TBS
INTERNATIONAL LIMITED & SUBSIDIARIES      EXHIBIT
10.39














LOAN
AGREEMENT





by
and among





AMOROS
MARITIME CORP.,


LANCASTER
MARITIME CORP.


AND


CHATHAM
MARITIME CORP.,





as
Borrowers,








TBS
INTERNATIONAL LIMITED,





as
Parent Guarantor, and








AIG
COMMERCIAL EQUIPMENT FINANCE, INC.,





as
Lender








February
29, 2008










THIS LOAN AGREEMENT made and
entered into this 29th day of February, 2008, 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 (“Parent
Guarantor”) and AIG Commercial Equipment Finance, Inc., a Delaware corporation
(together with its successors and assigns, “Lender”).WHEREAS,each of the Borrowers
has purchased, or entered into an agreement to respectively purchase, in its own
name and for its own account the Vessel listed next to its name on Schedule
1 hereto; andWHEREAS, each Borrower has
separately requested that Lender make a single advance loan directly to such
Borrower, to be used by the Borrower solely for (a) the purchase of that
Borrower’s Vessel and the payment of related costs approved for funding
hereunder or the reimbursement to Borrower for the purchase price of that
Borrower’s Vessel and the payment of related costs approved for funding
hereunder; andWHEREAS,
Lender has separately agreed with each Borrower to make a Loan to such Borrower,
subject to the terms and conditions hereinafter set forth.  Due to the
common ownership of Borrowers, and for ease of documentation, each Loan will be
governed by this Agreement and evidenced by a separate promissory note delivered
by the Borrower in connection with its Loan. 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:ARTICLE IDefinitionsSection 1.01.Definitions.  For all purposes
of this Agreement, except as otherwise expressly provided or unless the context
otherwise requires:   (a) The terms defined in this
Article shall have the meanings assigned to such terms in this Article, and
include the plural as well as the singular; and(b) All accounting terms not
otherwise defined herein shall have the meanings assigned to them in accordance
with GAAP (as defined below).





“ABS” means the American Bureau
of Shipping





“Adjustment Period”means a
successive series of LIBOR 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.  Thereafter, each successive
Adjustment Period during the term of the Loans shall be a period of one or more
months equal to the LIBOR Period chosen by Borrower under Section 2.06(b) prior
to the beginning of such Adjustment Period, commencing on the first day of each
Adjustment Period and ending on the last day of such LIBOR Period, resulting in
successive Adjustment Periods of one, two or three months each, depending on the
length of the applicable LIBOR Period.




“Advance”means, individually,
each made by Lender to a Borrower in connection with the Loan. “Advances” shall
collectively refer to all Advances.“Affiliate”means any Person
(1) which directly or indirectly controls, or is controlled by, or is under
common control with a Person or a Subsidiary of a Person; (2) which directly or
indirectly beneficially owns or holds five percent (5%) or more of any class of
voting stock of a Person or any Subsidiary of a Person; or (3) five percent (5%)
or more of the voting stock of which is directly or indirectly beneficially
owned or held by a Person or a Subsidiary of a Person.  The term
“control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.“Agreement” means this Loan
Agreement (including all exhibits and other attachments hereto), as amended,
supplemented and modified from time to time in accordance with the terms
hereof.“Aggregate Loan Limit”means $35,000,000.00.


“Applicable Foreign
Jurisdictions” means the Republic of Panama, the Marshall Islands, the
Republic of the Philippines and Bermuda.




“Applicable Law” means the
internal laws of the State of New York, without regard to the conflict of laws
principles of such state (or any other jurisdiction whose laws are mandatorily
applicable notwithstanding the parties=
choice of New York law) or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.




“Appraiser” means any of the
ship inspectors, surveyors, consultants or sale and purchase brokerage
companies, and any other independent inspector, surveyor, consultant or sale and
purchase ship brokerage company that the Lender may in its sole discretion,
approve from time to time for purposes of this Agreement.


“Assignment of Charter Hire”
shall mean, for each Borrower, that certain Assignment of Charter Hire by
Borrower in favor of Lender, 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 and dated as of the date of Borrower’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, that certain Assignment of Insurances by Borrower
and the other assignors party thereto in favor of Lender dated as of the date of
Borrower’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.“Attributable Indebtedness”
means, on any date, (a) in respect of any capitalized lease of any Person, the
capitalized amount thereof that would appear on a balance sheet of such Person
prepared as of such date in accordance with GAAP, (b) in respect of any
synthetic lease obligation, the capitalized amount of the remaining lease or
similar payments under the relevant lease or other applicable agreement or
instrument that would appear on a balance sheet of such Person prepared as of
such date in accordance with GAAP if such lease or other agreement or instrument
were accounted for as a capitalized lease and (c) all synthetic debt of such
Person.





“Audited Financial Statements”
means the audited consolidated balance sheet of Parent Guarantor and its
Subsidiaries for the fiscal year ended December 31, 2006, and the related
consolidated statements of income or operations, shareholders’ equity and cash
flows for such fiscal year of Parent Guarantor and its Subsidiaries, including
the notes thereto.





“Availability” means the
borrowing availability of Parent Guarantor and its Subsidiaries under the
revolving loan established under the BofA Credit Agreement or any future
revolving line of credit that replaces the BofA revolving loan under the BofA
Credit Agreement.





“BofA”means Bank of America,
N.A.





“BofA CreditAgreement” means that certain
Loan Agreement between Parent Guarantor, various Subsidiaries and BofA as
Administrative Agent dated July 31, 2006, as the same may be amended from
time to time.





“Borrowers” means, Amoros
Maritime Corp., Lancaster Maritime Corp. and Chatham Maritime Corp., each
a  Marshall Islands corporation; each of the Borrowers individually,
together with its successors and assigns, a “Borrower.”





“Business Day” means any day
other than a Saturday, Sunday or public holiday or the equivalent for banks in
New York.





“Calendar Quarter” means the
four (4) periods consisting of three (3) calendar months each during a calendar
year commencing on January 1st, April
1st,
July 1st and
October 1st.





“Cash Equivalents” means any
of the following types of Investments, to the extent owned by the Borrowers or
any of their Subsidiaries free and clear of all Liens (other than Liens created
under the Collateral Documents and other Liens permitted
hereunder):





(a)
readily marketable obligations issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
having maturities of not more than 360 days from the date of acquisition
thereof; provided that the full faith and credit of the United States of America
is pledged in support thereof;





(b) time
deposits with, or insured certificates of deposit or bankers’ acceptances of,
any


commercial
bank that (i) (A) is a Lender or (B) is organized under the laws of the United
States of America, any state thereof or the District of Columbia or is the
principal banking subsidiary of a bank holding company organized under the laws
of the United States of America, any state thereof or the District of Columbia,
and is a member of the Federal Reserve System, (ii) issues (or the parent of
which issues) commercial paper rated as described in clause (c) of this
definition and (iii) has combined capital


and
surplus of at least $1,000,000,000, in each case with maturities of not more
than 90 days from the date of acquisition thereof;





(c)
commercial paper issued by any Person organized under the laws of any state of
the United States of America and rated at least “Prime-1” (or the then
equivalent grade) by Moody’s or at least “A- 1” (or the then equivalent grade)
by S&P, in each case with maturities of not more than 180 days from the date
of acquisition thereof; and





(d)
Investments, classified in accordance with GAAP as current assets of the
Borrowers or any of their Subsidiaries, in money market investment programs
registered under the Investment Company Act of 1940, which are administered by
financial institutions that have the highest rating obtainable from either
Moody’s or S&P, and the portfolios of which are limited solely to
Investments of the character, quality and maturity described in clauses (a), (b)
and (c) of this definition.








“Charter Registration” means
the “dual” registry of each Vessel pursuant to the charter registry of the
Vessels by the Philippine Charterer in the Republic of the Philippines (the
“Charter Registration”).





“Closing Date” means the date
of this Agreement.





“Collateral” means,
collectively, the Vessels, all of 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 Loan, and all substitutions
and replacements therefor, including all component parts and
appurtenances.  It is the intent of Borrower and Lender that the
Collateral secure the entire Loan made to the Borrower.





“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) prepayment of fees and write-offs of
deferred financing fees in connection with the refinancing of the Existing
Credit Agreements, and (v) net losses from the sales of vessels as permitted
under this Agreement (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 this Agreement (in
each case of or by Parent Guarantor and its Subsidiaries for such Measurement
Period).





“Consolidated Fixed Charge 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) the sum of (i) Consolidated Interest Charges for the
most recently completed Measurement Period, (ii) the aggregate principal amount
of all regularly scheduled principal payments or redemptions or similar
acquisitions for value of outstanding debt for borrowed money for the period of
twelve (12) consecutive months following such date of determination, but
excluding any principal payments to be made in respect of the “Revolving Credit
Facility” under the BofA Credit Agreement or any replacement revolving line of
credit facility.





“Consolidated Funded
Indebtedness” means, as of any date of determination, for Parent
Guarantor and its Subsidiaries on a consolidated basis, the sum of (a) the
outstanding principal amount of all obligations, whether current or long-term,
for borrowed money (including Obligations hereunder) and all obligations
evidenced by bonds, debentures, notes, loan agreements or other similar
instruments, (b) all purchase money Indebtedness, (c) all direct obligations
arising under letters of credit (including standby and commercial), bankers’
acceptances, bank guaranties, surety bonds and similar instruments, (d) all
obligations in respect of the deferred purchase price of property or services
(other than trade accounts payable in the ordinary course of business), (e) all
Attributable Indebtedness, (f) without duplication, all guarantees with respect
to outstanding Indebtedness of the types specified in clauses (a) through
(e) above of
Persons other than the Borrowers or any Subsidiary, and (g) all Indebtedness of
the types referred to in clauses (a) through (f) above of any
partnership or joint venture (other than a joint venture that is itself a
corporation or limited liability company) in which a Borrower or a Subsidiary is
a general partner or joint venturer, unless such Indebtedness is expressly made
non-recourse to such Borrower or such Subsidiary; provided, however, for purposes
of calculating the “Consolidated Leverage Ratio”, Consolidated Funded
Indebtedness shall not include any portion of Permitted New Vessel Construction
Indebtedness in an aggregate amount up to $150,000,000 at any time outstanding
and used to finance a multipurpose tweendeck or bulk carrier shipping vessel so
long as such vessel remains in the construction phase (i.e., such vessel has not
been delivered to Parent Guarantor or its Subsidiaries ready for fleet service
and operation).





“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.





“Consolidated Leverage Ratio”
means, as of any date of determination, the ratio of (a) Consolidated Funded
Indebtedness as of such date to(b) Consolidated EBITDA
of Parent Guarantor and its Subsidiaries on a consolidated basis for the most
recently completed Measurement Period.





“Consolidated Net Income”
means, at any date of determination, the net income (or loss) of Parent
Guarantor and its Subsidiaries on a consolidated basis for the most recently
completed Measurement Period; provided that
Consolidated Net Income shall exclude (a) extraordinary gains and extraordinary
losses for such Measurement Period, (b) the net income of any Subsidiary during
such Measurement Period to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary of such income is not
permitted by operation of the terms of its organization documents or any
agreement, instrument or Law applicable to such Subsidiary during such
Measurement Period, except that Parent Guarantor’ equity in any net loss of any
such Subsidiary for such Measurement Period shall be included in determining
Consolidated Net Income, and (c) any income (or loss) for such Measurement
Period of any Person if such Person is not a Subsidiary, except that Parent
Guarantor’ equity in the net income of any such Person for such Measurement
Period shall be included in Consolidated Net Income up to the aggregate amount
of cash actually distributed by such Person during such Period to Parent
Guarantor or a Subsidiary as a dividend or other distribution (and in the case
of a dividend or other distribution to a Subsidiary, such Subsidiary is not
precluded from further distributing such amount to Parent Guarantor as described
in clause (b)
of this proviso).





“Consolidated Tangible Net
Worth” means, as of any date of determination, for Parent Guarantor and
its Subsidiaries on a consolidated basis, Shareholders’ Equity of Parent
Guarantor and its Subsidiaries on that date minus the Intangible Assets of
Parent Guarantors and its Subsidiaries on that date.





“Disposition” or “Dispose”means the sale, transfer, license, lease or other disposition (including
any sale and leaseback transaction) of any property by any Person (or the
granting of any option or other right to do any of the foregoing), including any
sale, assignment, transfer or other disposal, with or without recourse, of any
notes or accounts receivable or any rights and claims associated
therewith





“Dollars” and the sign A$@
mean lawful money of the United States of America.





“Event of Default” has the
meaning set forth in Section 7.01 hereof.





“Equity Interests” means, with
respect to any Person, all of the shares of capital stock of (or other ownership
or profit interests in) such Person, all of the warrants, options or other
rights for the purchase or acquisition from such Person of shares of capital
stock of (or other ownership or profit interests in) such Person, all of the
securities convertible into or exchangeable for shares of capital stock of (or
other ownership or profit interests in) such Person or warrants, rights or
options for the purchase or acquisition from such Person of such shares (or such
other interests), and all of the other ownership or profit interests in such
Person (including partnership, member or trust interests therein), whether
voting or nonvoting, and whether or not such shares, warrants, options, rights
or other interests are outstanding on any date of determination.





“Existing Credit Agreements”
shall have the meaning assigned in the BofA Credit Agreement.





“Fair Market Value” means, in
relation to any Vessel, the fair market value of such Vessel determined by the
most recent Valuation delivered to Lender








“Financial Statements” shall
have the meaning ascribed to such term in Section 5.01(a)(1)
hereof.





“First Installment Date”
means, for each Note, July 1, 2008.





“Funding Date” means, for each
Loan, the date on which such Loan is funded.





“GAAP” means generally
accepted accounting principles as in effect in the United States of
America.





“Guarantors” means Parent
Guarantor and all other Persons now or hereafter guarantying all or any part of
the Obligations, together with each such Person’s successors and assigns; each,
a “Guarantor.”





“Guaranty Agreements” means
all present and future Guaranty Agreements executed by a Guarantor securing
payment of all or any part of the Obligations; each such agreement, a “Guaranty
Agreement.”  Each of the Borrowers shall execute and deliver a
Guaranty Agreement for the obligations of the other Borrowers hereunder to be
secured by the Ship Mortgage granted by such Borrower.





“Indebtedness” means all items
of indebtedness which, in accordance with GAAP, would be deemed a liability of a
Person as of the date such indebtedness is to be determined, and shall also
include all indebtedness and liabilities of others assumed or guaranteed by such
Person or in respect of which such Person is secondarily or contingently liable,
whether by reason of any agreement to acquire such indebtedness, to supply or
advance sums, or otherwise.  Without limiting the scope of the
foregoing, such term shall include (a) all obligations for borrowed money, (b)
all obligations evidenced by bonds, debentures, notes or other similar
instruments, (c) all obligations to pay the deferred purchase price of property
or services, except trade accounts payable arising in the ordinary course of
business, (d) all lease obligations which are required to be capitalized for
financial reporting purposes in accordance with GAAP, (e) all debts secured by
any mortgage, lien, pledge, attachment, charge, or other security interest or
encumbrance of any kind in respect of any property or upon the income or profits
therefrom, whether or not such debt is assumed by the party granting such
security, and (f) all debt of third persons guaranteed by a party.





“Individual Loan Limit” means,
for each Loan and each Borrower, the amount listed next to the Borrower’s name
on Schedule 1 hereto.





“Initial Funding Date” means
the earliest Funding Date hereunder.  If all Loans are funded on the
same day, that day shall be the Initial Funding Date.





“Interest Rate” means, for
each Loan, a rate over each Adjustment Period equal to the greater of (a) five
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 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 five (5%) percent per annum.





“Intangible Assets” means
assets that are considered to be intangible assets under GAAP, including
customer lists, goodwill, computer software, copyrights, trade names,
trademarks, patents, franchises, licenses, unamortized deferred charges,
unamortized debt discount and capitalized research and development
costs.





“Lender” AIG Commercial
Equipment Finance, Inc., a Delaware corporation, together with its successors
and assigns.  In the event of the assignment of any Note, references
to “Lender” as they may relate to a specific Borrower shall be solely to the
holder of such Borrower’s Note.





“LIBOR Period” means a period
of one, two or three months, selected by Borrowers prior to the beginning of
each Adjustment Period to be the LIBOR Period applicable for such Applicable
Period, as more fully provided in Section 2.06(b) below.








"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 comparable to the applicable LIBOR Period selected for such
Adjustment Period under Section 2.06(b) (which shall be a period of one, two or
three months, as provided in Section 2.06(b)), 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 London Banking 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 for an LIBOR Period 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 LIBOR Period 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).




“Lien” means any mortgage,
deed of trust, pledge, security interest, hypothecation, assignment, deposit
arrangements, encumbrance, lien (statutory or other), or preference, priority,
or other security agreement or preferential arrangement, charge, or encumbrance
of any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement), any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code, the maritime
finance laws of the Republic of Panama, the Ship Mortgage Act (46 U.S.C. §31301
et seq.) or any
comparable law of any jurisdiction to evidence any of the
foregoing.





“Loan” means, for each
applicable Borrower, the loan made to it pursuant to Section 2.01 of this
Agreement.





“Loans” collectively refers to
each and every Loan now or hereafter funded under this Agreement.





“Loan Documents” means this
Agreement, the Notes, the Security Documents and all related documents,
agreements, consents, schedules and attachments in connection with the
Loan.  All Loan Documents must be in a form in compliance with this
Agreement and other acceptable to Lender in all respects.





“Loan Parties” means,
collectively, Borrowers and Guarantors; each, a “Loan Party.”





“Loan Value” means, at any
time, 60% of the Fair Market Value of the Collateral.





“London Banking Day” means all
days on which banks are required to be open for business in London,
England.





“Margin” means one and
75/100ths percent (1.75%), unless the sum of the Margin and the LIBOR Rate on
the first day of an Adjustment Period is less than five percent per annum, in
which case the Margin shall equal the difference between five percent per annum
and the LIBOR Rate in effect on such date, resulting in an Interest Rate of at
least five percent per annum at all times during the term of this
Agreement.





“Material Adverse Change”
means, with respect to any Person, a material adverse change in the business,
operations, results of operations, assets, liabilities or condition (financial
or otherwise) of such Person taken as a whole.





“Material Adverse Effect”
means, with respect to any Person, a material adverse effect on the business,
operations, results of operations, assets, liabilities or condition (financial
or otherwise) of such Person taken as a whole.





“Maturity Date” means, for
each Note, April 1, 2012.





“Measurement Period” means, at
any date of determination, the most recently completed four fiscal quarters of
Parent Guarantor.





“Net Present Rental Value”
means, as of any date, the aggregate net present value of all Rentals payable by
Parent Guarantor or any of its Subsidiaries to any Person (other than Parent
Guarantor or any of its other Subsidiaries) pursuant to any Operating Lease or,
without duplication, any charter of any vessel that, in each case, after giving
effect to any renewals or other extensions provided therein and in the absence
of any early termination, shall or would have a fixed remaining term of twenty
three months or more, in each case discounted to such date at a rate of 8.00%
per annum.





“Note”means, with respect to
each Borrower, the Promissory Note evidencing the Loan to such Borrower,
executed by such Borrower in connection with the applicable Funding Date, in
each case made payable to the order of Lender, in the principal amount of the
applicable Loan, together with any amendments thereto, and renewals,
replacements, refinancings and consolidations therefor.





“Notes” shall collectively
refer to the Borrowers’ Notes.





“Obligations” means, all
indebtedness, obligations and liabilities of Borrowers under the Notes or the
other Loan Documents, whether on account of principal, interest, indemnities,
fees (including, without limitation, attorneys=
fees, remarketing fees, origination fees, collection fees and all other
professionals=
fees), costs, expenses, taxes or otherwise.





“Operating Lease”  of
any Person means any lease or other arrangement conveying the right to use
personal property (including, for the avoidance of doubt, vessels) to such
Person and for which the obligation of such Person for Rentals is not required
to be capitalized on a balance sheet of the lessee in accordance with
GAAP.





“Panama Registry” means the
Directorate General of Consular and Maritime Affairs of the Republic of Panama
or any successor office or officer fulfilling the role of registering ships and
recording ship mortgages in the Republic of Panama.





“Parent Guarantor” means TBS
International Limited, a Bermuda corporation.





“Permitted Liens” means the
Liens on the Collateral permitted under Section 6.04 hereof.





“Person” means any individual,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, corporation, entity or any government or any agency
or political subdivision thereof.





“Philippine Charterer” means,
collectively, Bothelo Shipping Corporation or 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.





“Permitted New Vessel Construction
Indebtedness” means Indebtedness of Subsidiaries of Parent Guarantor that
are not Loan Parties in connection with the construction
of  multipurpose tweendeck or bulk carrier shipping
vessels.





“Registered Public Accounting
Firm” has the meaning assigned under the securities laws of the United
States of America and shall be independent of Parent Guarantor as prescribed in
such securities laws.





“Qualified Cash” means, as of
any date of determination, the amount of cash and Cash Equivalents which is
freely transferable and not subject to a Lien (other than the Lien in favor of a
secured lender under the Loan Documents or pursuant to the BofA Credit
Agreement), pledge, security interest, encumbrance, escrow or cash collateral
arrangement or any other restriction on its use.





“Rentals” means and includes,
as of the date of any determination thereof, all fixed payments (including as
such all payments which the lessee is obligated to make to the lessor on
termination of the lease or surrender of the property) payable by a Person, as
lessee or sublessee under a lease of real or personal property, exclusive of any
amounts required to be paid by such Person, directly or indirectly (whether or
not designated as rents or additional rents), on account of maintenance,
repairs, insurance, taxes and similar charges incurred by such lessee or
sublessee.  Fixed rents under any so-called “percentage leases” shall
be computed solely on the basis of the minimum rents, if any, required to be
paid by the lessee regardless of sales volume or gross revenues.





“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.





“Shareholders’ Equity” means,
as of any date of determination, consolidated shareholders’ equity of Parent
Guarantor and its Subsidiaries as of that date determined in accordance with
GAAP.





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





“Subsidiary” means, as to any
Person, a corporation of which shares of stock having ordinary voting power
(other than stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other manager of
such corporation are at the time owned, or the management of which is otherwise
controlled, directly, or indirectly, through one or more intermediaries, or
both, by such Person, every Subsidiary collectively, the
“Subsidiaries.”





“Synthetic Debt” means, with
respect to any Person as of any date of determination thereof, all obligations
of such Person in respect of transactions entered into by such Person that are
intended to function primarily as a borrowing of funds (including any minority
interest transactions that function primarily as a borrowing) but are not
otherwise included in the definition of “Indebtedness” or as a liability on the
consolidated balance sheet of such Person and its Subsidiaries in accordance
with GAAP.





“Synthetic Lease Obligation”
means the monetary obligation of a Person under (a) a so-called synthetic,
off-balance sheet or tax retention lease, or (b) an agreement for the use or
possession of property (including sale and leaseback transactions), in each
case, creating obligations that do not appear on the balance sheet of such
Person but which, upon the application of United States federal bankruptcy laws
to such Person, would be characterized as the indebtedness of such Person
(without regard to accounting treatment).





“Taxes” shall mean any present
or future taxes, levies, imposts, duties, fees, assessments, deductions,
withholdings or other charges of any kind, that may now or hereafter be imposed
or asserted by any jurisdiction or any political subdivision thereof or any
taxing authority therein and all interest, penalties or similar liabilities with
respect thereto.





“Total Outstanding” means, at
any time, the sum of the loan balances outstanding under the Loan Agreement at
any point in time.





“Valuation” means, with
respect to the Vessel, a valuation of such Vessel made (at the expense of the
Borrowers) in Dollars at any relevant time by an Appraiser with or without
physical inspection of such Vessel (as Lender may require in its sole
discretion), on the basis of a sale for prompt delivery for cash at arms’ length
on normal commercial terms as between a willing seller and a willing buyer, free
of any existing charter or other contracts of employment, and shall be
conclusive








“Vessel” means, for each
Borrower, the vessel listed next to such Borrower’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 Borrowers’ Vessels.


ARTICLE
II


Amount, Terms and Repayment
of the Loan





Section 2.01.Loan.Lender
individually agrees with each Borrower that Lender will make a single advance
term loan to such Borrower, on the terms and subject to the conditions set forth
herein, and in the Loan Documents and the Security Documents, in an amount not
to exceed the Individual Loan Limit applicable to such Borrower.  The
Loan shall be disbursed to Borrower in accordance with the following provisions
of this Article II.





Section 2.02.Closing;
Disbursement of Proceeds.  The closing shall
be held at the offices of Lender or Lender=s
counsel, or such other location as Borrower and Lender may mutually agree upon,
on the Closing Date.  Disbursement of Loan proceeds where the Borrower
is already the owner of the Vessel that is the subject of the Loan shall be by
bank wire transfer to an account of Borrower or any other Person designated to
Lender in writing by Borrower or by check payable to the order of Borrower or
any other Person designated to Lender in writing by Borrower delivered to
Lender.  Disbursement of Loan Proceeds where the proceeds are to be
used to purchase the Vessel that is the subject of the Loan will be in
accordance with the written disbursement instructions of Borrower, the seller of
the Vessel and any applicable mortgagee.  Notwithstanding any
provision of this Agreement to the contrary, Lender shall in no event be
obligated to make any Advance after March 31, 2008.





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.  Principal and interest payable under each Note shall be
repaid in accordance with the repayment terms set forth in the
Note.  Each Note will be payable in sixteen (16) quarterly
installments, with the first quarterly installment payable on the First
Installment Date, and on the first day of each quarter annual period
thereafter.  The first eight (8) installments shall consist of
quarterly payments of accrued interest together with a principal payment of 7.5%
of the original principal balance of the Note (resulting in the payment of 60%
of the principal balance of the note through the first eight quarterly
payments), followed by eight (8) installments, which shall consist of quarterly
payments of accrued interest together with a principal payment of 5.0% of the
original principal balance of the Note (resulting in the payment of 40% of the
principal balance of the Note with the second eight quarterly
payments).  A final payment under each Note in the amount of all
remaining principal, interest and other amounts due thereunder will be payable
on the applicable Maturity Date.  Each Note provides for a default
rate of interest.





Section 2.04.Loan
Accounting.  Lender shall
maintain, in accordance with its usual and customary practice, an account or
accounts evidencing the outstanding indebtedness of each Borrower under its Note
and the amounts of principal and interest payable and paid from time to time by
Borrower under the Note.  In any legal action or proceeding respecting
this Agreement or the Note, the entries made in such account or accounts shall
be conclusive evidence of the existence, amounts, and terms of the obligations
of a Borrower therein or thereon recorded, absent manifest error.





Section 2.05.Interest.  Each Borrower
shall pay interest on the amounts loaned to Borrower hereunder, in accordance
with the terms hereof and of the Borrower’s Note.  Interest shall
accrue on each Note commencing on the date of the advance of the Loan evidenced
by such Note and until such time as the entire principal balance thereof is
fully repaid, together with all other obligations of the applicable Borrower
hereunder or under the Note, and on such other terms as are specified herein and
in the Note.   Interest on all Loans will accrue at the Interest
Rate, adjusted for each Adjustment Period as of the first day of each Adjustment
Period. Any interest payable under a Note shall be computed as specified in the
Note.  The Note provides for a default rate of interest upon the
occurrence of an Event of Default.





Section 2.06.Changes
to LIBOR Rate.   (a)   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.





(b)    Prior
to the commencement of each Adjustment Period, Borrowers shall have the right to
select a period of one month, two months or three months as the LIBOR Period in
effect for such Adjustment Period.   Such election must be made
by written notice to Lender received at least five (5) London Banking Days prior
to the beginning of the Adjustment Period.  If Borrowers fail to
timely select a LIBOR Period prior to the commencement of an Adjustment Period,
a LIBOR Period of three months shall be deemed to be the LIBOR Period in effect
for the Adjustment Period.  Borrower may modify a prior selection of a
LIBOR Period for an Adjustment Period that has not yet accrued, provided that it
do so in writing no less than five London Banking Days prior to the Adjustment
Period in question.





Section 2.07.Payment.  Except as Lender
or any holder of the Note may otherwise direct in writing, each Borrower agrees
to make all payments directly to Lender or to the holder of the Borrower’s Note
from time to time at such address as Lender or such holder shall specify and in
accordance with the terms of payment set forth in the Borrower’s
Note.  All payments of principal and interest due under a Note and of
any other amounts due hereunder shall be made to Lender or the holder of the
Note in immediately available funds by not later than 2:00 p.m. Central Time on
the due date thereof without any deduction or offset
whatsoever.  Whenever any payment to be made under this Agreement or
under a Note shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day.





Section 2.08.Voluntary
Prepayment.  Each Borrower
shall have the right to prepay the Borrower’s Note, in whole or in part, in
accordance with the terms of the Borrower’s Note.  Each Borrower
agrees to the prepayment fee set forth in such Borrower’s Note.  At
the time of any prepayment, the Borrower making such prepayment shall pay to
Lender such amount as will compensate Lender for any loss, cost, expense,
penalty, claim or liability incurred by Lender as a result of such prepayment
which requires the Lender to prematurely break any related swap, interest rate
hedge or other derivative arrangement.  The Lender shall have no obligation
to purchase or enter into any swap or other derivative arrangement in connection
with funding or maintaining the Loans.





Section 2.09.Prepayment
Resulting from Acceleration.  If a holder of a
Note shall elect as one of its remedies acceleration of payment of the balance
owing under the Note pursuant to Section 7.02 hereof, the applicable Borrower
shall pay a premium determined in accordance with the computation set forth in
Section 2.08, above, and in the Borrower’s Note as to all amounts then payable
under the Borrower’s Note.





Section 2.10.Use of
Proceeds.  The proceeds of
each Loan shall be used by the Borrower under such Loan solely for the following
purposes: (a) in the case of Loans to a Borrower which has acquired the Vessel
through the use of self-generated funds prior to the Funding Date, to first
satisfy all loans to Borrower or for which Borrower is directly or indirectly
responsible, sufficient to cause Borrower to be in compliance with the
requirements of Section 6.09 hereof, and thereafter, to reimburse Borrower for
amounts paid to purchase the Vessel using its own capital or assets; (b) in the
case of Loans for which Borrower has not acquired the Vessel through the use of
self-generated funds prior to the Funding Date, to pay the purchase price due in
connection with the purchase of the Vessel.





Section 2.11.Taxes,
Assessments, etc.  Each Borrower
agrees to pay all amounts owing under its Note, this Agreement, or the other
Loan Documents free and clear of and without deduction for any present or future
Taxes, and (a) that if it is prevented by operation of law from paying any
Taxes, then the interest rate or fees required to be paid under the Borrower’s
Note or the other Loan Documents shall be increased by the amount necessary to
yield to the holder of the Note interest or fees at the rates specified in the
Note, this Agreement or the Other Loan Documents after provision for the payment
of all such Taxes and without taking into account any tax benefits accruing to
the Lender from such payment; (b) that it shall hold Lender and any holder of
Borrower’s Note harmless from and against any liabilities with respect to any
Taxes (whether or not properly or legally asserted); and (c) to provide Lender
or such other holder of its Note with the original or a certified copy of
evidence of the payment of any Taxes by it, as the holder may reasonably
request, or, if no Taxes have been paid to provide to the holder, at the
holder’s request, with a certificate from the appropriate taxing authority or an
opinion of counsel acceptable to Lender or such other holder stating that no
Taxes are payable.





Section 2.12.Term.  This Agreement
shall remain in effect so long as any sums are owing or any duties or
obligations remain to be performed by any Borrower to or for the benefit of the
holder of any Note under the Loan Documents, the Security Documents or any
documents or agreements relating hereto or thereto.





Section 2.13Currency
of Payments.  All payments
required to be made hereunder, or any of the Loan Documents, shall be payable
solely and exclusively in United States dollars.








ARTICLE
III


Conditions of
Lending





Section 3.01.Conditions
Precedent to each Loan.





(a)         The
obligation of Lender to make the Loan to a Borrower hereunder is subject to the
condition precedent that Lender shall have received, on or before the Closing
Date (unless otherwise indicated), all of the following, each dated (unless
otherwise indicated) as of the Closing Date, in form and substance satisfactory
to Lender in its sole discretion.  References in this Section 3.01 (a)
to Borrower, Note and Vessel shall be to the Borrower requesting the Loan, and
such Borrower’s Note and Vessel:





(1)             the
Note evidencing the Loan, properly executed on behalf of Borrower on or prior to
the Funding Date of such Advance and dated the Closing Date;





(2)             all
Security Documents and Loan Documents to which Borrower is a party or otherwise
applicable to Borrower’s Loan, properly executed on behalf of Borrower, the
Guarantors and other parties thereto, as applicable; the form of the Security
Documents for each Advance hereunder shall be substantially in the form of the
Security Documents for the initial Advance hereunder, with such changes as may
be reasonably requested by Lender;





(3)             copies
of the Articles of Incorporation and Bylaws or other organizational documents of
Borrower, its Guarantors and their constituent entities, as applicable,
certified by an authorized officer of such entity as being true and correct
copies thereof;





(4)             a
signed copy of a certificate of an authorized officer of Borrower and its
Guarantors which shall certify the names of the officers of such entity
authorized to execute and deliver this Agreement, the Note, the Security
Documents, the Loan Documents to which Borrower or its Guarantors are a party,
and other documents or certificates to be delivered pursuant to the Loan
Documents or the Security Documents, together with the true signatures of such
officers.  Lender may conclusively rely on such certificate until
Lender shall receive a further certificate of an authorized officer of such
entity canceling or amending the prior certificate and submitting the signatures
of the officers named in such further certificate;





(5)  the opinions
with respect to Borrower and its Guarantors set forth in Schedule
3.01(a)(5) hereto.





(6)             a
copy of the appropriate resolutions and consents of Borrower and its Guarantors
approving the Loan and the Loan Documents, certified by the Secretary (or other
appropriate official) of such party as being a true and correct copy
thereof;





(7)             a
good standing certificate with respect to Borrower and its Guarantors, issued as
of a recent date by the Secretary of State or other appropriate and authorized
official of such party=s
respective jurisdiction of incorporation;





(8)             subordinations
or releases, as deemed appropriate by counsel for Lender, executed by any
creditors of Borrower, as well any Person having a security interest in the
assets of Borrower which would include the assets covered by the Security
Documents, containing terms and conditions reasonably satisfactory to counsel
for Lender;





(9)             Guaranty
Agreements executed by Borrower’s Guarantor(s);





(10)               Copies
of the bills of sale for the Vessel, reflecting Borrower as the purchaser
thereunder, together with evidence of the filing of such bill of sale in the
appropriate records of the Panama Registry;





(11) evidence of the proper
registry of the Vessel 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;





(12)  copy of the
ownership and registration certificate for the Vessel issued by the applicable
Panamanian authorities;





(13)  duly executed
and filed Security Documents establishing in Lender, as determined by
Lender=s
counsel, a first preferred mortgage in the Vessel, to be received by Lender and
recorded in the  Panamanian Registry prior to the disbursement of any
Loan proceeds; subject to no adverse liens, claims or encumbrances (whether or
not perfected or preferred) it being agreed that Lender is under no obligation
to disburse any proceeds until it receives satisfactory evidence of its first
preferred mortgage position on the Vessel;





(14)             
evidence that all insurance policies required under any of the Loan Documents or
the Security Documents and all other documents which may be required thereunder,
are in full force and effect;





(15)  evidence
satisfactory to Lender that all required licenses have been obtained by Borrower
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;





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





(17)             
evidence satisfactory to Lender that no event has occurred and is continuing, or
would result from the Advance, which constitutes an Event of Default or would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both;





(18)             evidence
satisfactory to Lender that there shall not have occurred any Material Adverse
Change, as determined by Lender, in the business, financial condition or results
of operations of Borrower or any of its Guarantors, or the existence or value of
the Collateral provided by Borrower, or any event, condition or state of facts
which would reasonably be expected to have a Material Adverse Effect, as
determined by Lender;





(19)             evidence
satisfactory to Lender that no federal, state or local tax liens have been filed
against any Loan Party, other than for taxes that are being diligently contested
in good faith by such party by appropriate proceedings promptly instituted and
for which an adequate reserve is being maintained in accordance with
GAAP;





(20)             
evidence satisfactory to Lender that no suits are pending, and no unsatisfied
judgments have been rendered, against any Loan Party, in either event that could
have a Material Adverse Effect on such Loan Party;





(21)             
evidence satisfactory to Lender that Lender=s
Liens on the Collateral constitute first priority Liens in and to the Collateral
and that no other Liens other than the Permitted Liens affect the
Collateral;





(22)             
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;





(23)  evidence
satisfactory to Lender that (i) the Vessel 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





HOPI
PRINCESS


(ex
African
Sanderling)                                           36772
-PEXT                                   ABS                              Maltese
+ A1, E,


Maltese + AMS, ACCU





ZUNI
PRINCESS


(ex
Ypermachos)                                           36778-PEXT                                   Nippon
Kaiji


Kyokei                                    NS
MNS


MOHAVE
MAIDEN


(ex
      Diasozousa)
            36776-PEXT
            Nippon
      Kaiji


Kyokei
            NS
      MNS








and (ii)
all required licenses have been obtained by Borrower and Guarantors, as
applicable, and are in full force and effect to operate the Vessels according to
their intended use, including, but not limited to, the current operation of the
Vessels;





(24)evidence satisfactory to
Lender that the cash or revolver availability required by Section 6.10(b) of
this Agreement is in place;





(25)    Lender
or its agent shall have conducted an inspection of the Vessels which is
satisfactory to Lender;





(26)  Lender
confirms that additional financing commitments of at least $55,000,000 have been
made to Parent Guarantor and its Subsidiaries.





(27)   Lender’s
receipt of Borrowers’ arrangement fee of $175,000.00.





(b)  Lender’s waiver
of any condition with respect to any Loan 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.








ARTICLE
IV


Representations and
Warranties





Each
Borrower, severally, and its Guarantor(s), with the knowledge that Lender is
relying thereon in executing this Agreement and making the Loan to such
Borrower, represent and warrant the following to Lender as of the date hereof,
as of the date of each Advance hereunder, and for the entire term of this
Agreement:





Section 4.01.Corporate
Existence and Power.  Each of Borrower
and its Guarantors is duly formed, validly existing and in good standing under
the laws of its jurisdiction of formation, and is duly licensed or qualified to
transact business in all jurisdictions where the character of the property owned
or leased or the nature of the business transacted by such party makes such
licensing or qualification necessary.  Each of Borrower and its
Guarantors has all requisite power and authority, corporate or otherwise, to
conduct its business, to own its properties and to execute and deliver, and to
perform all of its obligations under, the Loan Documents and the Security
Documents.





Section 4.02.Authorization
of Borrowing; No Conflict as to Law orAgreements.  The execution,
delivery and performance by (x) each of Borrower’s Guarantors of the Guaranty
Agreement and other Loan Documents to which it is a party, and (y) Borrower of
the Loan Documents and the Security Documents to which its is a party, and the
borrowing thereunder, as the case may be, have been duly autho­rized by all
necessary corporate action and do not and will not (i) require any consent or
approval of the stockholders (or holders of any other equity interest) of
Borrower or any Guarantor, or any authorization, consent or approval by any
domestic or foreign governmental department, commission, board, bureau, agency
or instrumentality, (ii) violate any provision of any law, rule or regulation or
of any order, writ, injunction or decree presently in effect having
applicability to Borrower or any Guarantor, or of the organizational documents
of Borrower or any Guarantor, or (iii) 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 Borrower or any Guarantor is a party or by which it
or its properties may be bound or affected.





Section 4.03.Legal
Agreements.  The Loan
Documents and the Security Documents constitute the legal, valid and binding
obligations of Borrower and its Guarantors as applicable, enforceable against
such parties in accordance with their respective terms.





Section 4.04.Financial
Condition.  Borrower and its
Guarantors shall furnish to Lender the financial statements required to be
furnished to Lender in accordance with the terms of Section 5.01
hereof.  Such financial statements fairly present the financial
condition of the applicable Persons on the dates thereof and the results of
their operations for the periods then ended, and were prepared in accordance
with GAAP.  There are no liabilities of Borrower or any Guarantor,
fixed or contingent, which are material and are not reflected in the financial
statements or the notes thereto.





Section 4.05.Adverse
Change.  There has been no
Material Adverse Change as to Borrower or any Guarantor since the date of the
latest finan­cial statement referred to in Section 4.04 hereof.





Section 4.06.Labor
Disputes; Acts of God.  Neither the
business nor the properties of Borrower or any of its Guarantors  is
affected by any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy, or other casualty (whether or not covered by insurance) having a Material
Adverse Effect.





Section 4.07.Litigation.  Except as set
forth on Schedule
4.07 hereto, there are no actions, suits or proceedings pending or, to
the knowledge of Borrower, threatened against or affecting Borrower, or any of
its Guarantors or any Affiliate of Borrower or any of its Guarantors or the
properties of Borrower or any of its Guarantors or such Affiliate before any
court or governmental department, commission, board, bureau, agency or
instrumen­tality, domestic or foreign, which, if determined adversely to
Borrower, any of its Guarantors or such Affiliate, would have a Material Adverse
Effect on the financial condition, properties, or operations of Borrower or any
of its Guarantors and Borrower=s
or any such Guarantor=s
ability to perform hereunder and under the Loan Documents or the Security
Documents.





Section 4.08.No
Defaults on Outstanding Judgments or Orders.  Borrower and its
Guarantors have satisfied or appealed all judgments against any of them, and
Borrower and its Guarantors are not in default with respect to any judgment,
writ, injunction, decree, rule, or regulation of any court, arbitrator, or
federal, state, municipal, or other governmental authority, commission, board,
bureau, agency, or instrumentality, domestic or foreign.





Section 4.09.Compliance
with Laws and Regulations.  Each of Borrower
and its Guarantors, in the conduct of its business affairs, has complied in all
material respects with the requirements of all applicable laws and regulations,
noncompliance with which would have a Material Adverse Effect on such party and
such party=s
ability to perform under the Loan Documents or the Security
Documents.





Section 4.10.Title to
Properties.  Borrower and its
Guarantors have good, valid and marketable title to all their material
properties and assets, including, without limitation in the case of Borrower at
the time of the funding of its Loan, the Vessel, and all material property
reflected in the financial statements of Borrower and Guarantors referred to in
Section 4.04 above, free from any Liens, except as described in such
financial statements.





Section 4.11.Adverse
Fact.  No fact is known
to Borrower or any Guarantor, as of the date hereof, which has had or might in
the future have a Material Adverse Effect on Borrower or any Guarantor which has
not been previously disclosed to Lender by Borrower or Guarantors.





Section 4.12.Liens.  The assets of
Borrower, including, without limitation, the Vessel, are not and will not be
subject to any Lien or the terms of any security agreement or similar instrument
during the term hereof, other than any Lien which may be granted on part or all
of such assets to the holder of Borrower’s Note, and, if any, other Permitted
Liens.





Section 4.13.Accuracy
of Information.  All information
supplied to Lender by or on behalf of the Loan Parties with respect to any
properties of the Loan Parties (whether prior to entering into this Agreement,
in this Agreement, or after entering into this Agreement), is and shall be true
and correct in all material respects; and none of such information is or will be
incomplete by omitting to state any material fact necessary to make such
information not misleading.





Section 4.14.Taxes.  Borrower and its
Guarantors have filed or caused to be filed all tax returns which are required
to be filed by them pursuant to all applicable federal, state and local laws,
regulations, or orders.  Borrower and its Guarantors have paid, or
made provision for the payment of, all taxes which have or may have become due
pursuant to said returns or otherwise or pursuant to any assessment received by
Borrower or any of its Guarantors, other than taxes that are being diligently
contested in good faith by such Person by appropriate proceedings promptly
instituted and for which an adequate reserve is being maintained by such Person
in accordance with GAAP.  The charges, accruals, and reserves in
respect of income taxes on the books of Borrower are
adequate.  Borrower and its Guarantors know of no proposed material
tax assessment against them and no extension of time for the assessment of
federal, state or local taxes of Borrower or any of its Guarantor is in effect
or has been required or applied for, except as disclosed in the financial
statements furnished to Lender in accordance with Section 4.04
hereof.





Section 4.15.Other
Agreements.  Neither Borrower
nor any of its Guarantors is a party to any indenture, loan, or credit
agreement, or to any lease or other agreement or instrument, or subject to any
charter or corporate restriction which could have a Material Adverse Effect on
such party, or on the ability of such party to carry out its obligations under
the Loan Documents or the Security Documents.  Borrower and its
Guarantors are not in default in any material respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in the BofA Credit Agreement, or any other agreement or instrument
material to its business to which it is a party.





Section 4.16.Ownership
of Borrower and Westbrook Holdings Ltd.  Each Borrower is
a wholly owned subsidiary of Westbrook Holdings Ltd., a Marshall Islands
corporation.  Westbrook Holdings Ltd is a wholly owned subsidiary of
Parent Guarantor.





Section 4.17.Operation
of Business.  Borrower and its
Guarantors possess all licenses, permits, franchises, patents, copyrights,
trademarks, and trade names, or rights thereto, required by law to conduct their
business substantially as now conducted and as presently proposed to be
conducted, and Borrower is not in violation of any applicable laws or
regulations, or valid rights of others, with respect to any of the
foregoing.





Section 4.18 Stamp,
Duty, Documentary and Withholding Taxes.  No stamp, duty or
documentary taxes or charges imposed by any government or any taxing authority
are payable on or in connection with the Agreement, the Borrower’s Note, the
Loan Documents to which Borrower is a party or any related
documents.  Borrower has paid or shall pay when due all applicable
deductions or withholdings for or on account of any Taxes, levies, duties, fees,
deductions or withholding, restrictions or conditions of any nature imposed by
or on behalf of the Applicable Foreign Jurisdictions or any taxing authority
whatsoever on the payments by Borrower to Lender.





Section 4.19  No
Exchange Approvals.  There are no exchange approvals required
for the execution of the Agreement, the Borrower’s Note, or the other Loan
Documents to which Borrower is a party and the Borrower will be permitted to
purchase sufficient freely transferable United States dollars for the payment of
all amounts due under such agreements and documents.




Section 4.20 Civil
Acts; No Immunity.  Borrower is subject to civil and commercial
law with respect to its obligations under this Agreement. Each of Borrower’s
Guarantors is subject to civil and commercial law with respect to its
obligations under any guaranty to which it is a party. Each of the execution,
delivery and performance of this Agreement and the other Loan Documents by
Borrower and the execution, delivery and performance of any Security Documents
by any of Borrower’s Guarantors constitutes a commercial act as opposed to a
governmental act. Neither Borrower nor any of its Guarantors (nor the property
of each) enjoy, in the courts or under the laws of the Applicable Foreign
Jurisdictions any right of immunity from suit, setoff or attachment or execution
on a judgment in respect of the obligations of Borrower or any of its Guarantors
under this Agreement or any other Loan Document.




Section 4.21  No
Presence or Registration Required of Lender.  The Lender will
not be deemed to be a resident of the Applicable Foreign Jurisdictions as a
result of the Loan made to the Borrower hereunder, and the Lender will not be
required to be licensed or in any way qualified to do business in the Applicable
Foreign Jurisdictions in order to enforce its rights under the Agreement or any
Loan Document.




Section 4.22  Legal
Effect.  Except for (i) any registration requirements necessary
to reflect the transfer and sale of the Vessel to the Borrower, and (ii) the
recordation of the Ship Mortgage over the Vessel, no Loan Document is required
to be filed or recorded with any court or any other authority in any of the
Applicable Foreign Jurisdictions to ensure the validity of the obligations of
the Borrower and the admissibility in evidence of the Loan
Documents.





Section 4.23  Dual
Registry.  Subject to the terms of this Agreement, Lender
consents to the Charter Registration.  Upon the occurrence of any
Event of Default, the Lender may terminate the Charter
Registration.  In such event, (i) the registration of the Vessel with
the Panama Registry shall no longer be suspended, (ii) the Charter Agreement
with the Republic of the Philippines shall be canceled and terminated, (iii) the
registration of the Vessel with the Panama Registry shall be in full force and
effect in the manner it existed prior to the Charter Registration, and (iv)
Lender shall be entitled to all rights and remedies under the Loan
Documents.








ARTICLE
V


Affirmative
Covenants





Each Borrower
severally agrees as follows.  So long as the Borrower’s Note shall
remain unpaid or Borrower shall have any unfulfilled or undischarged obligations
or duties under the Loan Documents, the Security Documents or any related
agreements, Borrower 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, and
to Collateral shall be the Collateral provided directly by
Borrower.





Section 5.01.Financial
Statements; Other Information.  Borrower will deliver to
Lender:





(a)  (1)           
as soon as available, but in any event within 180 days after the end of each
fiscal year of Parent Guarantor (commencing with the fiscal year ending December
31, 2007, a consolidated balance sheet of Parent Guarantor and its Subsidiaries
as at the end of such fiscal year, and the related consolidated statements of
income or operations, shareholders’ equity and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and prepared in accordance with GAAP, such
consolidated statements to be audited and accompanied by (i) a report and
opinion of a Registered Public Accounting Firm of nationally recognized standing
reasonably acceptable to Lender which report and opinion shall be prepared in
accordance with generally accepted auditing standards and applicable Securities
Laws and shall not be subject to any “going concern” or like qualification or
exception or any qualification or exception as to the scope of such audit or
with respect to the absence of any material misstatement and (ii) if required
under Sarbanes-Oxley, an opinion of such Registered Public Accounting Firm
independently assessing Parent Guarantor’ internal controls over financial
reporting in accordance with Item 308 of SEC Regulation S-K, PCAOB Auditing
Standard No. 2, and Section 404 of Sarbanes-Oxley expressing a conclusion that
contains no statement that there is a material weakness in such internal
controls, except for such material weaknesses as to which the Lender does not
object;




(2)
as soon as available, but in any event within 90 days after the end of each of
the first three fiscal quarters of each fiscal year of Parent Guarantor
(commencing with the fiscal quarter ending March 31, 2008), a consolidated
balance sheet of Parent Guarantor and its Subsidiaries as at the end of such
fiscal quarter, and the related consolidated statements of income or operations,
shareholders’ equity and cash flows for such fiscal quarter and for the portion
of Parent Guarantor’ fiscal year then ended, setting forth in each case in
comparative form the figures for the corresponding fiscal quarter of the
previous fiscal year and the corresponding portion of the previous fiscal year,
all in reasonable detail, certified by the chief executive officer, chief
financial officer, treasurer or controller of Parent Guarantor as fairly
presenting the financial condition, results of operations, shareholders’ equity
and cash flows of Parent Guarantor and its Subsidiaries in accordance with GAAP,
subject only to normal year-end audit adjustments and the absence of
footnotes;




(b)                immediately
after the commencement thereof, notice in writing of all litigation and of all
proceedings before any state or federal court or any governmental or regulatory
agency, bureau or commission affecting Borrower or any of its Guarantors, or any
Subsidiary or Affiliate of Borrower or any of its Guarantors of the type
described in Section 4.07 hereof or which seek a monetary recovery against such
Party in excess of Two Million Dollars ($2,000,000.00), whether or not covered
by insurance, along with, if requested in writing by Lender, an opinion of
Borrower’s, Guarantor’s or such Subsidiary’s or Affiliate’s counsel regarding
the circumstances underlying and perceived merit of such litigation or
proceedings;





(c)         
as promptly as practicable (but in any event not later than five (5) Business
Days) after Borrower obtains knowl­edge of the occurrence of any event which
constitutes an Event of Default (as hereinafter defined) or would constitute an
Event of Default with the passage of time or the giving of notice or both,
notice of such occurrence, together with a detailed statement by an officer of
Borrower of the steps being taken by Borrower to cure such Event of Default or
monitor such event that is not an Event of Default;





(d)         within
ninety days of the end of each fiscal quarter of Parent Guarantor, a compliance
certificate in substantially the form attached hereto as Schedule 5.01 (d);
and





(e)                from
time to time and promptly upon the request of Lender, such data, certificates,
reports, statements, docu­ments or further information or assurances
regarding (i) the Loan Documents or the Security Documents to which Borrower is
a party, or (ii) the business, assets, liabilities, financial condition,
results of operations or business prospects of the Borrower and/or its
Guarantors as Lender may request, in each case in form and substance, and
certified in a manner, satisfactory to Lender.





Section 5.02.Compliance
with Laws and Regulations; Payment of Taxes and Claims.   Borrower
and its Guarantors shall, in the conduct of their business, comply with all
applicable laws, rules, regulations and orders (such compliance to include,
without limitation, paying and discharging promptly, and in all events before
the same become delinquent, all taxes, claims, assessments and governmental
charges imposed upon it or upon its property, except to the extent contested in
good faith), and shall comply with and perform and observe all material
covenants, provisions and conditions to be performed and observed on the part of
Borrower or such Guarantors in connection with all other loan or credit
agreements.





Section 5.03.Insurance.  Borrower shall
obtain and maintain insurance on the Vessel in accordance with the terms of
Schedule
5.03 hereto.  In addition, as to other business properties
owned by Borrower, Borrower shall obtain and maintain insurance with insurers
believed by Borrower 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 operates or as may be required by
any applicable laws, orders or regulations or as may reasonably be requested by
Lender.  Borrower shall promptly provide Lender with evidence of such
insurance coverage.  Additionally, Borrower 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.





Section 5.04.Preservation
of Corporate Existence.  Borrower and its
Guarantors shall preserve and maintain their corporate existence and all of
their respective rights, privileges, licenses, patents and franchises; provided,
however, that Borrower and any of its Guarantors will obtain Lender’s consent to
any change in the status of its corporate existence (whether by merger,
dissolution or otherwise), it shall not be required to preserve any such rights,
privileges, licenses, patents, and franchises if (i) its Board of Directors or
other governing body shall determine that the preservation thereof is no longer
desirable or necessary in the conduct of the current business of Borrower or
Guarantor and (ii) the loss thereof is not disadvantageous in any material
respect to the holder of Borrower’s Note.





Section 5.05.Inspection.  At any reasonable
time and from time to time, upon prior notice to Borrower, Lender or any agents
or representatives of Lender 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 and the other Loan
Parties and to discuss the affairs, finances and accounts of Borrower or any
other Loan Party with any officer of such Person.





Section 5.06.Maintenance
of Properties, Etc.  Borrower shall
maintain and preserve the Collateral 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.





Section 5.07.Maintenance
of Records and Books of Account.  Borrower and each
of its Guarantors shall keep accurate records and books of their accounts, in
accordance with GAAP consistently applied.





Section 5.08.Discharge
of Indebtedness.  Borrower and each
of its Guarantors shall promptly pay and discharge any and all Indebtedness and
lawful claims which, if unpaid, might become a lien or charge upon the
Collateral, except such as may in good faith be contested or disputed or for
which arrangements for deferred payment have been made, provided appropriate
reserves are maintained, to the satisfaction of Lender, for the eventual payment
thereof.





Section 5.09.  Uninsured
Loss.  Borrower shall
give Lender written notice of any uninsured loss suffered by Borrower or any
Guarantor through fire, theft, liability or property damage in excess of an
aggregate of Two Hundred Fifty Thousand Dollars ($250,000.00) for any Borrower
or an aggregate of Five Hundred Thousand Dollars ($500,000.00) for any
Guarantor.





Section 5.10.  Ownership
of Borrower 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 each Borrower.  There shall be no sale,
transfer, pledge, donation, hypothecation, alienation or other encumbrance of
any of the outstanding shares of Borrower or Westbrook, other than a transfer of
the shares of Westbrook to either Parent Guarantor or a wholly owned subsidiary
of Parent Guarantor.





Section 5.11.  Operation
of the Vessel.  The Vessel and
all related equipment shall at all times be operated and maintained in
accordance with good industry practice.





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 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 Outstandings 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.











ARTICLE
VI


Negative
Covenants





Each Borrower
severally agrees as follows.  So long as the Borrower’s Note shall
remain unpaid or Borrower shall have any unfulfilled or undischarged obligations
or duties under the Loan Documents, the Security Documents or any related
agreements, Borrower 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,
and to “Collateral” shall be the Collateral provided directly by
Borrower.





Section 6.01.Sale of
Assets.Borrower
will not sell, lease, assign, transfer or otherwise dispose of the Vessel or any
of the other Collateral or any assets being used in Borrower’s business, except
that, with respect to assets other than the Vessel, such restriction shall not
be applicable to any disposi­tion in the ordinary course of business of any
assets or retired property not used or useful in such party=s
business.





Section 6.02.Consolidation
and Merger.  Borrower will not
consolidate with or merge into any Person, or permit any other Person to merge
into it, or acquire (in a transaction analogous in purpose or effect to a
consolidation or merger) all or substantially all the assets of any other
Person.





Section 6.03.Restrictions
on Nature of Business.  The Loan Parties
will not engage in any line of business materially different from that presently
engaged in by such Loan Parties.





Section 6.04.Liens and
Encumbrances.  Borrower will not
permit or suffer to exist or to be created any Lien upon the Collateral,
except:





(a)         such
Lien as may be granted to Lender;





(b)
            Liens
      for taxes, assessments, or other governmental charges not yet due or which
      are being contested in good faith by appropriate action promptly initiated
      and diligently conducted, if such reserve as shall be required by GAAP
      shall have been made therefor;





(c)
            Liens
      of lessors (subordinated), carriers, warehousemen, mechanics, laborers and
      materialmen arising by law in the ordinary course of business for sums
      either not yet due or being contested in good faith by appropriate action
      promptly initiated and diligently conducted, if such reserve as shall be
      required by GAAP shall have been made therefor;
  and





(d)
            With
      respect to the Vessel, Liens in an aggregate amount not to exceed Two
      Hundred Fifty Thousand Dollars ($250,000.00) (i) for crew’s wages (1) for
      thirty (30) days after the termination of a voyage, or (2) which shall
      then be contested in good faith by appropriate action promptly initiated
      and diligently conducted, if such reserve as shall be required by GAAP
      shall have been made therefor, (ii) for general average (1) which are
      unclaimed, (2) for thirty (30) days after having been claimed, or (3)
      which shall then be contested in good faith by appropriate action promptly
      initiated and diligently conducted, if such reserve as shall be required
      by GAAP shall have been made therefor, (iii) for salvage, whether
      voluntary or contract, (1) which are unclaimed, (2) for thirty (30) days
      after having been claimed, or (3) which shall then be contested in good
      faith by appropriate action promptly initiated and diligently conducted,
      if such reserve as shall be required by GAAP shall have been made
      therefor, (iv) for the wages of a stevedore when employed directly by
      Borrower, or the operator, master or agent of the Vessel, (v) for repairs
      or with respect to any changes made in the Vessel (1) which are unclaimed,
      (2) for thirty (30) days after having been claimed, or (3) which shall
      then be contested in good faith by appropriate action promptly initiated
      and diligently conducted, if such reserve as shall be required by GAAP
      shall have been made therefor, and (vi) for necessaries (1) which are
      unclaimed, (2) for thirty (30) days after having been claimed, or (3)
      which shall then be contested in good faith by appropriate action promptly
      initiated and diligently conducted, if such reserve as shall be required
      by GAAP shall have been made
therefor.





Section 6.05.Loans by
Borrower.  Borrower will not
loan funds to any Person, whether by way of loan, stock purchase, capital
contribution or otherwise, other than loans to any Affiliate.





Section 6.06.Contingent
Liability; Investments.  Borrower shall,
at all times during the term hereof, not incur contingent liabilities (as
determined in accordance with GAAP and applicable standards of the Financial
Accounting Standards Board) for third-party obligations.  Borrower
will not acquire by purchase of stock or by purchase of assets in exchange for
cash, shares of capital stock, or other securities of Borrower or any other
Person, all or any substantial division or portion of the assets and business of
any other Person.





Section 6.07.Dividends.  During the term
hereof, Borrower will not: (i) declare, or pay, to any shareholders (or other
equity holders) of Borrower, Parent Guarantor or any parent of either (whether
directly or indirectly) any dividends of cash or stock; (ii) purchase, redeem,
retire, or otherwise acquire for value any of its capital stock now or hereafter
outstanding; make any distribution of assets to its shareholders as such,
whether in cash, assets, or in obligations of Borrower, (iii) allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption, or retirement of any shares of its capital
stock; or (iv) make any other distribution by reduction of capital or otherwise
in respect of any shares of its capital stock, to the extent any such action
would cause a violation of any of the financial covenants set forth in Section
6.10 hereof or any other term of this Agreement.





Section 6.08.Vessel
Operations.  Borrower will not
operate any Vessel, or permit any Vessel to be operated, in (a) any area
excluded from coverage by any insurance policy or coverage in effect with
respect to the Vessel or required by the terms of this Agreement or any other
Loan Document, including without limitation, the war risk coverage described
therein, or (b) the territorial waters of any jurisdiction which is or may
during the term of the Loan be subject to any trade restriction, trade or other
embargo, or similar sanctions, instituted from time to time by the government of
the United States of America or any other government having appropriate
jurisdiction over the Vessel, or by the United Nations, including without
limitation, any and all trade restrictions now or hereafter administered by the
United States Treasury Department’s Office of Foreign Assets Control; provided
that a Vessel may be located, operated or used in the territorial waters of any
jurisdiction with respect to which the government of the United States of
America has issued trade restrictions to the extent that the owner and/or
operator of the Vessel, (a) as required by applicable law, has obtained all
required valid and effective licenses and permits from all United States
governmental authorities permitting the location, operation and/or use of such
Vessel in such jurisdiction and (b) operated such Vessel in strict compliance
with such licenses and permits, and otherwise in accordance with applicable
law.





Section
6.09  Single
Purpose Entity Restrictions.




(a) The
Borrower’s business and purpose shall consist solely of the
following:




(1)
            To
      engage in the ownership of the Vessel, where the Vessel is placed on
      bareboat charter and operated by third persons;
  and




(2)
            to
      engage in such other lawful activities permitted to corporations by the
      applicable laws and statutes for such entities of the Marshall Islands as
      are incidental, necessary or appropriate to the
  foregoing.




(b) So
long as any portion of the Loan remains outstanding, the Borrower shall
not:




(i)
            engage
      in any business or activity other than those permitted hereby or own any
      assets other than the Vessel;




(ii)
            borrow
      money or incur any Indebtedness, other than normal trade accounts and
      charter obligations incurred in the ordinary course of business, or in
      favor of Lender pursuant to this Agreement;
or




(iii)
            institute
      proceedings to be adjudicated bankrupt or insolvent, or consent to the
      institution or bankruptcy or insolvency proceedings against it, or file a
      petition seeking or consenting to reorganization or relief under any
      applicable federal or state law relating to bankruptcy, or consent to the
      appointment of a receiver, liquidator, assignee, trustee, sequestration
      (or other similar official) of the Borrower or a substantial part of
      property of the Borrower, or make any assignment for the benefit of
      creditors, or admit in writing its inability to pay its debts generally as
      they become due, or take any action in furtherance of any such
      action.




(c)  All
property owned by the Borrower shall be owned by the Borrower as an entity and,
insofar as permitted by applicable law, no shareholder, officer or director
shall have any ownership interest in any Borrower property in its individual
name or right and, each share or other ownership interest in the Borrower shall
be personal property for all purposes.




Section
6.10Financial
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.   Permit Consolidated Tangible Net
Worth at any time to 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.  For each calendar month ending on or after the date
hereof, Qualified Cash, plus Availability in
an average daily amount during such calendar month not less than
$15,000,000.00.




(c)  Maximum Consolidated
Leverage Ratio.  Permit the Consolidated Leverage Ratioof Parent
Guarantor and its Subsidiaries at any time to be greater than
3.00:1.00.




(d)  Minimum Consolidated Fixed
Charge Coverage Ratio.  Permit the Consolidated Fixed Charge
Coverage Ratio as of the end of any fiscal quarter and for the period of four
fiscal quarters then ending of Parent Guarantor to be less than
1.50:1.00







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.

















ARTICLE
VII


Events of Default, Rights
and Remedies





Section 7.01.Events of
Default.  AEvent
of Default@,
wherever used herein, means any one of the following events:





(a)                default
by any Borrower in the payment of any principal of or interest on the Borrower’s
Note or any other amount for which Borrower is obligated when it becomes due
hereunder or under the Borrower’s Note or any other Loan Documents or the
Security Documents to which it is a party (whether at maturity, by reason of
notice of prepayment or acceler­ation or otherwise) and any such default
shall continue for ten (10) days unremedied; or





(b)         
default in the performance, or breach, of any covenant or agreement of any
Borrower or other obligor in the Loan Documents or the Security Documents to
which it is a party or a default in the performance, or breach, of any covenant
or agreement of any Guarantor or other Loan Party in this Agreement, the
Security Documents or the Guaranty Agreement, and (other than with respect to a
default under Section 7.01(d) or 7.01(p) hereof and other defaults for which no
cure period, or a shorter cure period, is provided in the applicable Loan
Document or Security Document) any such default or breach that is capable of
being cured is not cured within thirty (30) days after notice thereof from
Lender to any Borrower; or





(c)  default
(including the expiration, without cure, of any applicable grace periods) in the
performance, or breach (including the expiration, without cure, of any
applicable grace periods) , of any covenant or agreement of any Borrower or
Guarantor in the BofA Credit Agreement or any other loan or credit agreements
(other than the Loan Documents and the Security Documents) or any note issued
pursuant thereto or default (including the expiration, without cure, of any
applicable grace periods) in the payment of any sum due under any such agreement
or any note issued pursuant thereto (whether payment is due at maturity, by
reason of notice of prepayment or acceleration or otherwise); or





(d)
            (I)  any
      Borrower or Guarantor shall be adjudicated a bankrupt or insolvent, or
      admit in writing its inability to pay its debts as they mature, or make an
      assignment for the benefit of creditors; or any Borrower or Guarantor
      shall apply for or consent to the appointment of any receiver, trustee, or
      similar officer for it or for all or any substantial part of its property;
      or such receiver, trustee or similar officer shall be appointed without
      the application or consent of any Borrower or Guarantor and such
      appointment shall continue undischarged for a period of thirty (30) days;
      or any Borrower or Guarantor shall institute (by petition, application,
      answer, consent or otherwise) any bankruptcy, insolvency,
      reorganizat­ion, arrangement, readjustment of debt, dissolution,
      liquidation or similar proceeding relating to it under the laws of any
      jurisdiction; or any such proceeding shall be instituted (by petition,
      application or otherwise) against any Borrower or Guarantor and shall
      remain undismissed for a period of thirty (30) days; or any judgment,
      writ, warrant of attachment or execution or similar process shall be
      issued or levied against a substantial part of the property of
      any  Borrower or Guarantor and such judgment, writ, or similar
      process shall  not be released, vacated or fully bonded within
      thirty (30) days after its issue or levy;
or





(II)             if
any of the following events occur:  any Subsidiary or Affiliate of any
Borrower shall be adjudicated a bankrupt or insolvent, or admit in writing its
inability to pay its debts as they mature, or make an assignment for the benefit
of creditors; or any Subsidiary or Affiliate of any Borrower shall apply for or
consent to the appointment of any receiver, trustee, or similar officer for it
or for all or any substantial part of its property; or such receiver, trustee or
similar officer shall be appointed without the application or consent of such
Subsidiary or Affiliate of any Borrower and such appointment shall continue
undischarged for a period of thirty (30) days; or any Subsidiary or Affiliate of
any Borrower shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganizat­ion, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding relating to
it under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against any such Subsidiary
or Affiliate of a Borrower and shall remain undismissed for a period of thirty
(30) days; or any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
any Subsidiary or Affiliate of a Borrower and such judgment, writ, or similar
process shall not be released, vacated or fully bonded within thirty (30) days
after its issue or levy; or





(e)         
any representation or warranty made by any Loan Party in the Loan Documents or
the Security Documents, or in any certificate, instrument, financial statement
or other statement contemplated by or made or delivered pursuant to or in
connection with this Agreement, shall prove to be false, incorrect or misleading
in any material respect; or





(f)
            (I)
            Any
      Borrower or Guarantor suffers a final judgment against it which, within
      thirty (30) days from the date such judgment is entered, shall not have
      been discharged or execution thereof stayed pending appeal unless (i) such
      judgment in the reasonable opinion of Lender is adequately covered by
      insurance; or (ii) (x) adequate accruals with respect to such judgment
      have been established in accordance with GAAP, or (y) a bond in form and
      substance satisfactory to Lender in its sole discretion is issued in order
      to ensure payment of the judgment, and the aggregate amount of all such
      judgments at any time during the term hereof, not adequately covered by
      insurance is not at any time in excess of Two Hundred Fifty Thousand
      Dollars ($250,000.00); or





(II) if
any of the following events occur:  any Subsidiary or Affiliate of any
Borrower suffers a final judgment against it which, within thirty (30) days from
the date such judgment is entered, shall not have been discharged or execution
thereof stayed pending appeal unless (i) such judgment in the reasonable opinion
of Lender is adequately covered by insurance; or (ii) (x) adequate accruals with
respect to such judgment have been established in accordance with GAAP, or (y) a
bond in form and substance satisfactory to Lender in its sole discretion is
issued in order to ensure payment of the judgment, and the aggregate amount of
all such judgments at any time during the term hereof, not adequately covered by
insurance is not at any time in excess of Two Hundred Fifty Thousand Dollars
($250,000.00); or





(g)         
any other AEvent
of Default@
under and as defined in any of the Security Documents; or





(h)  a
hypothecation of any beneficial interest in any Borrower or Guarantor, without
the prior written consent of Lender; or





(i)         any
provision of any Loan Document or Security Document to which any of the Loan
Parties is a party shall for any reason cease to be valid and binding on such
Loan Party, or any of the Loan Parties shall so assert in writing;
or





(j)         any
of the Loan Parties suffers or sustains a Material Adverse Change;
or





(k)         any
Federal tax lien is filed of record against any of the Collateral of any of the
Borrowers or any of the Loan Parties and is not bonded or discharged within ten
(10) Business Days, other than a lien for taxes that are being diligently
contested in good faith by such Loan Party by appropriate proceedings promptly
instituted and for which an adequate reserve is being maintained by such Loan
Party in accordance with GAAP; or





(l)         any
of the Loan Parties shall deny or disaffirm its obligations under any of the
Loan Documents or any Liens granted in connection therewith; or any Liens
granted on any of the Collateral shall be determined to be void, voidable or
invalid, are subordinated or are not given the priority contemplated by this
Agreement; or





(m)                any
Loan Document or any Security Document shall for any reason (other than pursuant
to the terms hereof) cease to create a valid and perfected first priority lien
on the Collateral purported to be covered hereby or thereby, subject to the
Permitted Liens, if any; or





(n)         the
Ship Mortgage shall for any reason cease to create a valid and perfected first
preferred mortgage on the Vessel, subject to the Permitted Liens, if any;
or





(o)         there
is a change in the ownership of any equity interests in violation of Section
5.10; or





(p)         failure
of any Borrower to maintain any insurance required under this Agreement or any
other Loan Document.





Section 7.02.Rights
and Remedies Upon Event of Default.  Upon the
occurrence of an Event of Default or at any time thereafter until such Event of
Default is cured to the satisfaction of Lender, Lender may exercise any or all
of the following rights and remedies:





(a)                Lender
may declare the entire unpaid principal amount of the Note(s) held by it, all
interest accrued and unpaid thereon, and all other amounts payable to it under
this Agreement (including, but not limited to, any prepayment amount payable
under Section 2.09 hereof) to be forthwith due and payable, whereupon such
Note(s), all such accrued interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by each
Borrower;





(b)                Lender
may proceed to protect and enforce this Agreement and the Note(s) held by it by
suit or suits or proceedings in equity, at law or in bankruptcy, and whether for
the specific performance of any covenant or agreement herein contained or in
execution or aid of any power herein granted or for the recovery of judgment for
the indebtedness hereby owed, or for the enforcement of any other proper legal
or equitable remedy available under applicable law; and





(c)                Lender
may exercise any other rights and remedies available to it by law or under the
other Loan Documents or the Security Documents held by it.





Section 7.03.Status
Quo.  In case Lender
shall have proceeded to enforce any right under this Agreement, and such
proceedings shall have been discon­tinued or abandoned for any reason or
shall have been determined adversely to Lender, then, and in every such case,
the applicable Borrower(s) and Lender shall be restored to their former
positions and rights hereunder.








ARTICLE
VIII


Miscellaneous





Section 8.01.No
Waiver; Cumulative Remedies.  No failure or
delay on the part of Lender in exercising any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder.  The
remedies herein provided are cumulative and not exclusive of any remedies
provided by the Loan Documents or available under law.





Section 8.02.Amendments,
Etc.  No amendment,
modification, termination or waiver of any provision of this Agreement, the
Notes or any other Loan Documents or consent to any departure by the Loan
Parties therefrom shall be effective unless the same shall be in writing and
signed by the authorized representatives of Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.  Any such amendment, modification,
termination or waiver shall bind and benefit the Loan Parties and Lender and
their respective successors and assigns, subject, in the case of the Loan
Parties, to the limitations contained in Section 8.07 hereof.  No
notice to or demand on the Loan Parties in any case shall entitle any Loan Party
to any other or further notice or demand in similar or other
circumstances.





Section 8.03.Right of
Setoff.  As collateral
security for the repayment of Borrower=s
obligations and liabilities under this Agreement and the Note, each Borrower
hereby grants to the holder of Borrower’s Note and its successors and assigns
the right to apply, at any time and from time to time should an Event of Default
exist hereunder, any and all obligations owing from such Lender to Borrower
toward repayment of any sums owing from Borrower to such Lender hereunder or
under the Borrower’s Note.





Section 8.04.Addresses
for Notices, Etc.  Except as
otherwise expressly provided herein, all notices, requests, demands and other
communications provided for hereunder shall be in writing and sent by certified
mail (return receipt requested) or nationally recognized overnight courier
service delivered to the applicable party at its address indicated
below.  Notwithstanding the foregoing, any notice to an address
outside the continental United States may be sent by facsimile.





If to any Borrower or
Guarantor:





Suite
306


Commerce
Building


One
Chancery Lane


Hamilton
HM 12


Bermuda





Mailing
Address:





P.O. Box
HM 2522


Hamilton
HMGX


Bermuda





Attention:  William
J. Carr


Telephone:  1441
295 9230


Fax: 1441
295 4957







with a
copy to:







TBS
Shipping Services, Inc.


612 East
Grassy Sprain Road


Yonkers,
NY 10710


Attention:
Ferdinand Lepere


Telephone:
(914) 961-1000


Fax:
(914) 961-5121




And





Cardillo
& Corbett


29
Broadway


New York,
NY 10006 USA




Attention:  Tulio
R. Prieto


Telephone:  (212)
344-0464


Fax:  (212)
797-1212








If to
Lender:





AIG
Commercial Equipment Finance, Inc.


5700
Granite Parkway, Suite 850


Plano,
Texas  75024


Attention: 
Operations Manager





with a
copy to:




AIG
Commercial Equipment Finance, Inc.


5700
Granite Parkway, Suite 850


Plano,
Texas  75024


Attention: 
Legal Department





or, as to
each party, at such other address or to the attention of such other
representative as shall be designated by such party in a written notice to the
other party provided in accordance with the terms of this
Section.  All such notices, requests, demands and other communications
shall, when mailed or transmitted (postage or other charges pre-paid), be
effective three (3) Business Days after  deposited in the mails or one
(1) Business Day after deposited with the applicable courier service, addressed
as aforesaid.  Facsimile notices shall be effective upon confirmed
facsimile transmission by the sender.  Notice to any one Borrower or
Guarantor shall constitute notice to all Borrowers and Guarantors.





Section 8.05.Costs,
Expenses and Indemnification.  Each Borrower
agrees to pay all costs and expenses in connection with the execution and
enforcement of the Loan Documents and the Security Documents to which it is a
party or any other documents to be delivered by it hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for Lender
with respect thereto and with respect to advising Lender as to its rights and
responsibilities under this Agreement.  Each Borrower agrees to pay on
demand all losses, costs and expenses, if any (including reasonable counsel fees
and expenses), incurred in connection with the preservation of any rights of
Lender under, or the enforcement of, or legal advice in respect of, the rights
or responsibilities of Lender under this Agreement with respect to Borrower,
that Borrower’s Note, the Security Documents to which such Borrower is a party,
and any other documents delivered hereunder including, without limita­tion,
losses, costs and expenses (other than taxes, fees, duties and assessments for
which Borrower is not responsible under Section 2.11 hereof) sustained by Lender
as a result of any failure by such Borrower to perform or observe its
obligations contained herein or in such Borrower’s Note or any other document
related thereto.  Each Borrower further agrees to indemnify and hold
harmless Lender from and against any and all damages, losses, liabilities, costs
and expenses resulting from, related to or connected with this Agreement, the
Borrower’s Note, the Security Documents to which it is a party and any document
or instrument delivered in connection herewith or the transactions contemplated
thereby.





Section 8.06.Execution
in Counterparts.  This Agreement
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.





Section 8.07.Binding
Effect, Assignment.  This Agreement
shall be binding upon and inure to the benefit of the Loan Parties and Lender
and their respective successors and assigns, except that the Loan Parties may
not assign their rights hereunder or thereunder or any interest herein or
therein without the prior written consent of Lender.  Borrowers shall
not be responsible for any costs incurred by Lender in connection with any such
assignment by Lender of this Agreement or any interest in and to the
Notes.





Section 8.08.Governing
Law.  THE VALIDITY,
INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE NOTE 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.





Section 8.09.Judicial
Proceedings.   THE LOAN
PARTIES AND THE LENDER AGREE THAT ANY ACTION OR PROCEEDING ARISING UNDER OR
RELATED TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT  MAY BE COMMENCED IN
ANY FEDERAL OR STATE COURT SITTING IN THE SOUTHERN DISTRICT OF NEW YORK,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE LOAN PARTIES HEREBY
IRREVOCABLY SUBMIT TO, AND ACCEPT FOR THEMSELVES AND IN RESPECT OF THEIR
PROPERTY, GENERALLY AND UNCONDITIONALLY, 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 PARTIES 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.  EACH
LOAN PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE LOAN PARTY AT
THE ADDRESS FOR IT SPECIFIED IN SECTION 8.04 HEREOF.  NOTHING HEREIN
SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY LOAN
PARTY IN ANY OTHER JURISDICTION, SUBJECT IN EACH INSTANCE TO THE PROVISIONS
HEREOF WITH RESPECT TO RIGHTS AND REMEDIES.





Section 8.10.Consent
to Loan Participation and Assignments.  Each Loan Party
agrees and consents to Lender’s sale, transfer, assignment or syndication,
whether now or later, of one or more interests in the Loans or any one or more
of the Notes to one or more parties, whether related or unrelated to
Lender.  Lender may provide, without any limitation whatsoever, to any
such parties or potential parties, any information or knowledge Lender may have
about any Loan Party or about any other matter relating to the Loan, and each
Loan Party hereby waives any rights to privacy it may have with respect to such
matters.  Each Loan Party additionally waives any and all notices of
sale of participation interests or assignment, as well as all notices of any
repurchase of such interests. In the event of a sale of one or more Notes, the
holder of such transferred Note(s) will not have any rights against any
Borrowers other than the Borrower(s) that were the maker(s) of the Note(s)
acquired by such holder, or any interest any Collateral of such other Borrowers
whose Notes are held by another Lender, absent an express guaranty by the other
Borrowers with respect to the transferred Note(s), which continues with the
consent of all Note holders following the date of assignment.  Each
Loan Party agrees to execute and deliver to Lender or any other party involved
any in such sale, transfer or assignment, any and all documents requested by
Lender or such other party.  The requested documents may include
documents to re-define which Notes are cross-collateralized.





Section 8.11.Severability
of Provisions.  Any provision of
this Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.





Section 8.12.Survival
of Agreements, Representations and Warranties, Etc.  All warranties,
representations and agreements made by any Loan Party herein or in the Notes or
by any person in any certificate or other document or instrumen­t required
to be delivered in connection with this Agreement shall be considered to have
been relied upon by Lender and shall survive the issuance and delivery to Lender
of the Notes regardless of any investiga­tion made by Lender or on its
behalf, and shall terminate only upon the full and final payment and performance
by such Borrower of the Borrower’s Loan.  All statements in any such
certificate or other document or instrument shall constitute representations and
warranties by Borrower hereunder.





Section 8.13.Several
Liability of Borrowers.  The representations and liabilities of
each Borrower hereunder and any other Loan Documents to which a Borrower and
other Borrowers may be a party shall be several in nature, and no Borrower shall
have personal liability for any representations or liabilities of another
Borrower under this Agreement, the other Borrower’s Note, or Loan Documents or
Security Documents to which another Borrower may be a party, absent an express
guaranty of such obligations.  Nothing in this section shall be deemed to
modify the cross-default provisions of this Agreement or the other Loan
Documents, or to limit a Borrower’s liabilities under representations and
warranties that include matters pertaining to other Borrowers, notwithstanding
that the other Borrowers have independent and separately enforceable liability
to Lender for such matters.





Section 8.14.Headings.  Article and
Section headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.





Section 8.15.Jury
Trial Waiver.
EACH LOAN PARTY AND LENDER IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT,
ANY OTHER LOAN DOCUMENT, THE SECURITY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.  EACH LOAN PARTY ACKNOWLEDGES THAT THE FOREGOING
WAIVER IS A MATERIAL INDUCEMENT TO LENDER ENTERING INTO THIS AGREEMENT AND THAT
LENDER IS RELYING UPON THE FOREGOING WAIVER IN THEIR FUTURE DEALINGS WITH THE
LOAN PARTIES.  EACH LOAN PARTY WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THE FOREGOING WAIVER WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH SUCH LEGAL
COUNSEL.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.





{signature page
follows}


BORROWERS:





AMOROS
MARITIME CORP.








/s/
Tara DeMakes


By:  Tara
DeMakes


Title:  Attorney
in Fact





LANCASTER
MARITIME CORP.








/s/
Tara DeMakes


By:  Tara
DeMakes


Title:  Attorney
in Fact





CHATHAM
MARITIME CORP.








/s/
Tara DeMakes


By:  Tara
DeMakes


Title:  Attorney
in Fact





GUARANTOR:





TBS
INTERNATIONAL LIMITED








/s/
Tara DeMakes


By:  Tara
DeMakes


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 LOAN
AGREEMENT


Schedule
      1-
            List
      of Borrowers and Vessels


Schedule
      2.03 -
            Form
      of Note


Schedule
      3.01(a)(5)  -
            Forms
      of Opinion


Schedule
      4.07 -
            Litigation
      affecting Borrower, Guarantors or
Affiliates


Schedule
      5.01 (d)         Form of
      Compliance Certificate


Schedule
      5.03-
            Insurance
      Requirements


SCHEDULE
      1











Borrower
            Vessel Name Following Borrower
      Purchase
            Maximum Individual Loan
    Amount*Amoros
      Maritime Corp.
            Hopi
      Princess
            $13,000,000Lancaster
      Maritime Corp.
            Mohave
      Maiden
            $13,000,000Chatham
      Maritime Corp.
            Zuni
      Princess
            $9,000,000














VESSEL
      NAME
            PANAMA
      NAVIGATION PATENTE NO.
            PANAMA
      CALL LETTERS
            PHILIPPINES
      OFFICIAL NO.
            PHILIPPINES
      CALL SIGN
            ADDITIONAL
      VESSEL SPECIFICATIONSHOPI
      PRINCESS
            36772-PEXT
            3EPG2
            MNLA000706
            DYTU
            LENGTH,
      145.52 METERS, BREADTH, 22.70 METERS, DEPTH, 13.80 METERS, GROSS TONNAGE,
      13,911, NET TONNAGE 7,162MOHAVE
      MAIDEN
            36776-PEXT
            3EPG7
            MNLA000705
            DYTT
            LENGTH,
      167.64 METERS, BREADTH, 23.10 METERS, DEPTH, 14.75 METERS, GROSS TONNAGE,
      17,056, NET TONNAGE 10,329ZUNI
      PRINCESS
            36768-PEXT
            3EPG6
            MNLA000703
            DYTK
            LENGTH,
      167.64 METERS, BREADTH, 23.10 METERS, DEPTH, 14.75 METERS, GROSS TONNAGE,
      17,066, NET TONNAGE 10,334











SCHEDULE
2.03





Form
of Note





PROMISSORY
NOTE





Principal:  $_____________ Date:   ________________,
2005










FOR VALUE
RECEIVED, the undersigned promises, jointly and severally if more than one, to
pay to the order of AIG COMMERCIAL EQUIPMENT FINANCE, INC. or its assigns (the
“Payee”) at
Church Street Station, P.O. Box 6344, New York, NY 10249-6344 or at such other
place as the Payee or the holder hereof may designate in writing, the principal
amount of ___________________ and No/00 Dollars ($__________.00), with interest
(computed on the basis of a 360-day year for the actual number of days elapsed)
on the unpaid principal amount hereof from and including the date of the advance
by Payee until paid in full at a variable per annum simple interest rate (the
“Interest
Rate”) calculated as follows.  The Interest Rate shall be equal
to the greater of (a) five percent per annum or (b) LIBOR plus
1.75%.  Beginning on the first day of the Adjustment Period following
the date hereof, the Interest Rate shall be adjusted once each Adjustment Period
and such adjustment shall be effective during such Adjustment
Period





The
principal amount hereunder shall be payable (i) in eight (8) consecutive equal
quarterly installments each in the amount of $________ payable on the 1st day of
each month commencing July 1, 2008 and (ii) in eight (8) consecutive equal
monthly installments each in the amount of $________ payable on the 1st day of
each month commencing July 1, 2010, with the final installment of all amounts
due and payable hereunder payable on April 1, 2012.  The undersigned
further promises to pay interest, in like money and funds, at the Payee’s
address referenced above or at such other place as the Payee or the holder
hereof may designate in writing, on the unpaid principal amount hereof from and
including the date hereof until paid in full at the Interest Rate for the
applicable Adjustment Period.  Interest shall be payable in arrears on
each date on which an installment of principal is due, upon prepayment in part
of the unpaid principal amount hereof (with respect to the amount so prepaid)
and upon payment (including prepayment) in full of the unpaid principal amount
hereof.  All payments received by Payee shall be applied first to
interest and then to principal.




All
payments hereunder shall be made in lawful money of the United States and in
immediately available funds.  If any installment of this Note is not
paid within ten (10) days after its due date, the undersigned agrees to pay on
demand, in addition to the amount of such installment, an amount equal to the
lesser of (i) five percent (5%) of such installment or (ii) the maximum rate
permitted by Applicable Law (the “Default Rate”).





This Note is one of the promissory
notes referenced in that certain Loan Agreement by the undersigned, the other
borrowers and guarantors named therein, and the Payee, of even date herewith (as
amended, supplemented or otherwise modified from time to time, the “Loan Agreement”) and
is subject and entitled to all provisions and benefits
thereof.  Capitalized terms used, but not expressly defined, herein
shall have the meanings as set forth in the Loan Agreement.





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 furtherprovided
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, if
applicable, 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 one half of one percent (0.5%) of Prepayment
Amount if such prepayment occurs prior to the second anniversary of the date of
this Note, provided that the
Prepayment Fee shall be charged and paid only to the extent permitted by
Applicable Law.  No prepayment fee will be due if prepayment occurs on
or after the second anniversary date of this Note.  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, whether
or not a Prepayment Fee is due, 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.





Upon the maturity of this Note or the
acceleration of the maturity of this Note in accordance with the terms of the
Agreement, the entire unpaid principal amount on this Note, together with all
interest, fees and other amounts payable hereon or in connection herewith, shall
be immediately due and payable without further notice or demand, with interest
on all such amounts at a rate (the “Default Rate”) equal
to the lesser of (i) the Interest Rate plus 2.0%, or (ii) the maximum rate of
interest permitted by Applicable Law, from the date of such maturity or
acceleration, as the case may be, until all such amounts have been paid in
full.  Upon the occurrence of any Event of Default, without further
notice or demand and at Lender’s discretion, interest on all outstanding sums
under this Note shall accrue at the Default Rate, from the date of such Event of
Default until all such amounts have been paid in full.





If any payment on this Note becomes
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day and, with respect to prepayments of
principal, interest thereon shall be payable at the applicable rate during such
extension.





The undersigned hereby waives
diligence, demand, presentment, protest and notice of any kind, and assents to
extensions of the time of payment, release, surrender or substitution of
security, or forbearance or other indulgence, without notice.  The
undersigned agrees to pay all amounts under this Note without offset, deduction,
claim, counterclaim, defense or recoupment, all of which are hereby
waived.





The Payee, the undersigned and any
other parties to the Loan Documents intend to contract in strict compliance with
applicable usury law from time to time in effect.  In furtherance
thereof the undersigned and the Payee stipulate and agree that none of the terms
and provisions contained in the Loan Documents shall ever be construed to create
a contract to pay, for the use, forbearance or detention of money, interest in
excess of the maximum amount of interest permitted to be charged by Applicable
Law from time to time in effect.  Neither the undersigned nor any
present or future guarantors, endorsers, or other Persons hereafter becoming
liable for payment of any Obligation shall ever be liable for unearned interest
thereon or shall ever be required to pay interest thereon in excess of the
maximum amount that may be lawfully charged under Applicable Law from time to
time in effect, and the provisions of this paragraph shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith.  The Payee expressly disavows any intention to
charge or collect excessive unearned interest or finance charges in the event
the maturity of any Obligation is accelerated.  If (a) the maturity of
any Obligation is accelerated for any reason, (b) any Obligation is prepaid and
as a result any amounts held to constitute interest are determined to be in
excess of the maximum legal rate allowed under Applicable Law, or (c) the Payee
or any other holder of any or all of the Obligations shall otherwise collect
amounts which are determined to constitute interest which would otherwise
increase the interest on any or all of the Obligations to an amount in excess of
that permitted to be charged by Applicable Law then in effect, then all sums
determined to constitute interest in excess of such legal limit shall, without
penalty, be promptly applied to reduce the then outstanding principal of the
related Obligations or, at the Payee’s or such holder’s option, promptly
returned to the undersigned upon such determination.  In determining
whether or not the interest paid or payable, under any specific circumstance,
exceeds the maximum amount permitted under Applicable Law, the Payee and the
undersigned (and any other payors thereof) shall to the greatest extent
permitted under Applicable Law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate,
and spread the total amount of interest through the entire contemplated term of
this Note in accordance with the amount outstanding from time to time thereunder
and the maximum legal rate of interest from time to time in effect under
Applicable Law in order to lawfully charge the maximum amount of interest
permitted under Applicable Law.





This Note may not be changed, modified
or terminated orally, but only by an agreement in writing signed by the
undersigned and the Payee or any holder hereof.





The undersigned shall, upon demand, pay
to the Payee all costs and expenses incurred by the Payee (including the fees
and disbursements of counsel and other professionals) in connection with the
preparation, execution and delivery of this Note and all other Loan Documents,
and in connection with the administration, modification and amendment of the
Loan Documents, and pay to the Payee all costs and expenses (including the fees
and disbursements of counsel and other professionals) paid or incurred by the
Payee in (a) enforcing or defending its rights under or in respect of this
Note or any of the other Loan Documents, (b) collecting any of the
liabilities by the undersigned to the Payee or otherwise administering the Loan
Documents, (d) foreclosing or otherwise collecting upon any collateral and
(d) obtaining any legal, accounting or other advice in connection with any
of the foregoing.





This Note shall be binding upon the
successors and assigns of the undersigned and inure to the benefit of the Payee
and its successors, endorsees and assigns.  If any term or provision
of this Note shall be held invalid, illegal or unenforceable, the validity of
all other terms and provisions hereof shall in no way be affected
thereby.





THE UNDERSIGNED AND, BY ITS ACCEPTANCE
HEREOF, THE PAYEE, 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 NOTE AND AGREES THAT
ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A
JURY.





THIS NOTE 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.  THE PARTIES AGREE
THAT ANY ACTION OR PROCEEDING ARISING UNDER OR RELATED TO THIS NOTE MAY BE
COMMENCED IN ANY FEDERAL OR STATE COURT SITTING IN THE SOUTHERN DISTRICT OF NEW
YORK OR THE NORTHERN DISTRICT OF TEXAS 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 PARTIES 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









[__________]
      Maritime Corp., a Marshall Islands
corporation








By:


Name:


Title:














SCHEDULE
3.01 (a) (5)





[LETTERHEAD
OF CARDILLO AND CORBETT – NEW YORK AND MARSHALL ISLANDS COUNSEL TO BORROWERS AND
GUARANTORS]





AIG
Commercial Equipment Finance, Inc.


5700
Granite Parkway


Suite
850


Plano,
Texas  75024





Re:
            Loan
      Agreement dated as of ____________, 2005 (the “Loan
      Agreement”), by and among Amoros Maritime Corp., Lancaster Maritime
      Corp. and Chatham Maritime Corp., as borrowers (collectively, the “Borrowers”),
      and TBS International Limited, as guarantor, and AIG Commercial Equipment
      Finance, Inc., as lender (the “Lender”)




Gentlemen:




We have acted as counsel for the
Borrowers, and TBS International Limited (the “Guarantor”), all in
connection with the Loan Agreement and the loan made pursuant thereto by Lender
to the Borrowers in a principal amount not to exceed $35,000,000.00 (the “Loan”).  Capitalized
terms used herein, but not defined herein, shall have the meaning set forth in
the Loan Agreement.





For purposes of rendering our opinion
set forth herein, we have reviewed originals or copies of the following
documents which pertain directly to the Loan (collectively, the “Loan
Documents”):





1.
            Loan
      Agreement;


2.
            Notes
      by each of the Borrowers in the amounts set forth
  below:





Borrower
            Note
      Amount





a.           Amoros
Maritime
Corp.                                                                $9,000,000


b.           Lancaster
Maritime
Corp.                                                                $13,000,000


c.           Chatham
Maritime
Corp.                                                                $13,000,000








3.
            Ship
      Mortgage by each of the Borrowers;


4.
            Assignments
      of Insurances by each of the Borrowers and the other assignors described
      therein;


5.
            Assignments
      of Charter by each of the
Borrowers;


6.
            Assignments
      of Charter Hire by the various charterers and service provided described
      therein for each Vessel owned by the
Borrowers;


7
            Unsecured
      Guaranty by the Guarantor for each of the
Notes;


8.
            Omnibus
      Agreement Regarding Lien Rights by the various charterers and service
      provided described therein;


9.
            Pay
      Proceeds Letters by each of the Borrowers;
and


10.
            [ADD
      ADDITIONAL LOAN DOCUMENTS]





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 the Guarantor.  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 and 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 Guarantor and the
representations and warranties of the Borrowers and the Guarantor in the Loan
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 Loan Documents other than
the Borrowers and the Guarantor to enter into and perform their respective
obligations thereunder and the due authorization, execution and delivery of the
Loan Documents by such parties.  We have further assumed the validity
and enforceability of the Loan 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, Gibraltar and of Bermuda, we have
relied on the opinion of special Panamanian counsel, Patton, Moreno & Asvat,
special Gibraltar counsel Massias & Partners and special Bermuda counsel,
Conyers, Dill & Pearman.





Based
upon our examination of the foregoing, subject to the qualifications herein set
forth, we are of the opinion that:





1.           Each
Borrower 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 Guarantor 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 Loan Documents and the
Security Documents to which it is a party.





3.           The
individuals executing the Loan Documents on behalf of each Borrower and
Guarantor have been duly authorized and empowered to do so.





4.           The
execution, delivery and performance by each Borrower and Guarantor of the Loan
Documents and the Security Documents to which it is a party, and the borrowing
thereunder, 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 or Guarantor, 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 or Guarantor, or
of the partnership agreement, certificate of limited partnership, articles of
incorporation, bylaws or other organizational documents of such Borrower or
Guarantor.





5.           The
execution, delivery and performance by each Borrower and Guarantor of the Loan
Documents and the Security Documents to which it is a party, and the borrowing
thereunder, 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 or 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 or Guarantor is a
party or by which either of them or their properties may be bound or
affected.





6.           All
of the Loan Documents have been duly executed and delivered to Lender by each
Borrower and Guarantor, as applicable, and no consents, permissions or
authorizations are required from any other parties in connection with the
execution and delivery of the Loan Documents.





7.           Each
of the Loan Documents to which any Borrower is a party (except the Ship
Mortgages) is a legal, valid and binding instrument, enforceable against such
Borrower in accordance with its terms.  Each of the Loan Documents to
which Guarantor is a party is a legal, valid and binding instrument, enforceable
against such Guarantor in accordance with its terms.





8.           The
Loan, as made pursuant to the terms of the Loan Documents, and the Notes
evidencing the Loan, comply with applicable state or federal laws, regulations
and other requirements pertaining to usury.





9.           The
courts of the State of New York would, in a properly presented case with respect
to the Loan Documents, enforce against each Borrower and Guarantor the choice of
New York law provisions of the Loan Documents.





10.           To
the best of our knowledge after due inquiry, each Borrower and Guarantor has all
permits and approvals that are required for execution and delivery of the Loan
Documents and the Security Documents, and the operation of its business and
assets.





11.           There
are no actions, suits or proceedings pending or, to the best of our knowledge
after due inquiry, threatened against any Borrower or Guarantor, or the
properties of any Borrower or Guarantor before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which, if determined adversely to such Borrower or Guarantor, would
have a Material Adverse Effect on the financial condition, properties, or
operations of such party and its ability to perform under the Loan Documents and
the Security Documents.





12.           After
due inquiry, we have no knowledge of any outstanding judgments against any
Borrower or Guarantor.





The
opinions expressed in this letter are made subject to and are qualified by the
following:





a.           The
enforceability of the Loan 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 Loan Documents or applicable law
inadequate for the ultimate practical realization of the primary substantive
benefits intended to be available to the Lender under the Loan
Documents.




Our
opinions herein are limited solely to the laws of the State of New York, the
United States of America and the Marshall Islands, and we express no opinions as
to the laws of any other jurisdiction.





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,











[
LETTERHEAD OF  PATTON MORENO & ASVAT - PANAMA COUNSEL
]





AIG
Commercial Equipment Finance, Inc.


5700
Granite Parkway


Suite
850


Plano,
Texas  75024





Re:
            Loan
      Agreement dated as of ____________, 2005 (the “Loan
      Agreement”), by and among Amoros Maritime Corp., Lancaster Maritime
      Corp. and Chatham Maritime Corp., as borrowers (collectively, the “Borrowers”),
      and TBS International Limited, as guarantor,, and AIG Commercial Equipment
      Finance, Inc., as lender (the “Lender”)




Gentlemen:




We have acted as counsel for the
Borrowers and Guarantor, all in connection with the Loan Agreement and the loan
made pursuant thereto by Lender to the Borrowers in a principal amount not to
exceed $35,000,000.00 (the “Loan”).  Capitalized
terms used herein, but not defined herein, shall have the meaning set forth in
the Loan Agreement.





For purposes of rendering our opinion
set forth herein, we have reviewed originals or copies of the following
documents which pertain directly to the Loan (collectively, the “Loan
Documents”):





1.
            Loan
      Agreement;


2.
            Notes
      by each of the Borrowers set forth below (the “Initial Advance
      Borrowers”) in the amounts set forth
  below:





Borrower
            Note
      Amount





a.           Amoros
Maritime
Corp.                                                                $9,000,000


b.           Lancaster
Maritime
Corp.                                                                $13,000,000


c.           Chatham
Maritime
Corp.                                                                $13,000,000





3.
            Ship
      Mortgage by each of the Borrowers (the “Ship
      Mortgages”);


4.
            Assignments
      of Insurances by each of the Borrowers and the other assignors described
      therein;


5.
            Assignments
      of Charter by each of the
Borrowers;


6.
            Assignments
      of Charter Hire by the various charterers and service provided described
      therein for each Vessel owned by the
Borrowers;


7.
            Unsecured
      Guaranty by each of the Guarantors for each of the
  Notes;


8.
            Omnibus
      Agreement Regarding Lien Rights by the various charterers and service
      provided described therein;


9.
            Pay
      Proceeds Letters by each of the Borrowers;
and


10.
            [ADD
      ADDITIONAL LOAN DOCUMENTS]





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.





Based
upon our examination of the foregoing, subject to the qualifications herein set
forth, we are of the opinion that:





1.           Each
Vessel described below is registered with the Directorate General of Consular
and Maritime Affairs of the Republic of Panama (the “Registration Office”)
in the name of the respective Borrower set forth opposite each Vessel below,
free of mortgages, liens or other encumbrances of record, except the Ship
Mortgage encumbering each Vessel:





OWNER
            VESSEL
      NAME
            PANAMA
      NAVIGATION PATENTE NO.
            PANAMA
      CALL LETTERSAmoros
      Maritime Corp.
            HOPI
      PRINCESS
            36772-PEXT
            3EPG2Lancaster
      Maritime Corp.
            MOHAVE
      MAIDEN
            36776-PEXT
            3EPG7Chatham
      Maritime Corp.
            ZUNI
      PRINCESS
            36768-PEXT
            3EPG6








2.           Each
Ship Mortgage is in appropriate form under the laws of the Republic of Panama
for recordation with the Registration Office.





3.           Each
Ship Mortgage (a) has been received for record in the Registration Office,
(b) has been recorded in the book maintained by the Registration Office for such
purpose, (c) creates a valid preferred mortgage lien on the Vessel described
therein in favor of the Lender enforceable in accordance with its terms, (d) is
a legal, valid and binding instrument, enforceable against the applicable
Borrower in accordance with its terms, and (e) contains, at a minimum, 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.





4.           Apart
from the recordation of each Ship Mortgage in the Registration Office, none of
the Loan Documents are required under the laws of the Republic of Panama to be
filed, registered or recorded in any public office or elsewhere in the Republic
of Panama to ensure the validity, effectiveness or enforceability of the Loan
Documents.





5.           Under
the laws of the Republic of Panama, no further consent, license, permit,
approval, exemption or authorization of or by any governmental authority or
regulatory agency or body of the Republic of Panama is necessary to enable each
Borrower and Guarantor to execute and deliver the Loan Documents to which each
is a party or to ensure the legality, validity or enforceability
thereof.





6.           The
“dual registry” of each Vessel with the Maritime Industry Authority of the
Republic of the Philippines will not adversely affect the validity,
enforceability or priority of any Ship Mortgage.





7.           Neither
the execution and delivery of, nor the performance by each Borrower or Guarantor
of its respective obligations under, the Loan Documents will violate any
provision of the laws of the Republic of Panama.





The
opinions expressed in this letter are made subject to and are qualified by the
following:





The
enforceability of the Loan Documents shall be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
affecting the rights and remedies of secured creditors.





Our
opinions herein are limited solely to the laws of the Republic of Panama, and we
express no opinions as to the laws of any other jurisdiction.





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,





[
LETTERHEAD OF CONYERS, DILL &
PEARMAN- BERMUDA COUNSEL ]





AIG
Commercial Equipment Finance, Inc.


5700
Granite Parkway


Suite
850


Plano,
Texas  75024





Re:
            Loan
      Agreement dated as of ____________, 2005 (the “Loan
      Agreement”), by and among Amoros Maritime Corp., Lancaster Maritime
      Corp. and Chatham Maritime Corp., as borrowers (collectively, the “Borrowers”),
      and TBS International Limited, as guarantor,, and AIG Commercial Equipment
      Finance, Inc., as lender (the “Lender”)




Gentlemen:




We have acted as counsel for TBS
International Limited (the “Company”) in
connection with the Loan Agreement and the loan made pursuant thereto by Lender
to the Borrowers in a principal amount not to exceed $55,000,000.00 (the “Loan”).  Capitalized
terms used herein, but not defined herein, shall have the meaning set forth in
the Loan Agreement.





For purposes of rendering our opinion
set forth herein, we have reviewed originals or copies of the following
documents which pertain directly to the Loan (collectively, the “Loan
Documents”):





1.
            Loan
      Agreement;


2.
            Unsecured
      Guaranty by the Company for each of the Notes;
  and


3.
            [ADD
      ADDITIONAL LOAN DOCUMENTS TO WHICH THE COMPANY IS
      PARTY]





For
purposes of rendering our opinion set forth herein, we have also examined
originals or copies of corporate records, documents and instruments relating to
Company.  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.





Based
upon our examination of the foregoing, subject to the qualifications herein set
forth, we are of the opinion that:





1.           The
Company is a company duly incorporated, validly existing and in good standing
under the laws of Bermuda.





2.           The
Company has full power and authority under Bermuda law and its organizational
documents to enter into and perform its obligations under the Loan Documents and
the Security Documents.





3.           The
execution, delivery and performance by the Company of the Loan Documents has
been authorized by and on behalf of the Company and the Loan Documents have been
duly executed and delivered on behalf of the Company.





4.           The
execution and delivery of the Loan Documents by the Company and the performance
of its obligations under the Loan Documents do not and will not conflict with or
result in a breach of any of the terms or provisions of its organizational
documents or any published law, public rule or regulation applicable to the
Company currently in force in Bermuda and, to the best of our knowledge, do not
and will not conflict with or result in a breach of or constitute a default
under any existing published order, decree or judgment of any governmental
authority or agency or any official body or court in Bermuda. There are no
actions or petitions pending against the Company in the courts of
Bermuda.





5.           There
is no filing, recordation or enrollment of any documents with any governmental
department or other authority in Bermuda which is necessary or advisable to
ensure the legality, validity, enforceability or admissibility in evidence of
any of the Loan Documents.  No authorizations, notarizations, consents
or approvals are required from any governmental authorities or agencies or other
official bodies in Bermuda in connection with the execution, delivery, validity
or enforceability of the Loan Documents or the performance by the Company of its
obligations thereunder.





6.           Under
the laws of Bermuda, no deduction or withholding for or on account of any tax
will be required to be made by any person from any amount paid or expressed to
be payable under the Loan Documents.





7.           No
stamp, documentary, registration, transfer or like taxes are payable under the
laws of Bermuda in respect of the execution of the Loan Documents or the
enforcement thereof.





8.           The
Company is subject to suit in its own name and is not entitled to claim any
immunity in relation to itself or any of its assets under Bermuda law or in the
courts of Bermuda in connection with any legal proceedings relating to the Loan
Documents.





9.           No
taxes will be payable (by withholding or otherwise) to the Government of Bermuda
or any political subdivision or taxing authority thereof or therein in respect
of any payments made by the Company under the Loan Documents, including the
proceeds of any judgment obtained in respect of the Loan Documents in the courts
of Bermuda which may be remitted outside of Bermuda without limit or restriction
and without the need to obtain any consent, permit, license, approval,
authorization or exemption of any person.





10.           The
courts of Bermuda will recognize a foreign judgment as the basis for a claim in
Bermuda.





11.           Bermuda
courts have jurisdiction to give judgment in the currency of the relevant
obligation and statutory rates of interest payable upon judgments will vary
according to the currency of the judgment.





12.           The
courts of Bermuda will observe and give effect to the choice of New York law as
the governing law of the Loan Documents (and to the laws of Panama as the
governing law of each Ship Mortgage) and to the submission to the New York
courts in the Loan Documents.





The
opinions expressed in this letter are made subject to and are qualified by the
following:





Our
opinions herein are limited solely to the laws of Bermuda, and we express no
opinions as to the laws of any other jurisdiction.





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,








[ END OF
SCHEDULE 3.01 (a) (5) ]





SCHEDULE
4.07





Litigation





None.  There are no
actions, suits or proceedings pending or threatened against or affecting
Borrower, or any Guarantor or any Affiliate of Borrower or the properties of
Borrower or such Affiliate before any court or governmental department,
commission, board, bureau, agency or instrumen­tality, domestic or foreign,
which, if adversely determined, would have a Material Adverse Effect on the
financial condition, properties or operations of Borrower or any Guarantor and
Borrower=s
or Guarantor=s
ability to perform hereunder and under the Loan Documents or the Security
Documents.








[ END OF
SCHEDULE 4.07 ]





Schedule
5.01 (d)


Form
of Compliance Certificate





The
undersigned hereby certifies that he/she is the [Chief Financial Officer]
[President] of Amoros Maritime Corp., Lancaster Maritime Corp. and Chatham
Maritime Corp. (“Borrowers”) and an officer of TBS International Limited
(“Guarantor”), and as such he/she is authorized to execute this certificate on
behalf of the Borrowers.  With reference to the Loan Agreement dated
as of February __, 2008 by and between Borrowers and AIG Commercial Equipment
Finance, Inc. (“Lender”) (as the same may be amended or supplemented from time
to time, the "Agreement"), the undersigned certifies to the Lender and each
holder of a Note as follows (each capitalized term used herein having the same
meaning given to it in the Agreement unless otherwise specified):




(a)           The
representations and warranties of the Borrowers contained in the Agreement were
true and correct when made, and are repeated at and as of the time of delivery
hereof and are true and correct at and as of the time of delivery hereof, except
as such representations and warranties are expressly limited to another
date.




(b)           The
Guarantor is in compliance with the financial covenants of Section 6.10 of the
Agreement, as illustrated by the computations set forth on Schedule 1 attached
hereto and made a part hereof.




EXECUTED
AND DELIVERED this ___ day of ______ , 20__.







_____________________________


Name:


Title:





SCHEDULE
5.03





REQUIRED
INSURANCES





(a) Each
Borrower shall, without cost to the Lender, maintain insurance on each Vessel as
specified in this Schedule 5.03, and, in addition, keep the Vessels insured
against such further risks as may be commercially reasonable or reasonably
specified by the Lender from time to time.  The Borrowers shall
maintain all such insurance in an amount in United States dollars which shall
not be less than the greater of (i) the fair market value of the applicable
Vessel (taking into account any charter relating to the Vessel) from time to
time, as determined by Lender, or (ii) the amount set forth below in Section
1(a)(5) of this Schedule.  In the case of protection and indemnity
insurance required herein, the limits of such policies with respect to the
Vessel shall not be less than the greater of (i) the applicable protection &
indemnity club rules, or (ii) One Hundred Million Dollars
($100,000,000.00).





(1)           (a)
(i) Hull and machinery insurance (including, without limitation, war, navigation
and port risk); (ii) Protection and indemnity insurance (including, without
limitation, war risk), and (iii) Pollution risks insurance, in an amount not
less than the greater of (A) the applicable protection & indemnity club
rules or (B) Five Hundred Million Dollars ($500,000,000.00).  Such
policies of insurance shall be under the most current forms (determined at the
time of issuance of the policies in question) of policies approved by the Lender
insuring against the usual risks covered by such forms (including, at the option
of the Borrower, such amounts of increased value as are permitted by said hull
insurance policies).





(b)  While a Vessel is laid
up, at the option of the Borrower and in lieu of hull and machinery and
protection and indemnity insurance, port risk insurance under the most current
forms (determined at the time of issuance of the policies in question) of
policies approved by the Lender insuring the Vessel against hull and machinery
and protection and indemnity risks.





(c)  In addition, the
Lender’s interest in each Vessel shall be noted by any Protection and Indemnity
Club (where applicable) in which the Vessel is enrolled.





(d)  The Lender, at
Borrower’s expense, may directly obtain, or may cause Borrower for Lender’s
benefit to obtain, mortgagee’s interest coverage for each Vessel in a form
acceptable to Lender and in an amount acceptable to Lender, but in no event less
than the value set forth below in Section 1(a)(5) of this Schedule.





(2)           [intentionally
omitted].





(3)           Workers’
Compensation (to the extent required by applicable law) and Employer’s Liability
Insurance, including statutory workers’ compensation in compliance with the laws
of the states in which employees of Borrower conduct operations and the United
States Longshore and Harbor Workers’ Compensation Act, as extended by the Outer
Continental Shelf Land Act (to the extent applicable).  Borrower and
Lender agree and acknowledge that the coverages required by this paragraph shall
not be required by Lender to the extent such coverages are not applicable to the
Vessel’s operations or are otherwise included under the protection and indemnity
policy required above.





(4)           Borrower
shall further on behalf and for the benefit of itself and Lender maintain a
Certificate of Financial Responsibility (Oil Pollution) issued by the United
States pursuant to the Federal Water Pollution Control Act to the extent that
same may be required by law or regulation and such other similar certificates as
may be required in the course of the Vessel’s operations pursuant to the
International Convention on Civil Liability for Oil Pollution Damage of 1969, or
other applicable government requirement.





(5)
            Minimum
      coverage requirements:





Name
      of Vessel
            Hull
      & Machinery
            Mortgagee’s
      InterestMohave
      Maiden
            $18,000,000
            $13,000,000Zuni
      Princess
            $18,000,000
            $13,000,000Hopi
      Princess
            $14,000,000
            $9,000,000














(b)  All
policies of insurance maintained under this Schedule shall, except with respect
to worker’s compensation insurance, or liability insurance as provided in
subsection (e) below, provide that, so long as the Obligations are not fully
satisfied, payment of all losses in excess of Five Hundred Thousand Dollars
($500,000.00) (the “Threshold Amount”) by all insurance under­writers with
respect to any one accident, occurrence or event shall be made directly to the
Lender as loss payee and shall be payable to Lender and the applicable Borrower
as their interests may appear; provided, however, that after
an Event of Default (as hereinafter defined) or an event which, with lapse of
time or notice or lapse of time and notice, would constitute an Event of Default
(herein called an “Unmatured Event of Default”) shall have occurred, the Lender
may direct such insurance underwriters to make remittance of all payments under
such policies, regardless of amount, directly to and to the sole order of the
Lender, including amounts payable with respect to claims made or accidents,
events or occurrences transpiring prior to an Unmatured Event of
Default.  Payment prior to an Unmatured Event of Default of all losses
not in excess of the Threshold Amount shall be made to the Borrower or as the
Borrower may otherwise direct, except as otherwise provided in the proviso to the
foregoing sentence of this subsection (b).  Any such insurance
recoveries to which the Lender shall be so entitled shall be applied as
follows:





(1)  In
the event that insurance becomes payable under said policies on account of an
accident, occurrence or event not resulting in an actual or constructive total
loss or an agreed or compromised total loss of the Vessel, the Lender shall do
the following:





(A) If
there is no existing Event of Default and no Unmatured Event of Default, and if
a written request therefor shall have been made by the applicable Borrower,
Lender shall apply the proceeds of insurance to pay, or consent that the
underwriters pay, for repairs, liabilities, salvage or other charges and
expenses (including labor charges due or paid by the Borrower), covered by the
policies.  If the Borrower shall have repaired the damage and paid the
cost thereof or discharged or paid such liabilities, salvage claims or other
charges and expenses, and certifies such payment in a certificate signed by an
executive officer of the Borrower (a  “Borrower’s Certificate”) delivered
to the Lender, accompanied by written confirmation by the underwriter, a
surveyor, an adjuster or a marine insurance broker, Lender shall apply the
proceeds of insurance to reimburse, or consent that the underwriters reimburse,
the Borrower for such expenditures.  Provided that prior to
undertaking any repair estimated to cost more than Five Hundred Thousand Dollars
($500,000.00), Borrower shall obtain the approval of the
Lender.  After the repair of all known damage from a loss (unless
Borrower and Lender agree that the completion of such repair is not advisable),
and all known costs, liabilities, salvage claims, charges and expenses covered
by the policies with respect to such loss shall have been discharged or paid
(such fact having been certified to by a Borrower’s Certificate delivered to the
Lender, accompanied by written confirmation by the underwriter, a surveyor, an
adjuster or a marine insurance broker) Lender shall return (to the extent of its
remaining receipt), or consent that the underwriters pay, any balance of the
proceeds of insurance to the Borrower.





(B) If
there is no existing Event of Default but there is an existing Unmatured Event
of Default, no payment shall be made to any Borrower and all payments received
and retained by the Lender hereunder shall be applied by the Lender, if it so
elects, for the purposes stated in (A) above or shall be held by the Lender
until such payments may be applied pursuant to (C) below.





(C) If
there is an existing Event of Default, no payment shall be made to any Borrower
and all such payments received and retained by the Lender hereunder shall be
applied by the Lender, at its option, (a) in accordance with this Agreement, or
(b) for the purposes stated in (A) above, with the balance, if any, applied in
accordance with this Agreement.





(2)  In
the event of an accident, occurrence or event resulting in an actual or
constructive loss or an agreed or compromised total loss of a Vessel, the
applicable Borrower shall forthwith deposit with the Lender any insurance moneys
which the Borrower may receive on account thereof under policies of insurance
required by this Schedule, and any insurance moneys received by the Lender
(whether from the Borrower or any insurer or otherwise) shall be applied by the
Lender in accordance this Agreement (whether or not an Event of Default or
Unmatured Event of Default shall exist).





(c)  In
the event of an accident or event resulting in a constructive total loss of a
Vessel, the Lender shall have the right (but only with prior written consent of
the Borrower, unless there is an existing Event of Default, in which event no
such consent shall be neces­sary) to claim for a constructive total loss of
the Vessel, and if (1) such claim is accepted by all underwriters under all
policies then in force as to the Vessel under which payment is due for total
loss and (2) payment in full is made in cash under said policies, then the
Lender shall have the right to abandon the affected Vessel to the underwriters
under such policies, free from the lien of the Security Documents encumbering
such Vessel.





(d)  The
Lender shall not have the right to enter into an agreement or compromise
providing for an agreed or compromised total loss of a Vessel without the
applicable Borrower’s prior consent unless there is an existing Event of
Default.  If (1) the Borrower shall have given its prior consent
thereto or (2) there is an existing Event of Default, the Lender shall have the
right in its discretion to enter into an agreement or compromise providing for
an agreed or compromised total loss of the Vessel.





(e)  In
accordance with subsection (a) the Borrowers shall, without cost to the Lender,
keep the Vessels insured against marine protection and indemnity risks and
liabilities and against pollution liability, and shall maintain such other
liability policies required hereunder.  All such insurance shall be by
policies of insurance approved by the Lender as to form and
amount.  Such policies may provide that, (i) if the Borrower shall not
have incurred the loss, damage or expense in question, any loss under such
insurance may be paid directly to the person to whom any liability covered by
such policies has been incurred (whether or not an Event of Default then
exists), and (ii) if the Borrower shall have incurred the loss, damage or
expense in question, any such loss shall be paid (A) to the Borrower in
reimbursement if there is not an existing Event of Default or an existing
Unmatured Event of Default of which the underwriter has received written notice
from the Lender, or (B) to the Lender to be held and applied in the manner and
order as set forth in this Agreement if there is an existing Event of Default or
Unmatured Event of Default of which the underwriter has received written notice
from the Lender, or (C) to the Lender to be held until it may be applied under
(A) or (B) above.  Any contractual liability insurance obtained by
Borrower with respect to its obligations under this Agreement or the Security
Documents shall provide for payment directly to Lender, and any amounts paid
under such policy shall be applied in the manner and order as set forth in this
Agreement, unless Lender otherwise specifies in writing.





(f)  In
connection with its requiring, permitting or approving any insurance under this
Schedule (including the form and amount thereof and the insurer), the Lender, if
it shall so require, shall be furnished with, and may rely upon a certificate or
opinion of the firm of marine insurance brokers acting for the Borrowers in
respect of the Vessels at the date of this Agreement, or such other firm of
marine insurance brokers (who may be marine insurance brokers for the Borrower)
selected by the Borrower and approved by the Lender (which approval shall not be
unreasonably withheld or delayed), stating, in effect, that said insurance
complies in all respects with appli­cable requirements of this
Schedule.





(g)  Unless
otherwise consented to in writing, all insurance required under this Schedule
shall be placed and kept with first class American, British, or other insurance
companies, underwriters’ associations, clubs or underwriting funds approved by
the Lender.





(h)           All
insurance required under this Schedule shall be taken out in the name of the
Borrower and in the name of the Lender as assured.  If applicable, the
Lender shall be named loss payee under all such policies.





(i)  All
policies for such insurance so taken out shall, unless otherwise consented to by
the Lender, provide that (1) there shall be no recourse against the Lender for
the payment of premiums or commissions, (2) if such policies provide for the
payment of club calls, assessments or advances, there shall be no recourse
against the Lender for the payment thereof and (3) at least thirty (30) days’
prior written notice of any cancellation or modification of any element of
insurance coverage provided for herein shall be given to the Lender by the
insurance underwriters.  All policies of insurance required hereunder
shall contain a waiver of subrogation with respect to Lender and its
assigns.  All such policies shall provide that they are primary
insurance with respect to any insurance carried by Lender or its assigns, and
that any “Other Insurance Clause” contained in Borrower’s insurance shall be
inoperative as to the Lender and its assigns.  In addition, any policy
shall not contain any provision under which Borrower is a co-insurer, but may
provide for reasonable deductibles acceptable to Lender.  Lender
approves a deductible amount of up to $100,000 for hull & machinery coverage
and $100,000 for protection and indemnity risks.





(j)  The
Borrowers shall not, without the prior written consent of the Lender, do any
act, or voluntarily suffer or permit any act to be done, whereby any insurance
required by this Schedule shall or may be suspended, impaired or defeated, or
suffer or permit any Vessel to engage in any voyage or operations, or to carry
any cargo not permitted under the policies of insurance then in effect without
procuring insurance satisfactory to the Lender covering such Vessel in all
respects for such voyage of the carriage of such voyage.





(k)  In
the event that any claim or lien is asserted against any Vessel for loss, damage
or expense which is covered by insurance hereunder, and it is necessary for a
Borrower to obtain a bond or supply other security to prevent arrest of the
Vessel or to obtain the release of the Vessel from arrest on account of said
claim or lien, the Lender, at the written request of the Borrower may, but it
shall not be required to, assign all of its right, title and interest in and to
said insurance covering such loss, damage or expense, to any person, firm or
corporation executing a surety or guaranty bond or other agreement to save or to
release the Vessel from such arrest as collateral security to indemnify against
liability under said bond or other agreement.





(l)  The
Borrower shall deliver to the Lender detailed cover notes in a form acceptable
to Lender evidencing insurance maintained under this Schedule.





(m)  Concurrently
with the delivery of this Agreement and annually thereafter, the Borrowers shall
furnish or cause to be furnished to the Lender a detailed certificate or opinion
(signed by a firm of marine insurance brokers qualifying under subsection (f)
above) as to the insurance maintained by the Borrower pursuant to this Schedule
specifying the respective policies of insurance covering the same and stating,
in effect, that such insurance complies in all respects with the applicable
requirements of this Schedule.  If any Borrower fails to maintain any
such insurance, the Lender may arrange for (at such Borrower=s
expense and without any responsibility on the Lender’s part for) obtaining the
insurance.  Each of the coverages set forth in this Schedule may be
increased to such greater amount as Lender may reasonably required consistent
with prudent industry practice.





[ END OF
SCHEDULE 5.03 ]