TBS INTERNATIONAL LIMITED & SUBSIDIARIES             EXHIBIT 10.5

 

FIRST AMENDMENT TO LOAN AGREEMENT

by and among

AMOROS MARITIME CORP.,
LANCASTER MARITIME CORP.
AND
CHATHAM MARITIME CORP.,

as Borrowers,

TBS INTERNATIONAL LIMITED,

as Parent Guarantor,

SHERWOOD SHIPPING CORP.

as Guarantor, and

 AIG COMMERCIAL EQUIPMENT FINANCE, INC.,

as Lender

March 27, 2009

 

 

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FIRST AMENDMENT TO LOAN AGREEMENT

THIS FIRST AMENDMENT TO LOAN AGREEMENT (this “First Amendment”) is made and
entered into this 27th day of March, 2009, by and among Amoros Maritime Corp.,
Lancaster Maritime Corp. and Chatham Maritime Corp., each a Marshall Islands
corporation having a mailing address of P.O. Box HM 2522, Hamilton HMGX, Bermuda
and a registered address of Trust Company Complex, Ajeltake Road, Ajeltake
Island, Majuro, Marshall Islands MH96960 (the “Borrowers”; each, a “Borrower”),
TBS International Limited, a Bermuda corporation (“Parent Guarantor”), Sherwood
Shipping Corp. (“Sherwood”) and AIG Commercial Equipment Finance, Inc., a
Delaware corporation (together with its successors and assigns,
“Lender”).WHEREAS, Borrowers, Parent Guarantor and Lender are parties to that
certain Loan Agreement dated February 29, 2008 (the “Original Loan Agreement,”
as amended by this First Amendment and any future amendments, the “Loan
Agreement”); and

WHEREAS, Borrowers delivered the Notes to evidence their Loan under the Loan
Agreement, including that certain US$13,000,000 Promissory Note by Lancaster
Maritime Corp., that certain US$9,000,000 Promissory Note by Amoros Maritime
Corp., and that certain $13,000,000.00 Promissory Note by Chatham Maritime
Crop., each payable to the order of Lender and dated February 29, 2008; and

WHEREAS, Sherwood wishes to secure the Obligations by delivering its Secured
Guaranty of even date herewith and by granting a first priority mortgage on the
vessel “Zia Belle,” having Panamanian registration number 38142-PEXT (the “Zia
Belle”) which shall be added to the Vessels subject to the Loan Agreement; and

WHEREAS, the parties wish to amend the Loan Agreement and Notes in various
respects, including (i) a 175 basis point increase in the Margin, (ii) a 200
basis point increase in the lowest applicable Interest Rate, (iii) the
elimination of the one and the two month options for LIBOR terms currently
available to Borrowers, (iv) increases in applicable Prepayment Fees to (x)
three percent (3.0%) for any prepayments occurring on or prior to the first
anniversary of the effective date of this First Amendment, (y) two percent
(2.0%) for any prepayment occurring after the first anniversary but on or prior
to the second anniversary of this First Amendment, and (z) one percent (1.0%)
for any prepayments occurring after the second anniversary of the date of this
First Amendment, (v) the restructuring of the quarterly principal installments
due April 1, 2009, July 1, 2009, and October 1, 2009, to be due upon the
effective date of this First Amendment, (vi) the addition of an EBITDA to
Interest financial covenant, and a waiver of Borrowers’ compliance with the
financial covenants contained in Sections 6.10 (a), (c) and (d) for  the 2009
fiscal year (and each fiscal quarter thereof), and (vii) a waiver of Borrowers’
compliance with Section 5.12 for the 2008 fiscal year, among other matters more
fully addressed below.

NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt of which is hereby acknowledged, Borrowers and Lender
hereby agree as follows:
1. The following new definitions are added to Section 1.01 of the Original Loan
Agreement:
“Consolidated Interest Coverage Ratio” means, at any date of determination, the
ratio of (a) the result of (i) Consolidated EBITDA, less (ii) the sum of (x)
Federal, state, local and foreign income taxes paid in cash and (y) Restricted
Payments made, in each case, for the most recently completed Measurement Period,
to (b) Consolidated Interest Charges for the most recently completed Measurement
Period.

The definitions of “LIBOR Period” and “Existing Credit Agreement” are deleted
from the Original Loan Agreement.

2.   The following definitions are amended and restated.  In the case of the
revised definitions of “Adjustment Period” and “LIBOR Rate”, such amendment and
restatement shall take effect on April 1, 2009.  All other changes shall take
effect as of the date of this First Amendment.

“Adjustment Period” means a successive series of three month or quarterly
periods following the first Adjustment Period.  The first Adjustment Period
shall begin on the Initial Funding Date, and continue until the last day of the
calendar quarter in which the Initial Funding Date occurs, or March 31,
2008.  Thereafter, each successive Adjustment Period during the term of the
Loans shall be a Calendar Quarter. For the avoidance of doubt, the first full
Adjustment Period following the date of the First Amendment shall commence April
1, 2009, and end on June 30, 2009.
 
 “Assignment of Charter Hire” shall mean, for each Borrower and for Sherwood,
that certain Assignment of Charter Hire by Borrower or Sherwood in favor of
Lender, as applicable, and that certain Assignment of Charter Hire by Charterer,
by the assignors party thereto, in favor of Lender, each related to the Vessel
owned by the Borrower or Sherwood, as applicable and dated as of the date of the
Borrower’s or Sherwood’s Ship Mortgage, as amended, supplemented and modified
from time to time in accordance with the terms thereof.  “Assignments of Charter
Hire” shall collectively refer to all Assignments of Charter Hire.
 
“Assignment of Insurances” shall mean, for each Borrower and Sherwood, that
certain Assignment of Insurances by Borrower or Sherwood (as applicable) and the
other assignors party thereto in favor of Lender dated as of the date of
Borrower’s or Sherwood’s Ship Mortgage, as amended, supplemented and modified
from time to time in accordance with the terms thereof.  “Assignments of
Insurances” shall collectively refer to all Assignments of Insurances.
 
 “Collateral” means, collectively, the Vessels, all of Sherwood’s or each
Borrower’s property that is encumbered by a Ship Mortgage from time to time
during the term of this Agreement, all other collateral securing the Loans, and
all substitutions and replacements therefor, including all component parts and
appurtenances.  It is the intent of Borrowers, Sherwood and Lender that the
Collateral secure the entire Obligations owed to Lender by the Borrowers.

“Consolidated EBITDA” means, at any date of determination, an amount equal to
Consolidated Net Income of Parent Guarantor and its Subsidiaries on a
consolidated basis for the most recently completed Measurement Period, plus (a)
the following to the extent deducted in calculating such Consolidated Net Income
(and without duplication):  (i) Consolidated Interest Charges, (ii) the
provision for Federal, state, local and foreign income taxes payable, (iii)
depreciation and amortization expense, (iv) net losses from the sales of vessels
as permitted under the BofA Credit Agreement and (v) any noncash impairment
charges incurred during each fiscal year of Parent Guarantor and its
Subsidiaries ending December 31, 2009 in respect of any of Parent Guarantor’s or
its Subsidiaries’ goodwill and vessels, (in each case of or by Parent Guarantor
and its Subsidiaries for such Measurement Period) and minus (b) the following to
the extent included in calculating such Consolidated Net Income, all net gains
from the sales of vessels as permitted under the BofA Credit Agreement (in each
case of or by Parent Guarantor and its Subsidiaries for such Measurement
Period); provided that, to the extent characterized as interest on the income
statements of Parent Guarantor and its Subsidiaries for such Measurement Period
pursuant to FASB Interpretation No. 133 – Accounting for Derivative Instruments
and Hedging Activities (June 1998), noncash adjustments in connection with any
interest rate swap contract entered into by Parent Guarantor or any of its
Subsidiaries, shall be excluded.

“Consolidated Interest Charges” means, for any Measurement Period, the sum of
(a) all interest, premium payments, debt discount, fees, charges and related
expenses in connection with borrowed money (including capitalized interest but
excluding capitalized interest on Permitted New Vessel Construction
Indebtedness) or in connection with the deferred purchase price of assets, in
each case to the extent treated as interest in accordance with GAAP, (b) all
interest paid or payable with respect to discontinued operations and (c) the
portion of rent expense under Capitalized Leases that is treated as interest in
accordance with GAAP, in each case, of or by Parent Guarantor and its
Subsidiaries on a consolidated basis for the most recently completed Measurement
Period; provided that, to the extent characterized as interest on the income
statements of Parent Guarantor and its Subsidiaries for such Measurement Period
pursuant to FASB Interpretation No. 133 – Accounting for Derivative Instruments
and Hedging Activities (June 1998), noncash adjustments in connection with any
interest rate swap contract entered into by Parent Guarantor or any of its
Subsidiaries, shall be excluded.

“Interest Rate” means, for each Loan, a rate over each Adjustment Period equal
to the greater of (a) seven percent per annum, or (b) LIBOR Rate PLUS the Margin
per annum, adjusted for each Adjustment Period effective as of the first day of
each Adjustment Period.  The Interest Rate is subject to the default rate of
interest now or hereafter set forth in each Note, which default rate shall be
equal to the lesser of (i) the Interest Rate plus 2.0%, or (ii) the maximum rate
of interest permitted by Applicable Law.   At no time will the Interest Rate
ever be less than seven (7%) percent per annum.

"LIBOR Rate" shall mean, for each Adjustment Period, the rate per annum equal to
the arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered rates
for deposits in Dollars with a term of three months or ninety days, as published
by the British Bankers' Association (on its internet website at www.bba.org.uk
(or in the event such rate is not so published, in such other nationally
recognized publication as Payee may specify) at approximately 11:00 a.m.,
London, England time, on the day that is the last London Banking Day immediately
preceding the first day of such Adjustment Period, with adjustments to be
effective as of the first day of such Adjustment Period; provided, however, that
(i) if no comparable term of three months or ninety days is available, the LIBOR
Rate shall be determined using the weighted average of the offered rates for the
two terms most nearly corresponding to such term and (ii) if the British
Banker’s Association shall no longer publish such a rate, "LIBOR Rate" shall
mean in such other nationally recognized publication as Lender may specify).
 
“Margin” means three and one half of one percent (3.50%), unless the sum of the
Margin and the LIBOR Rate on the first day of an Adjustment Period is less than
seven percent per annum, in which case the Margin shall equal the difference
between seven percent per annum and the LIBOR Rate in effect on such date,
resulting in an Interest Rate of at least seven percent per annum at all times
during the term of this Agreement.

“Measurement Period” means, at any date of determination, the most recently
completed four fiscal quarters of Parent Guarantor.  Provided, in the case of
the Consolidated Interest Coverage Ratio, the Measurement Period for the
quarterly calculations for the quarter annual periods ending (i) on June 30,
2009 means the most recently completed two fiscal quarters of Parent Guarantor,
and (ii) September 30, 2009 means the most recently completed three fiscal
quarters of Parent Guarantor.

“Philippine Charterer” means (a) for the Mohave Maiden, the Hopi Princess, and
the Zuni Princess, CFS Bareboat Corp., (b) for the Zia Belle, General
Charterers, Inc. or (c) with respect to any Vessel, any other Person approved in
writing by Lender to bareboat charter the Vessel to permit the Charter Registry
of the Vessels in the Republic of the Philippines.

“Security Documents” means the Guaranty Agreements, the Assignments of Charter
Hire, the Assignments of Insurances, the Ship Mortgages and all other documents
now or hereafter constituting security for the Loans, including the Ship
Mortgage by Sherwood on the vessel “Zia Belle.”

“Ship Mortgage” shall mean, with respect to each Borrower or Sherwood, that
certain Panamanian First Naval Mortgage to be executed by or on behalf of such
Person in favor of Lender encumbering the Vessel owned by such Person, to be
recorded in the office of the Panama Registry, as amended, supplemented and
modified from time to time in accordance with the terms thereof.  “Ship
Mortgages” shall collectively refer to the Ship Mortgages of Borrowers and
Sherwood.

“Vessel” means, for each Borrower or Sherwood, the vessel listed next to such
Person’s name on Schedule 1 hereto.  The term “Vessel” shall include, without
limitation, all on board equipment, machinery and supplies.  “Vessels” shall
collectively refer to all of the Vessels described on Schedule 1.

3.   Section 2.03 of the Original Loan Agreement is amended and restated to read
as follows:

Section 2.03.  The Notes.  Each Loan and each Borrower’s obligation to repay its
Loan shall be evidenced by and repayable with interest in accordance with the
terms of such Borrower’s Note in the form attached hereto as Schedule 2.03, as
amended by an addendum (the “Addendum”) in the form attached to the First
Amendment as Schedule 2.03A.  Principal and interest payable under each Note
shall be repaid in accordance with the repayment terms set forth in the Note, as
amended by the applicable Addendum.  Each Note provides for a default rate of
interest.

4.   Section 2.06 of the Original Loan Agreement is amended and restated to read
as follows, effective as of April 1, 2009:

Section 2.06.  Changes to LIBOR Rate.   The LIBOR Rate in effect hereunder shall
be increased or decreased, as the case may be, effective as of the first day of
each Adjustment Period during the term of this Agreement, in the case of each
Adjustment Period, by an amount equal to any increase or decrease in the LIBOR
Rate from the immediately preceding Adjustment Period, as more fully set forth
in each Note.

5.   With respect to Section 4.05, and the other covenants and provisions of the
Loan Documents pertaining to a “Material Adverse Change” or “Material Adverse
Affect”, Lender agrees, in determining whether a Material Adverse Change or
Material Adverse Effect has occurred or exists, for calendar year 2009 only,
that Lender will disregard the effect of changes in accounting position
resulting from any increase in liability under interest rate swap contracts, or
any decrease in asset value resulting from reductions to the book value of
goodwill or any vessel or other item otherwise required under applicable
accounting standards.  Commencing on January 1, 2010, the determination of
compliance with all financial covenants, and the occurrence of a Material
Adverse Change or Material Adverse Effect, will revert to a determination based
on the results determined by application of GAAP, consistently applied.

6.   The first paragraph of Article V of the Original Loan Agreement is amended
and restated to read as follows:

Each Borrower, severally, and Sherwood agrees as follows.  So long as any
Borrower’s Note shall remain unpaid or any Borrower shall have any unfulfilled
or undischarged obligations or duties under the Loan Documents, the Security
Documents or any related agreements, each Borrower, severally, and Sherwood will
comply with the following requirements. References in this Article V to Note
shall be to the Borrower’s Note, to Vessel shall be the Vessel applicable to
such Borrower or Sherwood, and to Collateral shall be the Collateral provided
directly by Borrower or Sherwood.

7.   Section 5.03 of the Original Loan Agreement is amended and restated to read
as follows:

Section 5.03.  Insurance.  Each Borrower or Sherwood, as applicable shall obtain
and maintain insurance on the Vessel owned by it in accordance with the terms of
Schedule 5.03 hereto.  In addition, as to other business properties owned by
Borrower or Sherwood, Borrower or Sherwood shall obtain and maintain insurance
with insurers believed by Borrower or Sherwood to be responsible and reputable
and reason­ably acceptable to Lender, in such amounts and against such risks as
is usually carried by companies engaged in similar business and owning similar
properties in the same general areas in which Borrower or Sherwood operates or
as may be required by any applicable laws, orders or regulations or as may
reasonably be requested by Lender.  Borrower or Sherwood, as applicable, shall
promptly provide Lender with evidence of such insurance coverage.  Additionally,
Borrower or Sherwood, as applicable, shall provi­de not less than thirty (30)
days advance written notification to Lender in the event of cancellation or
material change in the terms of such coverage.

8.   Section 5.05 of the Original Loan Agreement is amended and restated to read
as follows:

Section 5.05.  Inspection.  At any reasonable time and from time to time, upon
prior notice to Borrower or Sherwood, Lender or any agents or representatives of
Lenders shall be allowed to examine and make and prepare copies of and abstracts
from the records and books of account of, and visit and inspect the Collateral
and the other properties of, Borrower or Sherwood and the other Loan Parties and
to discuss the affairs, finances and accounts of Borrower, Sherwood or any other
Loan Party with any officer of such Person.

9.    Section 5.06 of the Original Loan Agreement is amended and restated as
follows:

Section 5.06.  Maintenance of Properties, Etc.  Borrower or Sherwood shall
maintain and preserve the Collateral owned by it and all of its other properties
necessary or useful in the proper conduct of its current business in good
mechanical condition and running order, ordinary wear and tear excepted.

10.   Section 5.10 of the Original Loan Agreement is amended and restated as
follows:

Section 5.10.  Ownership of Borrower, Sherwood and Parent Guarantor.  Parent
Guarantor shall own 100% of all the issued and outstanding shares of Westbrook
Holdings Ltd. (“Westbrook”).  Westbrook shall own 100% of the all of the issued
and outstanding shares of Sherwood and each Borrower.  There shall be no sale,
transfer, pledge, donation, hypothecation, alienation or other encumbrance of
any of the outstanding shares of Borrower, Sherwood or Westbrook, other than a
transfer of the shares of Westbrook to either Parent Guarantor or a wholly owned
subsidiary of Parent Guarantor.

11.   Section 5.12 of the Original Loan Agreement is amended and restated as
follows:

Section 5.12     Valuation.  Borrowers will deliver to Lender as soon as
available, but in any event within 30 days after the end of each fiscal year
(except the fiscal year ending December 31, 2008) a certificate executed by an
Officer setting forth the Fair Market Value of the Vessels as of such fiscal
year end and attaching the most recent Valuation of the Vessels as of such date.

If for any reason at any time the Total Outstanding shall exceed the Loan Value,
the Borrowers shall immediately prepay the Loans in an aggregate amount equal to
such excess; provided that, the Borrowers shall not be required to make such
prepayment of the Loans so long as (A) no Default or Event of Default shall have
occurred or then be continuing and (B) within 10 days of any such event (or, in
the case of any Disposition of a Vessel, prior to any such Disposition), (x) the
Borrowers pledge additional vessels (to be accepted by Lender in its sole
discretion)s having an appraised fair market value sufficient to eliminate such
deficiency or (y) the Borrowers cause another Subsidiary of Parent Guarantor
(which may be an Excluded Subsidiary) to join this agreement and such Person
pledges additional vessels having an appraised fair market value sufficient to
eliminate such deficiency, in each case, such pledge to be in a manner and
pursuant to documentation satisfactory in all respects to the Lender, and to
include a Valuation of such additional vessels and documentation and information
acceptable to Lender.

12.   The first paragraph of Article VI of the Original Loan Agreement is
amended and restated to read as follows:

Each Borrower, severally, and Sherwood agrees as follows.  So long as any
Borrower’s Note shall remain unpaid or any Borrower shall have any unfulfilled
or undischarged obligations or duties under the Loan Documents, the Security
Documents or any related agreements, each Borrower, severally, and Sherwood will
comply with the following requirements. References in this Article VI to Note
shall be to the Borrower’s Note, to Vessel shall be the Vessel applicable to
such Borrower or Sherwood, and to Collateral shall be the Collateral provided
directly by Borrower or Sherwood.  The negative covenants of Article VI with
respect to each Borrower or the Vessel or Collateral owned by a Borrower shall
also apply to Sherwood, and the Zia Belle and the Collateral owned by
Sherwood.  Without limitation of the foregoing, the Single Purpose Entity
Restrictions of Section 6.09 shall also apply to Sherwood.

13.   Section 6.10 of the Original Loan Agreement is amended and restated to
read as follows:

Section 6.10   Financial Covenants.  Borrower covenants and agrees that for the
term of this Agreement that Parent Guarantor and its consolidated Affiliates and
Subsidiaries shall not violate, on a consolidated basis, the following financial
covenants:

(a) Minimum Consolidated Tangible Net Worth.   The Consolidated Tangible Net
Worth at any time shall not be less than the sum of (i) $235,000,000.00 plus
(ii) an amount equal to 75% of the Consolidated Net Income earned in each full
fiscal quarter ending after September 30, 2007 (with no deduction for a net loss
in any such fiscal quarter) and (iii) an amount equal to 100% of the aggregate
increases in Shareholders’ Equity of Parent Guarantor and its Subsidiaries
after September 30, 2007 by reason of the issuance and sale of Equity Interests
of Parent Guarantor or any Subsidiary (other than issuances to Parent Guarantor
or a wholly-owned Subsidiary), including upon any conversion of debt securities
of Parent Guarantor into such Equity Interests.
 
(b) Minimum Cash Liquidity.  Qualified Cash, plus Availability in an average
daily amount during such calendar month shall not be less than (a) for the
calendar months during 2008, $15,000,000.00, (b) for the months during 2009,
$40,000,000.00, and (c) for each calendar month ending on or after January 31,
2010, $15,000,000.00.
 
(c) Maximum Consolidated Leverage Ratio.  The Consolidated Leverage Ratio at any
time shall not be greater than 3.00:1.00.
 
(d) Minimum Consolidated Fixed Charge Coverage Ratio.  The Consolidated Fixed
Charge Coverage Ratio at any time shall not be less than 1.50:1.00.
 
          (e)  Consolidated Interest Coverage Ratio.  The Consolidated Interest
Coverage Ratio shall not be less than:  (a) for the six months ending June 30,
2009, 1.10:1.00; (b) for the nine months ending September 30, 2009, 1.35:1.00;
and (c) for the fiscal year ending December 31, 2009, 1.75:1.00.

Unless otherwise required by Lender as a result of a Default or a Material
Adverse Change in a Borrower’s or Guarantor’s financial position, compliance
will be tested on a quarterly basis on each March 31st, June 30th, September
30th and December 31st, based on the quarterly consolidated financial statements
of Parent Guarantor.  Notwithstanding anything herein to the contrary (i)
compliance with the financial covenants described in Sections 6.10 (a), 6.10(c)
and 6.10(d) shall not be measured during any quarter in the fiscal year ending
December 31, 2009, and (ii) compliance with the financial covenant described in
Section 6.10(e) shall be measured only for the periods described therein.

14.   The agreement of Lender to enter into this First Amendment is subject to
the condition precedent that Lender shall have received all of the following, in
form and substance acceptable to Lender in its sole discretion:

(a) executed Addendums to the Notes, the Secured Guaranty of Sherwood in the
form attached hereto as Schedule 14(a)(1) and the other Security Documents in
connection with the Zia Belle;

(b) evidence that all insurance policies and insurance coverages required under
any of the Loan Documents with respect to the Zia Belle are in full force and
effect;

(c) opinions of counsel of Borrowers, Parent Guarantor, and Sherwood with
respect to this First Amendment and the Security Documents (including the new
Security Documents in connection with the Zia Belle), confirming Lender’s first
priority ship mortgage on the Zia Belle;

(d) UCC search under the name Sherwood Shipping Corp., reflecting that no UCC
filings exist with respect to any of the Collateral owned by Sherwood Shipping
Corp.;

(e) copies of the Articles of Incorporation and Bylaws or other organizational
documents of Sherwood, certified by an authorized officer of such entity as
being true and correct copies thereof;

(f) signed copies of a certificates of an authorized officer of Borrowers,
Parent Guarantor, and Sherwood which shall certify the names of the officers of
such entities authorized to execute and deliver this First Amendment and the
other Loan Documents to which such entities are a party, and other documents or
certificates to be delivered pursuant to this First Amendment or the related
Security Documents, together with the true signatures of such officers;

(g) copies of the appropriate resolutions and consents of Borrowers, Parent
Guarantor, and Sherwood approving the First Amendment and related Loan
Documents, certified by the Secretary (or other appropriate official) of such
party as being a true and correct copy thereof;

(h) a good standing certificate with respect to Sherwood, issued as of a recent
date by the Secretary of State or other appropriate and authorized official of
Sherwood’s respective jurisdiction of incorporation;

(i) evidence of the proper registry of the Zia Belle in the provisional maritime
registry of the Panama Registry as reflected in registration certificates for
the Vessel, and the acceptance of such registry by the applicable authorities in
the office of the Panama Registry, including the Certificate of Provisional
Registry for the Vessel and  Patente Provisional de Navegacion;

(j) copy of the ownership and registration certificate for the Zia Belle issued
by the applicable Panamanian authorities;

(k) duly executed and filed Security Documents establishing in Lender, as
determined by Lender’s counsel, a first preferred mortgage in the Zia Belle;
subject to no adverse liens, claims or encumbrances (whether or not perfected or
preferred);

(l) evidence satisfactory to Lender that all required licenses have been
obtained by each Borrower and Sherwood and the Philippine Charterer, as
applicable, and are in full force and effect to operate the Vessel according to
her intended use, including, but not limited to, the current operation of the
Vessel;

(m) such other documents, certifications and acknowledgments respecting the Loan
Documents or the Security Documents as Lender shall reasonably request;

(n) the continuing compliance by Borrowers and Guarantors of their obligations
under the Loan Agreement as modified by this First Amendment;

(o) evidence satisfactory to Lender that no Loan Party is in default under the
Loan or any other indenture or loan or credit agreement or any other agreement,
lease or instrument to which it is a party or by which it or its properties may
be bound or affected; or, if such default exists, that it has been waived by the
applicable creditor;

(s) evidence satisfactory to Lender that (i) the Zia Belle is classed as
follows, without outstanding recommendations or notations, and otherwise in
compliance with the Ship Mortgage:

Panama
Navigation                      Classification
Vessel Name                                      Patente
No.                              Society                              Class

ZIA
BELLE                                           38142-PEXT            _______                        ___________
 
and (ii) all required licenses have been obtained by Sherwood and are in full
force and effect to operate the Zia Belle according to its intended use,
including, but not limited to, the current operation of the Zia Belle; and

(t) Lender’s receipt of a modification fee of $225,000.00, as well as all other
fees and costs of Lender in connection with this First Amendment and the
transactions contemplated hereby.

Lender’s waiver of any condition with respect to this First Amendment for a
particular Borrower shall not be deemed absent express written agreement to
constitute a waiver of such condition as it may apply to any other Borrower.

15.   All references in the Original Loan Agreement and other Loan Documents to
“Guarantor” and “Loan Parties” shall include, without limitation,
Sherwood.  Sherwood shall observe all of the obligations imposed on each
Guarantor under the Loan Document.  All references to the Vessels or the
Collateral under the Original Loan Agreement or other Loan Document shall
include, without limitation, the Zia Belle, and Sherwood shall keep and observe
with respect to the Zia Belle all of the Vessel related obligations imposed on
the owner of a Vessel under the Loan Documents, including all obligations with
respect to insurance and the collateral assignment and encumbrance of rights
related to the Zia Belle, her charter hire and insurances, and the operation of
the Zia Belle.  Without limitation of the foregoing, Sherwood’s failure to
maintain the insurance required under the Loan Documents shall constitute a
default under Section 7.01 (p) of the Original Loan Agreement. References to the
Guaranty Documents shall include the Collateral Documents executed by Sherwood.

16.   Lender consents to the change of the classification society for the Mohave
Maiden to “NK.”

17.   Borrowers agree to pay all costs and expenses in connection with the
execution and recordation of this First Amendment and all other Loan Documents
executed in connection therewith.  In addition, Borrowers shall reimburse Lender
for all costs incurred by Lender in connection with this First Amendment and the
transactions contemplated hereby, including without limitation, the costs of
Lender’s counsel, the costs of Lender’s insurance consultants, and the costs of
Panamanian and other foreign counsel.  Nothing herein shall be deemed to waive
or limit Borrowers’ obligation to reimburse and indemnify Lender as provided in
Section 8.05 of the Original Loan Agreement, and Sherwood agrees to similarly
indemnify and reimburse Lender for any costs, liabilities or expenses of Lender
relating to Sherwood or the Zia Belle.  Borrowers agree to pay Lender a
modification fee of $225,000.00 in connection with this First Amendment, which
shall be fully earned and non-refundable.

18.   This First Amendment may be executed separately by the Loan Parties and
Lender in any number of counterparts, each of which, when so executed and
delivered, shall be deemed to be an original and all of which, taken together,
shall constitute but one and the same instrument.

19.   THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FIRST AMENDMENT AND
THE LOAN DOCUMENTS EXECUTED IN CONNECTION THEREWITH SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

20.   Borrowers and Guarantors, by executing this First Amendment, hereby
confirm and acknowledgment that the amounts owed by them under the Loan
Agreement are free and clear of any deductions, offsets, counterclaims or other
reductions.  Borrowers and Guarantors further acknowledge that Lender has fully
complied with all of its obligations under the Loan Agreement, and hereby waive,
release and discharge Lender from and against any claim, right, demand or cause
of action arising on or before the date of this First Amendment out of any act
or failure to act by Lender or any breach by Lender of any obligation under or
in connection with the Loan Agreement, whether arising under theories of
contract, tort, lender liability or otherwise.
 
 
 

 
{signature page follows}
 
 

--------------------------------------------------------------------------------

BORROWERS:

AMOROS MARITIME CORP.

/s/ Christophil B. Costas
By:  Christophil B. Costas
Title:  Attorney in Fact

LANCASTER MARITIME CORP.

/s/ Christophil B. Costas
By:  Christophil B. Costas
Title:  Attorney in Fact

CHATHAM MARITIME CORP.

/s/ Christophil B. Costas
By:  Christophil B. Costas
Title:  Attorney in Fact

GUARANTOR:

TBS INTERNATIONAL LIMITED

/s/ Christophil B. Costas
By:  Christophil B. Costas
Title:  Attorney in Fact

SHERWOOD:
SHERWOOD SHIPPING CORP.

/s/ Christophil B. Costas
By:  Christophil B. Costas
Title:  Attorney in Fact

LENDER:
AIG COMMERCIAL EQUIPMENT FINANCE, INC.

By: /s/ Richard M. Johnston
Name:  Richard M. Johnston
Title:  Vice President

--------------------------------------------------------------------------------

LIST OF SCHEDULES TO FIRST AMENDMENT TO LOAN AGREEMENT
Schedule 1-          
List of Borrowers and Vessels

Schedule   -
            Forms of Opinion  [Forms of Opinions are included after Schedule 14
(a)(1)]

 
 
 

 

--------------------------------------------------------------------------------

SCHEDULE 1
 

Borrower
Vessel Name
Maximum Individual Loan Amount*
Amoros Maritime Corp.
Hopi Princess
$13,000,000
Lancaster Maritime Corp.
Mohave Maiden
$13,000,000
Chatham Maritime Corp.
Zuni Princess
$9,000,000
Sherwood Shipping Corp.
Zia Belle
N/A

VESSEL NAME
PANAMA NAVIGATION PATENTE NO.
PANAMA CALL LETTERS
PHILIPPINES OFFICIAL NO.
PHILIPPINES CALL SIGN
ADDITIONAL VESSEL SPECIFICATIONS
HOPI PRINCESS
34293-08
3EPG2
MNLA000706
DYTU
LENGTH, 145.52 METERS, BREADTH, 22.70 METERS, DEPTH, 13.80 METERS, GROSS
TONNAGE, 13,911, NET TONNAGE 7,162
MOHAVE MAIDEN
34295-08
3EPG7
MNLA000705
DYTT
LENGTH, 167.64 METERS, BREADTH, 23.10 METERS, DEPTH, 14.75 METERS, GROSS
TONNAGE, 17,056, NET TONNAGE 10,329
ZUNI PRINCESS
34300-08
3EPG6
MNLA000703
DYTK
LENGTH, 167.64 METERS, BREADTH, 23.10 METERS, DEPTH, 14.75 METERS, GROSS
TONNAGE, 17,066, NET TONNAGE 10,334
ZIA BELLE
38142-PEXT
3FZQ7
MNLA000716
DYVE
LENGTH, 96.52 METERS, BREADTH, 20.42 METERS, DEPTH, 11.11 METERS,
GROSS TONNAGE, 6,714,
NET TONNAGE, 2,888

--------------------------------------------------------------------------------

SCHEDULE 2.03A

Form of Addendum

ADDENDUM TO PROMISSORY NOTE

 
This Addendum to Promissory Note is made as of March __, 2009 with respect to
the Promissory Note dated February 29, 2008 by [       ] CORP. in the original
stated principal amount of $[   ] (the “Note”) to the order of AIG COMMERCIAL
EQUIPMENT FINANCE, INC.
 

The last two sentences of the first paragraph on Page 1 of the Note, commencing
“The Interest Rate shall be…” and “Beginning on the first day..,” respectively,
are deleted, and the following sentences are inserted in replacement thereof:

 “The Interest Rate shall be equal to the greater of (a) seven percent per annum
or (b) LIBOR Rate (as defined in the Loan Agreement) plus 3.50%.  Payee shall
have the right to prospectively increase the interest rate hereunder following
an Event of Default to the Default Rate, as provided below.  Beginning on the
first day of the Adjustment Period (as defined in the Loan Agreement) following
the date hereof, the Interest Rate hereunder shall be adjusted each Adjustment
Period and such adjustment shall be effective throughout such Adjustment
Period.”

The second paragraph of the first page of the Note is amended and restated to
read as follows:

Commencing on July 1, 2008, and on October 1, 2008 and January 1, 2009, the
undersigned will make quarterly principal payments of $[          ] each
together with accrued interest.  On March __, 2009, the undersigned will a
principal payment of $[        ].  On April 1, 2009, July 1, 2009 and October 1,
2009, the undersigned will make an interest payment in the amount of all accrued
but unpaid interest under this Note.  On January 1, 2010 and on April 1, 2010,
the undersigned will make quarterly payments of accrued interest together with
quarterly principal payments of $[          ] each together with accrued
interest.  Commencing on July 1, 2010, and on each October 1, January 1 and
April 1 thereafter, the undersigned will make quarterly principal payments of
$[        ] each together with accrued interest.  A final payment of all
remaining principal, interest and other amounts due hereunder and under the Loan
Documents (as defined in the Loan Agreement) will be payable on April 1, 2012,
the Maturity Date. Interest hereunder shall accrue on the unpaid balance of this
Note from the date of this Note until paid in full, at the Interest Rate
(subject to Payee’s right to prospectively increase the interest rate to the
Default Rate following an Event of Default), adjusted on the first day of each
Adjustment Period.  Interest shall be payable in arrears on the dates provided
above, and upon prepayment in part of the unpaid principal balance of this Note
(with respect to the amount so prepaid) and upon payment (including prepayment)
in full of the unpaid principal balance of this Note.  All payments received by
Payee shall be applied first to interest and then to principal.
 
The final paragraph of the first page of the Note, which is continued and
completed on the second page of the Note, is amended and restated to read as
follows:

In addition to the required payments set forth above, the undersigned shall have
the right to prepay this Note, in whole or in part, at any time following the
first anniversary date of this Note on fifteen (15) days prior written notice to
the Payee, provided, that the amount of the prepayment is at least $500,000.00
and the prepayment is made in multiples of $500,000.00, and further provided
that on the date of such prepayment, the undersigned shall pay the principal
amount of this Note being so prepaid (the “Prepayment Amount”), together with
all interest, fees and other amounts payable on the amount so prepaid or in
connection therewith to the date of such prepayment and, the Prepayment Fee set
forth below.  If the undersigned prepays this Note in full or in part, the
undersigned shall pay, on the date of such prepayment, a fee  (the “Prepayment
Fee”) to the Payee in an amount equal to (a) 3% of the amount of the principal
prepayment, if prepayment is made before March __ 2010; (b) 2% of the amount of
the principal prepayment, if prepayment is made on or after March __, 2010 but
before March __, 2011, or (c) 1% of the amount of the principal prepayment, if
prepayment is made on or after March __, 2011, provided that the Prepayment Fee
shall be charged and paid only to the extent permitted by Applicable Law.  No
prepayments will be permitted prior to the first anniversary date of this
Note.  Any prepayment pursuant to this paragraph shall be applied to the
installments hereof in the inverse order of maturity. In addition, at the time
of any prepayment, the undersigned shall pay to Payee such amount as will
compensate Payee for any loss, cost, expense, penalty, claim or liability
incurred by Payee as a result of such prepayment which requires the Payee to
prematurely break any related swap, interest rate hedge or other derivative
arrangement.  The Payee shall have no obligation to purchase or enter into any
swap or other derivative arrangement in connection with funding or maintaining
the loan evidenced by this Note.

                             [          ]    CORP.
 

 
 By:                                                      
Name:
Title:   Attorney in Fact
ACCEPTED BY LENDER:

AIG COMMERCIAL EQUIPMENT FINANCE, INC.

 By:                                                      
Name:
Title:

--------------------------------------------------------------------------------

SCHEDULE 14 (a) (1)
Form of Secured Guaranty

 
CHATHAM MARITIME CORP.
 
SECURED GUARANTY
 
SECURED GUARANTY (“Guaranty”), dated as of the 27th day of March, 2009 made by
Sherwood Shipping Corp., a Marshall Islands corporation (the “Guarantor”), in
favor of AIG Commercial Equipment Finance, Inc., a Delaware corporation
(“Lender”).
 
WHEREAS, Lender has made a loan to Chatham Maritime Corp., a Marshall Islands
corporation (the “Borrower”) in the principal amount of US$13,000,000.00 (the
“Loan”), and other borrowers in connection and in accordance with that certain
Loan Agreement dated as of February 29, 2008, between the Borrower, the other
borrowers and guarantor named therein and the Lender, as amended by that certain
First Amendment to Loan Agreement dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the “Loan Agreement”). The
Loan is evidenced by that certain Promissory Note in the principal amount of the
Loan by Borrower dated February 29, 2008, as amended by Allonge of even date
therewith, and as further amended by that certain Addendum to Promissory Note
dated as of the date hereof (collectively, the “Note”); and is secured, inter
alia, by a Panamanian First Naval Mortgage dated February 29, 2008 by Borrower
and various assignments executed in connection therewith, including a First
Amendment to Panamanian First Naval Mortgage of even date herewith
(collectively, as amended, supplemented or otherwise modified from time to time,
the “Borrower Security Documents”); and
 
WHEREAS, Borrower has or may executed various other agreements, notes, leases or
other documents or instruments in connection with the Loan and the Loan
Agreement (such documents, together with the Loan Agreement, the Note and the
Borrower Security Documents, collectively, as amended, supplemented or otherwise
modified from time to time, the “Agreements”); and
 
WHEREAS, to secure this Guaranty as well as the Loan and all other indebtedness
of the Borrower under the Agreements, together with all other indebtedness of
the other Borrowers under the Loan Agreement and all related loan documents,
Guarantor has executed and delivered the following instruments, all of which are
dated as of the date hereof: (i) a Panamanian First Naval Mortgage executed by
Guarantor in favor of Lender with respect to the “Zia Belle” (the “Vessel”);
(ii) that certain Assignment of Charter Hire executed by Guarantor in favor of
Lender with respect to the Vessel; and (iii) that certain Assignment of
Insurances executed by Guarantor and the other assignors named therein in favor
of Lender with respect to the Vessel; and
 
WHEREAS, it is a condition to the modification of the financing provided by, or
the acquisition of the rights transferred to, Lender under the Agreements that
Guarantor, who has a financial interest in Borrower, shall have executed and
delivered this Guaranty.
 
NOW, THEREFORE, in consideration of the premises and to induce Lender to modify,
enter into or become a party to the Agreements, as the case may be, Guarantor
hereby agrees as follows:
 
SECTION 1.  Guaranty. Guarantor hereby absolutely, unconditionally and
irrevocably guarantees, jointly and severally, the prompt and punctual payment
and due performance and observance of all obligations of Borrower now or
hereafter existing under the Agreements, which may in any manner whatsoever be
presently or hereafter due and owing, including without limitation, the payment
of all amounts now or hereafter due from Borrower under the Note, the Loan
Agreement and the other Agreements (collectively, the “Obligations”).
 
SECTION 2.  Guaranty Absolute. Guarantor jointly and severally guarantees that
the Obligations will be paid, performed and observed strictly in accordance with
the terms of the Agreements, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of Lender with respect thereto. The liability of Guarantor under this
Guaranty shall be absolute and unconditional irrespective of:
 
(i)           any lack of validity, regularity or enforceability of any of the
Agreements or any other agreement or instrument relating thereto;
 
(ii)           any lack of validity, regularity or enforceability of this
Guaranty or any other agreement or instrument relating hereto;
 
(iii)           any modification or change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or any other
modification, change, amendment or waiver of or any consent to departure from
any term of any of the Agreements;
 
(iv)           any exchange, release or non-perfection of any collateral, or any
release or Obligations;
 
(v)           any failure on the part of Lender or any other person or entity to
exercise, or any delay in exercising, any right under the Agreements or any
other document or instrument delivered in connection therewith; or
 
(vi)           any other circumstance which might otherwise constitute a defense
available to, or a discharge of, Borrower, the Guarantor or any other guarantor
with respect to the Obligations (including, without limitation, all defenses
based on suretyship or impairment of collateral, and all defenses that Borrower
may assert to the repayment of the Obligations, including, without limitation,
failure of consideration, breach of warranty, fraud, payment, statute of frauds,
bankruptcy, lack of legal capacity, statute of limitations, lender liability,
accord and satisfaction, and usury), this Guaranty and the obligations of the
Guarantor under this Guaranty.
 
Guarantor hereby agrees that if Borrower or any other guarantor of all or a
portion of the Obligations is the subject of a bankruptcy proceeding or similar
proceeding under Title 11 of the U.S. Code or any similar legislation relating
to bankruptcy or insolvency, it will not assert the pendency of such proceeding
or any order entered therein as a defense to the timely payment of the
Obligations. This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Obligations is
rescinded or must otherwise be returned by Lender upon the insolvency,
bankruptcy or reorganization of Borrower or otherwise, all as though such
payment had not been made.
 
Guarantor’s obligations and liability under this Guaranty shall be on a “joint
and several” basis along with Borrower to the same degree and extent as if
Guarantor had been and/or will be a co-principal obligor of the Obligations. In
the event that there is more than one Guarantor under this Guaranty, or in the
event that there are other guarantors, endorsers or sureties of all or any
portion of the Obligations, Guarantor’s obligations and liability hereunder
shall further be on a “joint and several” basis along with such other
guarantors, endorsers and/or sureties.
 
SECTION 3.  Waivers. Guarantor hereby waives:
 
(i)           promptness, diligence, notice of acceptance and any other notice
with respect to any of the Obligations and this Guaranty;
 
(ii)           any requirement that Lender protect, secure, perfect or insure
any security interest or lien on any property subject thereto or exhaust any
right to take any action against Borrower or any other person or entity or any
collateral;
 
(iii)           any right to receive notice of any disposition or retention by
Lender of any collateral and right of redemption relating to any collateral;
 
(iv)           any right to demand or require collateral security from Borrower
or any other person as provided under applicable law or otherwise;
 
(v)           any modification or amendment of the Obligations or any of the
Agreements, or the impairment of real security held for such Obligations, by
Lender as provided under applicable law or otherwise;
 
(vi)           notice of Lender’s acceptance of this Guaranty;
 
(vii)           presentment for payment of the Obligations, notice of dishonor
and of nonpayment, notice of intention to accelerate, notice of acceleration,
protest and notice of protest, collection or institution of any suit or other
action by Lender in collection thereof, including any notice of default in
payment thereof, or other notice to, or demand for payment thereof, on any
party;
 
(viii)                      any right to require Lender to notify Guarantor of
any nonpayment relating to any collateral directly or indirectly securing the
Obligations, or notice of any action or nonaction on the part of Borrower,
Lender, or any other guarantor, surety or endorser of the Obligations, or notice
of the creation of any new or additional Obligations subject to this Guaranty;
 
(ix)           any right to require Lender to notify Guarantor of the terms,
time and place of any public or private sale of any collateral directly or
indirectly securing the Obligations;
 
(x)           any election of remedies by Lender that may destroy or impair
Guarantor’s subrogation rights or Guarantor’s right to proceed for reimbursement
against Borrower or any other guarantor, surety or endorser of the Obligations,
including without  limitation, any loss of rights Guarantor may suffer by reason
of any law limiting, qualifying, or discharging the Obligations;
 
(xi)           any disability or other defense of Borrower, or any other
guarantor, surety or endorser, or any other person, or by reason of the
cessation from any cause whatsoever, other than payment in full of the
Obligations; and
 
(xii)           any statute of limitations or prescriptive period, if at the
time an action or suit brought by Lender against Guarantor is commenced, there
are any outstanding Obligations which are barred by any applicable statute of
limitations or prescriptive period.
 
SECTION 4.  Subrogation. Guarantor hereby agrees it will not exercise any rights
which it may acquire by way of subrogation under this Guaranty, by any payment
made hereunder or otherwise, until all the Obligations shall have been paid in
full. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all the Obligations shall not have been paid
in full, such amount shall be held in trust for the benefit of Lender and shall
forthwith be paid to Lender to be credited and applied upon the Obligations,
whether matured or unmatured, in accordance with the terms of the Agreements. If
(i) the Guarantor shall make payment to Lender of all or any part of the
Obligations and (ii) all the Obligations shall be paid, performed and observed
in full, Lender will, at the Guarantor’s request, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Obligations resulting from such payment by the Guarantor.
 
SECTION 5.  Representations and Warranties. Guarantor hereby represents and
warrants as follows:
 
(a)           Due Execution, Etc. The execution, delivery and performance
(including the incurrence of the Obligations hereunder) by the Guarantor of this
Guaranty do not and will not (i) contravene Guarantor’s organizational documents
or any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or any contractual restriction binding on or affecting
the Guarantor or any of its properties, or (ii) result in or require the
creation or imposition of any lien (other than pursuant hereto) upon or with
respect to any of the Guarantor’s properties. The Guarantor has been duly formed
and is in good standing in its jurisdiction of organization and is duly
qualified as a foreign business entity in all jurisdictions where it must be
qualified pursuant to applicable law. The Guarantor is not in default under any
such law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or any such contractual restriction, which default would
have a Material Adverse Effect on the Guarantor or on the ability of the
Guarantor to carry out its obligations under this Guaranty.
 
(b)           Government Consents. No authorization, consent, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery or performance by
the Guarantor of this Guaranty.
 
(c)           Legal, Valid and Binding Nature. This Guaranty is the legal, valid
and binding obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms.
 
(d)           Solvency. The fair value of the property of the Guarantor exceeds
the total amount of liabilities (including, without limitation, contingent
liabilities) of the Guarantor; the present fair market value of the assets of
the Guarantor exceeds the amount that will be required to pay the probable
liability of the Guarantor on its existing debts as they become absolute and
matured; the Guarantor is able to realize upon its assets and pay its debts and
other liabilities, contingent obligations and other commitments as they mature
in the normal course of business; the Guarantor does not intend to, and does not
believe that it will, incur debts or liabilities beyond the Guarantor’s ability
to pay as such debts and liabilities mature; and the Guarantor is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which the property remaining with the Guarantor would
constitute unreasonably small capital after giving due consideration to the
prevailing practice in the industry in which the Guarantor is engaged. In
computing the amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount which, in light of all facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
 
(e)           Absence of Litigation. There are no actions, suits,
investigations, litigation or proceedings pending or, to the knowledge of the
Guarantor, threatened against or affecting the Guarantor or the properties of
the Guarantor before any court, arbitrator or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
which purports to affect any part of the transactions contemplated hereby or by
the Agreements or the legality, validity or enforceability of this Guaranty.
There are no actions, suits, investigations, litigation or proceedings pending
or threatened against or affecting the Guarantor or its affiliates or
subsidiaries of the Guarantor or the properties of the Guarantor or its
affiliates or subsidiaries before any court, arbitrator or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign which, if determined adversely to the Guarantor, would have a Material
Adverse Effect on the financial condition or continued operation of Guarantor or
its affiliates or subsidiaries on a consolidated basis or any part of the
transactions contemplated hereby or by the Agreements.
 
(f)           Payment of Taxes. The Guarantor has filed all tax returns
(federal, provincial, local and foreign) required to be filed and paid all taxes
shown thereon to be due, including interest and penalties, except for such taxes
as are being contested in good faith and by proper proceedings and with respect
to which appropriate reserves are being maintained by the Guarantor, or except
where the failure to file such returns or pay such taxes would not have a
Material Adverse Effect on the Guarantor or otherwise on the ability of the
Guarantor to carry out its obligations under this Guaranty.
 
SECTION 6.  Integration. This Guaranty together with the Loan Documents
constitutes the entire agreement and understanding between Lender and Guarantor
relating to the subject matter hereof, and supersedes all prior negotiations,
agreements and understandings relating to such subject matter. In entering into
this Guaranty, Guarantor acknowledges that it is relying on no statement,
representation, warranty, covenant or agreement of any kind made by Lender or
any employee or agent of Lender.
 
SECTION 7.  Amendments, Etc. No amendment or waiver of any provision of this
Guaranty or consent to any departure by the Guarantor herefrom shall in any
event be effective unless the same shall be in writing and signed by Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
 
SECTION 8.  Addresses for Notices. All notices, requests, demands and other
communications provided for hereunder shall be in writing and sent in accordance
with the terms and conditions of the Loan Agreement.
 
SECTION 9.  No Waiver; Remedies. No failure on the part of Lender to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law or in any of the Agreements or other Loan Documents.
 
SECTION 10.  Right of Set-off. Upon the occurrence and during the continuance of
any Event of Default Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by Lender to or for the credit or
the account of the Guarantor against any and all of the obligations of the
Guarantor now or hereafter existing under this Guaranty, irrespective of whether
or not Lender shall have made any demand under this Guaranty and although such
obligations may be contingent and unmatured. Lender agrees promptly to notify
the Guarantor after any such set-off and application, provided that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of Lender under this Section are in addition to the
other rights and remedies (including, without limitation, other rights of
set-off) which Lender may have.
 
SECTION 11.  Continuing Guaranty; Transfer of Obligations. This Guaranty is a
continuing guaranty and shall (i) remain in full force and effect until payment
in full of the Obligations and all other amounts payable under this Guaranty,
(ii) be binding upon the Guarantor and its successors and assigns, and (iii)
inure to the benefit of and be enforceable by Lender and its successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(iii), Lender may assign or otherwise transfer the right to collect the
Obligations to any other person or entity, and such other person or entity shall
thereupon become vested with all the rights in respect thereof granted to Lender
herein or otherwise.
 
SECTION 12.  Indemnification. Guarantor hereby agrees, jointly and severally, to
indemnify and hold harmless Lender and its affiliates and their respective
directors, officers, employees and agents, including all professionals (each an
“Indemnified Party”) from and against any and all expenses, losses, claims,
damages and liabilities (including, without limitation, all legal fees and
disbursements of attorneys and other professionals incurred by or asserted
against any Indemnified Party in connection with or arising out of, relating to,
or by reason of any investigation, litigation or proceeding arising out of,
relating to or in connection with any claims made by any person or entity in any
way relating to this Guaranty or the  transactions contemplated hereby, but
excluding therefrom all expenses, losses, claims, damages, and liabilities
arising out of or resulting from the gross negligence or willful misconduct of
any Indemnified Party.
 
SECTION 13.  GOVERNING LAW. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE.
 
SECTION 14. JUDICIAL PROCEEDINGS. GUARANTOR AND, BY ITS ACCEPTANCE HEREOF,
LENDER, HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF
ANY DISPUTE ARISING UNDER OR RELATING TO THIS GUARANTY AND AGREES THAT ANY SUCH
DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. THE PARTIES AGREE
THAT ANY ACTION OR PROCEEDING ARISING UNDER OR RELATED TO THIS GUARANTY MAY BE
COMMENCED IN ANY FEDERAL OR STATE COURT SITTING IN THE SOUTHERN DISTRICT OF NEW
YORK AND THE PARTIES IRREVOCABLY SUBMIT TO THE JURISDICTION OF EACH SUCH COURT
AND AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY
SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO
THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM, THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER, OR THAT THE AGREEMENT OR THE SUBJECT MATTER THEREOF OR THE TRANSACTION
CONTEMPLATED HEREBY OR THEREBY MAY NOT BE ENFORCED IN OR BY SUCH COURT. THE
GUARANTOR AND LENDER AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
 
SECTION 16.  DEFINITIONS. Capitalized terms used but not defined herein shall
have the meanings set forth in the Loan Agreement.
 
SECTION 17.  COLLATERAL. Guarantor hereby waives any and all rights to claim a
lien or other security interest in and to any of the Vessels securing the
obligations arising under the Loan Agreement. In the event of any Event of
Default, Guarantor shall waive any possessory or other right in and to all such
Vessels.
 
[signature pages follow]

 
 

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IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the date
first above written.
 
GUARANTOR:
 
Sherwood Shipping Corp.
 
By:                                                                           
 
Name:  Christophil B. Costas
 
Title:  Attorney in Fact

 
 

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[Cardillo & Corbett Letterhead]

March 27, 2009
 
AIG Commercial Equipment Finance, Inc.
 
5700 Granite Parkway
 
Suite 850
 
Plano, Texas 75024
 
 
Re:
First Amendment to Loan Agreement dated March 27, 2009 (the "First Amendment")
by and among Amoros Maritime Corp., Chatham Maritime Corp. and Lancaster
Maritime Corp. as Borrowers (each a "Borrower" collectively, the "Borrowers"),
Sherwood Shipping Corp. ("Sherwood") TBS International Limited, as Parent
Guarantor and AIG Commercial Equipment Finance, Inc., as Lender (the "Lender")

 
Gentlemen:
 
We have acted as counsel for the Borrowers, Sherwood and the Parent Guarantor,
all in connection with the First Amendment to the Loan Agreement dated February
29, 2008, (the "Loan Agreement') among the Borrowers, the Parent Guarantor and
the Lender pursuant to which the Lender made a Loan to the Borrowers in the
principal amount of $35,000,000.  Capitalized terms used herein, but not defined
herein, shall have the meaning set forth in the Loan Agreement and in the First
Amendment.
 
For purposes of rendering our opinion set forth herein, we have reviewed
originals or copies of the following documents which pertain directly to the
First Amendment (collectively, the " Transaction Documents"):
 
 
1.
First Amendment

 
2.
Loan Agreement;

 
3.
Notes by each of the Borrowers dated February 29, 2008 set forth below in the
amount set forth below:

 
Borrower                                                      Note Amount
 
Amoros Maritime Corp.                                                      $
9,000,000.00
Chatham Maritime
Corp.                                                      $13,000,000.00
Lancaster Maritime
Corp.                                                      $13,000,000.00
 
 
4.
Addendum to each of the Notes;

 
5.
Ship Mortgage by Sherwood in favor of the Lender covering the Panama registered,
Philippine flag MN ZIA BELLE (the "Vessel);

 
6.
Assignment of Insurances by Sherwood and the other assignors described therein;

 
7.
Assignment of Charter by Sherwood;

 
8.
Assignment of Charter Hire by the various charterers and service providers
described therein for the Vessel;

 
9.
Secured Guaranty by Sherwood;

 
10.
First Amendment to Panamanian First Naval Mortgage in respect of each of the M/V
HOPI PRINCESS, M/V ZUNI PRINCESS and M/V MOHAVE MAIDEN

 
For purposes of rendering our opinion set forth herein, we have also examined
originals or copies of corporate records, documents and instruments relating to
the Borrowers and to Sherwood.  In addition to the foregoing, we have also
reviewed such other certificates, documents and instruments as necessary for us
to render the opinions set forth herein.
 
In such examination we have assumed the genuineness of all signatures (other
than the Borrowers, Sherwood and the Parent Guarantor), the authenticity of all
documents submitted to us as originals and the conformity with the original
documents of all documents submitted to us as copies.  As to factual matters we
have, to the extent that relevant facts were not independently established by
us, relied upon certificates of public officials and certificates or
representations made in writing by officers or representatives of the Borrowers
and the representations and warranties of the Borrowers in the Transaction
Documents.  We have no knowledge that any such certificates, representations or
warranties are incorrect.  We have also assumed the power, authority and legal
right of all parties to the Transaction Documents other than the Borrowers and
Sherwood to enter into and perform their respective obligations thereunder and
the due authorization, execution and delivery of the Transaction Documents by
such parties.  We have further assumed the validity and enforceability of the
Transaction Documents under all applicable laws other than the federal laws of
the United States of America, the laws of the State of New York and the laws of
the Republic of the Marshall Islands.  With respect to the laws of the Republic
of Panama and of Bermuda, we have relied on the opinion of special Panamanian
counsel, Patton, Moreno & Asvat and special Bermuda counsel, Conyers, Dill &
Pearman.
 
In rendering this opinion, we express no opinion as to the effect of any laws of
any jurisdiction other than the federal laws of the United States of America,
the laws of the State of New York, and the laws of the Republic of the Marshall
Islands.  Insofar as Marshall Islands law is involved in this opinion, we have
made such examination of the laws of the Marshall Islands as we considered
necessary or appropriate in connection with the opinions expressed herein and we
have relied upon opinions and advice of Marshall Islands counsel rendered in
transactions which we consider to be sufficiently similar to those contemplated
by the Transaction Documents as to afford a satisfactory basis for such
opinions, upon our independent examination of the Marshall Islands Associations
Law of 2007 as published by The Marshall Islands Maritime & Corporate
Administrators, Inc., and upon our knowledge of the interpretation of analogous
laws in the United States of America.  In rendering this opinion, we have
assumed 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 Marshall Islands.
 
Based upon our examination of the foregoing, subject to the qualifications
herein set forth, we are of the opinion that:
 
1.           Each Borrower and Sherwood is a company validly formed and duly
existing under the Marshall Islands, is qualified to do business and own and
operate its assets and is in good standing under the laws of the Marshall
Islands.
 
2.           Each Borrower and Sherwood has all requisite power and authority,
corporate or otherwise, to conduct its business, to own its assets and to
execute and deliver, and to perform all of its obligations under the Transaction
Documents and the Security Documents to which it is a party.
 
3.           The individuals executing the Transaction Documents on behalf of
each Borrower and Sherwood have been duly authorized and empowered to do so.
 
4.           The execution, delivery and performance by each Borrower and
Sherwood of the Transaction Documents to which it is a party, have been duly
authorized by all necessary action and do not and will not (i) require any
further or additional consent or approval of the directors, shareholders or
partners of such Borrower and Sherwood, or any authorization, consent or
approval by any governmental department, commission, board, bureau, agency or
instrumentality, or (ii) violate any provision of any law, rule or regulation
having applicability to such Borrower and Sherwood, or of the, articles of
incorporation, By-laws or other organizational documents of such Borrower and
Sherwood.
 
5.           The execution, delivery and performance by each Borrower and
Sherwood and the Parent Guarantor of the Transaction Documents to which it is a
party do not and will not (i) to the best of our knowledge after due inquiry,
violate any provision of any order, writ, injunction or decree presently in
effect having applicability to such Borrower, Sherwood or the Parent Guarantor,
or (ii) to the best of our knowledge after due inquiry, result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which such Borrower, Sherwood or the
Parent Guarantor is a party or by which either of them or their properties may
be bound or affected.
 
6.           All of the Transaction Documents have been duly executed and
delivered to Lender by each Borrower and Sherwood, and no consents, permissions
or authorizations are required from any other parties in connection with the
execution and delivery of the Transaction Documents.
 
7.           Each of the Transaction Documents to which Sherwood and any
Borrower is a party (except the Ship Mortgage) is a legal, valid and binding
instrument, enforceable against Sherwood and such Borrower in accordance with
its terms.
 
8.           The courts of the State of New York would, in a properly presented
case with respect to the Transaction Documents, enforce against the Borrower,
Sherwood and the Parent Guarantor the choice of New York law provisions of the
Transaction Documents.
 
9.           To the best of our knowledge after due inquiry, each Borrower and
Sherwood has all permits and approvals that are required for execution and
delivery of the Transaction Documents and the operation of its business and
assets.
 
10.           There are no actions, suits or proceedings pending or, to the best
of our knowledge after due inquiry, threatened against any Borrower, Sherwood or
the Parent Guarantor, or the properties of any Borrower, Sherwood or the Parent
Guarantor before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to such Borrower, Sherwood or the Parent Guarantor, would have a
Material Adverse Effect on the financial condition, properties, or operations of
such party and its ability to perform under the Transaction Documents.
 
11.           After due inquiry, we have no knowledge of any outstanding
judgments against any Borrower, Sherwood or the Parent Guarantor.
 
The opinions expressed in this letter are made subject to and are qualified by
the following:
 
 
a)
The enforceability of the Transaction Documents shall be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
application affecting the rights and remedies of secured creditors.

 
 
b)
The effect and application of general principles of equity, whether considered
in a proceeding in equity or at law;

 
 
c)
Limitations imposed by or resulting from the exercise by any court of its
discretion; and

 
 
d)
Limitations imposed by reason of generally applicable public policy principles
or considerations.

 
In our opinion, the foregoing exceptions (b), (c) and (d) do not make the
remedies and procedures which would be available under the Transaction Documents
or applicable law inadequate for the ultimate practical realization of the
primary substantive benefits intended to be available to the Lender under the
Transaction Documents.
 
The opinions expressed in this letter are given solely for the benefit of
Lender, its successors and assigns (including any purchaser of all or any
portion of the Loan), and any law firm representing Lender, its successors or
assigns (including any purchaser of the Loan), in the sale of the Loan in
connection with the transaction referred to herein.  The opinions expressed in
this letter are rendered as of the date hereof and we express no opinion as to
circumstances or events that may occur subsequent to such date.
 
Very truly yours,
 
CARDILLO & CORBETT
 
By: /s/ Christophil B.
Costas                                                                
Christophil B. Costas
 

 
 

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[Patton, Moreno & Asvat Letterhead]
 

 
27th March, 2009

 
Messrs.

 
AIG Commercial Equipment Finance Inc.

 
5700 Granite Parkway

 
Suite 850

 
Plano, Texas 75024

 
U.S.A.

 
Dear Sirs,

 
RE:  US$ 35,000,000 Loan to the Borrowers

1.
We have acted as special Panamanian legal advisers for Amoros Maritime Corp.
("Amoros"), Lancaster Maritime Corp. ("Lancaster") and Chatman Maritime Corp.
("Chatinan" which together with Amoros and Lancaster will be hereinafter
referred to as the "Borrowers"), Sherwood Shipping Corp. as guarantor
("Sherwood" which together with the Borrowers will be hereinafter referred to as
the "Owners") and TBS International Limited (the "Parent Guarantor"), all in
connection with the Loan Agreement dated February 29, 2008 (the "Original Loan
Agreement") which has been supplemented and amended by a First Amendment to Loan
Agreement dated 27th March, 2009 (the "First Loan Amendment" which together with
the Original Loan Agreement will be hereinafter referred to as the "Agreement")
and the loan made pursuant thereto by AIG Commercial Equipment Finance, Inc.
(the "Mortgagee") in connection with the transactions contemplated therein and
pursuant to which the Mortgagee has agreed to make available a facility of up to
US$35,000,000 (the "Loan") to the Borrowers. Capitalized terms used herein, but
not defined herein; shall have the meaning set forth in the Agreement.

2.
For the purpose of giving this opinion, we have only examined original,
facsimile or photocopies of:

 
a)
the First Loan Amendment;

 
b)
a first preferred mortgage dated 27th March. 2009 (the "Sherwood Mortgage")
executed by Sherwood in favour of the Mortgagee over the vessel "Zia Belle"
registered in the name of Sherwood under the flag of the Republic of Panama (the
"Zia Vessel"); and

 
c)
a first fleet amendment to Panamanian naval mortgage dated 27th March 2009 (the
"First Fleet Mortgage Amendment") executed by the Borrowers in favour of the
Mortgagee amending first mortgages registered at the Public Registry Office (the
"First Mortgages") over the vessels "Hopi Princess" (the "Hopi Vessel")
registered in the name of Amoros under the flag of the Republic of Panama, the
"Zuni Princess" (the "Zuni Vessel") registered in the name of Chatham under the
flag of the Republic of Panama, the "Mohave Maiden" registered in the name of
Lancaster under the flag of the Republic of Panama (the "Mohave Vessel" which
together with the Zuni Vessel and the Hopi Vessel will be hereinafter referred
to as the "Vessels").

items (a) to (c) will be hereinafter referred to as the "Documents").

We have made no independent investigation of any factual information contained
in the Documents. However, we have undertaken searches at the Shipping Bureau
and Public Registry in the Republic of Panama in respect of the Vessels as of
the date hereof.

Our due diligence and similar factual investigations have been limited to the
referred searches.
 
3.
This legal opinion is limited to and is given on the basis of the laws of Panama
in force as of the date hereof as currently applied by the Courts of Panama. We
have not investigated, and we do not express or imply any opinions whatsoever
with respect to the laws of any other jurisdiction or the effects thereof.

 
4.
For the purposes of this opinion, we have assumed:

 
 
(a)
that the Documents are within the capacity and power of, and have been duly
authorized, executed and delivered by each of the parties;

 
(b)
the genuineness of all signatures on all documents submitted, the accuracy of al
statements appearing therein, and the authenticity and conformity of all such
documents, whether submitted to us originals or copies (including, without
limitation, drafts, copies or photocopies);

 
(c)
that the Documents are legal, valid, binding and enforceable according to the
laws, other than laws of Panama, by which these are expressed to be governed;

 
(d)
that no action suit, proceeding, litigation, or dispute against the Vessels are
currently taking place or pending which may affect the capacity and/or ability
of the Owners to enter into and perform their obligations under the Documents;

 
(e)
that the Documents have been executed and delivered outside of Panama.

5.
We are of the opinion that insofar as Panamanian law is concerned:

 
(a)
subject to what is stated herein, the Sherwood Mortgage and the First Fleet
Mortgage Amendment (i) constitute valid and legally binding obligations of the
Owners enforceable in accordance with its terms and the laws of the Republic of
Panama and (ii) contains the customary remedies included in similar documents
used by international institutional lenders to effectuate naval mortgages
encumbering vessels registered in the Republic of Panama in transactions
involving substantial amounts of credit;

 
(b)
the execution and delivery of, the performance of its obligations under, and
compliance by the Owners with the provisions of, the Sherwood Mortgage and the
First Fleet Mortgage Amendment will not contravene any existing applicable law,
statute, rule or regulation, decree or permit of the Republic of Panama;

 
(c)
subject to what is stated below, no consents, authorizations, licenses or
approvals of, or filings or registration with or declarations to, any
governmental or public bodies or authorities or courts of Panama are required by
the Owners to authorize, or required by the Owners in connection with, the
execution, delivery, validity, enforceability or admissibility in evidence of
the Sherwood Mortgage and First Fleet Mortgage Amendment or the performance of
the Owners of its obligations thereunder;

 
(d)
save for the permanent registration of the Sherwood Mortgage and the First Fleet
Mortgage Amendment together with attachments thereto in Panama, it is not
necessary to ensure the legality, validity, enforceability or admissibility in
evidence of the Documents that any other instrument be notarized, filed,
recorded, registered or enrolled in any court, public office elsewhere in the

 
(e)
Republic of Panama or that any stamp, registration or similar tax or charge be
paid in the Republic of Panama on or in relation to any of the Documents save
for the customary mortgage registration fees, and a stamp tax at the rate of
US$0.10 for each US$100 of the face value of the obligations evidenced in the
Documents which may be levied in the event that any of the Documents are
submitted before any administrative or judicial authority in Panama;

 
(f)
the Sherwood Mortgage on account of its preliminary registration in the Public
Registry Office of the Republic of Panama constitutes a legal and valid mortgage
over the Zia Vessel, and will so constitute as long as the Sherwood Mortgage is
filed for final registration at the Panama Registry Office whitin six months
from the date of their preliminary registration and the definite registration is
completed. Upon such registration the Sherwood Mortgage will rank from the date
of its preliminary registration as a first mortgages over the Zia Vessel.

the First Fleet Mortgage Amendment on account of its preliminary registration in
the Public Registry Office of the Republic of Panama constitutes a legal and
valid mortgage amendment over the Mortgages of the respective Vessels, and will
so constitute as long as the First Fleet Mortgage Amendment is filed for final
registration at the Panama Registry Office whithin six months from the date of
their preliminary registration and the definite registration is completed. Upon
such registration the First Fleet Mortgage Amendment will rank from the date of
their preliminary registration as a first amendment to the Mortgages over the
Vessels.

The "dual registry" of the Vessels with the Maritime Industry Authority of the
Republic of the Philippines will not adversely affect the validity
enforceability or priority of the Sherwood Mortgage or the First Fleet Mortgage
Amendment.

 
(g)
no taxes of the Republic of Panama are imposed by withholding or otherwise on
any payment to be made by the Owners under the Sherwood Mortgage and the First
Fleet Mortgage Amendment or are imposed on or by virtue of the execution or
delivery of the Sherwood Mortgage and the First Fleet Mortgage Amendment;

 
(h)
the courts of the Republic will award a judgment in relation to the Sherwood
Mortgage and the First Fleet Mortgage Amendment expressed in terms of Dollars in
respect of any amount due and owing to the Mortgagee under the Documents but the
Owners shall be entitled to satisfy the judgment in a currency which is legal
tender in Panama (Balboas an Dollars as of this date);

 
(i)
the Mortgagee will not be deemed to be resident, domiciled, carrying on business
or subject to taxation in Panama by reason only of the negotiation, preparation,
execution, performance, enforcement of, and/or receipt of any payment due from
the Owners under any of the Documents;

 
(j)
it is nor necessary under the laws of the Republic of Panama (i) in order to
enable the Mortgagee to enforce its rights under the Documents or (ii) by reason
of the execution, delivery and performance of any the Documents by the Mortgagee
that the Mortgagee should be licensed qualified or otherwise entitled to carry
on business in the Republic of Panama;

 
(k)
the Zia Vessel is validly registered as a Panamanian vessel on a provisional
basis at the Shipping Bureau of the Republic of Panama free from registered
encumbrances other than the Sherwood Mortgage which rank as a first priority
mortgage over said vessel in favour of the Mortgagee; and

 
(1)
the Hopi Vessel is validly registered as a Panamanian vessel on a permanent
basis at the Shipping Bureau of the Republic of Panama free from registered
encumbrances other than the first mortgage under Microjacket: N- 31136,
Document: 1354962 which ranks as a first priority mortgage over said vessel in
favour of the Mortgagee;

 
(m)
the Mohave Vessel is validly registered as a Panamanian vessel on a permanent
basis at the Shipping Bureau of the Republic of Panama free from registered
encumbrances other than the first mortgage under Microjacket: N- 31138,
Document: 1348044 which ranks as a first priority mortgage over said vessel in
favour of the Mortgagee; and

 
(n)
the Zuni Vessel is validly registered as a Panamanian vessel on a permanent
basis at the Shipping Bureau of the Republic of Panama free from registered
encumbrances other than the first mortgage under Microjacket: N-31075, Document:
1350578 which ranks as a first priority mortgage over said vessel in favour of
the Mortgagee.

6.
The opinion expressed above is subject to the following qualifications:

 
(a)
in respect of certain enforcement rights of the Mortgagee concerning the
administration of the Vessels as well as the sale thereof following an Event of
Default, the following should be observer:

 
(i)
in the event that the Mortgagee takes possession of the Vessels, the Mortgagee
would have to render accounts to the respective Owners on a quarterly basis and
at the end of the period of administration unless otherwise agreed upon by the
parties;

 
(ii)
the power of non judicial sale of the Vessel in the Sherwood Mortgage may only
be exercised upon prior notice of at least twenty calendar days of the date on
which the sale is to take place, such notice to be given to the Owners and all
other mortgagees of the vessels whose mortgages are recorded at the Public
Registry in Panama and otherwise in accordance with Article 1527 of the Code of
Commerce;

 
(iii)
the waiver of the Owners of the right to claim damages from the Mortgagee in
respect of the certain remedies such as of taking possession and management, as
well as private sale, of the Vessels may by considered unenforceable by a
Panamanian court to the extent that the loss or damages resulting from such
action by the Mortgagee involves willful misconduct, recklessness or gross
negligence;

 
(b)
if a final conclusive judgment of a foreign court of competent jurisdiction were
rendered against the Owners under the Sherwood Mortgage and the First Fleet
Mortgage Amendment, such judgment would be recognized and enforced in the Courts
of the Republic of Panama without retrial of the originating action by
instituting exequatur proceedings in the Courts of Panama and upon determination
by such tribunal that:

 
(i)
the courts of the judgment country would in similar circumstances recognize a
final conclusive judgment of the courts of the Republic of Panama;

 
(ii)
the judgment has been issued as a consequence of an action "in personam";

 
(iii)
the judgment was rendered after personal service on the defendant;

 
(iv)
the cause of action upon which the judgment was based does not contravene the
public policy of the Republic of Panama;

 
(v)
the documents evidencing the judgment are in authentic form according to the law
of the relevant foreign court and have been duly legalized by a Consul of the
Republic of Panama or pursuant to the 1961 Hague Convention on the legalization
of documents; and

 
(vi)
a copy of the final judgment has been translated into Spanish by a licensed
translator in Panama.

 
(c)
we would point out that obligations which may be unenforceable against a primary
obligor or in respect of a primary obligation may be similarly unenforceable
against a guarantor, or in respect of a secondary obligation as a guarantee or
secondary obligation may not exist without a valid principal obligation. In
addition, whilst a guarantor may agree not to limit his liability to the
principal obligation, the guarantee may not extend to encompass more than the
principal obligation be it in respect of the amount involved or the terms or
conditions of the said principal obligation. In such case, a court may reduce
the obligation to that of the principal obligation;

 
(d)
the enforceability of the Documents may be limited by bankruptcy,
reorganization, insolvency, moratorium and other similar laws affecting
generally the enforcement of creditors rights.

7.
This opinion is limited to matters of the laws of the Republic of Panama as of
the date hereof and in respect of the Sherwood Mortgage and the First Fleet
Mortgage Amendment and the laws of Panama as they would generally apply, and
pursuant to which a mortgage may secure the fixed or maximum principal referred
to therein, an in addition, a mortgage would also secure, unless otherwise
stated, interest, cost, collections expenses and other sums agreed upon under
any other concept in the Sherwood Mortgage and which would include the Secured
Obligations as referred in the Sherwood Mortgage to the extent that these relate
to the Loan and/ or the Zia Vessel.

We would point out that modifications to the terms of the Sherwood Mortgage and
the First Fleet Mortgage Amendment or Agreement or variations in respect of
certain matters as may be contemplated under the terms thereof, such as interest
rates or default interest rates, or terms of repayment of the Loan, or the
possibility of securing additional or future obligations, may require the
registration of amendments to the Sherwood Mortgage and the First Mortgages or
consultation with us as to the effectiveness thereof.

8.
The opinions expressed in this letter are given solely for the benefit of the
Mortgagee, its successors and assigns (including any purchaser of all or any
portion of the Loan), and any law firm representing the Mortgagee, its
successors or assigns (including any purchaser of the Loan), in the sale of the
Loan in connection with the transaction referred to herein, The opinions
expressed in this letter are rendered as of the date hereof and we express no
opinion as to circumstances or events that may occur subsequent to such date.

 
Yours faithfully,

/s/ Belisario Porras
 

 
Belisario Porras

 
BJP/ pgc

 

 
 

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