Exhibit 10.4

 

FORBEARANCE AGREEMENT AND WAIVER

 

THIS FORBEARANCE AGREEMENT AND WAIVER (this “Forbearance Agreement”) dated as of
September 7, 2011 is 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 whose tax domicile is in Ireland
(“TBSIL Guarantor”), Sherwood Shipping Corp. (“Sherwood”), TBS Holdings Limited,
a Bermuda company (“Bermuda Holdco”), TBS International public limited company,
an Irish public limited company (“Parent Guarantor”) and AIG Commercial
Equipment Finance, Inc., a Delaware corporation (together with its successors
and assigns, “Lender”). Unless specifically defined in this Forbearance
Agreement, capitalized terms not used in this herein shall have the meanings
assigned in the Loan Agreement, as amended by the Loan Agreement Amendments
(defined below).

 

WHEREAS, Borrowers, TBSIL Guarantor and Lender are parties to that certain Loan
Agreement dated February 29, 2008, as amended by (i) that certain First
Amendment to Loan Agreement dated as of March 27, 2009; (ii) that certain Second
Amendment to Loan Agreement dated as of December 30, 2009, (iii) that certain
Third Amendment to Loan Agreement dated as of April 22, 2010, (iv) that certain
Fourth Amendment to Loan Agreement dated as of January 27, 2011, that certain
Fifth Amendment and Waiver to Loan Agreement dated as of March 11, 2011 and that
certain Sixth Amendment to Loan Agreement dated as of April 15, 2011
(collectively the “Loan Agreement Amendments”; the Loan Agreement together with
the Loan Agreement Amendments shall be referred to herein collectively as the
“Loan Agreement;”

 

WHEREAS, the Borrowers have advised Lender that the Borrowers anticipate the
following Event of Default under the Loan Agreement from and after the date
hereof and prior to December 15, 2011:  (i) failure to pay to the Lender on
October 1, 2011, the principal amounts due under the Loan Agreement as set forth
in Section 2.03 of the Loan Agreement (as later amended by the Fourth Amendment
to the Loan Agreement), which payment failure would be an Event of Default under
Section 7.01(a) of the Loan Agreement (the “Payment Event of Default”),

 

WHEREAS, the Borrowers have advised Lender that the Borrowers anticipate one or
more of the following Events of Default under the Loan Agreement from and after
the date hereon and prior to December 15, 2011: (i) the potential failure to
deliver a thirteen week forecast projection that Holding’s Qualified Cash will
exceed the minimum amount under Section 6.10 (b) of the Loan Agreement in each
case for any weekly or four week reporting period occurring prior to
December 15, 2011 which failure should such occur would be an Event of Default
under Section 7.01(b) of the Loan Agreement (the “Cash Flow Forecasts Event of
Default”), provided, that the Borrowers shall continue to be required to deliver
Cash Flow Forecasts as required in Section 6.10(b) of the Loan Agreement, and
the failure to deliver such reports shall not be a Specified Default; (ii) the
potential failure to satisfy the Minimum

 

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Consolidated Interest Charges Coverage Ratio of Section 6.10 (e) (the “Interest
Charges Ratio Default”) and/or the Maximum Consolidated Leverage Ratio of
Section 6.10 (c) (the “Leverage Ratio Default”), and/or the minimum liquidity
requirements of Section 6.10 (b),  in each case, with respect to four fiscal
quarter period ending as of September 30, 2011, which failures should such occur
would each be an Event of Default under Section 7.01(b) of the Loan Agreement
(collectively, the “Financial Covenant Compliance Events of Default”), and
(iii) one or more cross-defaults arising as a result of the occurrence of
certain defaults and events of default under other financing agreements
including that certain Second Amended and Restated Credit Agreement dated as of
January 27, 2011 by and among one or more of the Loan Parties, each lender party
thereto and Bank of America, N.A. as Administrative Agent, which such defaults
and events of default should such occur would be an Event of Default under
Section 7.01 of the Loan Agreement (the “Cross-Defaults”; the Cross Defaults and
the Financial Covenant Compliance Events of Default together, the “Specified
Defaults”),

 

WHEREAS, the Borrowers have requested that the Lender and the Lender is willing
to (i) forbear, as herein provided, from exercising their rights and remedies
under the Loan Agreement and applicable laws as a result of the Payment Event of
Default and (ii) waive, as herein provided, the Specified Defaults to the extent
such Specified Defaults occur.

 

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.                                       Forbearance Arrangements.  Subject to
all of the other terms and conditions set forth herein, and (a) solely with
respect to the Payment Event of Default, the Lender agrees to forbear from
exercising its rights and remedies under the Loan Agreement and applicable laws
(arising as a result of the Payment Event of Default (it being understood that
nothing herein shall constitute a waiver of any Payment Event of Default) and
(b) solely with respect to the Specified Defaults, the Lender agrees to waive
the Specified Defaults, in each case, solely during the period from the date
hereof until the Forbearance Termination Date.  The foregoing waiver shall apply
only to each Specified Default, and not to any other Event of Default, whether
now existing or hereafter arising, and Lender reserves all of its rights and
remedies with respect to any other Default, whether now existing or hereafter
arising.

 

2.                                       Forbearance Period.  For purposes
hereof, the “Forbearance Termination Date” is the earliest to occur of
(i) December 15, 2011, (ii) the failure after the date hereof of any of the
Borrowers to comply with any of the terms or undertakings of this Forbearance
Agreement, including, without limitation, the covenants set forth in Section 3
hereof, (iii) the failure after the date hereof of any of the Borrowers to
comply with any of the terms or undertakings of any amendment, waiver,
forbearance or similar agreement with its other lenders or the expiration, for
any reason, of any deferral, forbearance or similar period granted by any such
other lender, and (iv) the occurrence after the date hereof of any Default or
Event of Default (other than the Payment Event of Default and the Specified
Defaults).  Upon the Forbearance Termination Date, the agreement of the Lender
to forbear from exercising its rights and remedies in respect of the Payment
Event of Default and to waive the Finance Covenant Compliance Events of Default,
each as set forth herein, shall automatically, without the requirement of any
notice to any

 

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Borrower, terminate (and the Specified Defaults shall automatically be
reinstated, without the requirement of any notice to any Borrower or otherwise,
for all purposes und the Loan Documents for all periods, including periods after
the Forbearance Termination Date)  and the Lender shall be free in its sole and
absolute discretion to proceed to enforce any or all of their rights and
remedies set forth in this Forbearance Agreement, the Loan Agreement and
applicable law, including, without limitation, the right to demand the immediate
repayment of the Loan and the right to immediate repayment and satisfaction of
all other Obligations under the Loan Agreement in full.

 

3.                                       Default Interest.  Commencing on
September 30, 2011, the Borrowers shall accrue interest on the principal amount
of all outstanding Obligations at 2.0% per annum above the interest rate
otherwise applicable, provided, that the 2.0% per annum portion of the interest
rate that is above the rate otherwise applicable shall be payable on first day
of the fiscal quarter (January 1, 2012) immediately following the Forbearance
Termination Date.  Except as set forth above, interest on each Loan shall
continue to be due and payable in arrears on the first day of each fiscal
quarter and at such other times as specified in the Loan Agreement and
Note(s) and the Borrowers agree to pay all interest then due and payable on each
such payment due date and as otherwise provided in the Loan Agreement.

 

4.               Affirmation and Acknowledgment of the Loan Parties.

 

(a)                                  Ratification of Obligations and Security. 
Each Loan Party hereby ratifies and confirms all of its Obligations to the
Lender under the Loan Agreement.  Each Borrower hereby confirms that the
Obligations are secured pursuant to all instruments and documents executed and
delivered by the Borrowers and as security for the Obligations.

 

(b)                                 Compliance with Loan Documents.  Each Loan
Party will, and will cause each of its Subsidiaries to, comply and continue to
comply with all of the terms, covenants and provisions contained in the Loan
Documents to which each is a party and any other instruments evidencing or
creating any of the Obligations.  Without limiting the foregoing, the Borrowers
and the other Loan Parties acknowledge and agree that, notwithstanding the
forbearance and waiver arrangements set forth in Section 1 hereof, the Borrowers
and the other Loan Parties shall continue to be obligated to deliver all
financial statements, certificates, notices, valuations and other information
required under the terms of the Loan Documents as set forth in the applicable
Loan Document and any failure to deliver such financial statements,
certificates, notices, valuations and other information as therein provided
shall be an Event of Default under the Loan Agreement as provided therein.

 

(c)                                        Further Assurances.  Each Loan Party
will, and will cause its Subsidiaries to, at any time or from time to time
execute and deliver such further instruments, each in form and substance
satisfactory to the Lender, and take such further action as the Lender may
reasonably request, in each case further to effect the purposes of this
Forbearance Agreement, the Loan Documents and all documents, agreements and
instruments executed in connection therewith.

 

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5.                                       Release.  In order to induce the Lender
to enter into this Forbearance Agreement, each Loan Party acknowledges and
agrees that, as of the date hereof: (a) such Loan Party does not have any claim
or cause of action against the Lender (or any of its respective directors,
officers, employees or agents); (b) such Loan Party does not have any offset
right, counterclaim or defense of any kind against any of its respective
obligations, indebtedness or liabilities to the Lender; and (c) the Lender has
heretofore properly performed and satisfied in a timely manner all of its
obligations to the Loan Parties.  Each Loan Party unconditionally releases,
waives and forever discharges (i) any and all liabilities, obligations, duties,
promises or indebtedness of any kind of the Lender to such Loan Party, except
the obligations to be performed by the Lender on or after the date hereof as
expressly stated in this Forbearance Agreement, the Loan Agreement and the other
Loan Documents, and (ii) all claims, offsets, causes of action, suits or
defenses of any kind whatsoever (if any), whether arising at law or in equity,
whether known or unknown, which such Loan Party might otherwise have against the
Lender or any of its directors, officers, employees or agents, in either case
(i) or (ii), on account of any past or presently existing condition, act,
omission, event, contract, liability, obligation, indebtedness, claim, cause of
action, defense, circumstance or matter of any kind.

 

5.                                       Representations and Warranties.  Each
Loan Party hereby represents and warrants to the Lender as follows:

 

(a)                                  Representations and Warranties in the Loan
Agreement.  The representations and warranties of Loan Parties contained in the
Loan Agreement were true and correct in all material respects as of the date
when made and continue to be true and correct in all material respects on the
Forbearance Agreement Effective Date (as defined below) except for
(a) representations or warranties which expressly relate to an earlier date in
which case such representations and warranties shall be true and correct, in all
material respects, as of such earlier date, (b) representations or warranties
which are no longer true as a result of a transaction expressly permitted by the
Loan Agreement or (c) representations or warranties which are no longer true as
a result of the Payment Event of Default and the Specified Defaults.

 

(b)                                 Ratification, Etc.  Except as expressly
modified hereby, the Loan Agreement is hereby ratified and confirmed in all
respects and shall continue in full force and effect.  The Loan Agreement shall,
together with this Forbearance Agreement, be read and construed as a single
agreement.  All references in the Loan Agreement or any related agreement or
instrument shall hereafter refer to the Loan Agreement as modified hereby.

 

(c)                                  Authority, Etc.  The execution and delivery
by each of Loan Parties of this Forbearance Agreement and the performance by
each of the Loan Parties of all of its agreements and obligations under the Loan
Agreement, as modified hereby, are within each such Loan Party’s corporate
authority and have been duly authorized by all necessary corporate action on the
part of each such Loan Party.

 

(d)                                 Enforceability.  This Forbearance Agreement
and the Loan Agreement, as modified hereby, constitute the legal, valid and
binding obligations of each Loan Party and are enforceable against each Loan
Party in accordance with their terms, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or

 

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affecting generally the enforcement of, creditors’ rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought.

 

6.                                       Effectiveness of Forbearance
Agreement.  The provisions of this Forbearance Agreement shall become effective
upon the satisfaction of each of the following conditions (such date, the
“Forbearance Agreement Effective Date”), in each case in a manner and in form
and substance satisfactory to the Lender (unless otherwise agreed to in writing
by the Lender):

 

(a)                                  This Forbearance Agreement shall have been
duly executed and delivered by each of the Loan Parties and the Lender and shall
be in full force and effect;

 

(b)                                 Lender’s receipt of evidence that the
lenders under the BofA Credit Agreement and all other related loan documents
have entered into similar waivers of the financial covenants under each such
agreement and forbearance of their rights to exercise remedies to collect
payment due under such agreements, substantially consistent with the provisions
of this Agreement.

 

(c)                                  The representations and warranties of each
of the Loan Parties in the Loan Documents and other Loan Documents shall be true
and correct in all material respects as of the Forbearance Agreement Effective
Date, except with respect to the occurrence of the Payment Event of Default and
the Specified Defaults referred to herein and to the extent that any of such
representations and warranties relate by their terms to a prior date they shall
be true and correct in all material respects as of such prior date.

 

(d)                                 There shall have occurred no Default or
Event of Default other than the Payment Event of Default and the Specified
Defaults.

 

7.                                       No Other Amendments.  This Forbearance
Agreement shall constitute one of the Loan Documents referred to in the Loan
Agreement and any failure by any Loan Party to comply with the terms contained
herein shall constitute an immediate Event of Default.  Except as expressly
provided in this Forbearance Agreement, all of the terms and conditions of the
Loan Agreement and other Loan Documents remain in full force and effect.

 

8.                                       Execution in Counterparts.  This
Forbearance Agreement may be executed in any number of counterparts, but all
such counterparts shall together constitute but one instrument.  In making proof
of this Forbearance Agreement it shall not be necessary to produce or account
for more than one counterpart signed by each party hereto by and against which
enforcement hereof is sought.

 

9.                                       Expenses.  Borrowers agree to reimburse
Lender for all reasonable costs incurred by Lender in connection with this
Agreement and the transactions contemplated hereby, including without
limitation, the reasonable and documented costs of Lender’s 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 Loan Agreement.

 

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10.                                 THE VALIDITY, INTERPRETATION AND ENFORCEMENT
OF THIS AGREEMENT AND ANY OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH
SHALL UNLESS OTHERWISE PROVIDED THEREIN 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.

 

11.                                 THE LOAN PARTIES AND LENDER IRREVOCABLY
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the undersigned have duly executed this Forbearance
Agreement as of the date first set forth above.

 

BORROWERS:

 

 

 

AMOROS MARITIME CORP.

 

 

 

 

 

 

 

/s/ Tulio R. Prieto

 

By:

Tulio R. Prieto

 

Title:

Attorney in Fact

 

 

 

 

LANCASTER MARITIME CORP.

 

 

 

 

 

/s/ Tulio R. Prieto

 

By:

Tulio R. Prieto

 

Title:

Attorney in Fact

 

 

 

 

CHATHAM MARITIME CORP.

 

 

 

 

 

/s/ Tulio R. Prieto

 

By:

Tulio R. Prieto

 

Title:

Attorney in Fact

 

 

 

 

GUARANTORS:

 

 

 

TBSIL GUARANTOR:

 

TBS INTERNATIONAL LIMITED

 

 

 

 

 

 

 

/s/ Tulio R. Prieto

 

By:

Tulio R. Prieto

 

Title:

Attorney in Fact

 

 

[SIGNATURES CONTINUED ON NEXT PAGE]

 

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BERMUDA HOLDCO:

 

TBS HOLDINGS LIMITED, a Bermuda company

 

 

 

 

 

 

 

/s/ Tulio R. Prieto

 

By:

Tulio R. Prieto

 

Title:

Attorney in Fact

 

 

 

 

SHERWOOD:

 

SHERWOOD SHIPPING CORP.

 

 

 

 

 

/s/ Tulio R. Prieto

 

By:

Tulio R. Prieto

 

Title:

Attorney in Fact

 

 

 

 

 

 

 

PARENT GUARANTOR:

 

PRESENT WHEN THE COMMON SEAL OF

 

TBS INTERNATIONAL PUBLIC LIMITED COMPANY,

 

an Irish public limited company, was affixed hereto

 

 

 

 

 

/s/ Tulio R. Prieto

 

By:

Tulio R. Prieto

 

Title:

Attorney in Fact

 

 

[SIGNATURES CONTINUED ON NEXT PAGE]

 

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LENDER:

 

AIG COMMERCIAL EQUIPMENT FINANCE, INC.

 

 

 

 

 

 

/s/ Joe Gensor

 

By:

Joe Gensor

 

Title:

Vice President

 

 

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