (or of the Prospectus as amended or supplemented if
the Company shall have made any amendments or supplements thereto
after the effective date of the Registration Statement) as the
Underwriter may request for the purposes contemplated by the Act; in
case the Underwriter is required to deliver (whether physically or
through compliance with Rule 172 under the act or any similar rule),
a prospectus after the nine-month period referred to in
Section 10(a)(3) of the Act in connection with the sale of the
Shares, the Company will prepare, at its expense, promptly upon
request such amendment or amendments to the Registration Statement
and the Prospectus as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Act;
(c) if,
at the time this Agreement is executed and delivered, it is necessary
for any post-effective amendment to the Registration Statement to be
declared effective before the Shares may be sold, the Company will
use its best efforts to cause such post-effective amendment to become
effective as soon as possible and the Company will advise you
promptly and, if requested by you, will confirm such advice in
writing, (i) when any such post-effective amendment thereto has
become effective, and (ii) if Rule 430A under the Act is used, when
the Prospectus is filed with the Commission pursuant to Rule 424(b)
under the Act (which the Company agrees to file in a timely manner
under such Rule);
(d) if,
at any time during the period when a prospectus is required by the
Act to be delivered (whether physically or through compliance with
Rule 172 under the Act or any similar rule) in connection with any
sale of Shares, the Registration Statement shall cease to comply with
the requirements of the Act with respect to eligibility for the use
of the form on which the Registration Statement was filed with the
Commission, to (i) promptly notify you, (ii) promptly file with the
Commission a new registration statement under the Act, relating to
the Shares, or a post-effective amendment to the Registration
Statement, which new registration statement or post-effective
amendment shall comply with the requirements of the Act and shall be
in a form satisfactory to you, (iii) use its best efforts to cause
such
UBS
Securities LLC
February
28, 2007
Page 18
new
registration statement or post-effective amendment to become
effective under the Act as soon as practicable, (iv) promptly notify
you of such effectiveness and (v) take all other action necessary or
appropriate to permit the public offering and sale of the Shares to
continue as contemplated in the Prospectus; all references herein to
the Registration Statement shall be deemed to include each such new
registration statement or post-effective amendment, if
any;
(e) to
advise you promptly, confirming such advice in writing, of any
request by the Commission for amendments or supplements to the
Registration Statement, any Pre-Pricing Prospectus, the Prospectus or
any Permitted Free Writing Prospectus or for additional information
with respect thereto, or of notice of institution of proceedings for,
or the entry of a stop order, suspending the effectiveness of the
Registration Statement and, if the Commission should enter a stop
order suspending the effectiveness of the Registration Statement, to
use its best efforts to obtain the lifting or removal of such order
as soon as possible; to advise you promptly of any proposal to amend
or supplement the Registration Statement, any Pre-Pricing Prospectus
or the Prospectus and to provide you and the Underwriter’s
counsel copies of any such documents for review and comment a
reasonable amount of time prior to any proposed filing and to file no
such amendment or supplement to which you shall reasonably object in
writing;
(f) subject
to Section 4(e) hereof, to file promptly all reports and documents
and any preliminary or definitive proxy or information statement
required to be filed by the Company with the Commission in order to
comply with the Exchange Act subsequent to the date of the Prospectus
and for so long as the delivery of a prospectus is required (whether
physically or through compliance with Rule 172 under the act or any
similar rule) in connection with the offering or sale of the Shares;
and to provide you with a copy of such reports and statements and
other documents to be filed by the Company pursuant to Section 13, 14
or 15(d) of the Exchange Act during such period a reasonable amount
of time prior to any proposed filing, and to promptly notify you of
such filing;
(g) if
necessary or appropriate, to file a registration statement pursuant
to Rule 462(b) under the Act;
(h) to
advise the Underwriter promptly of the happening of any event within
the time during which a prospectus relating to the Shares is required
to be delivered under the Act (whether physically or through
compliance with Rule 172 under the act or any similar rule) which
could require the making of any change in the Prospectus then being
used so that the Prospectus would not include an untrue statement of
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they are made, not misleading, and, during such time, subject to
Section 4(e) hereof, to prepare and furnish, at the Company’s
expense, to the Underwriter promptly such amendments or supplements
to such Prospectus as may be necessary to reflect any such
change;
UBS
Securities LLC
February
28, 2007
Page 19
(i) to
make generally available to its security holders, and to deliver to
you, an earnings statement of the Company (which will satisfy the
provisions of Section 11(a) of the Act) covering a period of twelve
months beginning after the effective date of the Registration
Statement (as defined in Rule 158(c) under the Act) as soon as is
reasonably practicable after the termination of such twelve-month
period but not later than March 6, 2008;
(j) to
furnish to its shareholders as soon as practicable after the end of
each fiscal year an annual report (including a consolidated balance
sheet and statements of income, shareholders’ equity and cash
flow of the Company and the Subsidiaries for such fiscal year,
accompanied by a copy of the certificate or report thereon of
nationally recognized independent certified public
accountants);
(k) to
furnish to you three copies of the Registration Statement, as
initially filed with the Commission, and of all amendments thereto
(including all exhibits thereto and documents incorporated by
reference therein);
(l) to
furnish to you as early as practicable prior to the time of purchase
and any additional time of purchase, as the case may be, but not
later than two business days prior thereto, a copy of the latest
available unaudited interim and monthly consolidated financial
statements, if any, of the Company and the Subsidiaries which have
been read by the Company’s independent registered public
accountants, as stated in their letter to be furnished pursuant to
Section 7(f) hereof;
(m) to
comply with Rule 433(d) under the Act and with Rule 433(g) under the
Act;
(n) to
apply the net proceeds from the sale of the Shares in the manner set
forth under the caption of “Use of Proceeds” in the
Prospectus;
(o) for
a period of 45 days after the date hereof (the “Lock-Up
Period”), without the prior written consent of the Underwriter,
not to (i) sell, offer to sell, contract or agree to sell,
hypothecate, pledge, grant any option to purchase or otherwise
dispose of or agree to dispose of, directly or indirectly, or
establish or increase a put equivalent position or liquidate or
decrease a call equivalent position within the meaning of Section 16
of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, with respect to, any Common Stock or
securities convertible into or exchangeable or exercisable for Common
Stock or warrants or other rights to purchase Common Stock or any
other securities of the Company that are substantially similar to
Common Stock, (ii) file or cause to be declared effective a
registration statement under the Act relating to the offer and sale
of any shares of Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock or warrants or other
rights to purchase Common Stock or any other securities of the
Company that are substantially similar to Common Stock, (iii) enter
into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of
Common Stock or any securities convertible
UBS
Securities LLC
February
28, 2007
Page
20
into
or exercisable or exchangeable for Common Stock, or warrants or other
rights to purchase Common Stock or any such securities, whether any
such transaction is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise or (iv) publicly announce an
intention to effect any transaction specified in clause (i), (ii) or
(iii), except, in each case, for (A) the registration of the Shares
and the sales to the Underwriter pursuant to this Agreement, (B)
issuances of Common Stock upon the exercise of options or warrants
disclosed as outstanding in the Registration Statement, the
Disclosure Package and the Prospectus, and (C) the issuance of
employee stock options not exercisable during the Lock-Up Period
pursuant to stock option plans described in the Registration
Statement and the Prospectus; provided,
however,
that if (a) during the period that begins on the date that is fifteen
calendar days plus three business days before the last day of the
Lock-Up Period and ends on the last day of the Lock-Up Period, the
Company issues an earnings release or material news or a material
event relating to the Company occurs, or (b) prior to the expiration
of the Lock-Up Period, the Company announces that it will release
earnings results during the sixteen day period beginning on the last
day of the Lock-Up Period, the restrictions imposed by this Section
4(o) shall continue to apply until the expiration of the date that is
fifteen calendar days plus three business days after the date on
which the issuance of the earnings release or material news or the
material event occurs; provided, however, that this sentence shall
not apply if the research published or distributed with respect to
the Company is issued in compliance with or pursuant to Rule 139 of
the Securities Act of 1933, as amended, and the Company’s
securities are “actively traded” as such term is defined in
Rule 101(c)(1) of Regulation M of the Exchange Act;
(p) to
use its best efforts to cause the Shares to be listed for quotation
on the NASDAQ;
(q) to
maintain a transfer agent and, if necessary under the jurisdiction of
incorporation of the Company, a registrar for the Common Stock;
(r) prior
to the time of purchase or any additional time of purchase, as the
case may be, to issue no press release or other communication
directly or indirectly and hold no press conferences with respect to
the Company or any Subsidiary, the financial condition, results of
operations, business, properties, assets, or liabilities of the
Company or any Subsidiary, or the offering of the Shares, without
your prior consent;
(s) not,
at any time on or after the execution of this Agreement, to
distribute any “prospectus” (within the meaning of the Act)
or offering material in connection with the offering or sale of the
Shares other than the Registration Statement and the then most recent
Prospectus; and
(t) not
to, take, directly or indirectly, any action designed, or which has
constituted or might reasonably be expected to cause or result in,
under the Exchange Act or otherwise, the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
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5. Payment
of Expenses.
The
Company agrees to pay all costs, expenses, fees and taxes in
connection with (i) the preparation and filing of the Registration
Statement, the Pre-Pricing Prospectuses, the Prospectus and the
Permitted Free Writing Prospectuses and any amendments or supplements
thereto, and the printing and furnishing of copies of each thereof to
the Underwriter and to dealers (including costs of mailing and
shipment), (ii) the registration, sale and delivery of the Shares
including any stock or transfer taxes and stamp or similar duties
payable upon the sale, issuance or delivery of the Shares by the
Company to the Underwriter, (iii) the qualification of the Shares for
offering and sale under state or foreign laws and the determination
of their eligibility for investment under state or foreign law as
aforesaid (including the legal fees and filing fees and other
disbursements of counsel for the Underwriter) and the printing and
furnishing of copies of any blue sky surveys or legal investment
surveys to the Underwriter and to dealers, (iv) any listing of the
Shares on any securities exchange or qualification of the Shares for
quotation on the NASDAQ and any registration thereof under the
Exchange Act, (v) any filing for review of the public offering of the
Shares by the NASD, including the legal fees and filing fees and
other disbursements of counsel to the Underwriter relating to NASD
matters, (vi) the fees and disbursements of any transfer agent or
registrar for the Shares, (vii) the costs and expenses of the Company
relating to presentations or meetings undertaken in connection with
the marketing of the offering and sale of the Shares to prospective
investors and the Underwriter’s sales forces, including, without
limitation, expenses associated with the production of road show
slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations, travel, lodging and
other expenses incurred by the officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection
with the road show, (viii) the fees and expenses of the
Company’s accountants and the fees and expenses of counsel
(including local and special counsel) for the Company; and (ix) all
other costs and expenses incident to the performance by the Company
of their obligations hereunder.
It,
however, is understood that, except as provided in this Section 5,
Section 6 and Section 9, the Underwriter will pay all of their own
costs and expenses, including the fees and expenses of their counsel,
transfer and other taxes on resale of any Shares by them and any
advertising expenses connected with any offer they make.
6. Reimbursement
of Underwriter’s Expenses.
If the Shares are not delivered for any reason other than the
termination of this Agreement pursuant to clause (i), (iii), (iv) or
(v) of Subsection (y) of the second paragraph of Section 8 or the
default by the Underwriter in its obligations hereunder, the Company
shall, in addition to paying the amounts described in Section 5
hereof, reimburse the Underwriter for all of its actual accountable
out-of-pocket expenses, including the fees and disbursements of their
counsel.
7. Conditions
of Underwriter’s Obligations.
The obligations of the Underwriter hereunder are subject to the
accuracy of the representations and warranties on the part of the
Company on the date hereof, at the time of purchase and, if
applicable, at each additional time of purchase, the performance by
the Company of each of their respective obligations hereunder and to
the following additional conditions precedent:
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(a) The
Company shall furnish to you at the time of purchase and, if
applicable, any additional time of purchase, an opinion and negative
assurance letter of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP,
special United States counsel for the Company, addressed to the
Underwriter, and dated the time of purchase or the additional time of
purchase, as the case may be, in form and substance satisfactory to
Xxxxxx & Xxxxxx, counsel for the Underwriter, in the forms set
forth in Exhibit
B-1
and Exhibit
B-2
hereto.
(b) You
shall have received at the time of purchase and, if applicable, any
additional time of purchase, an opinion of Xxxxxx & Xxxxxx LLP,
addressed to the Underwriter, and dated the time of purchase or the
additional time of purchase, as the case may be, in form and
substance satisfactory to the Underwriter, in the form set forth in
Exhibit
C-1
hereto.
(c) You
shall have received at the time of purchase and, if applicable, any
additional time of purchase, the written opinion of Xxxxxx &
Xxxxxx LLP, , addressed to the Underwriter, and dated the time of
purchase in form and substance satisfactory to the Underwriter, in
the form set forth in Exhibit
C-2
hereto.
(d) You
shall have received at the time of purchase and, if applicable, any
additional time of purchase, an opinion of Xxxxxx & Xxxxxx LLP,
addressed to the Underwriter, and dated the time of purchase or the
additional time of purchase, as the case may be, in form and
substance satisfactory to the Underwriter, in the form set forth in
Exhibit
D
hereto.
(e) The
Company shall furnish to you at the time of purchase and, if
applicable, any additional time of purchase, an opinion of Xxxxxx
& Xxxxxxx P.C., special Xxxxxxxx Islands counsel for the Company,
addressed to the Underwriter, and dated the time of purchase or the
additional time of purchase, as the case may be, in form and
substance satisfactory to Xxxxxx & Xxxxxx LLP, counsel for the
Underwriter, in the form set forth in Exhibit
E
hereto.
(f) You
shall have received from Ernst & Young LLP letters dated,
respectively, the date of this Agreement, the time of purchase and,
if applicable, any additional time of purchase, and addressed to the
Underwriter in the forms heretofore approved by the
Underwriter.
(g) You
shall have received at the time of purchase and, if applicable, any
additional time of purchase, the favorable opinion and negative
assurance statement of Xxxxxx & Xxxxxx LLP, counsel for the
Underwriter, dated the time of purchase or the additional time of
purchase, as the case may be, in form and substance reasonably
satisfactory to the Underwriter.
(h) No
Prospectus or amendment or supplement to the Registration Statement
or the Prospectus shall have been filed to which you reasonably
object in writing.
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(i) The
Registration Statement shall have been filed and any registration
statement required to be filed, prior to the sale of the Shares,
under the Act pursuant to Rule 462(b) shall have been filed and shall
have become effective under the Act no later than 10:00 p.m. New York
City time on the date of determination of the public offering price
for the shares. The Prospectus Supplement shall have been filed with
the Commission pursuant to Rule 424(b) under the Act at or before
5:30 P.M., New York City time, on the second full business day after
the date of this Agreement.
(j) Prior
to and at the time of purchase and, if applicable, any additional
time of purchase, (i) no stop order with respect to the effectiveness
of the Registration Statement shall have been issued under the Act or
proceedings initiated under Section 8(d) or 8(e) of the Act; (ii) the
Registration Statement and all amendments thereto shall not contain
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading; (iii) the Prospectus, and any
amendment or supplement thereto, shall not include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading; and (iv)
the Disclosure Package, and any amendment or supplement thereto,
shall not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are made,
not misleading.
(k) Between
the time of execution of this Agreement and the time of purchase or
each additional time of purchase, as the case may be, (A) no material
adverse change or any development involving a prospective material
adverse change in the business, properties, management, financial
condition or results of operations of the Company and the
Subsidiaries taken as a whole shall occur or become known, and (B) no
transaction which is material and adverse to the Company has been
entered into by the Company or any of the Subsidiaries.
(l) There
shall not have been a material loss (whether actual or constructive
or partial or total) of or to any of the vessels that are described
in the Registration Statement, the Disclosure Package and the
Prospectus as owned or to be acquired by the Company or any
Subsidiary and no such vessel shall have been arrested or
requisitioned for title or hire.
(m) The
Company will, at the time of purchase and, if applicable, at each
additional time of purchase, deliver to you a certificate of its
Chief Executive Officer and its Chief Financial Officer, dated the
time of purchase or each additional time of purchase, as the case may
be, in the form attached as Exhibit
F
hereto.
(n) You
shall have received signed Lock-up Agreements referred to in Section
3(u) hereof, and each such Lock-Up Agreement shall be in full force
and effect at the time of purchase and each additional time of
purchase, as the case may be.
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(o) The
Shares shall have been approved for quotation on NASDAQ, subject only
to notice of issuance at or prior to the time of purchase and each
additional time of purchase, as the case may be.
(p) The
Company shall have furnished to you such other documents and
certificates as you may reasonably request.
8. Effective
Date of Agreement; Termination.
This Agreement shall become effective when the parties hereto have
executed and delivered this Agreement.
The
obligations of the Underwriter hereunder shall be subject to
termination in the absolute discretion of the Underwriter, if (x)
since the time of execution of this Agreement or the earlier
respective dates as of which information is given in the Registration
Statement, the Disclosure Package and the Prospectus, there has been
any material adverse change or any development involving a
prospective material adverse change in the business, properties,
management, financial condition or results of operations of the
Company and the Subsidiaries taken as a whole, which would, in the
Underwriter’s judgment, make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares on the
terms and in the manner contemplated in the Registration Statement,
the Disclosure Package and the Prospectus, or (y) since of execution
of this Agreement, there shall have occurred: (i) a suspension or
material limitation in trading in securities generally on the New
York Stock Exchange, the American Stock Exchange or the NASDAQ; (ii)
a suspension or material limitation in trading in the Company’s
securities on the NASDAQ; (iii) a general moratorium on commercial
banking activities declared by either federal or New York State
authorities or a material disruption in commercial banking or
securities settlement or clearance services in the United States;
(iv) an outbreak or escalation of hostilities or acts of terrorism
involving the United States or a declaration by the United States of
a national emergency or war; or (v) any other calamity or crisis or
any change in financial, political or economic conditions in the
United States or elsewhere, if the effect of any such event specified
in clause (iv) or (v) in the Underwriter’s judgment makes it
impracticable or inadvisable to proceed with the public offering or
the delivery of the Shares on the terms and in the manner
contemplated in the Registration Statement, the Disclosure Package
and the Prospectus, or (z) since the time of execution of this
Agreement, there shall have occurred any downgrading, or any notice
or announcement shall have been given or made of (i) any intended or
potential downgrading or (ii) any watch, review or possible change
that does not indicate an affirmation or improvement in the rating
accorded any securities of or guaranteed by the Company or any
Subsidiary by any “nationally recognized statistical rating
organization,” as that term is defined in Rule 436(g)(2) under
the Act.
If
the Underwriter elects to terminate this Agreement as provided in
this Section 8, the Company shall be notified promptly in
writing.
If
the sale to the Underwriter of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriter for any reason
permitted under this Agreement or if such sale is not carried out
because the Company shall be unable to comply with any of the terms
of this Agreement, the Company shall not be under any obligation or
liability under this Agreement
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9. Indemnity
and Contribution.
(a) The
Company agrees to indemnify, defend and hold harmless the
Underwriter, their partners, directors and officers, and any person
who controls the Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, and the successors and assigns
of all of the foregoing persons, from and against any loss, damage,
expense, liability or claim (including the reasonable cost of
investigation) which the Underwriter or any such person may incur
under the Act, the Exchange Act, the common law or otherwise, insofar
as such loss, damage, expense, liability or claim arises out of or is
based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or in the
Registration Statement as amended by any post-effective amendment
thereof by the Company) or arises out of or is based upon any
omission or alleged omission to state a material fact required to be
stated in either such Registration Statement or necessary to make the
statements made therein not misleading, except insofar as any such
loss, damage, expense, liability or claim arises out of or is based
upon any untrue statement or alleged untrue statement of a material
fact contained in, and in conformity with information concerning the
Underwriter furnished in writing by or on behalf of the Underwriter
through you to the Company expressly for use in the Registration
Statement or arises out of or is based upon any omission or alleged
omission to state a material fact in such Registration Statement in
connection with such information, which material fact was not
contained in such information and which material fact was necessary
in order to make the statements in such information, in the light of
the circumstances under which they were made, not misleading or (ii)
any untrue statement or alleged untrue statement of a material fact
included in any Prospectus (the term Prospectus for the purpose of
this Section 9 being deemed to include any Basic Prospectus, any
Pre-Pricing Prospectus, the Prospectus Supplement, the Prospectus and
any amendments or supplements to the foregoing), in any Permitted
Free Writing Prospectus, in any “issuer information” (as
defined in Rule 433 under the Act) of the Company or in any
Prospectus together with any combination of one or more of the
Permitted Free Writing Prospectuses, if any, or arises out of or is
based upon any omission or alleged omission to state a material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except,
with respect to such Prospectus or Permitted Free Writing Prospectus,
except insofar as any such loss, damage, expense, liability or claim
arises out of or is based upon any untrue statement or alleged untrue
statement of a material fact contained in, and in conformity with
information concerning the Underwriter furnished in writing by or on
behalf of the Underwriter through you to the Company expressly for
use in, such Prospectus or Permitted Free Writing Prospectus or
arises out of or is based upon any omission or alleged omission to
state a material fact in such Prospectus or Permitted Free Writing
Prospectus in connection with such information, which material fact
was not contained in such information and which material fact was
necessary in order to make the
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statements
in such information, in the light of the circumstances under which
they were made, not misleading.
(b) The
Underwriter agrees to indemnify, defend and hold harmless the
Company, its directors or officers and any person who controls the
Company within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, and the successors and assigns of all of the
foregoing persons, from and against any loss, damage, expense,
liability or claim (including the reasonable cost of investigation)
which, jointly or severally, the Company or any such person may incur
under the Act, the Exchange Act, the common law or otherwise, insofar
as such loss, damage, expense, liability or claim arises out of or is
based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or in the
Registration Statement as amended by any post-effective amendment
thereof by the Company) or arises out of or is based upon any
omission or alleged omission to state a material fact required to be
stated in either such Registration Statement or necessary to make the
statements made therein not misleading but only with reference to
information concerning the Underwriter furnished in writing by or on
behalf of the Underwriter through you to the Company expressly for
use in the Registration Statement (or in the Registration Statement
as amended by any post-effective amendment thereof by the Company) or
(ii) any untrue statement or alleged untrue statement of a material
fact contained in, and in conformity with information concerning the
Underwriter furnished in writing by or on behalf of the Underwriter
through you to the Company expressly for use in, a Prospectus or a
Permitted Free Writing Prospectus, or arises out of or is based upon
any omission or alleged omission to state a material fact in such
Prospectus, Permitted Free Writing Prospectus or Prospectus together
with any combination of one or more of the Permitted Free Writing
Prospectuses in connection with such information, which material fact
was not contained in such information and which material fact was
necessary in order to make the statements in such information, in the
light of the circumstances under which they were made, not
misleading.
(c) If
any action, suit or proceeding (each, a “Proceeding”) is
brought against the Underwriter or any such person in respect of
which indemnity may be sought against the Company pursuant to Section
9(a), the Underwriter or such person shall promptly notify the
Company, in writing of the institution of such Proceeding and the
Company, as the case may be, shall assume the defense of such
Proceeding, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and
expenses; provided,
however,
that the omission to so notify the Company shall not relieve the
Company from any liability which the Company may have to the
Underwriter or any such person or otherwise. The Underwriter or such
person shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the
expense of the Underwriter or of such person unless the employment of
such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such Proceeding
or the indemnifying party shall not have, within a reasonable period
of time in light of the circumstances, employed counsel to have
charge of the defense of such Proceeding or such indemnified party or
parties shall have reasonably concluded that there
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may
be defenses available to it or them which are different from,
additional to or in conflict with those available to the indemnifying
party (in which case the indemnifying party shall not have the right
to direct the defense of such Proceeding on behalf of the indemnified
party or parties), in any of which events such fees and expenses
shall be borne by the indemnifying party and paid as incurred (it
being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel (in
addition to any local counsel) in any one Proceeding or series of
related Proceedings in the same jurisdiction representing the
indemnified parties who are parties to such Proceeding). The
indemnifying party shall not be liable for any settlement of any
Proceeding effected without its written consent but if settled with
the written consent of the indemnifying party, the indemnifying party
agrees to indemnify and hold harmless the Underwriter and any such
person from and against any loss or liability by reason of such
settlement. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second sentence of this Section 9(d), then the
indemnifying party agrees that it shall be liable for any settlement
of any Proceeding effected without its written consent if (i) such
settlement is entered into more than 60 business days after receipt
by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall not have fully reimbursed the indemnified
party in accordance with such request prior to the date of such
settlement and (iii) such indemnified party shall have given the
indemnifying party at least 30 days’ prior notice of its
intention to settle. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of
any pending or threatened Proceeding in respect of which any
indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of
such Proceeding and does not include an admission of fault,
culpability or a failure to act, by or on behalf of such indemnified
party.
(d) If
any Proceeding is brought against the Company or any such person in
respect of which indemnity may be sought against the Underwriter
pursuant to Section 9(b) hereof, the Company or such person shall
promptly notify the Underwriter in writing of the institution of such
Proceeding and the Underwriter shall assume the defense of such
Proceeding, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and
expenses; provided,
however,
that the omission to so notify the Underwriter shall not relieve the
Underwriter from any liability which the Underwriter may have to the
Company, or any such person or otherwise. The Company, or such person
shall have the right to employ its own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of the
Company, or such person unless the employment of such counsel shall
have been authorized in writing by the Underwriter in connection with
the defense of such Proceeding or the Underwriter shall not have,
within a reasonable period of time in light of the circumstances,
employed counsel to defend such Proceeding or such indemnified party
or parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or
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additional
to or in conflict with those available to the Underwriter (in which
case the Underwriter shall not have the right to direct the defense
of such Proceeding on behalf of the indemnified party or parties, but
the Underwriter may employ counsel and participate in the defense
thereof but the fees and expenses of such counsel shall be at the
expense of the Underwriter), in any of which events such fees and
expenses shall be borne by the Underwriter and paid as incurred (it
being understood, however, that the Underwriter shall not be liable
for the expenses of more than one separate counsel (in addition to
any local counsel) in any one Proceeding or series of related
Proceedings in the same jurisdiction representing the indemnified
parties who are parties to such Proceeding). The Underwriter shall
not be liable for any settlement of any such Proceeding effected
without the written consent of the Underwriter but if settled with
the written consent of the Underwriter, the Underwriter agree to
indemnify and hold harmless the Company, and any such person from and
against any loss or liability by reason of such settlement.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by
the second sentence of this Section 9(d), then the indemnifying party
agrees that it shall be liable for any settlement of any Proceeding
effected without its written consent if (i) such settlement is
entered into more than 60 business days after receipt by such
indemnifying party of the aforesaid request, (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement and
(iii) such indemnified party shall have given the indemnifying party
at least 30 days’ prior notice of its intention to settle. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
Proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that
are the subject matter of such Proceeding.
(e) If
the indemnification provided for in this Section 9 is unavailable to
an indemnified party under subsections (a) or (b) of this
Section 9 or insufficient to hold an indemnified party harmless in
respect of any losses, damages, expenses, liabilities or claims
referred to therein, then each applicable indemnifying party shall
contribute to the amount paid or payable by such indemnified party as
a result of such losses, damages, expenses, liabilities or claims
(i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriter
on the other hand from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and of the
Underwriter on the other in connection with the statements or
omissions which resulted in such losses, damages, expenses,
liabilities or claims, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the
one hand and the Underwriter on the other shall be deemed to be in
the same respective proportions as the total proceeds from the
offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company and the total
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underwriting
discounts and commissions received by the Underwriter, bear to the
aggregate public offering price of the Shares. The relative fault of
the Company on the one hand and of the Underwriter on the other shall
be determined by reference to, among other things, whether the untrue
statement or alleged untrue statement of a material fact or omission
or alleged omission relates to information supplied by the Company or
by the Underwriter and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a
result of the losses, damages, expenses, liabilities and claims
referred to in this subsection shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in
connection with investigating, preparing to defend or defending any
Proceeding.
(f) The
Company and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined
by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in
subsection (e) above. Notwithstanding the provisions of this Section
9, the Underwriter shall not be required to contribute any amount in
excess of the amount by which the total price at which the Shares
underwritten by the Underwriter and distributed to the public were
offered to the public exceeds the amount of any damage which the
Underwriter has otherwise been required to pay by reason of such
untrue statement or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(g) The
indemnity and contribution agreements contained in this Section 9 and
the covenants, warranties and representations of the Company
contained in this Agreement shall remain in full force and effect
regardless of any investigation made by or on behalf of the
Underwriter, their partners, directors or officers or any person
(including each partner, officer or director of such person) who
controls the Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, or by or on behalf of the
Company, its directors or officers or any person who controls the
Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, and shall survive any
termination of this Agreement or the issuance and delivery of the
Shares. The Company and the Underwriter agree promptly to notify each
other of the commencement of any Proceeding against it and, in the
case of the Company, against any of the Company’s officers or
directors in connection with the issuance and sale of the Shares, or
in connection with the Registration Statement, any Pre-Pricing
Prospectus, the Prospectus or any Permitted Free Writing
Prospectus.
10. Information
Furnished by the Underwriter.
The statements set forth in the last paragraph on the cover page of
the Prospectus and the statements set forth in the section of the
Prospectus entitled “Underwriting” in (i) the first
paragraph listing the Underwriter and the number of shares to be
purchased by the Underwriter, (ii) the second sentence of the fourth
paragraph regarding the manner in which Shares may be offered by the
Underwriter; (iii) the fifth paragraph regarding resales and
commissions and (iv) in the eleventh, twelfth, thirteenth,
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fourteenth
and fifteenth paragraphs regarding stabilization, short positions and
passive market making constitute the only information furnished by or
on behalf of the Underwriter as such information is referred to in
Sections 3, 4 and 9 hereof.
11. No
Fiduciary Duty.
The Company hereby acknowledges that the Underwriter is acting solely
as an underwriter in connection with the purchase and sale of the
Company’s securities. The Company further acknowledges that the
Underwriter is acting pursuant to a contractual relationship created
solely by this Underwriting Agreement entered into on an arm’s
length basis and in no event do the parties intend that the
Underwriter act or be responsible as a fiduciary to the Company, its
management, stockholders, creditors, or any other person in
connection with any activity that the Underwriter may undertake or
has undertaken in furtherance of the purchase and sale of the
Company’s securities, either before or after the date hereof.
The Underwriter hereby expressly disclaims any fiduciary or similar
obligations to the Company, either in connection with the
transactions contemplated by this Underwriting Agreement or any
matters leading up to such transactions, and the Company hereby
confirms their understanding and agreement to that effect. The
Company and the Underwriter agree that they are each responsible for
making their own independent judgments with respect to any such
transactions, and that any opinions or views expressed by the
Underwriter to the Company regarding such transactions, including but
not limited to any opinions or views with respect to the price or
market for the Company’s securities, do not constitute advice or
recommendations to the Company. The Company hereby waives and
releases, to the fullest extent permitted by law, any claims that the
Company may have against the Underwriter with respect to any breach
or alleged breach of any fiduciary or similar duty to the Company in
connection with the transactions contemplated by this Underwriting
Agreement or any matters leading up to such
transactions.
12. Notices.
Except as otherwise herein provided, all statements, requests,
notices and agreements shall be in writing or by facsimile or
telegram and, if to the Underwriter, shall be sufficient in all
respects if delivered or sent to UBS Securities LLC,
000 Xxxx Xxxxxx, Xxx Xxxx, X.X. 00000-0000, Attention: Syndicate
Department and, if to the Company, shall be sufficient in all
respects if delivered or sent to the Company at the offices of the
Company at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Sophocles X. Xxxxxxx
13. Governing
Law; Construction.
This Agreement and any claim, counterclaim or dispute of any kind or
nature whatsoever arising out of or in any way relating to this
Agreement (“Claim”), directly or indirectly, shall be
governed by, and construed in accordance with, the laws of the State
of New York. The section headings in this Agreement have been
inserted as a matter of convenience of reference and are not a part
of this Agreement.
14. Submission
to Jurisdiction.
Except as set forth below, no Claim may be commenced, prosecuted or
continued in any court other than the courts of the State of New York
located in the City and County of New York or in the United States
District Court for the Southern District of New York, which courts
shall have jurisdiction over the adjudication of such matters, and
the Company consents to the jurisdiction of such courts and personal
service with respect thereto. The Company hereby consents to personal
jurisdiction, service and venue in any
UBS
Securities LLC
February
28, 2007
Page 31
court
in which any Claim arising out of or in any way relating to this
Agreement is brought by any third party against the
Underwriter or any indemnified party. The Underwriter and the
Company (on its behalf and, to the extent permitted by applicable
law, on behalf of its stockholders and affiliates) waives all right
to trial by jury in any action, proceeding or counterclaim (whether
based upon contract, tort or otherwise) in any way arising out of or
relating to this Agreement. The Company each agrees that a final
judgment in any such action, proceeding or counterclaim brought in
any such court shall be conclusive and binding upon the Company may
be enforced in any other courts to the jurisdiction of which the
Company is or may be subject, by suit upon such judgment. The Company
hereby appoint, without power of revocation, Xxxxxx & Xxxxxx LLP,
Xxx Xxxxxxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 as their respective
agents to accept and acknowledge on their behalf service of any and
all process which may be served in any action, proceeding or
counterclaim in any way relating to or arising out of this
Agreement.
15. Parties
at Interest.
The Agreement herein set forth has been and is made solely for the
benefit of the Underwriter, the Company and to the extent provided in
Section 11 hereof the controlling persons, partners, directors and
officers referred to in such Section, and their respective
successors, assigns, heirs, personal representatives and executors
and administrators. No other person, partnership, association or
corporation (including a purchaser, as such purchaser, from the
Underwriter) shall acquire or have any right under or by virtue of
this Agreement.
16. Counterparts.
This Agreement may be signed by the parties in one or more
counterparts which together shall constitute one and the same
agreement among the parties.
17. Successors
and Assigns.
This Agreement shall be binding upon the Underwriter and the Company
and their successors and assigns and any successor or assign of any
substantial portion of the Company’s, and any of the
Underwriter’s respective businesses and/or assets.
18. Miscellaneous.
UBS, an indirect, wholly owned subsidiary of UBS AG, is not a bank
and is separate from any affiliated bank, including any U.S. branch
or agency of UBS AG. Because UBS is a separately incorporated entity,
it is solely responsible for its own contractual obligations and
commitments, including obligations with respect to sales and
purchases of securities. Securities sold, offered or recommended by
UBS are not deposits, are not insured by the Federal Deposit
Insurance Corporation, are not guaranteed by a branch or agency, and
are not otherwise an obligation or responsibility of a branch or
agency.
[Remainder
of page left blank]
If
the foregoing correctly sets forth the understanding among the
Company and the Underwriter, please so indicate in the space provided
below for that purpose, whereupon this agreement and your acceptance
shall constitute a binding agreement among the Company and the
Underwriter.
Very
truly yours,
| By: |
/s/ XXXXXXXXX XXXXXXX |
|||
| Name:
Xxxxxxxxx Xxxxxxx Title: Chief Executive Officer |
Accepted
and agreed to as of the
date
first above written
UBS
SECURITIES LLC
| By: |
/s/ XXXXX XXXXX |
|||
| Name: Xxxxx
Xxxxx Title: Managing Director |
| By: |
/s/ XXXXXXX XXXXX |
|||
| Name: Xxxxxxx
Xxxxx Title: Associate Director |
Schedule
A
|
Underwriter
|
Number
of Shares
|
|
UBS
Securities LLC . |
5,400,000
|
|
Total
|
5,400,000
|
1
Schedule
B
Subsidiaries
of the Company
Eagle
Shipping International
Condor
Shipping LLC
Hawk
Shipping LLC
Falcon
Shipping LLC
Harrier
Shipping LLC
Osprey
Shipping LLC
Kite
Shipping LLC
Sparrow
Shipping LLC
Griffon
Shipping LLC
Shikra
Shipping LLC
Peregrine
Shipping LLC
Cardinal
Shipping LLC
Heron
Shipping LLC
Merlin
Shipping LLC
Xxxxxx
Shipping LLC
Kestrel
Shipping LLC
Tern
Shipping LLC
Kittiwake
Shipping LLC
Oriole
Shipping LLC
Xxxxx
Shipping LLC
Crested
Eagle Shipping LLC
Crowned
Eagle Shipping LLC
Shrike
Shipping LLC
Skua
Shipping LLC
Eagle
Bulk (Delaware) LLC
2
Schedule
C
Pricing
Information
|
1.
|
Permitted
Free Writing Prospectus dated February 28, 2007, filed by the Company
with the Commission pursuant to Rule 433 on March 1,
2007. |
Exhibit
A
Form
of Lock-Up Agreement
Common
Stock
($0.01
Par Value)
February
28, 2007
UBS Securities
LLC
000 Xxxx
Xxxxxx
Xxx
Xxxx, X.X. 00000-0000
Ladies
and Gentlemen:
This
Lock-Up Agreement is being delivered to you in connection with the
proposed Underwriting Agreement (the “Underwriting
Agreement”)
to be entered into by Eagle Bulk Shipping Inc., a Xxxxxxxx Islands
corporation (the “Company”)
and you, with respect to the sale by you (the “Offering”)
of your common stock, par value $0.01 per share (the
“Common
Stock”).
In
order to induce you to enter into the Underwriting Agreement, the
undersigned agrees that, for a period (the “Lock-Up
Period”)
beginning on the date hereof and ending on, and including, the date
that is 45 days after the date of the final prospectus relating to
the Offering, the undersigned will not, without the prior written
consent of UBS Securities LLC (i) sell, offer to sell, contract or
agree to sell, hypothecate, pledge, grant any option to purchase or
otherwise dispose of or agree to dispose of, directly or indirectly,
or file (or participate in the filing of) a registration statement
with the Securities and Exchange Commission (the “Commission”)
in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning
of Section 16 of the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder
(the “Exchange
Act”)
with respect to, any Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock, or warrants or other
rights to purchase Common Stock or any such securities, (ii) enter
into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or warrants or other rights to
purchase Common Stock or any such securities, whether any such
transaction is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise or (iii)
publicly
announce an intention to effect any transaction specified in clause
(i) or (ii). The foregoing sentence shall not apply to (a) the
registration of or sale to you of any Common Stock pursuant to the
Offering and the Underwriting Agreement, (b) bona fide gifts,
provided the recipient thereof agrees in writing with you be bound by
the terms of this Lock-Up Agreement or (c) dispositions to any trust
for the direct or indirect benefit of the undersigned and/or the
immediate family of the undersigned, provided that such trust agrees
in writing with you to be bound by the terms of this Lock-Up
Agreement. For purposes of this paragraph, “immediate
family” shall mean the undersigned and the spouse, any lineal
descendent, father, mother, brother or sister of the
undersigned.
In
addition, the undersigned hereby waives any rights the undersigned
may have to require registration of Common Stock in connection with
the filing of a registration statement relating to the Offering. The
undersigned further agrees that, for the Lock-Up Period, the
undersigned will not, without the prior written consent of UBS
Securities LLC make any demand for, or exercise any right with
respect to, the registration of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or
warrants or other rights to purchase Common Stock or any such
securities.
Notwithstanding
the above, if (i) during the period that begins on the date that is
fifteen calendar days plus three business days before the last day of
the Lock-Up Period and ends on the last day of the Lock-Up Period,
the Company issues an earnings release or material news or a material
event relating to the Company occurs, or (ii) prior to the expiration
of the Lock-Up Period, the Company announces that it will release
earnings results during the sixteen day period beginning on the last
day of the Lock-Up Period, the restrictions imposed by this Lock-Up
Agreement shall continue to apply until the expiration of the date
that is fifteen calendar days plus three business days after the date
on which the issuance of the earnings release or material news or the
material event occurs; provided, however, that this sentence shall
not apply if the research published or distributed with respect to
the Company is issued in compliance with or pursuant to Rule 139 of
the Securities Act of 1933, as amended, and the Company’s
securities are “actively traded” as such term is defined in
Rule 101(c)(1) of Regulation M of the Exchange Act. In addition, the
undersigned hereby waives any and all preemptive rights,
participation rights, resale rights, rights of first refusal and
similar rights that the undersigned may have in connection with the
Offering or with any issuance or sale by the Company of any equity or
other securities before the Offering, except for any such rights as
have been heretofore duly exercised.
The
undersigned hereby confirms that the undersigned has not, directly or
indirectly, taken, and hereby covenants that the undersigned will
not, directly or indirectly, take, any action designed, or which has
constituted or will constitute or might reasonably be expected to
cause or result in, under the Exchange Act or otherwise, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of shares of Common
Stock.
If
(i) the Company notifies you in writing that it does not intend to
proceed with the Offering, (ii) the registration statement filed with
the Commission with respect to the Offering is withdrawn or (iii) for
any reason the Underwriting Agreement shall be terminated prior to
the “time of purchase” (as defined in the Underwriting
Agreement), this Lock-Up
Agreement
shall be terminated and the undersigned shall be released from its
obligations hereunder.
| Yours very truly, | ||
| |
|
|
|
|
||
| Name: | ||
Exhibit
A-1
List
of Additional Persons Required to Execute Lock-Up
Agreements
|
Name
|
Position
|
|
|
1. Sophocles
X. Xxxxxxx |
Chief
Executive Officer, Chairman, Director |
|
|
2. Xxxx
X. Xxxxxxxx |
Chief
Financial Officer |
|
|
3. Xxxxxxx
X. Xxxxxxxx |
Director
|
|
|
4. Xxxxxx
Xxxxxxxxx |
Director
|
|
|
5. Xxxxx
X. Xxxxxxx |
Director
|
|
|
6. Xxxxx
X. Xxxxx |
Director
|
|
|
7. Xxxxxxx
Xxxxxxx |
Director
|
|
|
8. Xxxxxxx
Xxxxxxxx |
Director
|
|
|
9. Xxxxxx
X. Xxxxxxx, Xx. |
Chief
Operating Officer |
|
|
10. Xxxxxx
X. Xxxxx |
Chartering
Manager |
|
|
11. Xxxxx
Xxxxxxx |
Controller
|
Exhibit
B-1
Form
of Opinion of the Company’s Special United States
Counsel
We
have acted as special United States counsel to Eagle Bulk Shipping
Inc., a Xxxxxxxx Islands corporation (the “Company”), in
connection with the Underwriting Agreement, dated February 28, 2007
(the “Underwriting Agreement”), between you (the
“Underwriter”) and the Company, relating to the sale by the
Company to you of 5,400,000 shares (the “Firm Shares”) of
the Company’s Common Shares, par value $0.01 per share (the
“Common Stock”) and up to an additional 810,000 shares of
Common Stock (the “Option Shares”) at the
Underwriters’ option to cover over-allotments. The Firm Shares
and the Option Shares are collectively referred to herein as the
“Securities.”
This
opinion is being furnished to you pursuant to Section 7(a) of the
Underwriting Agreement.
In
rendering the opinions set forth herein, we have examined and relied
on originals or copies of the following:
| (a) |
the
registration statement on Form S-3 (File No. 333-139745) of the
Company relating to the Securities and other securities of the
Company filed with the Securities and Exchange Commission (the
“Commission”) under the Securities Act of 1933 (the
“Securities Act”) allowing for delayed offerings pursuant
to Rule 415 under the Securities Act, including information deemed to
be a part of the registration statement pursuant to Rule 430B of the
General Rules and Regulations under the Securities Act (the
“Rules and Regulations”) and the Notice of Effectiveness of
the Commission posted on its website declaring such registration
statement effective on January 9, 2007 (such registration statement,
as so amended, being hereinafter referred to as the
“Registration Statement”); |
| (b) |
the
prospectus, dated January 9, 2007 (the “Base Prospectus”),
which forms a part of and is included in the Registration
Statement; |
| (c) |
the
prospectus supplement, dated February 28, 2007 (the “Prospectus
Supplement” and, together with the Base Prospectus, the
“Prospectus”), relating to the offering of the Securities,
in the form filed by the Company pursuant to Rule 424(b) of the Rules
and Regulations; |
| (d) |
the
documents identified on Schedule I hereto, filed by the Company with
the Commission pursuant to the Securities Exchange Act of 1934 and
incorporated by reference into the Prospectus as of the date hereof
(collectively, the “Incorporated Documents”);
|
| (e) |
an
executed copy of the Underwriting Agreement; |
| (f) |
an
executed copy of the Registration Rights Agreement, dated as of June
28, 2005, between the Company and Eagle Bulk Ventures LLC (the
“Registration Rights Agreement”); |
| (g) |
the
certificate of Sophocles X. Xxxxxxx, Chairman of the Board and Chief
Executive Officer of the Company and Xxxx X. Xxxxxxxx, Chief
Financial Officer, of the Company, dated the date hereof, a copy of
which is attached as Exhibit A hereto (the “Company’s
Certificate”); and |
| (h) |
copies
of each of the Applicable Contracts (as defined below).
|
We
have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Company and
such agreements, certificates and receipts of public officials,
certificates of officers or other representatives of the Company and
others, and such other documents as we have deemed necessary or
appropriate as a basis for the opinions set forth below.
In
our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as facsimile, electronic,
certified or photostatic copies, and the authenticity of the
originals of such copies. In making our examination of executed
documents, we have assumed that the parties thereto, including the
Company, had the power, corporate or other, to enter into and perform
all obligations thereunder and have also assumed the due
authorization by all requisite action, corporate or other, and,
except to the extent expressly set forth in the opinion set forth in
paragraph 1 below, the execution and delivery by such parties of such
documents and the validity and binding effect thereof on such
parties. We have also assumed that the Company has been duly
organized and is validly existing in good standing, and has requisite
legal status and legal capacity, under the laws of its jurisdiction
of organization and that the Company has complied and will comply
with all aspects of the laws of all relevant jurisdictions (including
the laws of the Republic of the Xxxxxxxx Islands) in connection with
the transactions contemplated by, and the performance of its
obligations under, the Underwriting Agreement, other than the laws of
the United States of America and the State of New York insofar as we
express our opinions herein. As to any facts material to the opinions
expressed herein that we did not independently establish or verify,
we have relied upon statements and representations of officers and
other representatives of the Company and others and of public
officials, including the facts set forth in the Company’s
Certificate.
As
used herein, (i) “Applicable Contracts” means those
agreements or instruments identified in Schedule II hereto, (ii)
“Applicable Laws” means those laws, rules and regulations
of the State of New York and those federal laws, rules and
regulations of the United States of America, in each case that, in
our experience, are normally applicable to transactions of the type
contemplated
by the Underwriting Agreement (other than the United States federal
securities laws, state securities or blue sky laws, antifraud laws
and the rules and regulations of the National Association of
Securities Dealers, Inc.), but without our having made any special
investigation as to the applicability of any specific law, rule or
regulation; (iii) “Governmental Authorities” means any
court, regulatory body, administrative agency or governmental body of
the State of New York or the United States of America having
jurisdiction over the Company under Applicable Laws; (iv)
“Governmental Approval” means any consent, approval,
license, authorization or validation of, or filing, qualification or
registration with, any Governmental Authority required to be made or
obtained by the Company pursuant to Applicable Laws, other than any
consent, approval, license, authorization, validation, filing,
qualification or registration that may have become applicable as a
result of the involvement of any party (other than the Company) in
the transactions contemplated by the Underwriting Agreement or
because of such parties’ legal or regulatory status or because
of any other facts specifically pertaining to such parties; and (v)
“Applicable Orders” means those judgments, orders or
decrees identified on Schedule A to the Company’s Certificate.
The
opinions set forth below are subject to the following further
qualifications, assumptions and limitations:
|
(a)
|
we
do not express any opinion as to the effect on the opinions expressed
herein of (i) the compliance or noncompliance of any party to the
Underwriting Agreement (other than with respect to the Company to the
extent necessary to render the opinions set forth herein) with any
state, federal or other laws or regulations applicable to it or them
or (ii) the legal or regulatory status or the nature of the business
of any party (other than with respect to the Company to the extent
necessary to render the opinions set forth herein);
|
|
(b)
|
the
opinion set forth in paragraph 2 below is based solely on our
discussions with the officers and other representatives of the
Company responsible for the matters discussed therein, our review of
documents furnished to us by the Company and our reliance on the
representations and warranties of the Company contained in the
Underwriting Agreement and the Company’s Certificate; we have
not made any other inquiries or investigations or any search of the
public docket records of any court, governmental agency or body or
administrative agency. In addition, we note that we have not been
engaged by, nor have we rendered any advice to, the Company in
connection with any legal or governmental proceedings. Accordingly,
we do not have any special knowledge with respect to such matters. We
understand that such matters have been and are being handled by other
counsel; and |
|
(c)
|
we
note that certain of the Applicable Contracts are governed by laws
other than Applicable Laws; our opinions expressed herein are based
solely upon our understanding of the plain language of such agreement
or instrument, and we do not express any opinion with respect to the
validity, binding nature or enforceability of any such agreement or
instrument, and we do not assume any responsibility with respect to
the effect on the opinions or statements set forth herein of any
interpretation thereof inconsistent with such
understanding. |
We
do not express any opinion as to any laws other than Applicable Laws
and the federal laws of the United States of America to the extent
referred to specifically herein. Insofar as the opinions expressed
herein relate to matters governed by laws other than those set forth
in the preceding sentence, we have assumed, without having made any
independent investigation, that such laws do not affect any of the
opinions set forth herein. The opinions expressed herein are based on
laws in effect on the date hereof, which laws are subject to change
with possible retroactive effect.
Based
upon and subject to the foregoing and to the qualifications and
limitations hereafter expressed, we are of the opinion
that:
|
1. |
The
Underwriting Agreement has been duly executed and delivered by the
Company, to the extent such execution and delivery are governed by
the laws of the State of New York. |
| 2. |
To
our knowledge, there are no legal or governmental proceedings pending
to which the Company or any of its subsidiaries is a party or to
which any property of the Company or a subsidiary is subject that are
required to be disclosed in the Prospectus pursuant to Item 103 of
Regulation S-K of the Rules and Regulations that are not so
disclosed. |
| 3. |
The
execution and delivery by the Company of the Underwriting Agreement
and the consummation by the Company of the transactions contemplated
thereby, including the issuance and sale of the Securities, will not
(i) constitute a violation of, or a breach or default under, the
terms of any Applicable Contract or (ii) violate or conflict with, or
result in any contravention of, any Applicable Law or any Applicable
Order. We do not express any opinion, however, as to whether the
execution, delivery or performance by the Company of the Underwriting
Agreement will constitute a violation of, or a default under, any
covenant, restriction or provision with respect to financial ratios
or tests or any aspect of the financial condition or results of
operations of the Company or any of its subsidiaries.
|
| 4. |
No
Governmental Approval, which has not been obtained or taken and is
not in full force and effect, is required to authorize, or is
required for, the execution or delivery of the Underwriting Agreement
by the Company or the consummation by the Company of the transactions
contemplated thereby. |
| 5. |
The
statements in the Prospectus under the caption
“Underwriting”, insofar as such statements purport to
summarize certain provisions of the Underwriting Agreement, fairly
summarize such provisions in all material respects.
|
| 6. |
The
Company is not and, solely after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as
described in the Prospectus, will not be an “investment
company” as such term is defined in the Investment Company Act
of 1940. |
| 7. |
Except
as provided pursuant to the Registration Rights Agreement and in the
Securities Purchase Agreement dated June 22, 2006 between the Company
and the Investors listed in Exhibit A thereto, there are no persons
with rights under any Applicable Contract to have any Common Shares
or shares of any other capital stock or equity interests of the
Company registered by the Company under the Securities
Act. |
| 8. |
There
are no persons with rights under any Applicable Contract to have any
Common Shares or shares of any other capital stock or equity
interests of the Company registered under the Registration Statement.
|
| 9. |
Under
the laws of the State of New York relating to personal jurisdiction,
the Company has validly and irrevocably submitted to the personal
jurisdiction of any state court in the City, County and State of New
York (each, a “New York Court”) in any action arising out
of or relating to the Underwriting Agreement or the transactions
contemplated thereby, has validly and irrevocably waived any
objection to the venue of a proceeding in any such court, and has
validly and irrevocably appointed Xxxxxx & Xxxxxx LLP as its
authorized agent for the purpose described in Section 16 of the
Underwriting Agreement; and service of process effected on such agent
in the manner set forth in Section 16 of the Underwriting Agreement
will be effective insofar as the law of the State of New York is
concerned to confer valid personal jurisdiction over the
Company. |
We
advise you that Mr. Xxxxxxx Xxxxxxxx, of counsel to Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, is a director of Eagle Bulk Shipping
Inc. and as of the date hereof beneficially owns 13,333 options
exercisable into shares of Eagle Bulk Shipping Inc.’s common
stock and dividend equivalent rights with respect to 14,815 shares of
common stock.
This
opinion is furnished only to you and is solely for your benefit in
connection with the closing occurring today and the offering of the
Securities, in each case pursuant to the Underwriting Agreement.
Without our prior written consent, this opinion may not be used,
circulated, quoted or otherwise referred to for any other purpose or
relied upon by, or assigned to, any other person for any purpose,
including any other person that acquires Securities or that seeks to
assert your rights in respect of this opinion (other than your
successor in interest by means of merger, consolidation, transfer of
a business or other similar transaction).
Very
truly yours,
Exhibit
B-2
Form
of Negative Assurance Letter of the Company’s Special United
States Counsel
We
have acted as special United States counsel to Eagle Bulk Shipping
Inc., a Xxxxxxxx Islands corporation (the “Company”), in
connection with the Underwriting Agreement, dated February 28, 2007
(the “Underwriting Agreement”), between you (the
“Underwriter”) and the Company, relating to the sale by the
Company to you of 5,400,000 shares (the “Firm Shares”) of
the Company’s Common Shares, par value $0.01 per share (the
“Common Stock”) and up to an additional 810,000 shares of
Common Stock (the “Option Shares”) at the
Underwriters’ option to cover over-allotments. The Firm Shares
and the Option Shares are collectively referred to herein as the
“Securities.”
This
letter is being furnished to you pursuant to Section 7(a) of the
Underwriting Agreement.
In
the above capacity, we have reviewed the registration statement on
Form S-3 (File No. 333-139745) of the Company relating to the
Securities and other securities of the Company filed on December 29,
2006 with the Securities and Exchange Commission (the
“Commission”) under the Securities Act of 1933 (the
“Securities Act”) allowing for delayed offerings pursuant
to Rule 415 under the Securities Act, including the Incorporated
Documents (as defined below) and the information deemed to be a part
of the registration statement pursuant to Rule 430B of the General
Rules and Regulations under the Securities Act (the “Rules and
Regulations”), and the Notice of Effectiveness of the Commission
posted on its website declaring such registration statement effective
on January 9, 2007 (such registration statement, as so amended, being
hereinafter referred to as the “Registration Statement”),
and (i) the prospectus, dated January 9, 2007 (the “Base
Prospectus”), which forms a part of and is included in the
Registration Statement, (ii) the preliminary prospectus supplement,
dated February 28, 2007 (together with the Base Prospectus and the
Incorporated Documents, the “Preliminary Prospectus”),
relating to the offering of the Securities in the form filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations and
(iii) the prospectus supplement, dated February 28, 2007 (the
“Prospectus Supplement” and, together with the Base
Prospectus and the Incorporated Documents,
the “Prospectus”), relating to the offering of the
Securities in the form filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations. We also have reviewed the
documents identified on Schedule I hereto filed by the Company
pursuant to the Securities Exchange Act of 1934 and incorporated by
reference into the Prospectus as of the date hereof (collectively,
the “Incorporated Documents”), each “issuer free
writing prospectus” (as defined in Rule 433(h)(1) of the Rules
and Regulations) identified on Schedule II hereto relating to the
Securities (collectively, the “Issuer General Use Free Writing
Prospectuses”) and such other documents as we deemed
appropriate. We have been orally advised by the Commission that no
stop order suspending the effectiveness of the Registration Statement
has been issued and, to our knowledge, no proceedings for that
purpose have been instituted or are pending or threatened by the
Commission.
In
addition, we have participated in conferences
with officers and other representatives of the Company, Xxxxxxxx
Islands counsel for the Company, representatives of the independent
accountants of the Company and representatives of the Underwriters
and counsel for the Underwriters at which the contents of the
Registration Statement, the Prospectus and the General Disclosure
Package (as defined below) and related matters were discussed. We do
not pass upon, or assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the
Registration Statement, the Prospectus or the General Disclosure
Package and have made no independent check or verification thereof
(except to the limited extent referred to in paragraph 5 of our
opinion to you dated the date hereof).
On
the basis of the foregoing, (i) the Registration Statement, at the
Applicable Time (defined below), and the Prospectus, as of the date
of the Prospectus Supplement, appeared on their face to be
appropriately responsive in all material respects to the requirements
of the Securities Act and the Rules and Regulations (except that in
each case we do not express any view as to the financial statements,
schedules and other financial information included or incorporated by
reference therein or excluded therefrom) and (ii) no facts have come
to our attention that have caused us to believe that the Registration
Statement, at the Applicable Time contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, as of the date of the Prospectus
Supplement and as of the date hereof contained or contains an untrue
statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading
(except that in each case we do not express any view as to the
financial statements, schedules and other financial information
included or incorporated by reference therein or excluded therefrom
or the statements contained in the exhibits to the Registration
Statement). In addition, on the basis of the foregoing, no facts have
come to our attention that have caused us to believe that the General
Disclosure Package, as of the Applicable Time, contained an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading (except
that we do not express any view as to the financial statements,
schedules and other financial information included or incorporated by
reference therein or excluded therefrom or the statements contained
in the exhibits to the Registration Statement).
As
used herein, (i) “Applicable Time” means 8:45 a.m. (Eastern
time) on March 1, 2007, which you advised us is the time of the first
contract of sale of the Securities, and (ii) “General Disclosure
Package” means the issuer free writing prospectus, dated
February 28, 2007, in the form filed by the Company pursuant to Rule
433 of the Rules and Regulations on March 1, 2007, and the
Preliminary Prospectus, all considered together.
In
addition, based on the foregoing, we confirm to you that (i) the
Prospectus has been filed with the Commission within the time period
required by Rule 424 of the Rules and Regulations and (ii) any
required filing of Issuer General Use Free Writing Prospectuses
pursuant to Rule 433 of the Rules and Regulations has been filed with
the SEC within the time period required by Rule 433(d) of the Rules
and Regulations.
This
letter is furnished only to you and is solely for benefit in
connection with the closing occurring today and the offering of the
Securities, in each case pursuant to the
Underwriting
Agreement. Without our prior written consent, this letter may not be
used, circulated, quoted or otherwise referred to for any other
purpose or relied upon by, or assigned to, any other person for any
purpose, including any other person that acquires Securities or that
seeks to assert your rights in respect of this letter (other than
your successor in interest by means of merger, consolidation,
transfer of a business or other similar transaction).
Very
truly yours,
Exhibit
C-1
Form
of Opinion to the Underwriter of the Company’s Special United
States Tax Counsel
We
have acted as special United States counsel to Eagle Bulk Shipping
Inc., a corporation organized under the laws of the Republic of the
Xxxxxxxx Islands (the “Company”)
and each of the subsidiaries of the Company listed on Schedule I
hereto (collectively the “Subsidiaries”)
in connection with (i) the sale by the Company, of up to
[
] shares of the Company’s common stock, par value $.01 per share
(the “Shares”);
(ii) the Underwriting Agreement dated February 28, 2007 (the
“Underwriting
Agreement”)
among the Company, and UBS Securities LLC (the “Underwriter”)
and (C) the preparation of a registration statement on Form S-3
(File No. 333-139745), including the prospectus of the Company
contained therein and a final prospectus supplement thereto date
February 28, 2007 (as may be amended, the “Prospectus”),
with respect to the sale of the Shares included therein (as may be
amended, the “Registration
Statement”).
This opinion is furnished to the Underwriter pursuant to Section 7(b)
of the Underwriting Agreement. Except as otherwise provided herein,
capitalized terms used herein but not otherwise defined herein shall
have the meanings set forth in the Underwriting
Agreement.
In
rendering this opinion we have examined and relied on originals or
copies of the following:
| 1) |
the
Registration Statement (including the documents incorporated by
reference therein); and |
| 2) |
the
Prospectus and the Pre-Pricing Prospectus (as defined
herein). |
We
have also examined and relied, as to factual matters, upon originals,
or copies certified to our satisfaction, of such records, documents,
certificates of officers of the Company, the Subsidiaries and of
public officials and other instruments, and made such other
inquiries, as, in our judgment, are necessary or appropriate to
enable us to render the opinion expressed below. As to questions of
fact material to this opinion, we have, with your approval, where
relevant facts were not independently established, relied upon, among
other things, the representations made in the Underwriting Agreement
and certificates of officers of the Company or the
Subsidiaries.
Based
upon and subject to the foregoing and to the limitations hereafter
expressed, we are of the opinion that the statements contained in the
Company’s annual report on Form 10-K for the period ending
December 31, 2006 and incorporated by reference into the Registration
Statement under the captions “Risk Factors—Company Specific
Risk Factors—We may have to pay tax on United States source
income, which would reduce our earnings”, “Risk
Factors—Company Specific Risk Factors—United States tax
authorities could treat us as a “passive foreign investment
company”, which could have adverse United States federal income
tax consequences to United States holders”, the statements
contained in the Prospectus and the
preliminary
prospectus supplement dated February 28, 2007 relating to the Shares
(including the base prospectus attached thereto and the documents
incorporated by reference therein, the “Pre-Pricing
Prospectus”)
under the heading “Tax Considerations—United States Federal
Income Tax Considerations”, insofar as such statements
constitute a summary of documents or matters of law, or that are
descriptions of contracts, agreements or other legal documents or of
legal proceedings, or refer to statements of law or legal
conclusions, are accurate in all material respects.
Members
of our firm are members of the bar of the State of New York. Our
opinion is limited to the federal laws of the United States. We
express no opinion with respect to the laws of any other jurisdiction
or statute.
This
opinion is rendered as of the date hereof, and we have no
responsibility to update this opinion for events or circumstances
occurring after the date hereof, nor do we have any responsibility to
advise you of any change in the laws after the date
hereof.
This
opinion is rendered only to the Underwriter and is solely for its
benefit in connection with its purchase of the Shares. This opinion
may not be relied upon by the Underwriter for any other purpose or by
any other person, firm or corporation for any purposes whatsoever
without our prior written consent.
Very
truly yours,
Exhibit
C-2
Form
of Opinion to the Company of the Company’s Special United States
Tax Counsel
I. INTRODUCTION
We
have acted as counsel to UBS Securities LLC (the
“Underwriters”), in connection with the sale of up to
[
] shares of the common stock (the “Shares”) of Eagle Bulk
Shipping Inc., a Xxxxxxxx Islands corporation (“Eagle” or
the “Company”) by in a public offering (the
“Offering”). In this capacity, we have advised the
Underwriters regarding the extent to which Eagle and Eagle’s
wholly-owned subsidiaries incorporated outside the United States (the
“Subsidiaries”) will be subject to United States federal
income taxation (Eagle and its Subsidiaries, collectively, the
“Eagle Group”). The Underwriters have requested our opinion
regarding whether Eagle will constitute a “passive foreign
investment company” (a “PFIC”) for United States
federal income tax purposes.
Section II
below sets forth our understanding of the relevant facts relating to
the activities of the Eagle Group. Our analysis of the legal
authorities relating to the PFIC classification of the members of the
Eagle Group and our opinion on this issue are contained in Sections
III and IV, respectively.
II. RELEVANT
FACTS
Except
as described below, Eagle will not engage in any activities other
than its ownership of all of the stock of the Subsidiaries. The
Subsidiaries will own and operate a fleet of vessels which will
transport dry bulk commodities along worldwide shipping routes. Each
of the Subsidiaries has elected to be disregarded as an entity
separate from Eagle for United States federal income tax purposes.
Therefore, Eagle is the only entity in the Eagle Group which will
file a United States federal income tax return. Prior to and after
the Offering, the Shares of Eagle will be publicly traded on the
Nasdaq Global Select Market.
A
separate Subsidiary will own and operate each of the 16 Handymax dry
bulk carriers. For purposes of this opinion, all of the carriers
currently operated, and that are expected to be operated in the
future, by the Subsidiaries are collectively referred to herein as
the “Vessels.”
After
the Offering, the Vessels will be chartered (or continue to be
chartered) under time charters1 or
under voyage charters2 to
unrelated third parties (the “Charterers”).
1 A time charter is a contract for the use of
space in a vessel for a fixed period of time. Under such a charter,
the owner of the vessel remains in control over the navigation and
management of the vessel, paying and being responsible for the crew,
supplies, repairs and maintenance, provisions, insurance, fees, etc.
The time charterer is in control of where the vessel is to go, the
cargo to be transported on the vessel, and is subject to charges for
fuel, port charges, commissions and expenses connected with the
cargo.
Under
a time charter, Subsidiaries will typically receive a basic hire rate
determined on a per day basis, which will be payable monthly in
advance and, in the case of a long-term charter, will increase
annually. Under a voyage charter, the Subsidiaries will typically
receive a basic hire rate determined on a per voyage basis, which
will be payable in advance (the time and voyage charter fees,
collective, the “Charter Fees”). As of the date of this
opinion, none of the Vessels are subject to bareboat
charters.3
Eagle
currently charters the Vessels in the period charter market. The
period charter market consists of time charters which last for a long
period of time, often up to several years. After the Offering, Eagle
intends to deploy all of its vessels under period charters lasting
for periods of one year to three years.4
V.Ships
(“VS”), a company unaffiliated with Eagle, currently acts
and will continue to act after the Offering, as technical manager for
the fleet of Vessels owned by the Subsidiaries and will provide
services such as supervising the crewing, supplying and drydocking of
the Vessels. Eagle International (USA) LLC (“Eagle (USA)”),
a wholly-owned Xxxxxxxx Islands subsidiary of Eagle that has elected
to be disregarded as an entity separate from that of Eagle for United
States federal income tax purposes, currently provides and will
continue to provide after the Offering commercial management
services, including operations, chartering, sale and purchase,
post-fixture administration, accounting and freight invoicing, to the
Subsidiaries.
Under
its time charters and voyage charters of the Vessels, the
Subsidiaries generally are responsible for the payment of the
operating expenses of the Vessels that typically are borne by vessel
owners, including crew wages and all related costs, Vessel supplies,
insurance, tonnage taxes, routine repairs and maintenance and other
direct operating costs. In a time charter, the charterer is
responsible for voyage expenses (such as fuel and port charges),
whereas, in a voyage charter, the Subsidiaries are responsible for
such expenses. The time charters and voyage charters which are
entered into by the Subsidiaries are standard industry
Footnote
continued from previous page.
2 A voyage charter is similar to a time
charter except that the vessel is chartered for a specified voyage
instead of a specified period of time.
3 A bareboat charter is a contract for the
use of a vessel whereby the charterer performs functions normally
performed by the owner of the vessel, such as furnishing of the crew
and supplies. The charterer is in complete possession, control and
command of the vessel and the owner of the vessel bears none of the
expenses or responsibilities of the operation of the
vessel.
4 The two Vessels which will be acquired
after the Offering will be deployed in the period
market.
2
charter
party agreements (the “Charter Agreements”) and generally
provide, among other things, that:
| 12. |
throughout
the duration of the charter, the Vessel will “have a full and
efficient complement of master, officers and crew for a vessel of her
tonnage . . . who shall be trained to operate the
vessel and her equipment competently and safely”;
|
| 13. |
throughout
the duration of the charter, the Subsidiaries shall “exercise
due diligence so as to maintain or restore the
vessel”; |
| 14. |
the
Subsidiaries guarantee that throughout the duration of the charter,
and unless otherwise ordered by the Charterers, the Vessel’s
crew will “prosecute all voyages with the utmost dispatch,
render all customer assistance, and load and discharge cargo as
rapidly as
possible . . . . ”; |
| 15. |
the
Subsidiaries “undertake to provide and to pay for all
provisions, wages, and shipping and discharging fees and all other
expenses of the master, officers and crew” and, with certain
specified exceptions, “for all insurance on the vessel, for all
deck, cabin and engine room stores, and for water, except water used
for clearing, for all drydocking, overhaul, maintenance and repairs
to the vessel, and for all fumigation expenses and de-rat
certificates”; |
| 16. |
in
the case of a time charter, the Charterers shall provide and pay for
all fuel (except fuel used for domestic services), towage and
pilotage and shall pay agency fees, port charges, commissions,
expenses of loading and unloading cargoes, canal dues and all charges
other than those payable by the Subsidiaries under clause (iv) above.
In a voyage charter, the Subsidiaries shall provide and pay for the
above expenses; and |
| 17. |
the
Subsidiaries have the right and obligation to drydock the Vessel at
regular intervals at the expense of the Subsidiaries.
|
Eagle
and each Subsidiary has entered into identical technical management
agreements (the “Technical Management Agreements”),
pursuant to which the Subsidiary appoints VS as the technical manager
of the Subsidiary’s Vessel. Under the Technical Management
Agreements, VS will be paid a fixed monthly management fee of $8,333
per Vessel plus actual costs incurred by the Vessels (the
“Management Fee”).
In
consideration for the Management Fee, VS agrees to provide the
following technical management services:
| 1. |
engaging
and providing for crew for the Vessels, including all payroll,
pension and insurance arrangements; |
| 2. |
arranging
for and supervising the proper maintenance of the
Vessels; |
3
| 3. |
arranging
for the Vessel and its crew to at all times be properly insured and
in compliance with all applicable laws, rules and regulations;
|
| 4. |
arranging
for the supply of such provisions, stores, lubricating oil and other
consumables; and |
| 5. |
making
certain specified capital improvements to the Vessels.
|
Virtually
all of the technical management functions relating to the Vessels are
conducted by VS, including activities such as supervising the
maintenance and general efficiency of the Vessels, crewing,
arrangement and supervision of drydocking and repairs, alterations
and the upkeep of the Vessels, arrangement of the supply of necessary
stores, spares and lubricating oil, and appointment of supervisors
and technical consultants.
In
2006, VS employed numerous employees in connection with the
management of the Vessels. VS also is responsible for providing the
approximately 336 seafaring personnel who are employed by the
Subsidiaries. The relevant Subsidiary employs seagoing personnel for
the duration of each voyage. VS ensures that all seamen have the
qualifications and licenses required to comply with international
regulations and shipping conventions, and that the Vessels employ
experienced and competent personnel.
The
commercial management of the Vessels is conducted by Eagle (USA).
Eagle(USA) performs most of the operations, chartering, and financial
management services necessary to support the Vessels. Eagle (USA)
employs approximately eight shore-based personnel engaged in the
commercial management of the Vessels. Additionally, the seafaring
employees of the Subsidiaries perform most of the necessary ordinary
course maintenance on the Vessels. These employees inspect all of the
Vessels, both at sea and while the Vessels are in port.
For
purposes of rendering our opinion, you have authorized us to assume
that, based on the expectations of the Eagle Group with respect to
the future operations of the Vessels, the Eagle Group, in the
aggregate, has not and will not derive more than 25 percent of its
gross income with respect to any taxable year from income other than
Charter Fees which could constitute “passive income” within
the meaning of Code section 1297(a).
III. ANALYSIS
OF THE PFIC STATUS OF THE MEMBERS OF THE EAGLE GROUP
| A. |
Introduction
|
A
special and adverse United States federal income tax regime applies
to United States persons5 who
own, directly or indirectly pursuant to specific constructive stock
ownership
5
Individuals who are citizens or residents of the United States,
corporations formed under domestic law and estates and trusts which
are subject to United States federal income taxation regardless of
the source of their income are treated as United States persons for
Footnote
continued from previous page.
4
rules,
shares in a foreign corporation which is a PFIC within the meaning of
section 1297 of the Internal Revenue Code of 1986, as amended (the
“Code”). In general, a foreign corporation will be treated
as a PFIC for any taxable year in which either (i) at least 75
percent of its gross income for the year consists of certain
specified types of “passive income,” or (ii) at least
50 percent of the average value of the assets held by the corporation
during the taxable year produce, or are held for the production of,
“passive income.”6 For
purposes of determining whether a foreign corporation is a PFIC, the
corporation generally will be treated as earning and owning its
proportionate share of the income and assets, respectively, of any
subsidiary corporation in which it owns (directly or indirectly) at
least 25 percent of the value of the subsidiary’s
stock.7 In
addition, a foreign corporation will be treated as earning and owning
the income and assets respectively of any subsidiary entity which is
treated as an entity disregarded from such corporation for United
States federal income tax purposes.
Code
section 1297(b)(1) provides that, subject to certain specified
exceptions, the term “passive income” for PFIC purposes
“means any income which is of a kind which would be foreign
personal holding company income as defined in section
954(c).”8
Code
section 954(c)(1) provides that the term “foreign personal
holding company income” includes gross income consisting of,
among other items, “rents” and the net gains, if any,
derived from the sale or exchange of property that produces rental
income, other than property held by the foreign corporation as
inventory or primarily for sale to customers in the ordinary course
of its trade or business.9 Notwithstanding
this general inclusion of “rents” as
Footnote
continued from previous page.
United
States federal income tax purposes.
6 Code
§ 1297(a).
7 Code
§ 1297(c).
8 Under Code section 1297(b)(2),
certain types of income which would otherwise be treated as
“passive income” will not be so treated if they are derived
in the active conduct of a licensed banking or insurance business or
are received or accrued by a foreign corporation from a related
person to the extent such income is properly allocable to income of
such related person which is not “passive income.”
9 In addition to “foreign
personal holding company income,” income subject to Subpart F of
the Code also included, for taxable years prior to January 1, 2005,
“foreign base company shipping income,” which was defined
in former Code section 954(g) to include “income derived from,
or in connection with, the use (or hiring or leasing for use) of any
vessel in foreign commerce, or from, or in connection with, the
performance of services directly related to the use of any such
vessel….” Former Code section 954(b)(6)(A) provided that
income of a foreign corporation which constituted “foreign base
company shipping income”
Footnote
continued on next page.
5
“passive
income,” Code section 954(c)(2)(A) provides that “foreign
personal holding company” income does not include
“rents . . . which are derived in the active
conduct of a trade or business” and which are received from
persons who are not “related persons” to the foreign
corporation (within the meaning of Code section 954(d)(3)). Treas.
Reg. § 4.954-2(b)(6) provides specific rules for applying
this statutory exception for “active” rental income. Income
derived by the performance of services does not constitute
“foreign personal holding company income” within the
meaning of Code section 954(c).
Based
on the statutory and regulatory provisions cited above, it appears
clear that the PFIC rules were generally not intended to apply to
foreign corporations engaged in the active conduct of a trade or
business. Rather, as indicated by the legislative history of the Tax
Reform Act of 1986 (the “1986 Act”), these rules were
enacted principally to prevent United States persons from deferring
the taxation of investment income and possibly converting the
character of such income from ordinary income into capital
gains.10 Further,
based on our interpretation of the purposes of the PFIC rules and the
corresponding legislative history, we believe it is clear that the
PFIC rules were not intended to apply to holding corporations who
conduct an active trade or business through a group of entities
formed solely for the purpose of providing limited
liability.
| B. |
Applicability
of the PFIC Rules to the Eagle Group |
1. Introduction
Based
on the rules discussed in subsection A above, it is clear that
the Charter Fees could constitute “passive income” for
purposes of determining whether any member of the
Footnote
continued from previous page.
was not considered as subpart F income under any other
provision of Code section 954(a). Because characterization of
shipping income took priority over “passive income” for
purposes of Code section 954 in an overlap situation, it could be
argued that income which would have constituted “foreign base
company shipping income” cannot also constitute “foreign
personal holding company income” for purposes of Code section
1297(a). However, notwithstanding the priority noted in the preceding
sentence, we believe the better view is that, for PFIC classification
purposes, (i) the term “passive income” would not take
into account any of the exclusions or special rules contained in Code
section 954(b), and (ii) income which would have constituted
“foreign base company shipping income” can nevertheless
constitute “passive income” for purposes of Code section
1297(a) if such income is “of a kind which would be foreign
personal holding company income” (i.e., rents).
10
See,
e.g.,
S. Rep. No. 99-313, 99th
Cong., 2nd
Sess. at pp. 393-394 (1986) and General Explanation of the Tax
Reform Act of 1986, Joint Committee on Taxation, 99th
Cong., 2nd
Sess. at pp. 1023-1024 (Jt. Comm. Print).
6
Eagle
Group is a PFIC, only if the Charter Fees are treated for such
purposes as “rents.” We are not aware of any definitive
authority addressing the tax characterization for purposes of Code
section 1297(a) of fees derived by a foreign corporation from the
time and voyage chartering of its vessels. However, as discussed more
fully below, there is a significant amount of authority relating to
other provisions of the Code supporting the view that time and voyage
chartering fees should be treated as service income, rather than
“rents,” for purposes of Code section 1297(a) since the
owner of the vessel remains in possession, command and control of the
vessel and provides significant services in connection with the
charterer’s use of the vessel.
2. Code
Section 7701(e)
Treatment
of the Charter Fees as services income for federal income tax
purposes is supported by Code section 7701(e) and the case law
authority preceding its enactment. This statutory provision was
enacted in 1984 to provide specific rules for distinguishing between
a service contract and a lease of property for most United States
federal income tax purposes.11 Code
section 7701(e) provides that, for purposes of sections 1 through
1400 of the Code, a contract which purports to be a service contract
will be treated as a lease if the contract is properly treated as a
lease of property by taking into account all relevant factors,
including, whether or not:
| 1. |
the
service recipient is in physical possession of the
property; |
| 2. |
the
service recipient controls the property; |
| 3. |
the
service recipient has a significant economic possessory interest in
the property; |
| 4. |
the
service provider does not bear any risk of substantially diminished
receipts or substantially increased expenditures if there is
nonperformance under the contract; |
| 5. |
the
service provider does not use the property concurrently to provide
significant services to entities unrelated to the service recipient;
and |
| 6. |
the
total price payable by the service recipient under the service
contract does not substantially exceed the rental value of the
property for the contract period.12
|
11 The principal purpose of this
legislation was to address the fact that a taxpayer derived greater
investment tax credits and accelerated depreciation deductions if an
agreement is determined to be a service contract, rather than a
lease.
See
Section 31(e) of the Tax Reform Act of 1984
(P.L.98-369).
12 The factors set forth in Code
section 7701(e) are substantially similar to those utilized by the
Footnote
continued from previous page.
7
Applying
the factors enumerated in Code section 7701(e) to the time and voyage
charters of the Vessels entered into by the Subsidiaries, we believe
that these charters should qualify as service contracts, rather than
leases. Thus, pursuant to these charters:
| (i) |
the
Subsidiaries remain in physical possession and control of the Vessels
because the Vessels will at all times be operated by personnel
employed by, or on behalf of, the Subsidiaries; |
| (ii) |
the
Subsidiaries retain the possessory and economic interest in the
Vessels because (x) the Vessels will not be used by any of the
Charterers for a substantial portion of the Vessels’ useful
lives, and (y) the Subsidiaries retain all of the benefits and
burdens of ownership of the Vessels (i.e., the Charterers do not bear
any risk of loss with respect to the Vessels or share in any
appreciation in the value of the Vessels); |
| (iii) |
under
its charters, the Subsidiaries generally bear the risk of
substantially increased expenditures if there is nonperformance under
the charters by either the Subsidiaries or the Vessels;
and |
| (iv) |
the
amount of the Charter Fees payable with respect to each charter of a
Vessel reflects the operating costs that are attributable to items
other than the operations of the Vessel without any cargo (e.g., the
costs of the crew employed by an Subsidiary to operate the
Vessel).13
|
Footnote
continued from previous page.
courts in distinguishing between a service contract and
a lease prior to the enactment of that statutory provision.
See,
e.g.,
Xerox
Corporation v. United States,
656 F.2d 659 (Ct. Cl. 1981) (holding that contracts pursuant to which
photocopying machines were installed with various governmental and
tax-exempt organizations were management contracts rather than
leases) and Amerco
v. Xxxxxx Xxxxxx,
00 T.C. 654 (1984) (holding that U-Haul International was the lessee
of trailers, trucks and towbars owned by the lessors of such
equipment). The legislative history of Code section 7701(e) indicates
that this provision extends, rather than codifies, prior case law by
mandating the examination of other facts and circumstances that may
not have been considered by the courts. General Explanation of the
Deficit Reduction Act of 1984, 98th
Cong., 2d Sess. at p. 59 (Jt. Comm. Print. 1984).
13 The only statutorily enumerated
factor that indicates that a time or voyage charter should be treated
as a lease for tax purposes is that a Vessel may not concurrently be
used by multiple charterers.
8
3. Code
Section 883
In
Revenue Ruling 74-170, 1974-1 C.B. 175, the Internal Revenue Service
(the “IRS”) ruled that the income derived by a foreign
corporation that is actively engaged within the United States in the
leasing of vessels for time charters and voyage charters qualifies
for the tax exemption provided by Code section 883 because the
corporation’s income is “generated by the business of
transporting goods and passengers, as distinguished from the income
from investment.” This holding was based on the IRS’s
interpretation of the language in Code section 883 which then
provided a United States tax exemption for the income of a foreign
corporation “derived from the operation of a
ship.”14 In
this regard, the IRS noted that the shipping tax agreements entered
into between the United States and certain foreign countries define
the phrase “operation of a ship” to mean the “business
or enterprise, carried on by owners or charterers of a ship or ships,
of transporting persons, articles, mails and other
cargo. . . .”
Of
particular relevance to the characterization of the Charter Fees for
purposes of Code section 1297(a) is the clear distinction made by the
IRS in Revenue Ruling 74-170 between rental income derived by a ship
owner from the bareboat charter of a ship and the rental income
derived from a time charter or voyage charter of the ship. The IRS
noted that payments received by the owner of a bareboat chartered
vessel are generally regarded as “rents” received from an
investment and not as shipping profits excludable from gross income
under Code section 883. In contrast to bareboat charter
rental,15 the
IRS stated that this statutory exclusion does apply if the
“owner is actively engaged in the shipping business” and
held that a foreign corporation that is “actively engaged in the
leasing of vessels to others under time charters and voyage charters
is considered engaged in the shipping
business. . . .” Further, the IRS stated that
this holding would not change even if the vessel owner “acts
through an agent” provided that the owner
“retained . . . the risk of the
venture.”
We
believe the holding and rationale of Revenue Ruling 74-170 supports
excluding the Charter Fees as “passive income” for purposes
of Code section 1297(a). The IRS has clearly recognized that the
significant services provided by, and the risks of operation borne
by, a ship owner in time charters and voyage charters of ships cause
the owner to be treated as engaged in a business activity for
purposes of Code section 883(a). While Code sections 883(a) and
1297(a) have different statutory language, both provisions make a
clear distinction between activities generating investment income,
which the IRS views as passive “non-operational” income,
and those comprising a business, which the IRS views as
“operational” income. If time and voyage charters are
treated as business activities of a ship owner for purposes of Code
14 Code section 883(a) has
since been amended to provide a United States tax exemption for the
income derived by a foreign corporation from the
“international” operation of a ship.
15 We note that the 1986 Act
amended Code section 883 to specifically treat income derived from a
bareboat charter of a vessel as income qualifying for that statutory
exclusion.
See
Code sections 883(a)(4) and 872(b)(6).
9
section
883(a), we do not see a sound basis for the IRS treating such
charters as investment activities for PFIC purposes.
The
IRS’s distinction between time and voyage charters and bareboat
charters in Revenue Procedure 91-12, 1991-1 C.B. 473, provides
additional support for the treatment of the Charter Fees as services
income for federal income tax purposes. This Revenue Procedure sets
forth the IRS position regarding the proper procedures to be followed
by foreign persons for claiming the exemption from federal income
taxation provided under Code section 883 or an applicable income tax
treaty and for computing, reporting and paying the four percent tax
on shipping income that is not eligible for any such tax
exemption.16 In
Section 4.08 of this Revenue Procedure, the IRS defined the term
“leasing” for purposes of applying the special rules for
determining under Code section 887(b)(4) whether “United States
source gross transportation income” derived by a foreign person
constitutes “effectively connected income” with respect to
such person. In this regard, the IRS stated that “the term
‘leasing’ means the bareboat charter of a vessel or
aircraft. Time or voyage charter income is not considered income from
leasing for this purpose. It is considered income from the use (or
operation) of a vessel or aircraft.” We do not see any reason
why the distinction made by the IRS between the different types of
charter income for purposes of Code section 887(b)(4) should not be
equally applicable for other purposes of the Code, including Code
section 1297(a).
4. S
Corporations
A
substantial line of authority interpreting the definition of the term
“rents” for purposes of the statutory provisions relating
to subchapter S corporations (“S corporations”) also
supports treatment of the Charter Fees as services income, rather
than as rental income, for federal income tax purposes. Code section
1375 imposes a corporate tax on S corporations that were
formerly C corporations and derive more than 25 percent of their
gross receipts in any taxable year from “passive investment
income.” The term “passive investment income” is
statutorily defined to expressly include “rents” but does
not include income derived from the performance of
services.17 The
applicable Treasury regulations define the term “rents” to
mean amounts received for the use of, or right to use, real or
personal property other than rental income derived in the active
conduct of trade or business and provide that a taxpayer is engaged
in such conduct if it provides “significant services” and
incurs substantial costs in connection with its lease of
property.18 As
discussed more fully below, the IRS and the courts have held that
income derived from time and voyage charters of ships and rents
received from the chartering of aircraft where the owner provides
significant services to the charterer do not constitute
“rents” for purposes of the statutory provisions concerning
S corporations.
16 See
Code § 887.
17 See
Code § 1362(d)(3)(C)(i).
18 Treas. Reg.
§ 1.1362-2(c)(5)(ii)(B)(1), (2).
10
In
Revenue Ruling 81-197, 1981-1 C.B. 166, the IRS held that amounts
received by an S corporation from the full service charter of an
aircraft are not “rents” for purposes of the “passive
investment income” tests contained in the predecessor to Code
section 1375.19 In
connection with the chartering of its aircraft, the
S corporation involved in Revenue Ruling 81-197
conducted negotiations for chartering the aircraft, actually
chartered the aircraft and collected the charter fees. In
consideration for the charter fees, the S corporation provided
all pilots, fuel, catering and operating supplies and paid for all
hull and liability insurance, landing and parking fees, taxes and
governmental fees and charges. The pilots of the aircraft were
employees of the S corporation. The S corporation also
entered into a management agreement with the aircraft manufacturer to
secure assistance in maintaining the aircraft. The charter
arrangements between the S corporation and the charterers of the
aircraft permitted the charterers to specify the aircraft’s
destination and a desired time to depart for that
destination.
In
holding that the charter payments did not constitute
“rents” for S corporation purposes, the IRS stated
that the first issue to consider is “whether the payments were
in return for the use of, or right to use, property of the
corporation, as opposed to being made for some other reason, such as
compensation for services rendered.” Under the facts involved in
the ruling, the IRS stated that the S corporation retained
“possession, command and control” of the aircraft because
the pilot was an employee of the S corporation and had primary
authority for the safety and actual operation of the aircraft. Based
on this finding, the IRS held that the S corporation was using
the aircraft to “furnish a transportation service” and that
the payments it received under its charters were “compensation
for transportation services rendered and not payments for the use of
the aircraft.”
The
rationale set forth in General Counsel Memorandum 38525
(September 30, 1980) (“GCM 38525”), which the IRS
issued in connection with its issuance of Revenue Ruling 81-197,
provides additional support for treating the Charter Fees as income
from the performance of services. In GCM 38525, the IRS stated that a
payment does not constitute “rent” within the meaning of
Code section 1372(e)(5)(C) if either (i) the payor receives a
service in return for it, rather than the use of corporate property
as such, or (ii) the S corporation also provides
“significant services” to the payor in connection with the
payment. As an example, the IRS indicated that a taxicab fare escapes
classification as rent “because it is a payment for a
transportation service, rather than for the use of property (even
though the corporation’s property, the taxicab, is used in
providing the service).” This same rationale would appear to be
applicable to a ship owner who enters into a time or voyage charter
with respect to a vessel. In each case, the ship owner is bearing
substantially all (since fuel costs typically are paid by the
19 Prior to its replacement in 1982 by
Code section 1375, Code section 1372(e)(5) provided for the
termination of a corporation’s S corporation election if
the corporation derived more than 20 percent of its gross receipts in
any taxable year from “passive investment income.” As with
respect to the current Treasury regulations, the then applicable
Treasury regulations provided that payments for the use of personal
property do not constitute “rents” for purposes of the
S corporation provisions if “significant services”
were rendered in connection with such payment.
See
former Treas. Reg. § 1.1372-4(b)(5)(vi).
11
charterer) of the costs of operating the vessel and the
vessel is being operated by crew members who are employees of the
ship owner. As in the case of the taxpayer in Revenue Ruling 81-197,
at all times during a time or voyage charter of a ship, the ship
owner is in “possession, command and control” of the
vessel.20
Even
more compelling support for treating the Charter Fees as services
income is found in the reliance in GCM 38525 on the holding and
rationale of Revenue Ruling 74-170, supra.
In GCM 38525, the IRS stated that “the issue and factual
context in Revenue Ruling 74-170
are similar “to those in Revenue Ruling 81-197”, and
“the conclusion as to time and voyage charters is extremely
relevant to the instant case in that essentially what is concluded is
that earnings derived from such charters are income generated by the
business of transporting goods and passengers rather than payments
for the use of the vessel.” In this regard, the IRS noted that,
based on the holding in Revenue Ruling 74-170, it had drafted a
proposed revenue ruling holding that fees received by a ship owner
for time and voyage charters does not constitute “rents”
for purposes of the definition of “personal holding company
income” contained in Code section 543(a)(2). While the issuance
of this proposed revenue ruling had been postponed due to the fact
that the issue was being considered in connection with a pending
regulations project, the IRS indicated that “the proposed
revenue ruling would provide extremely persuasive support” for
the position taken in Revenue Ruling 81-197. Thus, the IRS clearly
viewed the rationale of Revenue Rulings 81-197 and 74-170 to be
nearly identical.
The
decision of the Tax Court in Winn
v. Commissioner,
67 T.C. 499 (1976), aff’d.
in part and rev’d. in part,
595 F.2d 1060 (5th
Cir. 1979) and its reference to the Supreme Court decision in
United
States x. Xxxx,
000 X.X. 000 (1894) also support the different tax characterizations
of fees derived from time and voyage charters of ships and fees
derived from bareboat charters of ships. In Xxxx,
the Tax Court held that amounts received by an S corporation
from its bareboat charters of barges constituted “rents”
for S corporation eligibility purposes because the
S corporation did not, under the particular facts involved in
that case, provide “significant services” to the charterer
in connection with its bareboat charters. However, in rejecting the
S corporation’s contention that bareboat charter income
cannot constitute “rent,” the Tax Court relied upon the
Supreme Court’s decision in the Xxxx
case. In that decision, the Supreme Court emphasized the distinction
between bareboat charters of ships and “contracts of
affreightment” where, as with respect to time and voyage
charters, the ship owner agrees to transport goods for hire and
retains the “possession and control” of the ship. In this
regard, the Supreme Court stated that the latter contracts were
“contract[s] for a special service to be rendered by the owner
of the vessel.” The Supreme Court’s recognition that
contracts of affreightment are service contracts which do not involve
“rents” clearly supports the conclusion that the Charter
Fees derived by the Subsidiaries from such “service
contracts” should not constitute “rents” for purposes
of the PFIC rules.
20 In essence, a time charter is a
series of voyage charters taking place at the direction of the
charterer during a specified time period. In GCM 38525, the IRS
stated that the aircraft owner remains “in control” of the
aircraft even though the charterers of the aircraft may decide the
time and destination of flights.
12
Further,
in General Counsel Memorandum 39169 (November 28, 1973)
(“GCM 39169”), the IRS held that charter fees derived
by an S corporation from the chartering of its aircraft
constituted “payments for transportation services,” and not
“rents,” for purposes of former Code section 1372(e)(5)(C)
even though most of the services provided by the S corporation
in connection with such chartering were actually performed by an
independent third party pursuant to an Aircraft Agency Agreement.
Similarly, in Private Letter Ruling 8916057 (Jan. 25,
1989),21 the
IRS held that income derived by an S corporation from the time
and voyage charters of vessels owned by a limited liability
partnership in which the S corporation was a limited partner did
not constitute “rents” or “passive investment
income” within the meaning of Code section 1362(d)(3). In this
regard, the limited partnership involved in this ruling had entered
into an Operating Management Agreement with a corporation pursuant to
which the corporation, in exchange for a specified fee, acted as the
limited partnership’s agent in connection with the operation and
management of the partnership’s vessels, including performing
the transportation services required by the time and voyage charters
(including hiring the crews), collecting the charter fees, and paying
all of the operational expenses of the vessels (including the
salaries of the crew). In reaching its holding in this private letter
ruling, the IRS stated that the limited partnership “through the
Agent” receives compensation for services rendered and not
“rent” for purposes of the S corporation provisions of
the Code. Relying upon its holding in Revenue Ruling 74-170, the IRS
stated that the limited partnership, not its agent, will enjoy any
“profit and bear any loss from the charter
business.”
5. Code
Sections 543 and 553
Additional
support for not treating the Charter Fees as “rents” within
the meaning of Code section 1297(a) is found in the authority
interpreting the definition of that term for purposes of the personal
holding company provisions of the Code. Code section 543(a)(2)
provides that the term “personal holding company income”
includes “rents.” Treasury regulation
§ 1.543-1(b)(10) defines the term “rents” for
this purpose to mean “compensation (however designated) for the
use, or right to use, property of the corporation
. . .” including “charter
fees.”
As
with respect to the other statutory provisions discussed above, the
courts and the IRS have held that amounts received under leasing
arrangements do not constitute “rents” for purposes of Code
section 543(a)(2) where the owner of the leased property also
provides significant services to the lessee.22
21 While the Subsidiaries may not rely
upon a private letter ruling or a Technical Advice Memorandum
received by another taxpayer, such a pronouncement by the National
Office of the IRS indicates the position of the IRS at the time of
the ruling on the technical issue involved therein.
22 See,
e.g.,
Xxxxxxx
Corporation v. Commissioner,
25 T.C. 55 (1955), aff’d.
per curiam,
240 F.2d 164 (2d Cir. 1957) (holding that income derived from farms
operated and managed by a corporation through a supervising agent who
engaged farmers to operate the properties under a crop-sharing
arrangement was not “rent” for personal holding company
purposes)
Footnote
continued on next page.
13
More
relevant to the proper tax characterization of the Charter Fees is
the IRS holding in Technical Advice Memorandum 7202140920A
(February 14, 1972) that charter fees received by a ship owner
from time and voyage charters of tankers did not constitute
“rents” for purposes of Code section 543(a)(2) because the
IRS regarded the charters as contracts for transportation services.
In reaching this holding, the IRS relied, in part, on the
distinctions between bareboat charters and time and voyage charters
contained in the treatise by Xxxxxxx and Black entitled The
Law of Admiralty.
With regard to time and voyage charters, the IRS concluded that
“the legal attributes of a voyage charter place the taxpayer in
the position of owner, possessor and user of the vessel, but the
economics of a voyage charter make it clear that this is a
straightforward business operation, with the risks of profit or loss
which normally attend a business operation.”
Based
on the similarity of the facts between those set forth in this
Technical Advice Memorandum and those relating to the time charters
entered into by the Subsidiaries relating to the Vessels, we believe
that the rationale adopted by the IRS in the Technical Advice
Memorandum should be applicable in determining whether the Charter
Fees constitute “rents” for purposes of both Code sections
954(c) and 1297(a). Support for this view is found in the fact that
the definition of “foreign personal holding company income”
for purposes of Code section 954(c) should be interpreted in the same
manner as the term “personal holding company income” which
is contained in Code section 543. Thus, the applicable Treasury
regulations indicate that the term “rent” has the same
definition for purposes of the “foreign personal holding
company” provisions of Code section 553 as it does for Code
section 543.23 Further,
prior to the 1986 Act, the definition of “foreign personal
holding company income” contained in Code section 954(c)
specifically referred to the definition of that term in Code section
553.24 While
this specific cross-reference to Code section 553 was eliminated by
the 1986 Act when Code section 954(c) was amended to include several
additional types of passive income (such as foreign currency gains
and income equivalent to interest) in the definition of “foreign
personal holding company income” for subpart F purposes,
there is no indication in the legislative history of the 1986 Act
that this statutory amendment was intended to change the meaning of
the term “rents” for
Footnote continued from previous page.
and Revenue Ruling 67-423, 1967-2 C.B. 221 (holding that
payments received by a corporation from its lease of farmland under a
crop-sharing arrangement did not constitute “rents” for
personal holding company purposes where the corporation materially
participated in the management of the farm production).
23
See Treas. Reg. § 1.553-1
24 Code Section 553 was repealed as
part of the American Jobs Creation Act of 2004. P.L. 108-357,
§ 413 (2004)./DIV>
14
purposes
of Code section 553.25
6. Code
Section 512(b)(3)
The
tax treatment of the Charter Fees as income derived by the
Subsidiaries from their performance of services, rather than rents,
is also supported by the authority under Code section 512(b)(3). This
statutory provision provides that, subject to certain limited
exceptions not applicable to the chartering of the Vessels, income
constituting “rents from real property” does not constitute
“unrelated business income” that could be taxable to a
tax-exempt organization pursuant to Code section 511. The Treasury
regulations defining the term “rents from real property”
for this purpose provide that such term does not include payments for
the use or occupancy of rooms and other space where (i) services
are rendered primarily for the convenience of the occupant, and
(ii) the services are not usually or customarily rendered in
connection with the rental of rooms or other space for occupancy
only.26 These
Treasury regulations indicate that amounts received by an owner of
leased property may not be treated as “rents” for relevant
federal income tax purposes where the owner provides services to the
lessee in addition to permitting the lessee to use the leased
property.
7. Other
Statutory Provisions Defining the Term “Rent”
In
reaching its holding in Revenue Ruling 81-197 that the aircraft
charter fees derived by the taxpayer involved in that ruling did not
constitute “rents” for S corporation purposes, the IRS
relied upon its prior holdings in three Revenue Rulings concerning
the applicability of the excise tax imposed by Code section 4261 on
amounts paid within the United States for “taxable
transportation” services. In Revenue Ruling 60-311, 1960-2 C.B.
341, the IRS held that certain helicopter rental companies are
considered to be furnishing a “transportation service”
pursuant to service contracts taxable under Code section 4261 where
they enter into contracts, designated as leases, whereby they
(1) lease helicopters with pilots to an oil company for use in
transporting the company’s personnel and equipment,
(2) retain possession, command and control of the helicopters,
and (3) perform all services in connection with the operation of
the helicopters. A similar conclusion was reached in Revenue Ruling
76-394, 1976-2 C.B. 355, and Revenue Ruling 76-431, 1976-2 C.B. 328.
In GCM 38525, the IRS analyzed the rationale of Revenue Ruling
60-311 in distinguishing between a lease and a service contract for
purposes of Code section 4261 and concluded that “no
significance” should be given to the use of the term
“lease” in that Revenue Ruling in determining whether a
particular transaction is a service contract or a lease for such
purposes.
Further,
the IRS has ruled that income derived from a lease of property may
properly be treated as income from the performance of services,
rather than rents, for purposes of
25
See generally, H. Rep. No. 99-426,
99th Cong., 1st Sess. 389-401 (1986);
S. Rep. No. 99-313, 99th Cong., 2nd Sess.
361-370 (1986).
26 Treas. Reg.
§ 1.512(b)-1(c)(5).
15
Code
section 165(g)(3)(B). Thus, in Revenue Ruling 88-65, 1988-2 C.B. 32,
the IRS held that amounts received by a corporation with respect to
the leasing of automobiles and trucks do not constitute
“rents” within the meaning of Code section 165(g)(3)(B)
(which statutory provision relates to the definition of an
“affiliated” corporation for purposes of the rules
concerning worthless securities) where the corporation performs
significant services in connection with such leasing
activities.27
C. Tax
Characterization of the Charter Fees
Based
upon the facts set forth in Section II above and the authorities
discussed in subsection B above, we believe that the Charter
Fees should be characterized as services income, rather than
“rents,” for purposes of determining whether any member of
the Eagle Group is a PFIC. Although there is no authority directly
holding that fees received by a ship owner from time charters or
voyage charters of a vessel do not constitute “passive
income” for purposes of Code section 1297(a), we believe that
the authorities discussed above clearly support the conclusion that
such charter fees should not be characterized as “rents”
for relevant federal income tax purposes if the owner of the property
involved retains the “possession, command and control” of
the property and/or provides “significant services” to the
person using the property. Each Subsidiary is responsible under its
time charters of the Vessels for providing the crew and bearing
substantially all of the costs relating to the operations of the
Vessels and retains the risk of loss with respect to the Vessel.
Therefore, each Subsidiary should be treated as both
(i) retaining the “possession, command and control” of
the Vessels within the meaning of the relevant authorities, and
(ii) providing “significant services” to the
charterers of the Vessels.
Our
view regarding the tax characterization of the Charter Fees is not
affected by the fact that VS, rather than the Subsidiaries, may be
the signatory on the employment contracts with the various members of
the crews that operate the Vessels. Pursuant to the Technical
Management Agreements, each Subsidiary bears the entire cost of the
crew and the operations of the Vessels through its reimbursement
payments to VS. As set forth in the Technical Management Agreement,
each crew member “will be employed” by the Subsidiary and
VS will execute the employment contracts with such members on behalf
of the Subsidiary. As such and as expressly stated in the Technical
Management Agreement, VS is merely acting as the agent for each
Subsidiary in connection with an agency agreement and each employment
contract executed by VS. Therefore, the activities of VS should be
attributed to the Subsidiaries for purposes of determining the tax
characterization of the Charter Fees and the necessary tax
.
27
While noting that the term “rents” as used in Code section
165(g)(3)(B) is not defined or discussed in the Code, the legislative
history of the statutory provision or its predecessor provisions or
the underlying Treasury regulations, the IRS relied upon the
definition of that term in Code section 1244(c)(1)(C) regarding the
definition of “section 1244 stock” and former Code section
1372(e)(5)(C). The IRS further stated that “it is appropriate to
distinguish between active and passive rental income” for
purposes of Code section 165(g)(3)(B).
16
analysis
under Code section 1297(a) should be undertaken as if the
Subsidiaries directly engaged in all of the activities engaged in by
VS as described in the Technical Management Agreements.
This
view is supported by a number of the authorities discussed above.
Thus, in Revenue Ruling 74-170, the IRS held that ship owners who
entered into a time charter of its vessels was engaged in the
shipping business and entitled to the benefits of the Code section
883 tax exemption regardless of whether the owner “charters the
vessels directly or through agents.” In this regard, the IRS
stated that “[t]he fact that a charterer acts through an agent
does not change his entitlement to the exclusion, the crucial factor
being retention by the charterer of the risk of the venture.”
The same conclusion is reached by GCM 39169 (where the IRS held
that charter fees derived by an S corporation from the
chartering of its aircraft constituted “payments for
transportation services,” and not “rents,” for
purposes of former Code section 1372(e)(5)(C) even though most of the
services provided by the S corporation in connection with such
chartering were actually performed by an independent third party
pursuant to an Aircraft Agency Agreement) and Private Letter Ruling
8916057 (where the IRS held that income derived by an
S corporation from the time and voyage charters of vessels owned
by a limited liability partnership in which the S corporation
was a limited partner did not constitute “rents” or
“passive investment income” within the meaning of Code
section 1362(d)(3) even though an agent of the partnership conducted
all of the activities relating to the operation and management of the
partnership’s vessels on behalf of the
partnership).
IV. OPINION
In
rendering the opinion set forth below, we have examined the
registration statement and such other documents and materials as we
have deemed relevant.
Based
upon all of the foregoing and our review of the Code, the final,
temporary and proposed Treasury regulations promulgated under the
Code, Revenue Rulings, Revenue Procedures and other published
pronouncements of the IRS, the published opinions of the United
States Tax Court and other United States federal courts, and such
other authorities, as we consider relevant, each as they exist as of
the date hereof, we are of the opinion that Eagle should not be
treated as a “passive foreign investment company” for
United States federal income tax purposes. However, because there is
no authority directly on point, we believe it is possible that the
IRS might, upon an audit of the United States federal income tax
returns filed by Eagle, disagree with this opinion. If the IRS were
to fully litigate the issue involved, we believe that a court should
ultimately agree with our opinion, although there can be no assurance
in this regard. Because our opinion is based upon current law, no
assurance can be given that existing United States federal income tax
laws will not be changed by future legislative or administrative or
judicial interpretation, any of which could affect the opinion
expressed above.
This
opinion is provided to the Underwriters in connection with the
Offering. This opinion may not be quoted or relied upon by any other
person or entity, or for any other purpose, without our prior written
consent.
17
Exhibit
D
Form
of Opinion of the Company’s Special Xxxxxxxx Islands
Counsel
Ladies
and Gentlemen:
We
have acted as your counsel in connection with your purchase (the
“Offering”) of up to [ ] shares of Common Stock, par
value $.01 per share (the “Shares”), of Eagle Bulk Shipping
Inc., a Xxxxxxxx Islands corporation (the “Company”),
pursuant to the Underwriting Agreement dated February 28, 2007 among
you and the Company (the “Underwriting Agreement”). In
connection with the Offering, you have asked us to deliver the
following opinions with respect to the Company and to each of the
Xxxxxxxx Islands subsidiaries of the Company listed on Schedule I
hereto (collectively the “Subsidiaries”) and with respect
to the prospectus of the Company (as may be amended, the
“Prospectus”) and a supplement thereto included in a
registration statement on Form S-3 (file No. 333-139745) (as may be
amended, the “Registration Statement”).
In
rendering this opinion, we have examined and relied on originals or
copies of the following:
| i. |
the
Registration Statement; |
| ii. |
the
Underwriting Agreement; |
| iii. |
any
document incorporated or deemed to be incorporated by reference into
the Registration Statement; |
| iv. |
the
Amended and Restated Articles of Incorporation and Bylaws of the
Company; and |
| v. |
the
limited liability company agreements or the amended and restated
limited liability company agreements, as the case may be, of each of
the Subsidiaries. |
We
have also examined and relied, as to factual matters, upon originals,
or copies certified to our satisfaction, of such records, documents,
certificates of officers of the Company, the Subsidiaries, and of
public officials and other instruments, and made such other
inquiries, as, in our judgment, are necessary or appropriate to
enable us to render the opinion expressed below. As to questions of
fact material to this opinion, we have, with your approval, where
relevant facts were not independently established, relied upon, among
other things, the representations made in the Underwriting Agreement
and certificates of officers of the Company or the
Subsidiaries.
18
For
the purpose of this opinion, we have further assumed:
| i. |
the
power, authority and legal right of the parties to the Underwriting
Agreement (other than the) to enter into and to perform their
respective obligations thereunder and that the Underwriting Agreement
has been duly authorized, executed and delivered by each such
party; |
| ii. |
the
genuineness of all signatures on all documents and the completeness,
and the conformity to original documents, of all copies submitted to
us; |
| iii. |
due
compliance of the Underwriting Agreement with all matters of, and the
validity and enforceability thereof under, all such laws as govern or
relate to them (other than the laws of the Republic of the Xxxxxxxx
Islands as to which we are opining); |
| iv. |
that
you have duly and validly executed and delivered the Underwriting
Agreement and has complied with all legal requirements pertaining to
its status as such status relates to its rights to seek benefits of
and enforce the Underwriting Agreement against the Company;
|
| v. |
that
any required consents, licenses, permits, approvals, exemptions,
qualifications or authorizations of or by, and any required
registrations or filings with, any governmental authority or
regulatory body of any jurisdiction other than the Republic of the
Xxxxxxxx Islands in connection with the transactions contemplated by
the Underwriting Agreement have been duly obtained or
made; |
| vi. |
insofar
as the opinions expressed herein relate to the issuance and delivery
of the Shares, that such issuance and delivery are occurring as of
the date hereof; and |
| vii. |
that
with respect to opinion 21 only, you are not deemed to be resident,
domiciled, or carrying on any commercial activity in the Republic of
the Xxxxxxxx Islands. |
In
rendering this opinion, we advise you that we are not admitted to
practice before the courts of the Republic of the Xxxxxxxx Islands.
However, certain members of this firm participated in the drafting of
The Associations Law of 1990 and The Maritime Act of 1990 of the
Republic of the Xxxxxxxx Islands, and such members have, in the past,
rendered legal opinions on similar subjects. Insofar as Xxxxxxxx
Islands law is involved in the opinions hereinafter expressed, we
have relied upon opinions and advice of Xxxxxxxx Islands counsel
rendered in transactions which we consider to be sufficiently similar
to those contemplated by the Underwriting Agreement as to afford a
satisfactory basis for such opinions, upon our independent
examination of the Xxxxxxxx Islands Associations Law 1990 and the
Xxxxxxxx Islands Maritime Act of 1990, including amendments thereto
effective as of May 9, 2005 as made available to us by the Xxxxxxxx
Islands Maritime & Corporate Administrators, Inc. and
19
upon
our knowledge of the interpretation of analogous laws in the United
States of America. In rendering the opinions set forth below, we have
assumed that the Xxxxxxxx Islands laws and regulations examined by us
have not been the subject of any further amendments and that the
persons who executed the aforementioned certificates of public
officials are duly authorized to act in such capacity on behalf of
the Registrar of Corporations of the Republic of the Xxxxxxxx
Islands.
Based
upon and subject to the foregoing and having regard to legal
considerations we deem relevant, we are of the opinion that, insofar
as the laws of the Republic of the Xxxxxxxx Islands are
concerned:
1. The
Company has been duly incorporated and validly exists as a
corporation in good standing under the laws of the Xxxxxxxx Islands,
with full power and authority to own, lease and operate its
properties and conduct its business as described in the Registration
Statement, the preliminary prospectus relating to the Shares
(including the base prospectus attached thereto and the documents
incorporated by reference therein, the “Pre-Pricing
Prospectus”) in the Prospectus and the Company has the full
power and authority to execute and deliver the Underwriting
Agreement.
2. Each
of the Subsidiaries has been duly formed and validly exists as a
limited liability company, in good standing under the laws of the
Xxxxxxxx Islands, with full power and authority to own, lease and
operate its properties and conduct its business as described in the
Registration Statement, the Pre-Pricing Prospectus, the Prospectus
and the Free Writing Prospectus attached hereto as Annex
A.
3. The
authorized capital stock of the Company conforms as to legal matters
to the description thereof contained in the Registration Statement,
the Pre-Pricing Prospectus and the Prospectus. All of the issued
shares of common stock of the Company, including the Shares, have
been duly authorized and are validly issued, fully paid and
non-assessable and are not subject to any preemptive rights. The
Shares to be delivered on the closing of the Offering by the Company
have been duly authorized and are fully paid and non-assessable. The
Shares conform to the descriptions of the Company’s common stock
contained in the Registration Statement, the Pre-Pricing Prospectus
and the Prospectus.
4. All
of the issued and outstanding limited liability company interests of
each of the Subsidiaries have been duly authorized and are validly
issued, fully paid and non-assessable and are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims, except as described in the Registration
Statement, the Pre-Pricing Prospectus and the
Prospectus.
5. The
Underwriting Agreement has been duly and validly authorized, executed
and delivered by the Company.
6. The
filing of the Registration Statement, the Pre-Pricing Prospectus and
the Prospectus with the U.S. Securities and Exchange Commission has
been duly authorized by and
20
on
behalf of the Company and the Registration Statement has been duly
executed pursuant to such authorization by and on
behalf of the Company.
7. Other
than as set forth or contemplated in the Prospectus and insofar as
matters of the Republic of the Xxxxxxxx Islands are concerned, to our
knowledge, there are no judicial, regulatory or other legal or
governmental proceedings pending to which the Company or any of the
Subsidiaries is a party or of which any property of the Company or
any of the Subsidiaries is the subject which, if determined adversely
to the Company or any of the Subsidiaries, would individually or in
the aggregate have a material adverse effect on the financial
position or results of operations of the Company.
8. The
execution and delivery by the Company, and performance by the Company
of its obligations under, the Underwriting Agreement and the
consummation of the transactions contemplated by the Underwriting
Agreement, the Registration Statement, the Pre-Pricing Prospectus and
the Prospectus will not violate or conflict with any provision of the
Company’s Amended and Restated Articles of Incorporation or
Bylaws, the limited liability company agreements of any of the
Subsidiaries, any indenture, mortgage, deed of trust, bank loan or
credit agreement or other evidence of indebtedness, or any license,
lease, contract or other agreement or instrument to which the Company
or any of the Subsidiaries is a party or by which any of them or any
of their respective properties may be bound or affected, or any rule
or regulation, or, to our knowledge, any order of any court or
governmental agency or body in the Republic of the Xxxxxxxx Islands
having jurisdiction over the Company or any of the
Subsidiaries.
9. No
consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any Xxxxxxxx Islands
court or any judicial, regulatory or other legal or governmental
agency or body is required for the execution and delivery of, and
performance of the Company’s obligations under the Underwriting
Agreement or the consummation of the transactions contemplated by the
Underwriting Agreement, the Registration Statement, the Pre-Pricing
Prospectus and the Prospectus, except such as have been duly obtained
and are in full force and effect.
10. Each
of the Company and its Subsidiaries has such authorizations of, and
has made all filings with and notices to, all governmental or
regulatory authorities and self-regulatory organizations and all
courts and other tribunals as are necessary to own, lease, license
and operate its respective properties and to conduct its business,
except where the failure to have any such authorization or to make
any such filing or notice would not, singly or in the aggregate, have
a material adverse effect; each such authorization is valid and in
full force and effect and each of the Company and its Subsidiaries is
in compliance with all the terms and conditions thereof and with the
rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse
of time or both, would allow, revocation, suspension or termination
of any such authorization or results or, after notice or lapse of
time or both, would result in any other impairment of the rights of
the holder of any such authorization; and such authorizations contain
no restrictions that are burdensome to the Company or any of its
Subsidiaries; except where such failure to be valid and
21
in full force and effect or to be in compliance, the occurrence of any such event or the presence of any such restriction would not, singly or in the aggregate, have a material adverse effect.
11. The
Company has the full right, power and authority to execute and
deliver the Underwriting Agreement and to perform its obligations
thereunder, and all corporate action required to be taken by the
Company for the due and proper authorization, execution and delivery
of the Underwriting Agreement and the consummation of the
transactions contemplated by the Underwriting Agreement as described
in the Registration Statement, the Pre-Pricing Prospectus and the
Prospectus have been duly and validly taken.
12. The
Company and each of the Subsidiaries owns, possesses or has obtained
all licenses, permits, certificates, consents, orders, approvals and
other authorizations from, and has made all declarations and filings
with, all governmental authorities and all courts and other
tribunals, in the Xxxxxxxx Islands, necessary to own or lease, as the
case may be, and to operate its respective properties and to carry on
its respective business as conducted as of the date hereof (other
than such licenses, permits, certificates, consents, orders,
approvals and other authorizations the failure to obtain would not in
the aggregate have a material adverse effect on the Company or the
respective Subsidiary).
13. Neither
the Company nor its Subsidiaries are in violation of their respective
articles of incorporation, bylaws or limited liability company
agreement or other charter documents.
14. The
certificates evidencing the Shares are in due and proper form and the
holders of Shares evidenced by such certificates will not be subject
to any personal liability by reason of holding such
Shares.
15. Each
of the vessels listed on Schedule I hereto is duly and validly
registered as a vessel in the sole ownership of the Subsidiary set
forth next to its name on Schedule I hereto under the laws of the
Republic of the Xxxxxxxx Islands; each vessel owning Subsidiary has
good and marketable title to the vessel set forth next to its name on
Schedule I hereto, free and clear of all liens, claims, charges,
debts or encumbrances and defects of title of record on the Xxxxxxxx
Islands Ships Register, except as described in the Registration
Statement, the Pre-Pricing Prospectus and the Prospectus; and each
such vessel is in good standing with respect to the payment of past
and current taxes, fees and other amounts payable under the laws of
the Republic of the Xxxxxxxx Islands as would affect its registry
with the Xxxxxxxx Islands Ships Register.
16. The
statements contained in the Company’s annual report on Form 10-K
for the period ending December 31, 2006 and incorporated by reference
into the Registration Statement under the captions “Risk
Factors—Company Specific Risk Factors—We cannot assure you
that our board of directors will declare dividends”, “Risk
Factors—Risks Relating to Our Common Stock—We are
incorporated in the Xxxxxxxx Islands, which does not have a
well-developed body of corporate law” and “Exchange
Controls”; the statement contained in the Company’s
registration statement on Form 8-A filed with the U.S. Securities and
Exchange Commission on
22
June
20, 2005 under the heading “Description of Capital Stock”;
the statement contained in the Pre-Pricing Prospectus and the
Prospectus under the heading “Tax Considerations—Xxxxxxxx
Islands Tax Considerations” insofar as such statements
constitute a summary of documents or matters of law, and those
statements in the Registration Statement, and Prospectus that are
descriptions of contracts, agreements or other legal documents or of
legal proceedings, or refer to statements of law or legal
conclusions, are accurate in all material respects.
17. The
agreement of the Company to the choice of law provisions set forth in
Section 13 of the Underwriting Agreement will be recognized by the
courts of the Xxxxxxxx Islands; the Company can xxx and be sued in
its own name under the laws of the Xxxxxxxx Islands; the irrevocable
submission of the Company to the jurisdiction of any court of the
State of New York or the United States District Court for the
Southern District of the State of New York (each a “New
York Court”),
the waiver by the Company of any objection to the venue of a
proceeding in a New York Court, the appointment by the Company of
Xxxxxx & Xxxxxx LLP as their agent for service of process and the
agreement of the Company that the Underwriting Agreement shall be
governed by and construed in accordance with the laws of the State of
New York are legal, valid and binding; service of process effected in
the manner set forth in Section 14 of the Underwriting Agreement will
be effective, insofar as the laws of the Xxxxxxxx Islands are
concerned, to confer valid personal jurisdiction over the
Company.
18. Neither
the Company nor any of its Subsidiaries is required to file tax
returns or is subject to taxation in the Republic of the Xxxxxxxx
Islands. All dividends and other distributions declared and payable
on the shares of Common Stock of the Company and the capital stock of
each of its Subsidiaries may under the current laws and regulations
of the Republic of the Xxxxxxxx Islands be paid in United States
dollars and may be freely transferred out of the Republic of the
Xxxxxxxx Islands, and all such dividends and other distributions are
not subject to withholding or other taxes under the current laws and
regulations of the Republic of the Xxxxxxxx Islands and are otherwise
free and clear of any withholding, stamp, transfer, excise or other
tax, and may be declared and paid without obtaining any consents,
approvals, authorizations, orders, licenses, registrations,
clearances and qualifications of or with any court or governmental
agency or body or any stock exchange authorities, in the Republic of
the Xxxxxxxx Islands.
19. You
will not be deemed to be resident, domiciled, carrying on any
commercial activity in the Republic of the Xxxxxxxx Islands or
subject to any taxation in the Republic of the Xxxxxxxx Islands
solely by reason only of the entry into, performance or enforcement
of the Underwriting Agreement to which it is a party or the
transactions contemplated by the Underwriting Agreement, the
Registration Statement, the Pre-Pricing Prospectus and the
Prospectus. It is not necessary under the laws of the Republic of the
Xxxxxxxx Islands that you be authorized, licensed, qualified or
otherwise entitled to carry on business in the Republic of the
Xxxxxxxx Islands for their execution, delivery, performance or
enforcement of the Underwriting Agreement.
20. No
stamp or other issuance or transfer taxes or duties and no capital
gains, income, withholding or other taxes are payable to the Republic
of the Xxxxxxxx Islands or to any political subdivision or taxing
authority thereof or therein in connection with the sale and
23
delivery
of the Shares by the Company to or for your respective accounts or in
connection with the resale of the Shares by you.
We
also qualify our opinion to the extent that (i) the
enforceability of the rights and remedies provided for in the
Underwriting Agreement (a) may be limited by insolvency,
bankruptcy, reorganization, moratorium, fraudulent transfer,
fraudulent conveyance or other similar laws affecting generally the
enforceability of creditors’ rights from time to time in effect
and (b) is subject to general principles of equity, regardless
of whether such enforceability is considered in a proceeding in
equity or at law, including application of principles of good faith,
fair dealing, commercial reasonableness, materiality,
unconscionability and conflict with public policy and other similar
principles; (ii) while there is nothing in Xxxxxxxx Islands law
which prohibits a Xxxxxxxx Islands corporation from submitting to the
jurisdiction of a forum other than the Republic of the Xxxxxxxx
Islands, the validity and enforceability of the submission to
jurisdiction provisions set forth in the Underwriting Agreement are
not dependent upon Xxxxxxxx Islands law and such provisions may not
be enforceable under the laws of a particular jurisdiction;
(iii) Xxxxxxxx Islands courts are not bound by a foreign
judgment and have the right to review a case on the merits if a
motion is made to the court to the effect that there is no merit to
the case or the foreign court lacked jurisdiction; and
(iv) different results might be obtained under laws other than
those of the State of New York by which the Underwriting Agreement is
expressed to be governed.
This
opinion is limited to matters of law of the Republic of Xxxxxxxx
Islands. We express no opinion with respect to the law of any other
jurisdiction.
Very
truly yours,
24
Schedule
I
LIST
OF XXXXXXXX ISLANDS SUBSIDIARIES AND VESSELS OWNED BY
EACH
XXXXXXXX ISLANDS SUBSIDIARY OF THE COMPANY
|
Subsidiary
|
Vessel
|
|
|
Condor
Shipping LLC |
(ii) Condor
|
|
|
Hawk
Shipping LLC |
Hawk
I |
|
|
Falcon
Shipping LLC |
Falcon
|
|
|
Harrier
Shipping LLC |
Harrier
|
|
|
Osprey
Shipping LLC |
Osprey
I |
|
|
Kite
Shipping LLC |
Kite
|
|
|
Sparrow
Shipping LLC |
Sparrow-
|
|
|
Griffon
Shipping LLC |
Griffon
|
|
|
Shikra
Shipping LLC |
Shikra
|
|
|
Peregrine
Shipping LLC |
Peregrine
|
|
|
Cardinal
Shipping LLC |
Cardinal
|
|
|
Heron
Shipping LLC |
Xxxxx
|
|
|
Xxxxxx
Shipping LLC |
Xxxxxx
|
|
|
Xxxxxx
Shipping LLC |
Xxxxxx
|
|
|
Kestrel
Shipping LLC |
Kestrel
I |
|
|
Tern
Shipping LLC |
Tern
|
|
|
Kittiwake
Shipping LLC |
Kittiwake
|
|
|
Oriole
Shipping LLC |
-
|
|
|
Xxxxx
Shipping LLC |
-
|
|
|
Golden
Eagle Shipping LLC |
-
|
|
|
Imperial
Eagle Shipping LLC |
-
|
|
|
Crested
Eagle Shipping LLC |
|
|
|
Crowned
Eagle Shipping LLC |
|
|
|
Shrike
Shipping LLC |
Shrike
|
|
|
Skua
Shipping LLC |
Skua
|
Annex
A
None
Exhibit
E
Form
of Opinion of the Company’s Special Xxxxxxxx Islands
Counsel
We
have acted as special Xxxxxxxx Islands counsel to Eagle Bulk Shipping
Inc., a non-resident domestic corporation organized and existing
under the laws of the Republic of the Xxxxxxxx Islands (the
“RMI”) (the “Company”), in connection with the
purchase by you of up to [_______] shares (the “Shares”),
of Common Stock, par value US$0.01 per share (the “Common
Stock”), pursuant to the Underwriting Agreement (the
“Underwriting Agreement”), dated January 10, 2007, among
the Company and you. This opinion is furnished to you pursuant to
Section 7(e) of the Underwriting Agreement. We are licensed to
practice law in the RMI and are members in good standing of the Bar
of the RMI. We have sufficient knowledge of the laws of the RMI and
are therefore qualified to give the opinions set forth herein. It is
our understanding that the Company will be offering the Shares for
sale and we are acting as special counsel to the Company for the
purpose of rendering this opinion to you regarding the above
mentioned laws.
We
express no opinion as to matters governed by, or the effect or
applicability of any laws of any jurisdiction other than the laws of
the RMI which are in effect as of the date hereof. This opinion
speaks as of the date hereof, and it should be recognized that
changes may occur after the date of this letter which may effect the
opinions set forth herein. We assume no obligation to advise the
parties, their counsel, or any other party seeking to rely upon this
opinion, of any such changes, whether or not material, or of any
other matter which may hereinafter be brought to my
attention.
This
opinion is based on our review of the RMI Associations Law of 1990,
the RMI Maritime Act of 1990, and the legal opinion, dated the date
hereof, of Xxxxxx & Xxxxxx LLP, RMI counsel to the Company, a
copy of which is attached to this opinion (the “SK Opinion
Letter”), and is furnished solely for your benefit and may not
be used for any other purpose or relied upon by, nor copies
disseminated to any person without my prior written consent in each
case.
Based
on the above we are of the opinion that there have not been any
amendments to the RMI Associations Law of 1990 or the RMI Maritime
Act of 1990 during 2006, and through the date of this letter, that
substantively affect the legal opinions of Xxxxxx & Xxxxxx
LLP set forth in the Opinion Letter.
Form
of Officers’ Certificate
Pursuant
to Section 7(n) of the Underwriting Agreement (the
“Underwriting Agreement”), dated February 28, 2007, among
Eagle Bulk Shipping Inc., a Xxxxxxxx Islands corporation (the
“Company”) and UBS Securities LLC (the
“Underwriter”), each of the undersigned, Sophocles X.
Xxxxxxx, the duly appointed Chief Executive Officer of the Company,
and Xxxx X. Xxxxxxxx, the duly appointed Chief Financial Officer of
the Company, does hereby certify that:
1. He
has reviewed the Registration Statement and the
Prospectus.
2. The
representations and warranties of the Company as set forth in the
Underwriting Agreement are true and correct as of the date hereof and
as if made on the date hereof.
3. The
Company has performed all of its obligations under the Underwriting
Agreement as are to be performed at or before the date
hereof.
4. The
conditions set forth in paragraphs (j), (k) and (l) of Section 7 of
the Underwriting Agreement have been met.
5. The
financial statements and other financial information included in the
Registration Statement or the Prospectus fairly present the financial
condition, results of operations and cash flows of the Company and
the Subsidiaries as of, and for, the periods therein
presented.
Capitalized
terms used but not otherwise defined herein shall have the meanings
set forth in the Underwriting Agreement.
IN
WITNESS WHEREOF, the undersigned have hereunto set their hands on
this March 6, 2007.
| |
|
|
| By: | ||
|
|
||
|
Name: Sophocles
X. Xxxxxxx
Title: Chief
Executive Officer |
||
| |
|
|
| By: | ||
|
|
||
|
Name: Xxxx
X. Xxxxxxxx
Title: Chief
Financial Officer |
||
