SHARE LENDING AGREEMENT Dated as of November 19, 2009 Between DRYSHIPS INC. ("Lender"), and DEUTSCHE BANK AG, LONDON BRANCH ("Borrower")
Exhibit
4
Dated as
of November 19, 2009
Between
DRYSHIPS
INC. ("Lender"),
and
DEUTSCHE
BANK AG, LONDON BRANCH ("Borrower")
This
Agreement sets forth the terms and conditions under which Borrower may, from
time to time, borrow from Lender shares of Common Stock.
DEUTSCHE
BANK AG, LONDON BRANCH IS NOT REGISTERED AS A BROKER DEALER UNDER THE U.S.
SECURITIES EXCHANGE ACT OF 1934. DEUTSCHE BANK SECURITIES
INC. ("DBSI") HAS ACTED SOLELY AS AGENT IN CONNECTION WITH THE
TRANSACTION AND HAS NO OBLIGATION, BY WAY OF ISSUANCE, ENDORSEMENT, GUARANTEE OR
OTHERWISE WITH RESPECT TO THE PERFORMANCE OF EITHER PARTY UNDER THE TRANSACTION.
AS SUCH, ALL DELIVERY OF FUNDS, ASSETS, NOTICES, DEMANDS AND COMMUNICATIONS OF
ANY KIND RELATING TO THIS TRANSACTION BETWEEN DEUTSCHE BANK AG, LONDON BRANCH,
AND COUNTERPARTY SHALL BE TRANSMITTED EXCLUSIVELY THROUGH DEUTSCHE BANK
SECURITIES INC. DEUTSCHE BANK AG, LONDON BRANCH IS NOT A MEMBER OF THE
SECURITIES INVESTOR PROTECTION CORPORATION (SIPC).
The
parties hereto agree as follows:
Section
1. Certain
Definitions. The following capitalized terms shall have the
following meanings:
"Borrowing Termination Date"
means the earlier of (i) the maturity date of the Convertible Notes, and (ii)
the date on which the Borrower, or an affiliate of the Borrower, completes its
offering of all of the Supplemental Loaned Shares pursuant to a registration
statement or statements, and the purchase by the Borrower (or such affiliate) of
an equal number of shares of Common Stock on the open market.
"Business Day" means a day on
which regular trading occurs in the principal trading market for the Common
Stock.
"Cash" means any coin or
currency of the United States as at the time shall be legal tender for payment
of public and private debts.
1
"Clearing Organization" means
The Depository Trust Company, or, if agreed to by Borrower and Lender, such
other Securities Intermediary at which Borrower and Lender maintain accounts, or
the Issuer's transfer agent for the Common Stock.
"Closing Price" on any day
means, with respect to the Common Stock (i) if the Common Stock is listed on a
U.S. securities exchange registered under the Exchange Act or is included in the
OTC Bulletin Board Service (operated by the Financial Industry Regulatory
Authority, Inc.), the last reported sale price, regular way, in the principal
trading session on such day on such market on which the Common Stock is then
listed or is admitted to trading (or, if the day of determination is not a
Business Day, the last preceding Business Day) and (ii) if the Common Stock is
not so listed or admitted to trading or if the last reported sale price is not
obtainable (even if the Common Stock is listed or admitted to trading on such
market ), the average of the bid prices for the Common Stock obtained from as
many dealers in the Common Stock (which may include Borrower or its affiliates),
but not exceeding three, as shall furnish bid prices available to
Lender.
"Common Stock" means shares of
common stock, par value $0.01, of Lender; provided that, if the Common
Stock shall be exchanged or converted into any other security, assets or other
consideration (including cash) as the result of any merger, consolidation, other
business combination, reorganization, reclassification, recapitalization or
other corporate action (including, without limitation, a reorganization in
bankruptcy), then, effective upon such exchange or conversion, the amount of
such other security, assets or other consideration received in exchange for one
share of Common Stock (without regard to any substitutions of cash in lieu of
fractional securities) shall be deemed to become one share of Common
Stock. For purposes of the foregoing, where a share of Common Stock
may be converted or exchanged into more than a single type of consideration
based upon any form of stockholder election, such consideration will be deemed
to be the weighted average of the types and amounts of consideration received by
the holders of Lender's Common Stock that affirmatively make such an
election.
"Convertible Notes" means the
$400,000,000 aggregate principal amount of 5.00% Convertible Senior Notes due
2014 issued by the Lender, or up to $460,000,000 aggregate principal amount to
the extent the option to purchase additional Convertible Notes is exercised in
full as set forth in the underwriting agreement relating to the underwritten
offering of the Convertible Notes.
"Cutoff Time" shall mean 10:00
a.m. in the jurisdiction of the Clearing Organization, or such other time on a
Business Day by which a transfer of Loaned Shares must be made by Borrower or
Lender to the other, as shall be determined in accordance with market
practice.
"Exchange Act" means the
Securities Exchange Act of 1934, as amended.
"Facility Termination Date" has
the meaning assigned to such term in Section 4(b).
"Lender's Designated Account"
means the securities account of the Lender maintained on the books of Deutsche
Bank Securities Inc., as securities intermediary, and designated "DryShips Inc.
(account number 145-28282)," established simultaneously with the execution of
this Agreement.
2
"Loan Availability Period"
means the period beginning with the date of issuance of the Convertible Notes
and ending on the earliest of (i) the date as of which Lender has notified
Borrower in writing of its intention to terminate this Agreement at any time
after the entire principal amount of Convertible Notes ceases to be outstanding,
whether as a result of conversion, redemption, repurchase, cancellation or
otherwise (provided,
that such notification shall be mandatory in the event that the entire principal
amount of Convertible Notes ceases to be outstanding), and (ii) the date on
which this Agreement shall terminate in accordance with the terms of this
Agreement.
"Loaned Shares" means shares of
Common Stock transferred in a Loan hereunder until such Common Stock (or
identical Common Stock) is transferred back to Lender hereunder. If,
as the result of a stock dividend, stock split or reverse stock split, the
number of outstanding shares of Common Stock is increased or decreased, then the
number of outstanding Loaned Shares shall be proportionately increased or
decreased, as the case may be. If any new or different security or
securities, assets or other consideration shall be exchanged for the outstanding
shares of Common Stock as described in the definition thereof, such new or
different security or securities, assets or other consideration shall, effective
upon such exchange, be deemed to become a Loaned Share in substitution for the
former Loaned Share for which such exchange is made and in the same proportions
as described in the definition of "Common Stock." For
purposes of return of Loaned Shares by Borrower or purchase or sale of
securities pursuant to Section 4 or 10, Borrower may return securities of the
same issuer, class and quantity as the Loaned Shares as adjusted pursuant to the
two preceding sentences.
"Maximum Number of Shares"
means 26,100,000 shares of Common Stock, subject to the following
adjustments:
(a) If,
as the result of a stock dividend, stock split or reverse stock split, the
number of outstanding shares of Common Stock is increased or decreased, the
Maximum Number of Shares shall, effective as of the payment or delivery date of
any such event, be proportionally increased or decreased, as the case may
be.
(b) Upon
the termination of any Loan pursuant to Section 4(a), the Maximum Number of
Shares shall be reduced by the number of Loaned Shares under such Loan
surrendered by Borrower to Lender; provided that if the number
of Loaned Shares offered and sold by Borrower in any registered public offering
under the Securities Act is less than the number of shares of Common Stock
constituting the Loan made in connection with such registered public offering
(such difference, the "Unsold
Amount"), any termination of a Loan in an amount equal to the Unsold
Amount prior to the Borrowing Termination Date shall not so reduce the Maximum
Number of Shares.
"Securities Act" means the
Securities Act of 1933, as amended.
"Securities Intermediary" means
a "securities
intermediary" as defined by Section 8-102(a)(14) of the UCC.
3
"Supplemental Loaned Shares"
means the number of Loaned Shares that Borrower, or an affiliate of Borrower,
determines in its sole discretion to offer in accordance with Section 14 on a
delayed basis.
"UCC" means the Uniform
Commercial Code as in effect in the State of New York on the date hereof and as
it may be amended from time to time.
Section
2. Loans Of Shares;
Transfers of Loaned Shares
(a) Subject
to the terms and conditions of this Agreement, Lender hereby agrees to make
available for borrowing by Borrower on or prior to the Borrowing Termination
Date shares of Common Stock up to, in the aggregate, the Maximum Number of
Shares.
(b) Subject
to the terms and conditions of this Agreement, Borrower may, from time to time,
by written notice to Lender on any date on or prior to the Borrowing Termination
Date (a "Borrowing
Notice"), initiate one or more transactions in which Lender will lend
Loaned Shares to Borrower through the issuance by Lender of such Loaned Shares
to Borrower upon the terms, and subject to the conditions, set forth in this
Agreement (each such issuance and loan, a "Loan"). To the best
of the Borrower's knowledge at the time any Loan is initiated, such Loan shall
be used for purposes reasonably designed to facilitate hedging transactions
relating to the purchase or ownership of the Convertible Notes. Such
Loan shall be confirmed through the book-entry settlement system of the Clearing
Organization. The records maintained by the Clearing Organization
shall constitute conclusive evidence with respect to the Loan, including the
number of shares of Common Stock that are the subject of such Loan to which the
applicable records relate.
(c) Lender
shall transfer Loaned Shares to Borrower on or before the Cutoff Time on the
date specified in the Borrowing Notice for the commencement of any Loan, which
date shall not be earlier than the second Business Day following the receipt by
Lender of the Borrowing Notice. Transfer of the Loaned Shares to
Borrower shall be made in the manner and to the account set forth under Section
11 below.
(d) Notwithstanding
anything to the contrary in this Agreement, Borrower or its affiliates shall not
transfer or dispose of any Loaned Shares unless such Loaned Shares are sold by
Borrower or such affiliate pursuant to a registration statement that has been
declared effective under the Securities Act. Nothing herein shall
prohibit transfers among affiliates of the Borrower that are not pursuant to an
effective registration statement and that are exempt from registration, provided that transfers by
such transferee subsidiaries shall remain subject to the provisions of the
foregoing sentence. Borrower may not initiate any Loan hereunder
unless Lender has a registration statement that has been declared effective
under the Securities Act with respect to the Loaned Shares.
Section
3. Loan
Fee. Borrower agrees to pay Lender a single loan fee per Loan
(a "Loan Fee") equal to
$0.01 per Loaned Share included in such Loan. The Loan Fee shall be paid by
Borrower on or before the time of transfer of the Loaned Shares pursuant to
Section 2(c) on a delivery-versus-payment basis through the facilities of the
Clearing Organization.
4
Section
4. Loan
Terminations.
(a) Borrower
may terminate all or any portion of a Loan on any Business Day by giving written
notice thereof to Lender and transferring the corresponding number of Loaned
Shares under such Loan to Lender, without any consideration being payable in
respect thereof by Lender to Borrower. Any such loan termination
shall be effective upon delivery of the Loaned Shares in accordance with the
terms hereof.
(b) Subject
to Section 10 below, all outstanding Loans, if any, on the last day of the Loan
Availability Period shall terminate on the date this Agreement terminates
pursuant to Section 13 (the "Facility Termination Date")
and all Loaned Shares then outstanding, if any, shall be delivered by Borrower
to Lender, without any consideration being payable in respect thereof by Lender
to Borrower, no later than the fifth Business Day following the Facility
Termination Date.
(c) Subject
to Section 10 below, if a Loan is terminated upon the occurrence of a Default as
set forth in Section 9, the Loaned Shares shall be delivered by Borrower to
Lender, without any consideration being payable in respect thereof by Lender to
Borrower, no later than the third Business Day following the termination date of
such Loan, as provided in Section 9.
(d) If
at any time the number of Loaned Shares outstanding under this Agreement exceeds
the Maximum Number of Shares, then the outstanding Loans shall immediately
terminate to the extent of such excess and, subject to Section 10 below, such
excess number of Loaned Shares shall be delivered by Borrower to Lender, without
any consideration being payable in respect thereof by Lender to Borrower, no
later than the fifth Business Day following the first date as of which such
excess exists.
Section
5. Distributions.
(a) If
at any time when there are Loaned Shares outstanding under this Agreement,
Lender pays a cash dividend or makes a cash distribution in respect of all its
outstanding Common Stock, Borrower shall pay to Lender (regardless of whether
Borrower is a holder of any or all of the outstanding Loaned Shares, in
accordance with the terms of this Agreement), within three Business Days after
the payment of such dividend or distribution, an amount in cash equal to the
product of (i) the amount per share of such dividend or distribution and (ii)
the number of Loaned Shares outstanding at such time; provided, that if Borrower
returns any Loaned Shares to Lender following a record date for such a dividend
or distribution on such Loaned Shares, but prior to the payment of such dividend
or distribution on such Loaned Shares, Borrower shall nonetheless pay to Lender
the amount of such dividend or distribution within three Business Days after the
payment of such dividend or distribution.
(b) If
at any time when there are Loaned Shares outstanding under this Agreement,
Lender makes a distribution in respect of its outstanding Common Stock (other
than a distribution upon liquidation or a reorganization in bankruptcy) in
property or securities, including any options, warrants, rights or privileges in
respect of securities (other than a distribution of Common Stock, but including
any options, warrants, rights or privileges exercisable for, convertible into or
exchangeable for Common Stock) (a "Non-Cash Distribution"),
Borrower shall deliver to Lender in kind (regardless of whether Borrower is a
holder of any or all of the outstanding Loaned Shares, in accordance with this
Agreement) within twenty Business Days after the date of such Non-Cash
Distribution, the property or securities so distributed in an amount (the "Delivery Amount") equal to the
product of (i) the amount per share of Common Stock of such Non-Cash
Distribution and (ii) the number of Loaned Shares outstanding at such time;
provided that if
Borrower returns any Loaned Shares to Lender following a record date for such a
Non-Cash Distribution on such Loaned Shares, but prior to the settlement of such
Non-Cash Distribution on such Loaned Shares, Borrower shall nonetheless deliver
to Lender the Delivery Amount in respect of such Non-Cash Distribution within
twenty Business Days after the settlement date of distribution.
5
Section
6. Rights in
Respect of Loaned Shares.
Subject
to the terms of this Agreement, including Borrower's obligation to return the
Loaned Shares in accordance with the terms of this Agreement, and except as
otherwise agreed by Borrower and Lender or Borrower and any subsequent
transferee of Loaned Shares, insofar as such person is the record owner of any
such Loaned Shares, such person shall have all of the incidents of ownership in
respect of any such Loaned Shares, including the right to transfer the Loaned
Shares to others. Borrower agrees that neither it nor any affiliate
of it that is the record owner of any Loaned Shares that are (i) initially
transferred hereunder and (ii) held for delivery to Lender or held by Borrower
or its affiliates for the purpose of facilitating the hedging of an investment
in Convertible Notes by holders thereof (other than any such securities that are
held in the accounts of, and beneficially owned by, any unaffiliated third
party, where such third party has the power to, and has, directed the vote of
such securities) shall vote such Loaned Shares on any matter submitted to a vote
of Lender's stockholders; provided that, if by failing
to vote such Loaned Shares there shall not be a quorum at any meeting of
stockholders relating to such a matter, Borrower shall vote its shares
proportionately to the votes of all other stockholders voting on such matter at
such meeting.
Section
7. Representations
and Warranties.
(a) Each
of Borrower and Lender represent and warrant to the other that:
(i) it
has full power to execute and deliver this Agreement, to enter into the Loans
contemplated hereby and to perform its obligations hereunder;
(ii) it
has taken all necessary action to authorize such execution, delivery and
performance;
(iii) this
Agreement constitutes its legal, valid and binding obligation enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except that
rights to indemnification and contribution hereunder may be limited by federal
or state securities laws or public policy relating thereto; and
(iv) the
execution, delivery and performance of this Agreement does not and will not
violate, contravene, or constitute a default under, (A) its articles of
incorporation, bylaws or other governing documents, (B) any laws, rules or
regulations of any governmental authority to which it is subject, (C) any
contracts, agreements or instrument to which it is a party or (D) any judgment,
injunction, order or decree by which it is bound.
6
(b) Lender
represents and warrants to Borrower, as of the date hereof and as of any date
Loaned Shares are transferred to Borrower in respect of any Loan hereunder, that
such Loaned Shares and all other outstanding shares of Common Stock of the
Company have been duly authorized and, upon the issuance (where necessary) and
delivery of such Loaned Shares to Borrower in accordance with the terms and
conditions hereof, and subject to the contemporaneous or prior receipt of the
applicable Loan Fee by Lender, will be duly authorized, validly issued, fully
paid and nonassessible shares of Common Stock; and the stockholders of Lender
have no preemptive rights with respect to such Loaned Shares.
(c) Lender
represents and warrants to Borrower, as of the date hereof, and as of any date
Loaned Shares are transferred to Borrower in respect of any Loan hereunder, that
the outstanding shares of Common Stock are listed on The NASDAQ Global Select
Market ("NASDAQ") and
such Loaned Shares have been approved for listing on NASDAQ, subject to official
notice of issuance.
(d) Lender
represents and warrants to Borrower, as of any date Loaned Shares are
transferred to Borrower in respect of any Loan hereunder, Lender is not
"insolvent" (as such term is defined under Section 101(32) of Title 11 of the
United States Code (the "Bankruptcy
Code").
(e) Lender
represents and warrants to Borrower, as of any date Loaned Shares are
transferred to Borrower in respect of any Loan hereunder, Borrower would be able
to purchase the Maximum Number of Shares at a price equal to the Loan Fee in
compliance with the corporate law of Lender's jurisdiction of
incorporation.
(f) Lender
represents and warrants to Borrower, as of any date Loaned Shares are
transferred to Borrower in respect of any Loan hereunder, subject to notice
otherwise as set forth in the next sentence, any distributions paid on such
Loaned Shares during the term of the Agreement, to the extent such distributions
constitute dividends for U.S. federal income tax purposes, will qualify as
foreign source dividends for U.S. federal income tax purposes within the meaning
of Section 862 of the Internal Revenue Code. If, at any time during a
period in which this Agreement is in effect, such dividends would not qualify,
or there is a substantial likelihood that such dividends will not qualify, as
foreign source dividends (whether as a result of a change of law, a change of
facts or otherwise), Lender shall notify Borrower of such change or potential
change in tax treatment as soon as practicable.
(g) Lender
acknowledges that Borrower intends to rely upon the representation and warranty
in Section 7(f) in determining the extent, if any, to which Borrower is
obligated to make any deduction or withholding of present or future taxes,
levies, imposts, duties, charges, assessments or fees of any nature (including
interest, penalties and additions thereto) that are imposed by any government or
other taxing authority ("Taxes") with respect to any
payment by Borrower under this Agreement. On the basis of such
reliance and assuming no notice is made pursuant to the second sentence of
Section 7(f), Borrower will make each payment described in Sections 5(a) and
5(b) without withholding or deduction for or on account of any
Taxes. The previous sentence shall not apply if, at any time during a
period in which this Agreement is in effect, Borrower concludes in its
reasonable judgment that such withholding or deduction is necessary or
appropriate to protect Borrower from potential withholding tax
liability. In that case, Borrower shall notify Lender of its intent
to make such withholding or deduction as soon as
practicable. Borrower shall have no obligation to pay any additional
amounts in respect of such withholding or deduction to Lender.
7
(h) The
representations and warranties of Borrower and Lender under this Section 7 shall
remain in full force and effect at all times during the term of this Agreement
and shall survive the termination for any reason of this Agreement.
Section
8. Covenants.
(a) The
parties hereto acknowledge that Borrower has informed Lender that Borrower is a
"financial institution" within the meaning of Section 101(22) of the Bankruptcy
Code. The parties hereto further acknowledge and agree that (i) each Loan
hereunder is intended to be a "securities contract," as such
term is defined in Section 741(7) of the Bankruptcy Code; and (ii) each and
every transfer of funds, securities and other property under this Agreement is
intended to be a "settlement payment" or a "margin payment," as such terms are used in
Sections 362(b)(6) and 546(e) of the Bankruptcy Code.
(b) Lender
shall, no later than five Business Days prior to any repurchase of Common Stock,
give Borrower a written notice of such repurchase (a "Repurchase Notice") if,
following such repurchase, the Outstanding Borrow Percentage as determined on
such day after giving effect to such repurchase would be greater than 9% or,
after the first such Repurchase Notice, greater by 0.5% than the Outstanding
Borrow Percentage included in the immediately preceding Repurchase Notice; provided that, in the event
that the amount of Loaned Shares provided pursuant to the initial Borrowing
Notice causes the Outstanding Borrow Percentage to exceed 8%, then the first
Repurchase Notice shall be deemed to have been given in connection with such
initial Borrowing Notice. The "Outstanding Borrow Percentage"
as of any day is the fraction (A) the numerator of which is the number of Loaned
Shares outstanding on such day and (B) the denominator of which is the number of
shares of Common Stock outstanding on such day, including such Loaned
Shares.
(c) Borrower
covenants and agrees with Lender that it will not transfer or dispose of any
Loaned Shares initially transferred to Borrower by Lender as a Loan hereunder of
which it is the record owner except pursuant to a registration statement that
has been declared effective under the Securities Act; provided that Borrower may
transfer any such Loaned Shares to any of its affiliates without a registration
statement so long as such affiliate transferee does not transfer or dispose of
such Loaned Shares to any non-affiliated transferee except pursuant to a
registration statement that has been declared effective under the Securities
Act.
(d) Borrower
covenants and agrees with Lender that, insofar as Borrower or any of its
affiliates is the record owner of any Loaned Shares, such Loaned Shares shall be
used for the purpose of directly or indirectly facilitating the sale of the
Convertible Notes and hedging activities (including short sales of such Loaned
Shares) (all such facilitation and hedging activities, the "Hedging Activities") relating
to the Convertible Notes by the holders thereof.
(e) Lender
covenants and agrees with Borrower that it shall have no interest whatsoever in
any of the proceeds that Borrower or its affiliates may receive in connection
with the Hedging Activities and that Borrower or its affiliates shall be
entitled to all such proceeds, if any.
8
Section
9. Events of
Default.
(a) All
Loans, and any further obligation to make Loans under this Agreement, may, at
the option of the non-defaulting party by a written notice to the defaulting
party, be terminated two Business Days following such notice on the occurrence
of any of the events set forth below (each, a "Default"):
(i) Borrower
fails to deliver Loaned Shares to Lender as required by Section 4;
(ii) Borrower
fails to deliver or pay to Lender when due any cash, securities or other
property as required by Section 5;
(iii) the
filing by or on behalf of either party of a voluntary petition or an answer
seeking reorganization, arrangement, readjustment of its debts or for any other
relief under any bankruptcy, reorganization, receivership, compromise,
arrangement, insolvency, readjustment of debt, dissolution, moratorium,
delinquency, winding-up or liquidation or similar act or law, of any state,
federal or other applicable foreign jurisdictions, now or hereafter existing
("Bankruptcy Law"), or
any action by such party for, or consent or acquiescence to, the appointment of
a receiver, trustee, conservatory, custodian or similar official of such party,
or of all or a substantial part of its property; or the making by such party of
a general assignment for the benefit of creditors; or the admission by such
party in writing of its inability to pay its debts as they become
due;
(iv) the
filing of any involuntary petition against either party in bankruptcy or seeking
reorganization, arrangement, readjustment of its debts or for any other relief
under any Bankruptcy Law and an order for relief by a court having jurisdiction
in the premises shall have been issued or entered therein; or any other similar
relief shall be granted under any applicable federal or state law or law of any
other applicable foreign jurisdictions; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee or other officer having similar powers over such party or
over all or a part of its property shall have been entered; or the involuntary
appointment of an interim receiver, trustee or other custodian of such party or
of all or a substantial part of its property or the issuance of a warrant of
attachment, execution or similar process against any substantial part of the
property of such party; and continuance of any such event for 15 consecutive
calendar days unless dismissed, bonded to the satisfaction of the court having
jurisdiction in the premises or discharged;
(v) Borrower
or Lender fails to provide any indemnity as required by Section 12; provided, that Borrower may
waive such Default by Lender in its sole discretion, and Lender may waive such
Default by Borrower in its sole discretion;
(vi) Borrower
notifies Lender of its inability to or intention not to perform Borrower's
obligations hereunder or otherwise disaffirms, rejects or repudiates any of its
obligations hereunder; or
(vii) Any
representation made by Borrower under this Agreement in connection with any Loan
or Loans hereunder shall be incorrect or untrue in any material respect during
the term of any Loan hereunder or Borrower fails to comply in any material
respect with any of its covenants under this Agreement.
9
Section
10. Right to
Extend; Remedies.
(a) Except
to the extent a Loan is terminated pursuant to Section 4(c) as a result of a
Default by Borrower, Borrower may, following the termination of any Loan
pursuant to Section 4, delay the date on which the related Loaned Shares are due
to Lender (the "Settlement Due
Date," as so delayed to the extent applicable), with respect to some or
all of such Loaned Shares, if Borrower reasonably determines in good faith upon
advice of counsel that such extension is reasonably necessary to enable Borrower
(or any of its affiliates) to effect purchases of Common Stock in connection
with this Agreement in a manner that would be in compliance with legal and
regulatory requirements (i) applicable to Borrower or such affiliates in
purchasing such shares of Common Stock or (ii) if Borrower were deemed to be
Lender or an affiliated purchaser of Lender, that would be applicable to Lender
in purchasing such shares of Common Stock; provided that no such
extension or extensions shall postpone the Settlement Due Date later than the
date that is 90 days after the original date that would have been the Settlement
Due Date but for this clause (a).
(b) If,
upon the termination of any Loan as a result of a Default by Borrower under
Section 9 or pursuant to Section 4(c) on any Settlement Due Date, the purchase
of Common Stock in an amount equal to all or any portion of the Loaned Shares to
be delivered to Lender by Borrower in accordance with Section 4(c) of this
Agreement (i) shall be prohibited by any law, rules or regulation of any
governmental authority to which it is or would be subject, (ii) shall violate,
or would upon such purchase likely violate, any order or prohibition of any
court, tribunal or other governmental authority, (iii) shall require
the prior consent of any court, tribunal or governmental authority prior to any
such repurchase, (iv) would subject Borrower, in the commercially reasonable
judgment of Borrower, to any liability or potential liability under any
applicable federal securities laws (including, without limitation, Section 16 of
the Exchange Act), or (v) shall be commercially impracticable in the time period
required by Section 4(c), in the commercially reasonable judgment of Borrower as
a result of a demonstrable legal or regulatory impediment (including regulations
of self-regulatory organizations) to such purchases (each of (i), (ii), (iii),
(iv) and (v), a "Legal
Obstacle"), then, in each case, Borrower shall immediately notify Lender
of the Legal Obstacle and the basis therefor, whereupon such Borrower's
obligations under Section 4(c) shall be suspended until such time as no Legal
Obstacle with respect to such obligations shall exist (a "Repayment Suspension"); provided that, in the case of
an inability of the Borrower to return such purchase of Common Stock or the
delivery of such Common Stock to the Lender shall be impracticable under clause
(v) above, Borrower shall take all commercially reasonable steps to purchase
such Common Stock as soon as possible after the cause of such inability shall be
rectified. Following the occurrence of and during the continuation of
any Repayment Suspension, Borrower shall use its commercially reasonable best
efforts to remove or cure the Legal Obstacle as soon as practicable; provided, that (except in
circumstances where the Legal Obstacle resulted from the failure by Borrower to
comply with applicable securities laws or regulations or the rules of a
securities self-regulatory organization) Lender shall promptly reimburse all
reasonable costs and expenses (including of legal counsel to Borrower) incurred
or, at Borrower's election, provide reasonably adequate surety or guarantee for
any such costs and expenses that may be incurred by Borrower, in each case in
removing or curing such Legal Obstacle; and provided further that, if Borrower
cannot remove or cure the Legal Obstacle within five Business Days, then Lender
shall have the right at any time thereafter to notify Borrower of its election
that Borrower pay to Lender, in lieu of the delivery of Loaned Shares in
accordance with Section 4(c), the Replacement Cash (as defined in the following
sentence) within five Business Days of such notification (with the Average
Closing Price in such case measured over the ten consecutive Business Day period
ending on the Business Day immediately preceding such notification
date). If Lender does not make the election described in the
preceding sentence and Borrower is unable to remove or cure the Legal Obstacle
within 30 Business Days of the Settlement Due Date, Borrower's obligation to
return the Loaned Shares shall be converted to an obligation to pay to Lender,
on the fifth day following such 30th Business Day, in lieu of the delivery of
Loaned Shares in accordance with Section 4(c), an amount in immediately
available funds (the "Replacement Cash") equal to
the product of (A) the average Closing Price (the "Average Closing Price") during
the ten consecutive Business Day period ending on the Business Day immediately
preceding such 30th
Business Day multiplied by (B) the number of Loaned Shares then
outstanding.
10
(c) If
Borrower shall fail to deliver Loaned Shares to Lender when due, then, in
addition to any other remedies available to Lender under this Agreement or under
applicable law, Lender shall have the right (upon prior written notice to
Borrower) to purchase a like amount of Loaned Shares ("Replacement Shares") in the
principal market for such securities in a commercially reasonable manner; provided that if any
Repayment Suspension or failure to deliver shall exist and be continuing, Lender
may not exercise its right to purchase Replacement Shares unless Borrower shall
fail to deliver the Loaned Shares or pay the Replacement Cash to Lender when due
in accordance with Section 10(b) above. To the extent Lender shall
exercise such right, Borrower's obligation to return a like amount of Loaned
Shares or to pay the Replacement Cash, as applicable, shall terminate and
Borrower shall be liable to Lender for the purchase price of Replacement Shares
(plus all other amounts, if any, due to Lender hereunder), all of which shall be
due and payable within three Business Days of notice to Borrower by Lender of
the aggregate purchase price of the Replacement Shares. The purchase
price of Replacement Shares purchased under this Section 10 shall include
broker's fees and commissions and all other reasonable costs, fees and expenses
related to such purchase.
Section
11. Transfers.
(a) All
transfers of Loaned Shares to Borrower hereunder shall be made by the crediting
by a Clearing Organization of such Loaned Shares to the Borrower's "securities account" (within
the meaning of Section 8-501 of the UCC) maintained with such Clearing
Organization, which shall be ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇#▇▇▇▇ Account
Number 906-43690 (Attention: ▇▇▇▇ ▇▇▇▇▇▇), or such other account as Borrower
shall inform Lender. All transfers of Loaned Shares to Lender
hereunder shall be made by the crediting of such Loaned Shares to Lender's
Designated Account (whereupon, for the avoidance of doubt, such Loaned Shares
credited to Lender's Designated Account shall become the property of Lender, and
Borrower shall have no voting, dispositive control or pecuniary interest with
respect thereto). In every transfer of "financial assets" (within the
meaning of Section 8-102 of the UCC) hereunder, the transferor shall take all
steps necessary (i) to effect a delivery to the transferee under Section 8-301
of the UCC, or to cause the creation of a security entitlement in favor of the
transferee under Section 8-501 of the UCC, (ii) to enable the transferee to
obtain "control" (within
the meaning of Section 8-106 of the UCC), and (iii) to provide the transferee
with comparable rights under any applicable foreign law or regulation that is
applicable to such transfer.
(b) All
transfers of cash hereunder to Borrower or Lender shall be by wire transfer in
immediately available, freely transferable funds.
(c) A
transfer of securities or cash may be effected under this Section 11 on any day
except a day on which the transferee is closed for business at its address set
forth in Section 15 or Section 2 or a day on which a Clearing Organization or
wire transfer system is closed, if the facilities of such Clearing Organization
or wire transfer system are required to effect such transfer.
11
(d) The
rights and duties of Borrower under this Agreement may not be assigned or
transferred by Borrower without the prior written consent of Lender, such
consent not to be unreasonably withheld; provided that Borrower may
assign or transfer any of its rights or duties hereunder to Borrower's ultimate
parent entity or any directly or indirectly wholly-owned subsidiary or affiliate
of Borrower's ultimate parent entity (a "Permitted Transferee") without
the prior written consent of Lender as long as such Permitted Transferee is of
equal or better credit rating as the borrower or is guaranteed by the Borrower
or an entity of equal or better credit rating as the Borrower.
(e) The
rights and duties of Lender under this Agreement may not be assigned or
transferred by Lender without the prior written consent of
Borrower.
(f) Any
purported transfer that is not in compliance with Section 11(d) or 11(e) of this
agreement, as the case may be, shall be null and void.
(g) Whenever
delivery of funds or other assets is required hereunder by or to Lender, such
delivery shall be effected through DBSI.
Section
12. Indemnities.
(a) Lender
hereby agrees to indemnify and hold harmless Borrower and its affiliates and its
former, present and future directors, officers, employees and other agents and
representatives from and against any and all liabilities, judgments, claims,
settlements, losses, damages, fees, liens, taxes, penalties, obligations and
expenses (and losses relating to Borrower's market activities as a consequence
of becoming, or of the risk of becoming, subject to Section 16(b) under the
Exchange Act, including without limitation, any forbearance from market
activities or cessation of market activities and any losses in connection
therewith or with respect to this Agreement) incurred or suffered by any such
person or entity directly or indirectly arising from, by reason of, or in
connection with, (i) any breach by Lender of any of its representations or
warranties contained in Section 7 or (ii) any breach by Lender of any of its
covenants or agreements in this Agreement.
(b) Borrower
hereby agrees to indemnify and hold harmless Lender and its affiliates and its
former, present and future directors, officers, employees and other agents and
representatives from and against any and all liabilities, judgments, claims,
settlements, losses, damages, fees, liens, taxes, penalties, obligations and
expenses incurred or suffered by any such person or entity directly or
indirectly arising from, by reason of, or in connection with (i) any breach by
Borrower of any of its representations or warranties contained in Section 7 or
(ii) any breach by Borrower of any of its covenants or agreements in this
Agreement.
(c) In
case any claim or litigation which might give rise to any obligation of a party
under this Section 12 (each an "Indemnifying Party") shall
come to the attention of the party seeking indemnification hereunder (the "Indemnified Party"), the
Indemnified Party shall promptly notify the Indemnifying Party in writing of the
existence and amount thereof; provided that the failure of
the Indemnified Party to give such notice shall not adversely affect the right
of the Indemnified Party to indemnification under this Agreement, except to the
extent the Indemnifying Party is materially prejudiced thereby. The
Indemnifying Party shall promptly notify the Indemnified Party in writing if it
accepts such claim or litigation as being within its indemnification obligations
under this Section 12. Such response shall be delivered no later than
30 days after the initial notification from the Indemnified Party; provided that, if the
Indemnifying Party reasonably cannot respond to such notice within 30 days, the
Indemnifying Party shall respond to the Indemnified Party as soon thereafter as
reasonably possible.
12
(d) An
Indemnifying Party shall be entitled to participate in the defense of any claim
and, to the extent that it shall wish, jointly with any other Indemnifying Party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party (who shall not, except with the consent
of the Indemnified Party, be counsel to the Indemnifying Party), and, after
notice from the Indemnifying Party to such Indemnified Party of its election so
to assume the defense thereof, the Indemnifying Party shall not be liable to
such Indemnified Party under such subsection for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
Indemnified Party, in connection with the defense thereof other than reasonable
costs of investigation. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (regardless of whether the indemnified
party is an actual or potential party to such action or claim) unless such
settlement, compromise or judgment (i) includes an unconditional release of the
Indemnified Party from all liability arising out of such action or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act, by or on behalf of any Indemnified Party. An
Indemnified Party shall not make any settlement of any claim or litigation under
this Section 12 without the written consent of the Indemnifying
Party.
Section
13. Termination Of
Agreement.
(a) This
Agreement shall terminate on the first Business Day following the last day of
the Loan Availability Period, and may be terminated earlier (i) at any time by
the written agreement of Lender and Borrower, or (ii) by Lender or Borrower upon
the occurrence of a Default of the other party.
(b) Unless
otherwise agreed by Borrower and Lender, the provisions of Section 12 shall
survive the termination of this Agreement.
Section
14. Registration
Provisions. If, following the initial Loan hereunder and
registration of the initial Loaned Shares in respect of such Loan, any
subsequent Loan and public sale of the Loaned Shares in respect of such
subsequent Loan that, to the best of Borrower's knowledge at the time any such
Loan is initiated, shall be used for purposes reasonably designed to facilitate
hedging transactions relating to the purchase and ownership of Convertible
Notes, in the reasonable opinion of counsel to Borrower, would require
registration under the Securities Act, Lender shall register such sale in a form
and manner reasonably satisfactory to Borrower, and shall enter into an
underwriting agreement substantially in the form of the underwriting agreement
relating to the issuance and sale of such initial Loaned Shares and shall afford
Borrower and its representatives and agents an opportunity to conduct an
appropriate "due
diligence" investigation to Borrower's reasonable satisfaction, all at
the expense of Lender. In no event shall this Section 14
require Lender to register shares of Common Stock in excess of the Maximum
Number of Shares.
13
Section
15. Notices.
(a) All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given when received.
(b) All
notices, demands and communications of any kind relating to the transactions
contemplated by this Agreement between Borrower and any of its affiliates, on
the one hand, and Lender and any of its affiliates, on the other, shall be
transmitted exclusively through DBSI.
(c) All
such notices and other communications shall be directed to the following
address:
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(i)
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If
to Borrower or Agent to:
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Deutsche
Bank Securities Inc.
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▇▇
▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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||
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Attention:
Equity Capital Markets – Syndicate Desk
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(ii)
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If
to Lender to:
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▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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||
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▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
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||
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▇▇▇▇▇▇,
▇▇▇▇▇▇
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||
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Attention: Chief
Executive Officer
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||
(d) In
the case of any party, at such other address as may be designated by written
notice to the other parties.
Section
16. Governing Law;
Submission To Jurisdiction; Severability.
(a) This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, but excluding any choice of law provisions that would require
the application of the laws of a jurisdiction other than New York.
(b) EACH
PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW
YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH COURT, SOLELY FOR THE PURPOSE
OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS OBLIGATIONS HEREUNDER
OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY LOAN HEREUNDER AND (B) WAIVES,
TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND ANY
RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF RESIDENCE OR
DOMICILE.
(c) EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
14
(d) Lender
hereby appoints ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, as agent for service of process.
(e) To
the extent permitted by law, the unenforceability or invalidity of any provision
or provisions of this Agreement shall not render any other provision or
provisions herein contained unenforceable or invalid.
Section
17. Counterparts. This
Agreement may be executed in any number of counterparts, and all such
counterparts taken together shall be deemed to constitute one and the same
agreement.
15
IN
WITNESS WHEREOF, the parties hereto to have executed this Share Lending
Agreement as of the date and year first above written.
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DEUTSCHE
BANK AG, LONDON BRANCH,
as
Borrower
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By:
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/s/ ▇▇▇▇ ▇▇▇▇▇▇
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Name:
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▇▇▇▇
▇▇▇▇▇▇
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Title:
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Managing
Director
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By
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name:
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▇▇▇▇▇
▇▇▇▇▇▇▇
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Title:
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Director
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DEUTSCHE
BANK SECURITIES INC.
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||
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By:
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/s/ ▇▇▇▇▇ ▇▇▇▇▇
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Name:
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▇▇▇▇▇
▇▇▇▇▇
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Title:
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Director
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By:
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/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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Name:
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▇▇▇▇▇▇
▇▇▇▇▇
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Title:
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Managing
Director
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Confirmed
and Acknowledged as of the date first above written:
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DRYSHIPS,
INC.
As
Lender
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By:
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/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name:
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▇▇▇▇▇▇
▇▇▇▇▇▇
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Title:
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Chief
Operating Officer
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