FreeSeas Announces Entering into a Term Sheet for an Investment of USD 10 million

FreeSeas Announces Entering into a Term Sheet for an Investment of USD 10
million

Athens, Greece, Oct. 22,  2013 (GLOBE NEWSWIRE) --  FreeSeas Inc. (Nasdaq  CM: 
FREE)("FreeSeas'' or the "Company"), a transporter of dry-bulk cargoes through
the ownership  and operation  of a  fleet  of six  Handysize vessels  and  one 
Handymax vessel, announced today that it  has entered into a non-binding  term 
sheet with an institutional investor (the "Investor") for an investment of USD
10 million into the Company through the issuance of zero-dividend  convertible 
preferred stock ("Preferred Stock") and warrants, subject to certain terms and
conditions.

Mr. Ion G. Varouxakis, Chairman, President and CEO, commented as follows:  "We 
are particularly pleased to announce  that after our recent extinguishment  of 
bank debt amounting to USD  30 million we are now  in the process of  securing 
additional funds to be added on our balance sheet as fresh working capital and
growth capital. We look forward to using such capital for the repositioning of
the Company and towards executing on our plans for balance sheet turn  around, 
and income and revenue growth."

Upon signing the  transaction documents (the  "Initial Closing"), the  Company 
will sell to the Investor $1.5 million  of units, each unit consisting of  (i) 
one share of Preferred Stock and (ii) a warrant to purchase one share of stock
for every share that the Preferred  Stock is convertible into. The  preferred 
stock issued in the Initial Closing shall be convertible into common stock  at 
the lower of (a) the closing bid price  of the common stock on the day  before 
the Initial Closing or (b) the price of the common stock on the day after  the 
registration statement is  declared effective by  the Securities and  Exchange 
Commission ("SEC").

On the date  after effectiveness  of the registration  statement (the  "Second 
Closing"), the Company  will sell to  the Investor $8.5  million of  Preferred 
Stock and warrants. The preferred stock issued in the Second Closing shall be
convertible into common stock at the closing bid price of the common stock  on 
the day of the Second Closing.

The warrants included in the units to  be sold at the Initial Closing and  the 
Second Closing  will allow  the Investor,  for  five years  from the  date  of 
issuance, to  purchase one  share of  common stock  for every  share it  could 
acquire upon exercise of the securities received at such closing,  exercisable 
at a price equal to a 30% premium to the consolidated closing bid price on the
day prior  to the  Initial  Closing and  the  Second Closing,  as  applicable. 
Investor may exercise such warrants by paying for the shares in cash, or on  a 
cashless basis  by  exchanging  such  warrants  for  common  stock  using  the 
Black-Scholes value, which  is assumed to  have a volatility  of 135%. In  the 
event that the Company's common stock trades at a price 25% or more about  the 
exercise price  of the  warrants for  a period  of 20  consecutive days  (with 
average daily dollar  volume at least  equal to $1  million), the Company  may 
call the warrants for cash.

In addition,  the Investor  shall  also receive  a second  five-year  warrant, 
exercisable for a  period of 90  days, allowing  it to purchase  one share  of 
common stock  for every  two shares  it  could acquire  upon exercise  of  the 
securities received  at such  closing, under  the same  terms as  the  warrant 
listed above. All warrants issued to the Investor shall not be exercisable  by 
the Investor  if it  results in  the Investor  owning more  than 9.9%  of  the 
Company's common  stock. The  warrants shall  contain customary  anti-dilution 
protection.

The  Company  will  be  required   to  file  a  registration  statement   (the 
"Registration Statement") with the SEC within 20 days of the Initial  Closing, 
registering the common stock underlying the  (i) Preferred Stock to be  issued 
in the Initial Closing and Second Closing  and (ii) the warrants to be  issued 
to the Investor.  The Company shall  pay a penalty  of 2% per  month for  each 
month that the registration statement is not declared effective after 90 days,
but such  penalties such  cease after  six months,  assuming the  Investor  is 
eligible to sell shares under Rule 144.

The closing  of  the  investment  with the  Investor  is  subject  to  several 
conditions, including  the  successful negotiation  of  transaction  documents 
between the Company and the  Investor, the Company being fully-reporting  with 
the SEC, the Company's  common stock being listed  on The NASDAQ Stock  Market 
and the Company being in compliance with all listing requirements, the absence
of events of default under any financial agreement other than those identified
to the Investor; and other customary conditions for this type of transaction.
In addition, the  Second Closing is  conditioned upon the  Company having  the 
Registration Statement effective with the SEC.

The Company will pay the Investor an expense reimbursement fee of 5% from  the 
gross proceeds  received  at  each  closing.  In  addition,  the  Company  is 
responsible for paying a non-refundable fee of $75,000 to the Investor's legal
counsel for the preparation of the investment documents. As well, the Investor
shall have the right to participate on  the same terms as other investors,  up 
to 25% of the amount of any subsequent financing the Company enters into,  for 
a period of one year  from the Second Closing.  Further, the Company shall  be 
prohibited from issuing additional common stock or securities convertible into
common stock for a period of 150 days from the later of the Initial Closing or
the Second  Closing,  except for  issuances  pursuant to  acquisitions,  joint 
ventures, license  arrangements, leasing  arrangements, employee  compensation 
and the like.

The securities to be offered have not been registered under the Securities Act
of 1933, as amended, (the "Securities Act"), or any state securities laws, and
unless so registered, the securities may not be offered or sold in the  United 
States except pursuant to an exemption  from, or in a transaction not  subject 
to, the registration requirements of  the Securities Act and applicable  state 
securities laws. The Company plans to offer and issue the preferred stock only
to accredited investors pursuant to Rule 506 promulgated under Regulation D of
the Securities Act.

This press release is issued pursuant to Rule 135c of the Securities Act,  and 
shall not constitute an offer to sell or a solicitation of an offer to buy any
securities, nor  shall  there  be any  sale  of  securities in  any  state  or 
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the  securities laws of any such  state 
or jurisdiction.

About FreeSeas Inc.

FreeSeas Inc.  is a  Marshall Islands  corporation with  principal offices  in 
Athens, Greece. FreeSeas is engaged  in the transportation of drybulk  cargoes 
through the ownership and operation of  drybulk carriers. Currently, it has  a 
fleet of Handysize and Handymax vessels. FreeSeas' common stock trades on  the 
NASDAQ Capital  Market under  the  symbol FREE.  Risks and  uncertainties  are 
described in  reports  filed by  FreeSeas  Inc. with  the  SEC, which  can  be 
obtained free of charge on the  SEC's website at http://www.sec.gov. For  more 
information  about  FreeSeas  Inc.,   please  visit  the  corporate   website, 
www.freeseas.gr.

Forward-Looking Statements

This press release contains forward-looking statements (as defined in  Section 
27A of  the  Securities Act  of  1933, as  amended,  and Section  21E  of  the 
Securities Exchange Act of 1934, as amended) concerning future events and  the 
Company's growth strategy and measures to implement such strategy. Words  such 
as  ''expects,''   ''intends,''  ''plans,''   ''believes,''   ''anticipates,'' 
''hopes,'' ''estimates,'' and variations of such words and similar expressions
are intended  to identify  forward-looking  statements. Although  the  Company 
believes that the  expectations reflected in  such forward-looking  statements 
are reasonable, no assurance can be given that such expectations will prove to
be correct. These  statements involve known  and unknown risks  and are  based 
upon a number  of assumptions and  estimates which are  inherently subject  to 
significant uncertainties  and contingencies,  many of  which are  beyond  the 
control of  the  Company. Actual  results  may differ  materially  from  those 
expressed or implied  by such forward-looking  statements. Factors that  could 
cause actual results  to differ materially  include, but are  not limited  to, 
changes in the demand for dry bulk vessels; competitive factors in the  market 
in which the Company  operates; risks associated  with operations outside  the 
United States; and  other factors listed  from time to  time in the  Company's 
filings with the  Securities and  Exchange Commission.  The Company  expressly 
disclaims any obligation  or undertaking  to release publicly  any updates  or 
revisions to any  forward-looking statements contained  herein to reflect  any 
change in the  Company's expectations with  respect thereto or  any change  in 
events, conditions or circumstances on which any statement is based.

Contact Information:

At the Company

FreeSeas Inc.

AlexandrosMylonas, Chief Financial Officer

011-30-210-45-28-770

Fax: 011-30-210-429-10-10

info@freeseas.gr

www.freeseas.gr
 
Press spacebar to pause and continue. Press esc to stop.