EX-4.38 12 f20f2016ex4-38_freeseas.htm DEBT SETTLEMENT AGREEMENT - SICHENZIA ROSS FRIEDMAN FERENCE LLP

Exhibit 4.38

DEBT SETTLEMENT AGREEMENT

THIS DEBT SETTLEMENT AGREEMENT (this “Agreement”) is made and entered into as of July 11, 2016 (the “Effective Date”), by and between Sichenzia Ross Friedman Ference LLP, a New York limited liability partnership (the “Creditor”) and FreeSeas Inc., a Marshall Islands corporation (the "Company").

RECITALS:

WHEREAS, the Creditor has provided to the Company (and/or one or more of its subsidiaries) legal services, for which an aggregate amount equal to $100,000 remains unpaid pursuant to the invoice attached on Schedule A hereto (the “Invoice”);

WHEREAS, the Creditor has agreed to accept, and the Company has agreed to issue to the Creditor, a convertible debenture in the principal face amount of $100,000, in the form attached hereto as Exhibit A (the “Note”) in full satisfaction of the Invoice, which Note shall be convertible into shares of the Company’s common stock (the “Common Stock”); and

WHEREAS, the Note has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), that the Note will be issued on the basis of the statutory exemption provided by Section 4(a)(2) of the Securities Act and the provisions of Regulation D thereunder, relating to transactions by an issuer not involving any public offering, and that such Note shall be considered a restricted security.

NOW, THEREFORE, in consideration of the foregoing and of the agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Payment in Full of Invoice by Issuance of the Note. The Creditor hereby agrees to accept the Note as payment in full of the Invoice and, upon issuance and delivery to the Creditor of the Note, the Creditor agrees that any and all obligations that the Company may have pursuant to the Invoice shall be satisfied in full and the Company shall have no further obligations to the Creditor pursuant to the Invoice.

2. Representations, Warranties and Covenants of the Company. The Company hereby represents and warrants to the Creditor as of the Effective Date as follows: (i) that the execution, delivery and performance of this Agreement by it will not violate, or result in a breach of, or constitute a default under, any agreement, instrument, judgment, order or decree to which it is a party or to which it is subject; (ii) that it has the legal capacity and power and authority to execute and deliver this Agreement and any other related agreements and instruments delivered in connection herewith; (iii) that no further proceedings or actions are necessary to authorize the execution and delivery of this Agreement or the performance by the Company of its obligations hereunder; and (iv) that this Agreement constitutes the legal and binding obligation of the Company, enforceable against it in accordance with these terms. The Company hereby covenants that the shares of Common Stock issuable upon conversion of the Note (the “Conversion Shares” and together with the Note, the “Securities”) shall be entitled to piggyback registration rights and shall be included on the next registration statement filed by the Company with the Securities and Exchange Commission.

3. Representations and Warranties of the Creditor and the Company. The Creditor hereby represents and warrants to the Company as of the Effective Date as follows: (i) that the execution, delivery and performance of this Agreement by it will not violate, or result in a breach of, or constitute a default under, any agreement, instrument, judgment, order or decree to which it is a party or to which it is subject; (ii) that it has the legal capacity and power and authority to execute and deliver this Agreement and any other related agreements and instruments delivered in connection herewith; (iii) that no further proceedings or actions are necessary to authorize the execution and delivery of this Agreement or the performance by the Creditor of its obligations hereunder; and (iv) that this Agreement constitutes the legal and binding obligation of the Creditor, enforceable against it in accordance with these terms.

In addition, the Creditor hereby represents and warrants to the Company as of the Effective Date as follows:

(a) Accredited Investor. Creditor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act;

(b) Own Account. The Creditor is acquiring the Securities for the Creditor’s own account as principal, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalization thereof, in whole or in part, and no other person has a direct or indirect beneficial interest in such Securities;

(c) Exemption. The Creditor understands that the offer and sale of the Note is not being registered under the Securities Act or any state securities laws and is intended to be exempt from registration provided by Section 4(a)(2) of the Securities Act and the provisions of Regulation D thereunder;

(d) No Registration. The Securities have not been registered under the Securities Act or any state securities laws and may not be transferred, sold, assigned, hypothecated or otherwise disposed of unless registered under the Securities Act and applicable state securities laws or unless registered or an exemption from such registration is available. The Creditor represents and warrants and hereby agrees that all offers and sales of the Securities shall be made only pursuant to such registration or to such exemption from registration;

(e) Financial Risk. The Creditor represents, warrants and agrees that the Creditor will not sell or otherwise transfer the Securities unless registered under the Securities Act or in reliance upon an exemption therefrom, and fully understands and agrees that the Creditor must bear the economic risk of his investment in the Securities for an indefinite period of time because, among other reasons, the Securities have not been registered under the Securities Act or under the securities laws of certain states and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under the applicable securities laws of such states or an exemption from such registration is available. The Creditor has the financial ability to bear the economic risk of his investment in the Securities, has adequate means for providing for his current needs and personal contingencies and has no need for liquidity with respect to his investment in the Securities; and

(f) Legend. The Securities shall bear a legend in substantially the following form, and the Creditor understands that the Company shall be required to refuse to register any transfer of the Securities not made in accordance with applicable U.S. securities laws:

“THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) , AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.”

4. Representations of the Creditor with Respect to the Invoice. The Creditor hereby represents as to the Invoice as follows: (i) the Invoice represents a bona fide outstanding claim against the Company, and is an enforceable obligation arising in the ordinary course of business, for money due and payable to the Creditor for services rendered pursuant to a written or verbal agreement, by and between the Creditor and the Company (and/or one or more of its subsidiaries), in each case, in good faith; (ii) the Invoice is currently due and owing and is payable in full; (iii) the document attached hereto is a true and, correct and complete copy of the Invoice; (iv) the Creditor is the sole owner of the Invoice, and has not previously sold, transferred, encumbered or released any part of the Invoice; and (v) there is no action based on the Invoice that is currently pending in any court or other legal venue and no judgments based upon the Invoice have been previously entered in any legal proceeding.

5. Release. Effective upon delivery of the Note to the Creditor, the Creditor hereby knowingly and voluntarily releases and forever discharges the Company and its predecessors, successors, direct and indirect parent companies, direct and indirect subsidiary companies, companies under common control with any of the foregoing, assigns, directors, officers, affiliates, agents and representatives (collectively, the “Released Parties”), from all claims, liabilities, demands, costs, charges, expenses, actions, causes of action, judgments, and executions, past, present or future, with respect to the Invoice. The parties agree that the foregoing release is not intended to release, and shall not release, any claims between any of the parties that may arise under this Agreement or the Note. Upon the execution of this Agreement, the Creditor shall be deemed to have received sufficient consideration for the releases set forth in this Section 5.

6. Voluntary and Knowing Agreement and Release. Each of the parties hereto acknowledges that they have entered into this Agreement of their own free will, and that no promises or representations have been made to them by any person to induce them to enter into this Agreement other than the express terms set forth herein. Each of the parties hereto further acknowledges that they have read this Agreement and understands all of their respective terms.

7. Advice of Counsel. The Company acknowledges that before entering into this Agreement, it has had the opportunity to consult with an attorney of its choice.

8. Attorneys’ Fees. Each party shall bear its own legal fees and expenses in connection with the negotiation, execution and delivery of this Agreement.

9. Choice of Law and Venue. This Agreement shall be governed by and construed according to the laws of the State of New York, without giving effect to its choice of law principles. The parties agree that all actions and proceedings arising out of or relating directly or indirectly to this Agreement or any ancillary agreement or any other related obligations shall be litigated solely and exclusively in the state or federal courts located in the City of New York, New York, and that such courts are convenient forums. Each party hereby submits to the personal jurisdiction of such courts for purposes of any such actions or proceedings.

10. Severance of Provisions; Survival of Representations and Warranties. If any of the provisions of this Agreement shall be held invalid, the remainder of this Agreement shall not be affected thereby, and shall remain in full force and effect. The representations, warranties and agreements of the Parties shall survive the delivery of the Note under this Agreement.

11. Notices. All notices and other communications shall be in writing and shall be provided to the recipient party to the addresses set forth on the signature page hereto. All notices and communications shall be deemed made and effective as follows: (i) if transmitted for overnight delivery via a nationally recognized delivery service, the first business day after being delivered by the transmitting party to such overnight delivery service, (ii) if faxed, when transmitted in legible form by facsimile machine to the recipient party’s correct facsimile machine number, (iii) if by e-mail, when transmitted by e-mail, or (iv) if mailed via regular mail, upon delivery. Any party may designate a superseding notice contact name, street address, e-mail address or fax number by providing the other parties with written notice pursuant to the provisions hereof.

12. Entire Agreement. This Agreement sets forth the entire understanding of the parties and supersedes any and all prior agreements, oral or written, relating to the subject matter hereof. The parties attest that no other representations were made regarding this Agreement other than those contained herein.

13. Confidentiality. Each of the parties hereby agrees, without the prior written consent of the other, to not disclose, and to otherwise keep confidential, the transactions contemplated hereby, except to the extent that disclosure thereof is required by law, rule or regulation; provided, however, that each of the parties may disclose information regarding such sale to their respective accountants, attorneys, shareholders and other interest holders.

14. No Third Party Beneficiaries. This Agreement is intended for the benefit of the Creditor and the Company and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

15. Modifications. This Agreement may not be modified except by a writing, signed by each of the parties hereto. This Agreement shall be binding upon the parties and their respective successors and assigns.

16. Counterparts. This Agreement may be signed in counterparts, and said counterparts shall be treated as though signed as one document. Facsimile or other electronic signatures to this Agreement shall be treated as original signatures.

(SIGNATURES APPEAR ON THE FOLLOWING PAGE)

IN WITNESS WHEREOF, the Creditor and the Company have caused this Settlement Agreement and Release to be signed by their respective duly authorized officers or representatives as of the date first above written.

	CREDITOR:

	SICHENZIA ROSS FRIEDMAN FERENCE LLP

	By:
	Name:	Marc J. Ross
	Title:	Partner

	Address for delivery of notice:

	61 Broadway, 32^nd Floor
	New York, NY 10006

	COMPANY:

	FREESEAS INC.

	By:
	Name:	Dimitris Papadopoulos
	Title:	Chief Financial Officer

	Address for delivery of notice:

	10 Eleftheriou Venizelou Street
	(Panepistimiou Ave.)
	10671 Athens, Greece

SCHEDULE A

Invoice