Merrill Lynch 12-15-05 Loan


    LOAN
      AND SECURITY AGREEMENT

     

    by
      and between

     

    MERRILL
      LYNCH BUSINESS FINANCIAL SERVICES INC., ACTING THROUGH ITS DIVISION, Merrill
      Lynch Capital

    As
      Lender

     

    and

     

    STERLING
      SHIPPING CORP.

    


    


    and

    


    REMSEN
      NAVIGATION CORP.

    


    


    As
      Debtors

     

    Dated
      as of December ____, 2005

     

    



    
      
        
          


        

         

      

      
         

        
          

        

      

      
         

        
        

      

    



    LOAN
      AND SECURITY AGREEMENT

     

    LOAN
      AND SECURITY AGREEMENT
      (this
“Agreement”),
      dated
      as of December 15, 2005, by and between MERRILL
      LYNCH BUSINESS FINANCIAL SERVICES INC., acting through its division, Merrill
      Lynch Capital (“Lender”),
      a
      Delaware corporation, as lender, and∙STERLING
      SHIPPING CORP. (“Sterling
      Shipping”), and REMSEN
      NAVIGATION CORP. (“Remsen
      Navigation”), as borrowers (each of Sterling Shipping and Remsen Navigation, a
“Debtor”
      and
      collectively the “Debtors”), each a corporation organized under the laws of the
      Republic of the Marshall Islands with an address at Trust Company Complex,
      Ajeltake Island, P.O. Box 1405, Majuro, Marshall Islands, MH 96960. In
      consideration of the mutual agreements contained herein, the parties hereto
      agree as follows:

     

    RECITALS

     

    The
      Debtors have entered into a series of transactions, pursuant to which (i)
      Sterling Shipping has purchased the Panama registered bulk carrier m.v. BILOXI
      BELLE, IMO No. 8316261, currently under bareboat charter registry in the
      Republic of the Philippines, under Philippine flag and port of registry, Manila
      (the “BILOXI BELLE”); and (ii) Remsen Navigation has purchased the Panama
      registered bulk carrier m.v. MAORI MAIDEN, IMO No. 8312746, currently under
      bareboat charter registry in the Republic of the Philippines, under Philippine
      flag and port of registry, Manila (the “MAORI MAIDEN”). 

     

    By
      this
      Agreement, the Debtors desire, among other things, (i) to provide for
      the
      making of a single Loan by Lender on the same date to the Debtors in an
      aggregate principal amount not to exceed U.S.$17,500,000 to enable Sterling
      Shipping to refinance its acquisition of the BILOXI BELLE and Remsen Navigation
      to refinance its acquisition of the MAORI MAIDEN, (ii) to provide for
      the
      issuance by the Debtors to Lender of one joint and several Note evidencing
      the
      consolidated Loan to be made by Lender to the Debtors as herein provided, and
      (iii) to provide for the assignment and mortgage by each Debtor to Lender
      of, among other things, all such Debtor’s right, title and interest in and to
      its respective Vessel and all payments and other amounts received hereunder
      or
      thereunder in accordance with the terms hereof, as security for the Debtors’
      obligations to Lender.

     

    Lender
      is
      willing to make the Loan to the Debtors on the terms and conditions of this
      Agreement in partial consideration for, among other things, the Debtors’
      agreement to be jointly and severally liable for all Obligations and to grant
      and to cause certain other parties to grant to Lender security interests in
      the
      Collateral as provided hereunder and to grant to Lender a Mortgage on the whole
      of each Vessel and to obtain the guaranty by the Guarantors of the Obligations
      pursuant to the Guaranty.

     

    All
      things have been done to make the Note, when issued, executed and delivered
      to
      Lender by the Debtors hereunder, the legal, valid and binding joint and several
      obligation of the Debtors.

     

    Section 1.  DEFINITIONS.

     

    1.1  Defined
      Terms.
      As used
      in this Agreement, the following terms shall have the following defined
      meanings, unless the context otherwise requires (such terms to be equally
      applicable to both singular and plural forms of the terms defined):

     

    “Additional
      Valuations”
      as
      defined in Section 5.37 hereof.

     

    “Affiliate”
      of any
      specified Person shall mean any other Person which, directly or indirectly,
      controls, is controlled by, or is under common control with, such Person. For
      purposes of this definition, “control” of a Person shall mean the power, direct
      or indirect, to vote forty percent (40%) or more of the securities having voting
      power for the election of directors of such Person, or otherwise to direct
      or
      cause the direction of the management and policies of such Person, whether
      by
      contract or otherwise.

     

    “Agreement”,
      “hereof”,
      “hereto”,
      “hereunder”
      and
      words of similar import shall mean this Loan and Security Agreement, as the
      same
      may from time to time be amended, modified or supplemented.

     

    “Amendment
      No. 2 to the August 2004 Loan Agreement”
      shall
      mean that certain amendment no. 2 to the August 2004 Loan Agreement, between
      the
      Collateral Vessel Owners, as debtors and Lender, as lender, which further amends
      certain provisions of the August 2004 Loan Agreement.

     

    “Applicable
      Interest Rate”
      shall
      mean a floating rate equal to two and one-half percent (2.5% ) plus LIBOR.
      Interest shall be calculated on the basis of a 360-day year, in each case for
      the actual number of days occurring in the period for which interest or fees
      are
      payable. 

     

    “Appraisal
      Value”
      shall
      mean the fair market value of each Vessel as determined by an opinion of value
      rendered by a recognized, independent appraisal firm, mutually acceptable to
      all
      parties, and at the Debtors’ cost. The appraisal will be on a “willing seller,
      willing buyer” basis for a charter-free vessel. 

     

    “Approved
      Shipbrokers”
      shall
      mean Compass Maritime Services LLC, Simpson, Spence & Young and Merrill
      Marine Services LLC.

     

    “Assigned
      Charters”
      shall
      mean the Head Charters and the Subcharters.

     

    “Assignments”
      shall
      mean, collectively, the Earnings Assignments and the Assignments of
      Insurances.

     

    “Assignment
      of Insurances”
      shall
      mean each of the first priority assignments of insurances granted in favor
      of
      Lender in form and substance satisfactory to Lender. 

     

    “August
      2004 Loan”
      shall
      mean the U.S. $15,000,000 loan advanced by Lender to the Collateral Vessel
      Owners under the August 2004 Loan Agreement.

     

    “August
      2004 Loan Agreement”
      shall
      mean that certain loan and security agreement dated as of August 26, 2004,
      as
      amended by an amendment no. 1 to loan and security agreement dated as of March
      30, 2005, each between the Collateral Vessel Owners, as borrowers and Lender,
      as
      lender pursuant to which Lender made a term loan in the amount of U.S.
      $15,000,000 available to the Collateral Vessel Owners.

     

    “B
      of A Commitment”
      shall
      mean that certain loan commitment from the Bank of America N.A. to be obtained
      by TBS before April 29, 2006 in a minimum amount of U.S.
      $150,000,000.

     

    “Breakage
      Costs”
      shall
      mean any costs incurred by Lender as a result of payment of principal or
      interest other than on a scheduled Installment Payment Date in accordance with
      the scheduled amortization of the Loan. 

     

    “Business
      Day”
      shall
      mean a day other than a Saturday, Sunday or legal holiday under the laws of
      the
      State of New York.

     

    “CERCLA”
      means
      the Comprehensive Environmental Response, Compensation and Liability Act, as
      amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C.
      Section 9601 et
      seq.
      and as
      further amended from time to time.

     

    “Charterer’s
      Consent”
      shall
      mean the consent and subordination of each charterer that is a party to an
      Assigned Charter to the rights of Lender and the Earnings Assignments, the
      Mortgage, the Collateral Vessel Owners’ Second Assignment of Earnings, the
      Collateral Vessel Owners’ Second Mortgage in respect of the applicable Security
      Vessel, in form and substance acceptable to Lender.

     

    “Classification
      Society”
      shall
      mean a classification society which is a member of the International Association
      of Classification Societies reasonably acceptable to Lender 

     

    “Closing
      Fee”
      shall
      have the meaning ascribed thereto in the Proposal Letter.

     

    “Code”
      or
“UCC”
      shall
      mean the Uniform Commercial Code as from time to time in effect in any
      applicable jurisdiction.

     

    “Collateral”
      as
      defined in Section 6.1 hereof.

     

    “Collateral
      Vessel”
      shall
      mean each of the vessels m.v. IROQUOIS
      MAIDEN, IMO Number 8109008
      and m.v.
MANHATTAN
      PRINCESS, IMO Number 8029715,
      together with all of its machinery, anchors, cables, chains, rigging, tackle,
      fittings, tools, pumps, pumping equipment, gear, apparel, furniture, appliances,
      equipment, spare and replacement parts and all other appurtenances thereunto
      appertaining or belonging, whether now owned or hereafter acquired and whether
      on board or not, and also any and all additions, improvements and replacements
      made in or to such Collateral Vessel or any part thereof or in or to any
      equipment and appurtenances thereto appertaining or belonging.

     

    “Collateral
      Vessel Owners”
      shall
      mean Stratford and Sheffield.

     

    “Collateral
      Vessel Owners’ Guaranty”
      shall
      mean the guaranty by the Collateral Vessel Owners of the Obligations of the
      Debtors under this Agreement.

     

    “Collateral
      Vessel Owners’ Second Assignment of Insurances”
      shall
      mean each of the second priority assignments of insurances relating to each
      of
      the Collateral Vessels granted in favor of Lender in form and substance
      satisfactory to Lender, and collectively, the “Collateral Vessel Owners’ Second
      Assignments of Insurances”.

     

    “Collateral
      Vessel Owners’ Second Assignments”shall
      mean the Collateral Vessel Owners’ Second Assignments of Insurances and the
      Collateral Vessel Owners’ Second Earnings Assignments.

     

    “Collateral
      Vessel Owners’ Second Earnings Assignment”
      shall
      mean each of the second priority assignments of earnings relating to each of
      the
      Collateral Vessels granted in favor of Lender in form and substance satisfactory
      to Lender, and collectively, the “Collateral Vessel Owners’ Second Earnings
      Assignments”.

     

    “Collateral
      Vessel Owners’ Second Mortgage”
      shall
      mean each Panamanian second preferred ship mortgage, as the same may hereafter
      be amended and/or supplemented from time to time, granted by a Collateral Vessel
      Owner on the whole of its Collateral Vessel, in favor of Lender, to secure
      the
      obligations guaranteed by the such Collateral Vessel Owner under the Collateral
      Vessel Owners’ Guaranty, and collectively the “Collateral Vessel Owners’ Second
      Mortgages”.

     

    “Commitment”
      shall
      mean the obligation of Lender to make the Loan in the aggregate principal amount
      specified in Section 2.1 hereof.

     

    “Debtor(s)”
      as
      defined in the preamble of this Agreement.

     

    “Debtors’
      Guaranty”
      shall
      mean the joint and several guaranty by the Debtors of the obligations of the
      Collateral Vessel Owners under the August 2004 Loan Agreement.

     

    “Default”
      shall
      mean any event which, with notice, lapse of time or both, would constitute
      an
      Event of Default.

     

    “DOC”means
      a
      Document of Compliance issued to a Company in accordance with Regulation 4.1
      of
      SOLAS Chapter IX, Management for the Safe Operation of Ships.

     

    “Earnings”
      as
      defined in the Earnings Assignments.

     

    “Earnings
      Assignments”
      shall
      mean the first priority assignment of charter parties, charter hire, freights
      and earnings granted by each Debtor with respect to its Vessel and the
      assignments of charter parties, charter hire and earnings granted by any other
      disponent owner or intermediate charterer with respect to such
      Vessel,
      in
      favor
      of Lender in form and substance satisfactory to Lender and its
      counsel.

     

    “Environmental
      Action”
      means
      any administrative, regulatory or judicial action, suit, demand, demand letter,
      claim, notice of non-compliance or violation, notice of liability or potential
      liability, investigation, proceeding, consent order or consent agreement arising
      under any Environmental Law or Environmental Permit relating to Hazardous
      Materials or arising from alleged injury or threat of injury to health, safety
      or the environment in connection with or arising from exposure to or the actual
      or potential release of Hazardous Materials, including (a) by any
      Governmental Authority for enforcement, cleanup, removal, response, remedial
      or
      other actions or damages, and (b) by any Governmental Authority or any
      third party for damages, contribution, indemnification, cost recovery,
      compensation or injunctive relief.

     

    “Environmental
      Event”
      shall
      mean (i) an environmental event that has occurred or any environmental
      condition that is discovered in, on, beneath, from or involving any Security
      Vessel (including the presence, emission or release of Hazardous Materials
      or
      the violation of any applicable Environmental Law) for which a remediation
      or
      reporting could reasonably be required under applicable Environmental Law,
      or
      (ii) notification received by any Debtor or Collateral Vessel Owner
      that a
      Debtor, Collateral Vessel Owner or any Security Vessel is the subject of an
      Environmental Action relating to such Security Vessel that could reasonably
      be
      expected to result in any ordered remediation or corrective action or other
      material liability under applicable Environmental Law.

     

    “Environmental
      Law”
      shall
      mean any and all applicable international, foreign, federal, state, regional
      and
      local Laws (as well as obligations, duties and requirements relating thereto
      under common law) relating to: (a) emissions, discharges, spills, releases
      or threatened releases of pollutants, contaminants, Hazardous Materials,
      materials containing Hazardous Materials, or hazardous or toxic materials or
      wastes into ambient air, surface water (including, without limitation, all
      inland and ocean waters), groundwater, watercourses, publicly or privately-owned
      treatment works, drains, sewer systems, wetlands, septic systems or onto land;
      (b) the use, treatment, storage, disposal, handling, manufacturing,
      transportation, or shipment of Hazardous Materials, materials containing
      Hazardous Materials or hazardous and/or toxic wastes, materials, products or
      by-products (or of equipment or apparatus containing Hazardous Materials);
      or
      (c) pollution or the protection of human health, safety or the environment
      from exposure to or injury or damage caused by Hazardous Materials. Without
      limitation, “Environmental
      Law”
      includes CERCLA and OPA 90 and IMO 13(g) (when and if the latter comes into
      effect). Debtors hereby agree to comply with, take or abstain from, any action,
      as the case may be, as the International Maritime Organization may require.
      

     

    “Environmental
      Permit”
      means
      any permit, approval, identification number, license or other authorization
      required under any Environmental Law.

     

    “Event
      of Default”
      as
      defined in Section 7 hereof.

     

    “Event
      of Loss”
      shall
      mean, with respect to a Security Vessel, the actual or constructive loss or
      the
      disappearance of such Security Vessel or the loss of use thereof, due to theft,
      destruction, damage beyond repair or damage from any reason whatsoever, to
      an
      extent, in the sole judgment of Lender, which makes repair uneconomical, or
      rendition thereof unfit for normal use, or the condemnation, confiscation or
      seizure of, or requisition of title to or use of, such Security Vessel by any
      governmental authority or any other Person, whether or not acting under color
      of
      governmental authority.

     

    “Financial
      Statements”
      shall
      mean, as to any Person or group of Persons, the balance sheets and statements
      of
      income and cash flows, prepared in accordance with GAAP, of such Person or
      group
      of Persons as required from time to time to be provided by the Debtors under
      this Agreement.

     

    “Funding
      Date”
      shall
      mean the date on which Lender shall make the Loan to the Debtors pursuant
      hereto.

     

    “GAAP”
      shall
      mean generally accepted accounting principles consistently applied in the United
      States.

     

    “GMTBS
      Africa”
      shall
      mean GMTBS Africa Line Limited, a corporation organized and existing under
      the
      laws of Hong Kong.

     

    “GMTBS
      Africa Gmbh”
      shall
      mean GMTBS Africa Line Gmbh, a company organized and existing under the laws
      of
      the Federal Republic of Germany.

     

    “Governmental
      Authority”
      shall
      mean any governmental or quasi-governmental authority, whether executive,
      legislative, judicial, administrative or other, or any combination thereof,
      including, without limitation, any national, Federal, state, local, territorial,
      county, municipal or other government or governmental or quasi-governmental
      agency, arbitrator, board, body, branch, bureau, commission, corporation, court,
      department, instrumentality, master, mediator, panel, referee, system or other
      political unit or subdivision or other entity of any of the foregoing, whether
      domestic or foreign.

     

    “Guarantor”
      shall
      mean each of the entities listed on Schedule 1 hereto, as the same may be
      hereafter amended or modified.

     

    “Guaranty”shall
      mean a joint and several guaranty of all Obligations given by the Guarantors
      in
      form and substance satisfactory to Lender.

     

    “Hazardous
      Materials”
      shall
      mean (a) hazardous materials, hazardous wastes, and hazardous substances
      as
      those or similar terms are defined under any Environmental Laws, including,
      but
      not limited to, the following: the Hazardous Materials Transportation Act,
      49
      U.S.C. Section 1801 et
      seq.,
      as
      amended from time to time, the Resource Conservation and Recovery Act, 42 U.S.C.
      Section 6901 et
      seq.,
      as
      amended from time to time, CERCLA, the Clean Water Act, 33 U.S.C.
      Section 1251 et
      seq.,
      as
      amended from time to time, the Clean Air Act, 42 U.S.C. Section 7401
      et
      seq.,
      as
      amended from time to time, and/or the Toxic Substances Control Act, 15 U.S.C.
      Section 2601 et
      seq.,
      as
      amended from time to time, OPA 90; (b) petroleum and petroleum products,
      including crude oil and any fractions thereof; (c) natural gas, synthetic
      gas, and any mixtures thereof; (d) asbestos and/or any material which
      contains any hydrated mineral silicate, including, but not limited to,
      chrysolite, amosite, crocidolite, tremolite, anthophylite and/or actinolite,
      whether friable or non-friable; (e) polychlorinated biphenyls
      (“PCBs”),
      or
      PCB-containing materials or fluids; (f) radon; (g) any other
      hazardous
      radioactive, toxic or noxious substance, material, pollutant, or solid, liquid
      or gaseous waste; and (h) any hazardous substance that, whether by its
      nature or its use, is subject to regulation under any Environmental Law or
      with
      respect to which any international, federal, state or local Environmental Law
      or
      governmental agency requires environmental investigation, monitoring or
      remediation.

     

    “Head
      Charter”
      shall
      mean each of the bareboat charter parties between a Debtor or a Collateral
      Vessel Owner and identified under the heading “Head Charters” on Schedule 5
      hereto, registered under the laws of the Republic of the Philippines, as any
      such charter is amended, extended or renewed from time to time.

     

    “Hire”
      shall
      mean all freights, earnings and charter hire under any and all charters and
      contracts of affreightment, or requiring or contemplating the use of, a Security
      Vessel from time to time, together with additional hire, supplemental hire,
      requisition hire and any other amounts paid on account of the use or employment
      of such Security Vessel.

     

    “Indebtedness”
      shall
      mean with respect to any Person, at any date of determination (without
      duplication), (i) all indebtedness or other obligation for borrowed
      money
      or for the deferred purchase price of property or services which in accordance
      with GAAP would be shown on the liability side of the balance sheet of such
      Person, (ii) the face amount of all letters of credit issued for the
      account of such Person and, without duplication, all drafts drawn thereunder,
      (iii) obligations as lessee under any lease which shall have been or
      should
      be, in accordance with GAAP, recorded as capital leases, (iv) obligations
      under direct or indirect guarantees in respect of, and obligations (contingent
      or otherwise) to purchase or otherwise acquire, or otherwise to assure a
      creditor against loss in respect of, indebtedness or obligations of other
      Persons of the kinds referred to in clause (i), (ii) or (iii)
      above.

     

    “Installment
      Payment Date”
      shall
      mean, with the respect to the Note, each of the sixty (60) consecutive monthly
      dates during the Note Term, the first of which shall be February 1, 2006 on
      which a regular installment of principal and interest is due on the Note. If
      any
      such date is not a Business Day, then any amounts owing on such day shall be
      payable on the next succeeding Business Day.

     

    “Interest
      Period”
      shall
      mean, during the Note Term, each monthly period ending on an Installment Payment
      Date, provided the first Interest Period shall commence on the Funding Date
      and
      end on the first Installment Payment Date, and the last Interest Period of
      the
      Note Term shall end on the Maturity Date.

     

    “ISM
      Code”
      means
      the International Safety Management Code for the Safe Operation of Ships and
      Pollution Prevention, as adopted by the Assembly of the International Maritime
      Organization on 4 November 1993 by resolution A.741 (18) and incorporated
      on 19 May 1994 as Chapter IX of the Safety of Life at Sea Convention
      1974.

     

    “ISPS
      Code”means
      the
      International Ship and Port Facility Security Code adopted by the International
      Maritime Organization; in accordance with Regulation 1.12 of SOLAS Chapter
      XI-2;
      Special Measures to Enhance Maritime Security.

     

    “ISSC”means
      a
      valid and current International Ship Security Certificate issued under the
      ISPS
      Code.

     

    “Late
      Charge Rate”
      shall
      mean a rate per annum equal to five (5) percentage points higher than the
      Applicable Interest Rate, however, in no event to exceed the highest rate
      allowed by applicable law, if any.

     

    “Law”
      shall
      mean any law, rule, regulation or official code, consent decree, constitution,
      decree, directive, enactment, guideline, injunction, interpretation, judgment,
      order, ordinance, policy statement, proclamation, promulgation, requirement,
      rule of law, rule of public policy, settlement agreement, statute, or writ,
      of
      any Governmental Authority.

     

    “Lender”
      as
      defined in the preamble of this Agreement.

     

    “Letter
      of Undertaking”
      shall
      mean a Letter of Undertaking delivered to Lender by the Manager of each Vessel
      in the form attached hereto as Exhibit A.

     

    “LIBOR”
      means
      the rate of interest per annum at which deposits in U.S. dollars are offered
      to
      major banks in the London interbank market as reported by the Wall Street
      Journal, as determined in accordance with Section 2.2 hereof.

     

    “Liens”
      shall
      mean any interest in property securing an obligation owed to, or a claim by,
      any
      Person other than the owner of the property, whether such interest shall be
      based on common law, maritime law, statute, contract or conveyance, including,
      but not limited to, the security interest lien arising from any pledge,
      mortgage, chattel mortgage, charge, encumbrance, conditional sale or trust
      receipt, or from a charter, consignment or bailment for security purposes and
      any maritime lien, right of retention, tax lien, mechanic’s lien, materialman’s
      lien, workman’s lien, repairman’s lien, any financing statement or other similar
      charge or encumbrance.

     

    “Liner
      Guarantors”
      as
      identified on Schedule 1 hereto.

     

    “Loan”
      shall
      mean the loan made by Lender to the Debtors, as provided in Section 2.1
      and
      evidenced by the Note, as provided for in Section 2.2 of this
      Agreement.

     

    “Loan
      Balances”
      shall
      mean, collectively, any and all amounts advanced by Lender under and in
      connection with this Agreement and the August 2004 Loan Agreement.

     

    “Loan
      Documents”
      shall
      mean, collectively, this Agreement, the Note, the Mortgages, the Collateral
      Vessel Owners’ Second Mortgages, the Assignments, the Collateral Vessel Owners’
      Second Assignments, the Pledge, the Guaranty, the Collateral Vessel Owners’
      Guaranty, the Debtors’ Guaranty, the Letter of Undertaking, the Assigned
      Charters, Amendment No. 2 to the August 2004 Loan Agreement and any consents
      or
      other instruments given with respect to the foregoing, each as may hereinafter
      be amended, modified or supplemented pursuant to the terms hereof or thereof
      respectively.

     

    “Management
      Agreement”
      shall
      mean an agreement to be entered into between the Manager and the disponent
      owner
      of each Vessel, in form and substance acceptable to Lender, and providing for
      the waiver by the Manager of any lien or security interest in such
      Vessel.

     

    “Manager”
      shall
      mean TBS Shipping Services, Inc., a New York corporation, with an address at
      Commerce Building, Suite 306, One Chancery Lane, Hamilton HM 12, Bermuda.


     

    “Material
      Adverse Effect”
      shall
      mean any fact or circumstance which (i) materially and adversely affects
      the business, operations, property or condition of any of the Debtors, the
      Collateral Vessel Owners, the Guarantors or any charterer of an Assigned
      Charter, (ii) has a material adverse effect on the ability of any of
      the
      Debtors, the Collateral Vessel Owners, the Guarantors or any charterer of an
      Assigned Charter to perform its respective obligations under this Agreement,
      the
      Note or the other Loan Documents to which it is a party, or (iii) has
      a
      material adverse effect on the Collateral or Lender’s security interest therein
      (including, without limitation, any event, fact or circumstance which results
      in
      the imposition of any Lien (other than a Permitted Lien not discharged within
      the periods provided in this Agreement or the Loan Documents).

     

    “Maturity
      Date”
      shall
      mean the last day of the Note Term. 

     

    “Mortgage”
      shall
      mean each Panamanian first preferred ship mortgage, as the same may hereafter
      be
      amended and/or supplemented from time to time, granted by a Debtor on the whole
      of its Vessel, in favor of Lender, to secure the Obligations contemplated in
      this Agreement and under the Debtors’ Guaranty, and collectively, the
“Mortgages”.

     

    “MTSA”means
      the
      Maritime Transportation Security Act of 2002, as amended, Public Law
      107-295.

     

    “Note”
      shall
      mean the joint and several secured promissory note of the Debtors, substantially
      in the form of Exhibit B attached hereto (including Schedule A
      thereto), evidencing the Loan made by Lender to the Debtors hereunder, as
      described in Section 2.2 hereof.

     

    “Note
      Term”
      shall
      mean the period commencing with the Funding Date and ending on January ____,
      2011. 

     

    “Obligations”
      shall
      mean (i) the aggregate unpaid principal amount of, and accrued interest
      on,
      the Note; (ii) all other obligations and liabilities of the Debtors
      and any
      of them, now existing or hereafter incurred, under, arising out of or in
      connection with this Agreement, the Loan, the Note, the Debtors’ Guaranty or any
      of the other Loan Documents; and (iii) any and all other present and
      future
      indebtedness, obligations and liabilities of any kind under the Loan Documents
      whatsoever of either Debtor to Lender, whether direct or indirect, joint or
      several, absolute or contingent, liquidated or unliquidated, secured or
      unsecured, matured or unmatured and whether originally contracted with Lender
      or
      otherwise acquired by Lender or from time to time reduced and thereafter
      increased.

     

    “OPA
      90”
      means
      the United States Oil Pollution Act, 1990, as amended from time to time, and
      the
      Environmental Law of any jurisdiction, whether or not in effect on the Funding
      Date, the violation of which includes either strict liability of any Debtor
      or
      unlimited liability of any Debtor.

     

    “Other
      Shipowners”
      shall
      mean the entities identified on Schedule 2 hereto and the term shall be deemed
      to include any current or future Affiliate (but excluding GMTBS Africa and
      GMTBS
      Africa Gmbh) hereafter acquiring one or more vessels.

     

    “Permitted
      Liens”
      with
      respect to a Security Vessel, shall have the meaning assigned to it in the
      Mortgage or Collateral Vessel Owner’s Second Mortgage of such Security Vessel
      only in respect of such Security Vessel and generally it shall also mean the
      following: (a) Liens securing payment of the Obligations, granted pursuant
      to any Loan Document; (b) Liens by operation of law for taxes, assessments
      or other governmental charges or levies not at the time delinquent or being
      diligently contested in good faith by appropriate proceedings and for which
      adequate reserves in accordance with GAAP shall have been set aside on its
      books; and where, by posting of bonds or other substitute security, there is
      no
      material risk of attachment or other levy on any Collateral; (c) Liens
      incurred by operation of law in the ordinary course of business in connection
      with workmen’s compensation, unemployment insurance or other forms of
      governmental insurance benefits, or to secure performance of statutory
      obligations; and (d) deposits to secure the performance of statutory
      obligations incurred in the ordinary course of business.;.

     

    “Person”
      shall
      mean any individual, partnership, corporation, business trust, joint stock
      company, trust, unincorporated association, joint venture, governmental
      authority (whether domestic or foreign) or other entity of whatever
      nature.

     

    “Pledge”
      shall
      mean a pledge and assignment by Pledgor of its legal and beneficial shareholding
      interest in each Debtor in form and substance satisfactory to Lender.


     

    “Pledgor”
      shall
      mean Westbrook Holdings, Ltd., a Marshall Islands corporation. 

     

    “Pool”
      as
      defined in the Pooling Agreement.

     

    “Pooling
      Agreement”
      shall
      mean that certain agreement among the Debtors, the Other Shipowners, the Liner
      Guarantors and TBS Worldwide Services, Inc., as amended from time to time and
      as
      the same may from time to time add or delete one or more parties. 

     

    “Prepayment
      Date”
      shall
      mean, as to the Note, the date on which prepayment of the Note is to be made
      pursuant to notice given in compliance with Section 2.4(b) of this
      Agreement. 

     

    “Proceeds”
      shall
      have the meaning assigned to it in the Code and, in any event, shall include,
      but not be limited to, (i) any and all proceeds of any insurance,
      indemnity, warranty or guaranty payable to any Debtor or Collateral Owner from
      time to time with respect to its Security Vessel or other Collateral;
      (ii) any and all payments (in any form whatsoever) made or due and payable
      to a Debtor or Collateral Vessel Owner from time to time in connection with
      any
      requisition, confiscation, condemnation, seizure or forfeiture of all and any
      part of a Security Vessel by any governmental body, authority, bureau or agency
      of any other Person (whether or not acting under color of governmental
      authority); and (iii) accounts arising out of, any charter, contract
      of
      affreightment or chattel paper evidencing, any lease or charter of, any and
      all
      other rents, hire or profits or other amounts from time to time paid or payable
      in connection with, the Security Vessel. In no event shall the term be construed
      more narrowly than the meaning set forth in the Assignments, the Second
      Assignments, the Mortgages and the Collateral Vessel Owners’ Second
      Mortgages.

     

    “Prohibited
      Jurisdiction”
      means
      any country or jurisdiction, from time to time, (a) that, at any relevant
      time, is subject of a prohibition order (or any similar order or directive),
      sanctions or restrictions promulgated or administered by the Office of Foreign
      Assets Control of the United States Treasury Department or the United Nations,
      or (b) in which, or for which, Lender or any assignee thereof is otherwise
      prohibited or restricted, under laws, regulations, sanctions or restrictions
      applicable to it or its business, from extending credit, transferring property
      or assets, engaging in or facilitating trade or other economic activity, or
      otherwise doing business.

     

    “Prohibited
      Person”
      means
      any Person appearing on the Specially Designated Nationals List compiled and
      disseminated by the Office of Foreign Assets Control of the United States
      Treasury Department, as the same may be amended from time to time.

     

    “Proposal
      Fee”
      shall
      have the meaning given thereto in the Proposal Letter.

     

    “Proposal
      Letter”
      shall
      mean that certain letter dated October 26, 2005 from Lender to TBS regarding
      the
      transaction provided for in this Agreement.

     

    “Relevant
      Percentage(s)”
      as
      defined in Section 5.37 hereof.

     

    “Security
      Vessels”
      shall
      mean, collectively, the Vessels and the Collateral Vessels.

     

    “Sheffield”
      shall
      mean Sheffield Maritime Corp., a corporation organized and existing under the
      laws of the Republic of the Marshall Islands.

     

    “SMC”means
      the
      Safety Management Certificate issued to a Vessel in accordance with Regulation
      4.3 of SOLAS Chapter IX; Management for the Safe Operation of
      Ships.

     

    “Stratford”
      shall
      mean Stratford Shipping Corp., a corporation organized and existing under the
      laws of the Republic of the Marshall Islands.

     

    “Subcharters”
      shall
      mean each time charter of a Security Vessel, including, without limitation,
      those identified under the heading “Subcharters” on Schedule 5 hereto and to the
      August 2004 Loan Agreement and any other contracts for use or employment of
      any
      Security Vessel, other than the Head Charters. 

     

    “TBS”
      shall
      mean TBS International Limited, a corporation organized and existing under
      the
      laws of the Commonwealth of Bermuda.

     

    “Valuation”
      as
      defined in Section 5.37 hereof.

     

    “Vessel”
      shall
      mean each of the vessels BILOXI BELLE and MAORI MAIDEN, together with all of
      its
      machinery, anchors, cables, chains, rigging, tackle, fittings, tools, pumps,
      pumping equipment, gear, apparel, furniture, appliances, equipment, spare and
      replacement parts and all other appurtenances thereunto appertaining or
      belonging, whether now owned or hereafter acquired and whether on board or
      not,
      and also any and all additions, improvements and replacements made in or to
      such
      Vessel or any part thereof or in or to any equipment and appurtenances thereto
      appertaining or belonging.

     

    1.2  Accounting
      Terms.
      All
      accounting terms not specifically defined herein shall be construed in
      accordance with GAAP.

     

    Section 2.  AMOUNT
      AND TERMS OF LOAN.

     

    2.1  Commitment.
      Subject
      to the terms and conditions of this Agreement, Lender agrees to make a single
      Loan to the Debtors in the principal amount of U.S.$17,500,000. Lender shall
      have no obligation to make the Loan to the Debtors after December 30,
      2005.

     

    2.2  The
      Note.

     

    (a)  Note
      Term. The Loan shall be evidenced by the Note, which Note (i) shall
      be
      dated the Funding Date; (ii) shall be for a term equal to the Note Term,
      commencing on the Funding Date and ending on the Maturity Date, and (iii) shall
      be payable on each Installment Payment Date in sixty (60) consecutive monthly
      installments of principal and interest, commencing February 1,2006, with the
      first twenty-four (24) such installments to be in the amount of U.S.$401,041.67
      and the next thirty-six (36) such installments to be in the amount of
      U.S.$218,750; provided,
      further,
      that
      the Note shall bear interest from the date thereof on the unpaid principal
      amount thereof at the Applicable Interest Rate at all times while any amounts
      are outstanding under the Note during the Note Term. 

     

    (b)  Interest.
      The Loan shall bear interest at the Applicable Interest Rate. The Applicable
      Interest Rate shall be determined by Lender two (2) Banking Days prior to the
      first (1st)
      day of
      the relevant Interest Period. Lender shall promptly notify the Debtors in
      writing of the Applicable Interest Rate as and when determined. Each such
      determination, absent manifest error, shall be conclusive and binding upon
      the
      Debtors.

     

    (c)  Cross-Collateralization.
      The Note and all Obligations shall be equally secured by all Collateral. No
      lien
      securing the Obligations or any of them shall be released or deemed released
      unless and until all Obligations are fully and finally repaid and discharged
      except as otherwise provided herein.

     

    2.3  Late
      Charges.
      Any
      amount of principal or interest not paid on or before the third Business Day
      following the due date thereof under the Note shall, to the extent permitted
      by
      applicable law, bear late charges thereon, calculated at the Late Charge Rate,
      from the due date thereof until such amount shall be paid in full. Debtors
      shall
      continue to pay in full regular installments under the Note as and when due,
      notwithstanding any Event of Loss, until all Obligations are entirely paid
      and
      performed.

     

    2.4  Prepayment.

     

    (a)  An
      Event
      of Loss. In the event that either Vessel shall suffer an Event of Loss and
      unless Lender agrees in writing to a lesser prepayment amount, the Debtors
      shall
      make a prepayment of the Note, in an amount equal to the lesser of (i) all
      Obligations remaining due under the Loan Documents, or (ii) 167% of the then
      outstanding principal amount of the Loan multiplied by a fraction, the numerator
      of which is the Appraisal Value of the Vessel suffering an Event of Loss and
      the
      denominator of which is the aggregate Appraisal Value of the lost Vessel and
      the
      other Vessel then remaining (with Appraised Value determined as at the time
      immediately preceding such Event of Loss), together with any other amounts
      then
      due under this Agreement, the Note or any other Loan Document, on the next
      Installment Payment Date after (1) the earlier of 180 days after the date of
      such Event of Loss, or (2) the date the relevant Debtor or Lender receives
      all
      insurance proceeds in respect of such Event of Loss.

     

    (b)  Voluntary
      Prepayment: At any time after the twelfth (12th)
      Installment Payment Date, with not less than 30 days’ prior written notice to
      Lender, Debtors may prepay all, but not less than all, of the Loan on an
      Installment Payment Date. If any prepayment is made after the twelfth
      (12th)
      Installment Payment Date or on or before the thirty-sixth (36th)
      Installment Payment Date, Debtors shall pay a prepayment fee equal to two
      percent (2%) of the principal amount of such prepayment. If the Debtors make
      prepayment after the thirty-sixth (36th)
      Installment Payment Date, Debtors shall pay a prepayment fee equal to one
      percent (1%) of the amount of principal then being prepaid. Notwithstanding
      the
      foregoing, should TBS obtain the B of A Commitment, with not less than 30 days’
      prior written notice, the Debtors may prepay all, but not less than all, of
      the
      Loan on or prior to the twelfth (12th)
      Installment Payment Date, provided that prepayment occurs on an Installment
      Payment Date, and is made from the proceeds of the B of A Commitment. If the
      Debtors prepay the Loan in accordance with the foregoing sentence, the Debtors
      shall pay an early termination fee equal to one percent (1%) of the principal
      amount of such prepayment.

     

    (c)  Except
      as
      expressly provided in the foregoing subsections (a) and (b), the Debtors shall
      not be permitted to make any prepayments on the Note. 

     

    2.5  Use
      of Proceeds.
      The
      proceeds of the Loan shall be advanced to the Debtors and used by them to
      finance, maintain and operate the Vessels in the Pool under the Pooling
      Agreement and for other lawful purposes of the Debtors only. 

     

    2.6  Application
      of Payments.
      

     

    (a)  Note
      Payments Received During the Note Term. So long as no (x) Default with respect
      to any payments due hereunder or under any of the Obligations or (y) Event
      of
      Default shall have occurred and be continuing, each payment of an installment
      under the Note received by Lender during the Note Term shall be applied,
first,
      to any
      costs, expenses, fees or other amounts due under this Agreement or under the
      other Loan Documents not constituting principal and interest due under the
      Note,
second,
      to late
      charges due under the Note, third,
      to
      interest due under the Note, and fourth,
      to the
      payment of principal and all other Obligations which are then due and payable.
      

     

    (b)  Casualty
      Payments. So long as no (x) Default with respect to any payments due hereunder
      or under any of the Obligations or (y) Event of Default shall have occurred
      and
      be continuing, any amounts received by Lender as a result of an Event of Loss
      with respect to any Vessel (including, without limitation, any payment of
      prepayment amounts under Section 2.4(a) or insurance or condemnation proceeds)
      shall be applied, first, to the prepayment amounts required to be paid by
      Section 2.4 hereof; second, to the payment in full of all of the Obligations
      set
      forth in the Note and the other Loan Documents then due and owing; and, third,
      the balance, if any, after payment of the foregoing amounts shall be released
      by
      Lender to the Debtors. 

     

    (c)  Other
      Amounts. So long as no (x) Default with respect to any payments due
      hereunder or under any other Obligation or (y) Event of Default shall
      have
      occurred and be continuing, all Proceeds (other than Proceeds received in
      respect of damage to a Security Vessel, which shall be distributed in accordance
      with Section 1.22 of the applicable Mortgage or Collateral Vessel Owners’
      Second Mortgage) from time to time received by Lender shall be applied, first,
      to any costs, expenses, fees or other amounts due under this Agreement and
      the
      other Loan Documents not constituting principal and interest due under the
      Note,
      second, to late charges due under the Note, third, to interest due under the
      Note, fourth, to principal installments due under the Note in the inverse order
      of maturities, fifth, to the payment in full of all other Obligations which
      are
      then due and payable, and sixth, if provision as to the application of such
      amounts is made in this Agreement or any other Loan Document, Lender shall,
      in
      its sole discretion, either apply such payment to the purpose for which it
      was
      made or pay it to the Debtors, which shall so apply it, and seventh, if due
      to
      the Debtors, Lender shall pay such amounts to the Debtors.

     

    (d)  Application
      After Declaration. After an Event of Default shall have occurred and be
      continuing and after Lender has either, (i) as assignee from the Debtors
      of
      any charter, declared such charter to be in default, or (ii) declared
      the
      Note to be due and payable pursuant to Section 8 hereof, or done both
      (i)
      and (ii), all payments received and amounts realized by Lender, as well as
      all
      payments or amounts then held by Lender as part of the Collateral, shall be
      applied as set forth in said Section 8 hereof and as otherwise provided
      in
      the other Loan Documents and the documents evidencing the other Obligations,
      and
      the balance, if any, shall be paid by Lender to the Debtors.

     

    (e)  Application
      After Default or Event of Default. Subject to Section 2.6(a) hereof,
      all
      payments received and amounts realized by Lender after a Default or an Event
      of
      Default shall have occurred and be continuing, but prior to any declaration
      thereof by Lender or any acceleration of the Note shall be held by Lender as
      part of the Collateral until such time as no Defaults or Events of Default
      shall
      be continuing hereunder (at which time such funds shall be paid to the Debtors)
      or until such funds are applied pursuant to Section 8 hereof.

     

    2.7  Nature
      of the Obligations.
      Each
      Debtor is jointly and severally liable for each and every Obligation. Each
      Debtor consents that, without the necessity of any reservation of rights against
      it and without notice to or further assent by it, the obligations and
      liabilities of each Debtor and any other party or parties for or upon any of
      the
      obligations of any Affiliate of each Debtor, or any collateral security or
      guaranty therefor or right of offset with respect thereto, may, from time to
      time, in whole or in part, be renewed, extended, modified, accelerated,
      compromised or released by Lender; all as Lender may deem advisable from time
      to
      time without impairing, abridging, releasing or affecting the obligations set
      forth in this Section 2.7.

     

    Section 3.  CONDITIONS
      OF BORROWING.

     

    3.1  Conditions
      to Be Fulfilled Prior to the Funding Date.
      Lender
      shall not be required to make the Loan hereunder unless on the Funding
      Date:

     

    (a)  Inspection.
      Lender shall have inspected and found satisfactory the Security
      Vessels.

     

    (b)  Appraisal.
      Lender shall have received an independent third party appraisal of each Security
      Vessel to determine the fair market value of each Security Vessel, as completed
      by an independent appraiser mutually acceptable to Lender and the Debtors,
      all
      at the sole cost and expense of the Debtors. Such appraisal shall be determined
      not more than fifteen (15) days prior to the Funding Date.

     

    (c)  Certificate
      of Incumbency of Each Debtor. Lender shall have received a current certificate
      of incumbency of each Debtor signed by its Secretary or Assistant Secretary
      (or
      other authorized officer), which certificate shall certify the names of the
      officers of it authorized to execute and deliver any Loan Documents hereunder
      or
      under any other related document on its behalf, together with specimen
      signatures of such officers, and Lender may conclusively rely on such
      certificate until receipt of a further certificate of the Secretary or Assistant
      Secretary (or other authorized officer) of such Debtor canceling or amending
      its
      prior certificate and submitting the signatures of the officers named in such
      further certificate.

     

    (d)  Certificate
      of Incumbency of Each Charterer of an Assigned Charter. Lender shall have
      received a current certificate of incumbency of each charterer of an Assigned
      Charter signed by its Secretary or Assistant Secretary (or other authorized
      officer), which certificate shall certify the names of the officers of it
      authorized to execute and deliver any Loan Documents to which it is a party
      hereunder or under any other related document on its behalf, together with
      specimen signatures of such officers, and Lender may conclusively rely on such
      certificate until receipt of a further certificate of the Secretary or Assistant
      Secretary (or other authorized officer) of such charterer canceling or amending
      its prior certificate and submitting the signatures of the officers named in
      such further certificate.

     

    (e)  Certificate
      of Incumbency of the Manager. Lender shall have received a current certificate
      of incumbency of the Manager signed by its Secretary or Assistant Secretary
      (or
      other authorized officer), which certificate shall certify the names of the
      officers of it authorized to execute and deliver any Loan Documents to which
      it
      is a party hereunder or under any other related document on its behalf, together
      with specimen signatures of such officers, and Lender may conclusively rely
      on
      such certificate until receipt of a further certificate of the Secretary or
      Assistant Secretary (or other authorized officer) of the Manager canceling
      or
      amending its prior certificate and submitting the signatures of the officers
      named in such further certificate.

     

    (f)  Certificate
      of Incumbency of Pledgor. Lender shall have received a current certificate
      of
      incumbency of Pledgor signed by its Secretary or Assistant Secretary (or other
      authorized officer), which certificate shall certify the names of the officers
      of it authorized to execute and deliver any Loan Documents to which it is a
      party hereunder or under any other related document on its behalf, together
      with
      specimen signatures of such officers, and Lender may conclusively rely on such
      certificate until receipt of a further certificate of the Secretary or Assistant
      Secretary (or other authorized officer) of Pledgor canceling or amending its
      prior certificate and submitting the signatures of the officers named in such
      further certificate.

     

    (g)  Certificate
      of Incumbency of Each Collateral Vessel Owner. Lender shall have received a
      current certificate of incumbency of each Collateral Vessel Owner signed by
      its
      Secretary or Assistant Secretary (or other authorized officer), which
      certificate shall certify the names of the officers of it authorized to execute
      and deliver any Loan Documents to which it is a party hereunder or under any
      other related document on its behalf, together with specimen signatures of
      such
      officers, and Lender may conclusively rely on such certificate until receipt
      of
      a further certificate of the Secretary or Assistant Secretary (or other
      authorized officer) of each Collateral Vessel Owner canceling or amending its
      prior certificate and submitting the signatures of the officers named in such
      further certificate.

     

    (h)  Certificate
      of Incumbency of Each Guarantor. Lender shall have received a current
      certificate of incumbency of each Guarantor signed by its Secretary or Assistant
      Secretary (or other authorized officer), which certificate shall certify the
      names of the officers of it authorized to execute and deliver any Loan Documents
      to which it is a party hereunder or under any other related document on its
      behalf, together with specimen signatures of such officers, and Lender may
      conclusively rely on such certificate until receipt of a further certificate
      of
      the Secretary or Assistant Secretary (or other authorized officer) of each
      Guarantor canceling or amending its prior certificate and submitting the
      signatures of the officers named in such further certificate.

     

    (i)  Resolutions
      of Each Debtor. Lender shall have received a current certified copy of all
      corporate proceedings of each Debtor evidencing that all action required to
      be
      taken in connection with the authorization, execution, delivery and performance
      of this Agreement, the Note, its Mortgage, the Assignments, the Debtors’
      Guaranty and the other Loan Documents to which it is a party and the
      transactions contemplated hereby and thereby has been duly taken.

     

    (j)  Resolutions
      of Charterers of Assigned Charters. Lender shall have received a current
      certified copy of all corporate proceedings of each charterer of an Assigned
      Charter (except for the Head Charters) evidencing that all action required
      to be
      taken in connection with the authorization, execution, delivery and performance
      of the Loan Documents to which it is a party and the transactions contemplated
      hereby and thereby has been duly taken.

     

    (k)  Resolutions
      of Pledgor. Lender shall have received a current certified copy of all limited
      liability company proceedings of Pledgor evidencing that all action required
      to
      be taken in connection with the authorization, execution, delivery and
      performance of the Pledge, and the transactions contemplated hereby and thereby
      has been duly taken.

     

    (l)  Resolutions
      of the Collateral Vessel Owners. Lender shall have received from each Collateral
      Vessel Owner a copy of all corporate or other entity proceedings of such
      Collateral Vessel Owner evidencing that all action required to be taken in
      connection with the authorization, execution, delivery and performance of the
      Collateral Vessel Owners’ Guaranty and the Loan Documents to which each is a
      party, shall have been taken by the owners, members, partners or shareholders
      and directors thereof.

     

    (m)  Resolutions
      of the Guarantors. Lender shall have received from each Guarantor a copy of
      all
      corporate or other entity proceedings of such Guarantor evidencing that all
      action required to be taken in connection with the authorization, execution,
      delivery and performance of each Guarantor shall have been taken by the owners,
      members, partners or shareholders and directors thereof. 

     

    (n)  Resolutions
      of the Manager. Lender shall have received a current certified copy of all
      corporate proceedings of the Manager evidencing that all action required to
      be
      taken in connection with the authorization, execution, delivery and performance
      of the Loan Documents to which it is a party and the transactions contemplated
      hereby and thereby has been duly taken.

     

    (o)  Opinions
      of Counsel. Lender shall have received the written opinions addressed to it
      of
      New York, Panama, Marshall Islands, and Bermuda counsel for each Debtor, the
      Pledgor, each Collateral Vessel Owner, each Guarantor and each charterer of
      an
      Assigned Charter (except for the Head Charters), satisfactory in form and
      substance to Lender.

     

    (p)  Documents.
      Each of the Note, the Mortgages, the Assignments and the other Loan Documents
      shall be in form and substance satisfactory to Lender and its counsel and shall
      have been duly executed and delivered to Lender by the parties thereto and
      acknowledgments and consents to Assignments, including, but not limited to,
      Charterers’ Consents, in form and substance satisfactory to Lender, from any
      charterer of or any party to a contract of affreightment relating to any Vessel
      shall have been duly authorized, executed and delivered to Lender.

     

    (q)  Insurance.
      Lender shall have received evidence satisfactory to it that each Vessel is
      insured in accordance with the provisions of this Agreement, the applicable
      Mortgage and the Assignments of Insurances. 

     

    (r)  Mortgages
      and Security Interests. All filings, including all applicable UCC-1 filings
      pursuant to the Code, recordings and other actions deemed necessary or desirable
      by Lender in order to establish, protect, preserve and perfect (i) the Mortgage
      as a first naval mortgage on the whole of each Vessel in favor of Lender and
      Lender’s lien on and security interest in all other Collateral as a valid
      perfected first priority security interest, (ii) the Collateral Vessel Owners’
      Second Mortgage as a second naval mortgage on the whole of each Collateral
      Vessel in favor of Lender and Lender’s lien on and security interest in all
      other collateral securing the Collateral Vessel Owners’ Guaranty as a valid
      perfected second priority security interest, shall all have been duly effected,
      including, without limitation, the filing of financing statements and the filing
      and recordation of the Mortgages and the Collateral Vessel Owners’ Mortgages and
      all other actions required to perfect Lender’s security interest in the
      Collateral, all in form and substance satisfactory to Lender, and all fees,
      taxes and other charges relating to such filings and recordings shall have
      been
      paid by the Debtors. Lender shall have received UCC-3 releases or other
      documents satisfactory to Lender from such Persons as Lender shall deem
      necessary or desirable to evidence the release of any liens such Person may
      have
      on the Collateral.

     

    (s)  Discharge
      of Any Existing Liens. Lender shall be satisfied that, concurrently with the
      funding of the Loan, the Security Vessels are free and clear of all Liens other
      than Permitted Liens, as the term is defined herein and in the relevant Mortgage
      or Collateral Vessel Owners’ Second Morgage.

     

    (t)  Representations.
      Lender shall have received a certificate of the Debtors confirming that
      (i) the representations and warranties contained in this Agreement,
      the
      Mortgages and in all of the other Loan Documents and other documents and
      instruments executed and delivered to Lender in connection herewith shall be
      true and correct in all material respects on and as of the Funding Date with
      the
      same effect as if made on and as of such date; (ii) no Default or Event
      of
      Default shall be in existence on the Funding Date or shall occur as a result
      of
      the Loan; (iii) no Event of Default shall have occurred and be continuing
      under any charter of any Security Vessel on the Funding Date; and (iv) the
      acceptance by the Debtors of the Loan shall constitute a representation by
      the
      Debtors that the statements contained in clauses (i), (ii) and (iii) above
      are
      true and correct on the Funding Date.

     

    (u)  No
      Material Adverse Change. In the sole determination of Lender, there shall have
      been no material adverse change since, in the financial condition, business
      or
      operations (as the case may be) of any Debtor, Pledgor, Guarantor, Collateral
      Vessel Owner or the Manager.

     

    (v)  Certificates
      of Ownership. Lender shall have received and found to be satisfactory, or will
      receive upon the funding of the Loan to the Debtors, an abstract of title or
      documents of similar effect as to each Security Vessel confirming that such
      Security Vessel is owned by such Debtor or Collateral Vessel Owner and
      registered in the Republic of Panama upon the funding of the Loan, free of
      all
      recorded Liens other than the applicable Mortgage and with respect to the
      Collateral Vessels, the first preferred mortgage recorded in favor of Lender
      and
      the Collateral Vessel Owners’ Second Mortgage and that such Security Vessel is
      authorized by both the Republic of Panama and the Philippines to fly the
      Philippine flag and show its official number and port of registry under
      Philippines law, accordingly. 

     

    (w)  No
      Event
      of Loss. No Event of Loss shall have occurred with respect to any Security
      Vessel.

     

    (x)  Consent
      and Subordination; Execution of Charter Assignments. Lender shall have received
      and found to be satisfactory each Charterer’s Consent, subordinating any rights
      of any charterer under an Assigned Charter (except the Head Charters) in the
      Collateral to the rights of Lender under the Earnings Assignments, Assignment
      of
      Insurances and the Mortgages. Additionally, the Debtors shall have entered
      into
      the Earnings Assignments, in form and substance satisfactory to Lender,
      providing, among other things, for the assignment to Lender of all of the
      Debtors’ rights and earnings under the Assigned Charters and the acknowledgment
      of and consent to such assignment by any charterer under such Assigned
      Charter.

     

    (y)  Other
      Documents and Information. Lender shall have received from each Debtor, in
      form
      and substance satisfactory to Lender, such other documents and information
      as
      Lender may reasonably request.

     

    (z)  Legal
      Matters. All legal matters with respect to and all legal documents (including,
      but not limited to, the Loan Documents) executed in connection with the
      transactions contemplated by this Agreement shall be satisfactory to counsel
      for
      Lender.

     

    (aa)  Pay
      Proceeds Letter. The Debtors jointly shall submit a letter at least two (2)
      Business Days prior to the Funding Date, acceptable to Lender authorizing and
      instructing Lender to: (i) make the Loan in proper amount, (ii) to
      retain and apply U.S.$87,500 as the Closing Fee on the Funding Date, and (iii)
      pay to Lender’s counsel the amount of Lender’s legal fees and disbursements.


     

    Section 4.  REPRESENTATIONS
      AND WARRANTIES.

     

    In
      order
      to induce Lender to enter into this Agreement and to make the Loan, each Debtor
      represents and warrants to Lender that:

     

    4.1  Organization.
      Each
      Debtor is a corporation duly organized, validly existing and in good standing
      under the laws of the Republic of the Marshall Islands, has the necessary right,
      power and authority to own its Vessel and its other assets and to transact
      the
      business in which it is engaged, and each Debtor is duly qualified to do
      business in each jurisdiction where such qualification is legally required
      and
      where the failure to so qualify would materially adversely affect the
      enforceability of the Loan Documents or otherwise materially adversely affect
      the Collateral or any Debtor’s ability to perform its obligations under any of
      the Loan Documents. Pledgor is the record and beneficial owner of one hundred
      percent (100%) of the authorized, issued and outstanding stock of Sterling
      Shipping and Remsen Navigation.

     

    4.2  Power
      and Authority.
      Each
      Debtor, Pledgor, Collateral Vessel Owner, Guarantor and any charterer of an
      Assigned Charter has full corporate power, authority and legal right to execute
      and deliver the Loan Documents to which it is a party, and to perform its
      obligations hereunder and thereunder respectively, and the Debtors have full
      corporate power, authority and legal right to borrow hereunder and to grant
      the
      security interests created by this Agreement, its Mortgage and each of the
      Assignments, the Collateral Vessel Owners have full corporate power, authority
      and legal right to grant the security interests created by its Collateral Vessel
      Owners’ Second Mortgages and Collateral Vessel Owners’ Second
      Assignments.

     

    4.3  Consents
      and Permits.
      No
      consent of any other Person (including any stockholder, trustee or holder of
      indebtedness), and no consent, license, approval or authorization of, exemption
      by, or registration or declaration with, any governmental body, authority,
      bureau or agency (or other Person) is required in connection with the execution,
      delivery or performance by (i) each Debtor of this Agreement, the Note, its
      Mortgage, the Assignments, the Debtors’ Guaranty or any other Loan Document to
      which it is party other than the filing of its Mortgage and the UCC-1 financing
      statements and (ii) each Collateral Vessel Owner of its Collateral Vessel
      Owners’ Guaranty, Collateral Vessel Owners’ Second Mortgages, the Collateral
      Vessel Owners’ Second Assignments or any other Loan Document to which it is
      party other than the filing of its Collateral Vessel Owners’ Second Mortgages
      and the UCC-1 financing statements.

     

    4.4  No
      Legal Bar.
      The
      execution, delivery and performance by each Debtor, Guarantor, Pledgor and
      Collateral Vessel Owner of any Loan Document to which it is a party, does not
      and will not violate any provision of any applicable law or regulation or of
      any
      judgment, award, order, writ or decree of any court or governmental
      instrumentality, will not violate any provision of the organizational documents
      of any Debtor, Pledgor, Collateral Vessel Owner or Guarantor, and will not
      violate any provision of, or cause a default under, any mortgage, indenture,
      contract, agreement or other undertaking to which any Debtor, Pledgor,
      Collateral Vessel Owner or Guarantor is a party or which purports to be binding
      upon any Debtor, Pledgor, Collateral Vessel Owner or Guarantor or upon any
      of
      their respective assets, and will not result in the creation or imposition
      of
      any Lien on any of the respective assets of any Debtor, Pledgor, Collateral
      Vessel Owner or Guarantor other than the security interests and mortgage
      intended to be created hereby and under the Assignments, the Mortgages, the
      Collateral Vessel Owners’ Second Assignments, the Collateral Vessel Owners’
      Second Mortgages and the Pledge.

     

    4.5  No
      Defaults.
      None of
      the Debtors, Pledgor, Collateral Vessel Owners or Guarantors is in default,
      and
      no event or condition exists which after the giving of notice or lapse of time
      or both would constitute an Event of Default under this Agreement, the Note,
      the
      Mortgages, the Collateral Vessel Owners Second Mortgages, the Pledge, the
      Guaranty, the Assignments, the Collateral Vessel Owners Second Assignments,
      the
      Collateral Vessel Owners’ Guaranty, the Debtors’ Guaranty or any other Loan
      Document or under any mortgage, indenture, contract, agreement, judgment or
      other undertaking to which any is a party or upon any of their respective
      assets, except for any such default, event or condition which, individually
      or
      in the aggregate, would not materially adversely affect any of the Debtors’,
      Pledgor’s, the Collateral Vessel Owners’ or Guarantors’ ability to perform their
      respective obligations under any of this Agreement, the Note, the Mortgages,
      the
      Collateral Vessel Owners Second Mortgages, the Pledge , the Guaranty, the
      Assignments, the Collateral Vessel Owners Second Assignments, the Collateral
      Vessel Owners’ Guaranty, the Debtors’ Guaranty or any other Loan Document to
      which they are a party, or any such mortgage, indenture, contract, agreement,
      judgment or other undertaking.

     

    4.6  Enforceability.
      Each of
      Loan Documents has been duly authorized, executed and delivered by the parties
      thereto (other than Lender) and constitutes a legal, valid and binding
      obligation of the Debtors, Pledgor, the Collateral Vessel Owners or the
      Guarantors, as the case may be, enforceable in accordance with its respective
      terms except as the enforceability thereof may be limited by applicable
      bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
      creditors’ rights generally, by general equitable principles (whether
      enforcement is sought by proceedings in equity or at law) and an implied
      covenant of good faith and fair dealing.

     

    4.7  No
      Litigation.
      Except
      as described on Schedule 3 hereto, there is no action, suit, proceeding
      or,
      to our knowledge, investigation (whether or not purportedly on behalf of any
      Debtor, Pledgor, Collateral Vessel Owner or Guarantor) pending or to our
      knowledge threatened against any Debtor, Pledgor, Collateral Vessel Owner or
      Guarantor or any of their respective assets in any jurisdiction, which, if
      adversely determined, could reasonably be expected to have a Material Adverse
      Effect. There is no action, suit or proceeding or, to our knowledge,
      investigation (a) which involves any Vessel, or Collateral Vessel, the
      Assignments, the Collateral Vessel Owners’ Second Assignments, or any of the
      transactions contemplated by this Agreement or the other Loan Documents
       which, if adversely determined, could reasonably be expected to have
      a
      Material Adverse Effect, or (b) which, if adversely determined, could
      reasonably be expected to have a Material Adverse Effect, pending or threatened
      in any jurisdiction.

     

    4.8  Title
      to Vessel.
      Each
      Debtor has and will have, while any Obligation remains outstanding, valid and
      marketable title to its Vessel, subject to no Liens except Permitted Liens,
      and
      each Vessel shall be registered in the name of its respective Debtor with the
      Republic of Panama and to the extent permitted by the Republic of Panama and
      the
      Philippines, under the flag of the Philippines with respect to the period of
      such Vessel’s Head Charter; Each Collateral Vessel Owner has and will have,
      while any Obligation remains outstanding, valid and marketable title to its
      Collateral Vessel, subject to no Liens except Permitted Liens, and each
      Collateral Vessel shall be registered in the name of its respective Collateral
      Vessel Owner with the Republic of Panama and to the extent permitted by the
      Republic of Panama and the Philippines, under the flag of the Philippines with
      respect to the period of such Collateral Vessel’s Head Charter (as defined in
      the August 2004 Loan Agreement).

     

    4.9  Lender’s
      Security Interest.
      On the
      Funding Date, Lender shall have a legal, valid and continuing (i) first
      preferred ship mortgage (as amended, supplemented or otherwise modified from
      time to time) and a perfected first lien on and security interest in each
      Vessel, and Lender shall have a perfected first lien on and security interest
      in
      Collateral (except for the second liens of the Collateral Vessel Owners’ Second
      Mortgages and the collateral Vessel Owners’ Second Assignments pursuant to which
      the Lender shall have a perfected second lien and security interest in the
      Collateral the subject of such Loan Documents) subject only to Permitted Liens
      and (ii) second preferred ship mortgage (as amended, supplemented or otherwise
      modified from time to time) and a perfected second lien on and security interest
      in each Collateral Vessel, and Lender shall have a perfected second lien on
      and
      security interest in the collateral securing the Collateral Vessel Owners’
      Guaranty subject only to Permitted Liens and all taxes, fees and other charges
      in connection with all of the foregoing shall have been duly paid. There are
      no
      charters in effect on (i) any Vessel other than the Assigned Charters
      specifically identified on Schedule 5 hereto and (ii) any Collateral Vessel
      other than the Assigned Charters (as defined in the August 2004 Loan Agreement)
      identified on Schedule 5 to the August 2004 Loan Agreement.

     

    4.10  Income
      Taxes.
      Each
      Debtor has filed all federal, state and local income tax returns that are
      required to be filed, and has paid all taxes as shown on said returns or which
      are required to be paid and all assessments received by it to the extent that
      such taxes and assessments have become due, and each Debtor does not have any
      knowledge of any actual or proposed deficiency or additional assessment in
      connection therewith. The charges, accruals and reserves on the books of each
      Debtor in respect of federal, state and local taxes for all open years, and
      for
      the current fiscal year, make adequate provision for all unpaid tax liabilities
      for such periods.

     

    4.11  No
      Other Name.
      During
      the past five (5) years, none of the Debtors, the Collateral Vessel Owners
      or
      Pledgor has changed its name and none has done business in any name other than
      as set forth in the introductory paragraph of this Agreement.

     

    4.12  Payment
      of Taxes.
      All
      sales, use, property or other taxes, licenses, tolls, inspection or other fees,
      bonds, permits or certificates which were or may be required to be paid or
      obtained in connection with the acquisition by each Debtor, or Collateral Vessel
      Owner, of its Security Vessel, as the case may be or such vessel’s subsequent
      employment will have been, or when due will be, paid in full or
      obtained.

     

    4.13  Environmental
      Compliance.
      Each
      Debtor, Collateral Vessel Owner and any charterer under an Assigned Charter
      has
      duly complied in all material respects with, and its business, operations,
      assets, equipment, property, leaseholds, or other facilities are in compliance
      in all material respects with, the provisions of all federal, state and local
      environmental, health and safety laws, codes and ordinances, and all rules
      and
      regulations promulgated thereunder. Except as disclosed in Schedule 4
      hereto, neither Pledgor, any Debtor, any Collateral Vessel Owner, any charterer
      under an Assigned Charter, nor any Affiliate thereof is in, or has been notified
      of, any violation of any Environmental Law with respect to the ownership,
      chartering or operation of any Security Vessel, which violation could have
      a
      Material Adverse Effect under OPA 90 or could otherwise reasonably be expected
      to have a Material Adverse Effect on the ability of any Debtor, Collateral
      Vessel Owner or of any charterer of an Assigned Charter to perform the
      transaction contemplated in this Agreement or under an Assigned
      Charter.

     

    4.14  Investment
      Company Act. 

     

    4.15  Neither
      TBS nor any of its Affiliates is an “investment company” or an “affiliated
      person” of, or a “promoter” or “principal underwriter” for or a company
“controlled” by an “investment company” as such terms are defined in the
      Investment Company Act of 1940, as amended; neither the making of the Loan
      nor
      the application of the proceeds or repayment thereof by the Debtors, nor the
      consummation of the other transactions contemplated hereby, will violate any
      provision of such act or any rule, regulation or order of the Securities and
      Exchange Commission thereunder.

     

    4.15  Hire
      of Security Vessels.
      Each of
      the relevant Debtor or Collateral Vessel Owner, together with the Affiliate
      Charterers (as defined in the relevant Earnings Assignments and Collateral
      Vessel Owners Second Earnings Assignment) are the only Persons entitled to
      receive Hire with respect to the Security Vessels.

     

    Section 5.  COVENANTS.

     

    Each
      Debtor covenants and agrees that, from and after the date hereof and so long
      as
      the Commitment or the Obligations are outstanding:

     

    5.1  Notices.
      Such
      Debtor will promptly after obtaining knowledge thereof give written notice
      to
      Lender of (i) the occurrence of any Default or Event of Default;
      (ii) the occurrence of an Event of Loss relating to any Security Vessel;
      (iii) the commencement or threat of any material litigation or proceedings
      or threatened or asserted claim of lien affecting any Debtor, Pledgor,
      Guarantor, the Manager or a Security Vessel; and (iv) any dispute between
      any Debtor, Pledgor, the Manager and any governmental regulatory body or other
      party that involves and Material Adverse Effect respecting any Vessel or that
      could reasonably be expected to materially interfere with the normal business
      operations of any Debtor.

     

    5.2  Laws,
      Obligations; Operations.
      Each
      Debtor will and will cause each of the Pledgor, Guarantor, Collateral Vessel
      owner to (i) duly observe and conform to all requirements of any
      governmental authorities relating to the conduct of its business or to its
      properties or assets; (ii) maintain its existence as a legal entity
      and
      obtain and keep in full force and effect all rights, franchises, licenses and
      permits which are necessary to the proper conduct of its business;
      (iii) obtain or cause to be obtained as promptly as possible any
      governmental, administrative or agency approval and make any filing or
      registration therewith which at the time shall be required with respect to
      the
      performance of the Obligations or the operation of its business; and
      (iv) pay all fees, taxes, assessments and governmental charges,
      withholdings or levies imposed upon any of the Collateral, and at all times,
      such Debtor shall pay or cause to be paid all fees, taxes, assessments and
      governmental charges or levies imposed upon any of the Collateral except for
      such contested in good faith by appropriate proceedings not involving any risk
      of loss of the Vessels or such other Collateral or Lender’s interest or priority
      therein. 

     

    5.3  Inspection.
      Lender
      or its authorized representative may, at any reasonable time or times and
      annually at the Debtors’ expense, inspect any Security Vessel and at Lender’s
      cost (provided, if an Event of Default has occurred and is continuing, every
      inspection thereafter shall be at the Debtors’ expense), it shall have the right
      to review the operating and insurance records of the Debtors upon reasonable
      notice and during normal business hours. Inspection will be conducted in such
      a
      manner as to minimize interference in the Security Vessels’ operation, provided
      that no Event of Default shall be then continuing. The Debtors shall provide,
      and shall require any charterer under an Assigned Charter to provide, Lender
      advance notice of all known surveys and regulatory inspection in order that
      Lender may observe and participate.

     

    5.4  Books.
      The
      Debtors will keep proper books of record and account in which full, true and
      correct entries in accordance with GAAP will be made of all dealings or
      transactions in relation to their businesses and activities.

     

    5.5  Financial
      Information.
      The
      Debtors will furnish or cause to be furnished to Lender (a) as soon
      as
      available, but in any event not later than ninety (90) days after the end of
      each fiscal year of the Debtors and Guarantors, Financial Statements of TBS
      and
      its consolidated subsidiaries as at the end of such fiscal year, all in
      reasonable detail, complying in all material respects with all applicable rules
      and regulations promulgated by the Securities and Exchange Commission, prepared
      in accordance with GAAP applied on a basis consistently maintained throughout
      the period involved and audited by independent certified public accountants
      reasonably acceptable to Lender; (b) as soon as available, but in no
      event
      later than forty-five (45) days after the end of each fiscal quarter of the
      Debtors and Guarantors unaudited financial statements of such entity as at
      the
      end of such fiscal quarter, all certified (subject to normal year-end
      adjustments) as to fairness of presentation and compliance in all material
      respects with all applicable rules and regulations of the Securities and
      Exchange Commission with respect to interim financial statements all in
      reasonable detail, prepared in accordance with GAAP applied on a basis
      consistently maintained throughout the period involved and certified by the
      chief financial officer of such entity; (c) within ninety (90) days of the
      end
      of each fiscal year of Debtors and Guarantors, consolidating internally prepared
      annual financial statements for each Debtor and each Guarantor; (d) with
      each submission of Financial Statements as herein provided, each of the Debtors
      and Pledgor shall submit a written executed Certificate of Compliance, a form
      of
      which is attached hereto as Exhibit C, confirming to Lender the accuracy
      of
      the respective Financial Statements submitted on that date (subject to normal
      year-end audit adjustment),identifying the current charter or other contract
      under which the Vessels are employed and the basic deal economics of such
      contract including rates, term of the contract and any renewals, confirming
      to
      Lender that there exists no Default or Event of Default under this Agreement
      or
      any other of the Loan Documents or, if such Default or Event of Default exists,
      the steps being taken to remedy such Default or Event of Default; and
      (e) promptly, such additional financial and other information as Lender
      may
      from time to time reasonably request.

     

    5.6   Vessel
      Classification.

     

    5.7  
      The
      Debtor shall do or cause to be done all things necessary to ensure that each
      of
      the Security Vessels is classed, at a minimum, at the classification and rating
      required by the respective Head Charter by the respective Classification Society
      without any material outstanding recommendations.

     

    5.7  Incurrence
      of Indebtedness.
      No
      Debtor shall contract, create, incur, assume or suffer to exist any Indebtedness
      except (i) Indebtedness represented by the Loan, or any other Loan
      Documents or other Obligations, (ii) trade debt incurred in the ordinary
      course of such Debtor’s business in a manner and to an extent consistent with
      past practices and necessary for the prudent operation of its business or
      operation, including, without limitation, contingent liabilities under
      Protection and Indemnity entries for club calls and back calls.

     

    5.8  Advances
      or Loans; No Transaction of Other Business or
      Activities.
      No
      loans or advances to any Person shall be made by any Debtor.

     

    5.9  Further
      Assurances.
      Each
      Debtor will, promptly at any time and from time to time, at its sole expense,
      execute and deliver, and cause any charterer under an Assigned Charter, Pledgor,
      Collateral Vessel Owner, Guarantor and the Manager to execute and deliver,
      to
      Lender such further instruments and documents, and take such further action,
      as
      Lender may from time to time reasonably request in order to further carry out
      the intent and purpose of the Loan Documents and to establish and protect the
      rights, interests and remedies created, or intended to be created, in favor
      of
      Lender hereby and thereby, including, without limitation, the execution,
      delivery, recordation and filing of financing statements and continuation
      statements. The Debtors hereby authorize Lender, in such jurisdictions where
      such action is authorized by law, to effect any such recordation or filing
      of
      financing statements and continuation statements without the signature of any
      Debtor thereon and to file as valid financing statements in the applicable
      financing statement records, photocopies hereof and of any other financing
      statement executed in connection herewith. Lender agrees to provide the Debtors
      with copies of UCC filings, but shall have no liability for failure to do so
      and
      such failure shall not serve as a defense to the performance by any party of
      its
      obligations under the Documents. The Debtors will pay, or reimburse Lender
      for,
      any and all reasonable fees, reasonable costs and expenses of whatever kind
      or
      nature incurred in connection with the creation, preservation and protection
      of
      Lender’s security interest in the Security Vessels, the Assignments and the
      other Collateral, including, without limitation, all fees and taxes in
      connection with the recording or filing of instruments and documents in public
      offices, payments or discharge of any taxes or Liens upon or in respect of
      the
      Collateral not discharged as herein required and all other fees, reasonable
      costs and expenses in connection with protecting, maintaining or preserving
      the
      Collateral and Lender’s interests therein, whether through judicial proceedings
      or otherwise, or in connection with defending or prosecuting any actions, suits
      or proceedings arising out of or related to any Security Vessel, the Pledge
      and
      the other Collateral and premiums for insurance with respect to any Security
      Vessel; and all such amounts that are paid by Lender shall, until reimbursed
      by
      or on behalf of the Debtors, constitute Obligations of the Debtors secured
      by
      the Collateral.

     

    5.10  No
      Disposition of Collateral.
      No
      Debtor will and will not permit any charterer under an Assigned Charter,
      Collateral Vessel Owner, Pledgor, Guarantor or the Manager sell, convey,
      transfer, exchange, lease or otherwise relinquish possession or dispose of
      any
      of the Collateral (other than obsolete or worn out equipment disposed of and
      replaced with equipment of the same or better quality and value, in the ordinary
      course of business), or attempt or offer to do any of the foregoing, without
      Lender’s prior written consent.

     

    5.11  No
      Liens.
      The
      Debtors will not and will not permit any charterer under an Assigned Charter,
      Collateral Vessel Owner, Pledgor, Guarantor or the Manager to create, assume
      or
      suffer to exist any Lien of any kind upon the Collateral except for liens in
      favor of Lender and Permitted Liens.

     

    5.12  Environmental
      Compliance.
      (a)
      The
      Debtors shall, and shall require the Collateral Vessel Owners and that any
      charterer under an Assigned Charter, and any and all subcharterers, managers,
      employees, contractors, subcontractors, agents, representatives, Affiliates,
      consultants, occupants and any and all other Persons (other than Lender) to
      (i) comply in all material respects with all applicable Environmental
      Laws,
      (ii) use, employ, process, emit, generate, store, handle, transport,
      dispose of and/or arrange for the disposal of any and all Hazardous Materials
      in, on, or, directly or indirectly, related to or in connection with a Security
      Vessel or any portion thereof in a manner consistent with prudent industry
      practice and in compliance in all material respects with all applicable
      Environmental Laws, and in a manner which does not pose a significant risk
      to
      human health, safety (including occupational health and safety) or the
      environment, and (iii) obtain, maintain, and have on board each Security
      Vessel any required Certificate of Financial Responsibility (“COFR”).

     

    (b)  The
      Debtors shall, and shall require that a Collateral Vessel Owner and that any
      charterer under an Assigned Charter or any other Persons in custody of a
      Security Vessel shall, upon the occurrence or discovery of an Environmental
      Event with respect to such Security Vessel, promptly carry out, using the
      Debtors’ or such other Person’s own funds or proceeds of insurance with respect
      thereto, such actions as may be necessary to remediate or cure such
      Environmental Event in compliance in all material respects with all applicable
      Laws, to comply in all material respects with all applicable Environmental
      Laws
      and to alleviate any significant risk to human health or the environment if
      the
      same arises from a condition on or in respect of such Security Vessel, whether
      existing prior to or during the Note Term or the term of any charter. Once
      a
      Debtor or such other Person commences such actions, such Debtor shall, and
      shall
      cause such other Person to, thereafter diligently and expeditiously proceed
      to
      comply in all material respects in a timely manner with all Environmental Laws
      and to eliminate any significant risk to human health or the environment arising
      from such Environmental Event and shall, at the request of Lender, give periodic
      progress reports to Lender on its compliance efforts and actions.

     

    5.13  The
      Debtors’ Title; Lender’s Security Interest; Personal
      Property.
      Each
      Debtor shall and shall cause the Collateral Vessel Owners to warrant and defend
      its good and marketable title to its Security Vessel and Lender’s perfected
      first priority security interest in all Collateral (except its second priority
      security interest in the Collateral Vessels, the Collateral Vessel Owners’
      Second Mortgages and the Collateral Vessel Owners’ Second Assignments, wherein
      each, Debtor shall cause the Collateral Vessel Owners to warrant and defend
      Lenders perfected second priority security interest), against all claims and
      demands whatsoever. The Debtors agree that the Security Vessels shall be, and
      at
      all times remain, separately identifiable personal property. 

     

    5.14  No
      Changes in Any Debtor.
      No
      Debtor, and the Debtor shall procure that no Guarantor, Collateral Vessel Owner
      or Pledgor, shall (a) liquidate, dissolve, consolidate or merge itself
      into
      or with any other entity; (b) materially change its business;
      (c) change the form of organization of its business; or (d) without
      thirty (30) days’ prior written notice to Lender, change its name, address or
      jurisdiction of organization.

     

    5.15  Use
      of Vessels; Maintenance; Operation.
      The
      Debtors shall require and shall cause the Collateral Vessel Owners to require
      at
      all times that any charterer shall use its due diligence to operate, maintain,
      repair, insure, man and supply the Security Vessels in a careful and proper
      manner, comply in all material respects with and conform to all governmental
      laws, rules and regulations and insurance restrictions relating thereto, and
      operate the Security Vessels with competent and duly qualified personnel. The
      Debtors shall and shall cause the Collateral Vessel Owner to ensure that, except
      as specifically permitted from time to time by an appropriate license issued
      by
      the United States government and a copy of which shall have been theretofore
      furnished to Lender, the Security Vessels shall not be traded, located, operated
      or used, directly or indirectly, in a Prohibited Jurisdiction or by a Prohibited
      Person, and no charterer nor Pledgor nor any subcharterer or shipper shall
      be a
      Prohibited Person or organized in a Prohibited Jurisdiction.

     

    5.16  Indemnification.
      Without
      limiting the generality of any other provision hereof, the Debtors shall jointly
      and severally indemnify, protect, save and keep harmless Lender, its agents,
      servants, employees, officers, directors and shareholders from and against
      any
      reduction in the amount payable out of the Collateral to Lender with respect
      to
      the Obligations, or any other loss, cost or expense (including reasonable legal
      fees) incurred by Lender, as the result of any breach of the provisions of
      Section 5 hereof, except to the extent any such amount or loss is incurred
      solely as a result of the gross negligence or willful misconduct of Lender
      or
      solely by the breach by Lender of its obligations, representations or warranties
      under any of the Loan Documents. 

     

    5.17  Performance
      of Contracts.
      The
      Debtors will, and shall require the Collateral Vessel Owner to duly observe
      and
      perform in all material respects all covenants and obligations to be performed
      by it under any charter of any Security Vessel, including, without limitation,
      the Head Charters, and will promptly take any and all action as may be
      reasonably necessary to enforce its rights under any such charter or to secure
      the performance by such charterer of the charterer’s obligations under any such
      charter. No Debtor, Collateral Vessel Owner or charterer of any Assigned
      Charter, Guarantor or any Affiliate of any of the foregoing shall enter into
      any
      charter or other contract for the use, employment or operation of a Security
      Vessel for a term in excess of six (6) months (except for any renewal of any
      Head Charter), without the prior written consent of Lender, which shall not
      be
      unreasonably withheld or delayed, but to which reasonable conditions may be
      attached; provided, however, Lender shall have no obligation to consent to
      any
      charters or other contracts if, in Lender’s judgment such charter or other
      contract would materially increase Lender’s risks in this transaction, reduce
      its returns or otherwise disadvantage Lender.

     

    5.18  Governmental
      Approvals.
      The
      Debtors will obtain from time to time all permits, licenses, approvals and
      authorizations of, and will file all registrations and declarations with, all
      governmental authorities, bureaus and agencies required in connection with
      the
      execution, delivery, performance, validity or enforceability of this Agreement
      (including, without limitation, the payment to Lender at its office address
      referred to in this Agreement, in lawful money of the United States of America,
      of the obligations of the Debtors under this Agreement) and any other Loan
      Document and will take all action necessary to maintain each such permit,
      license, approval or authorization, or registration or declaration, in full
      force and effect.

     

    5.19  Special
      Purpose Covenants.
      (a)  Positive
      Covenants.
      Throughout the Note Term, each Debtor shall:

     

    (i)  hold
      itself out to the public as a legal entity that is separate and distinct from
      any other Person, including the other Debtor, the Collateral Vessel Owners,
      Guarantors, Pledgor, charterer of Assigned Charters, the Manager, and their
      respective Affiliates, and shall conduct its business solely in its own name
      and
      separate and apart from those of any Affiliate of such Debtor in order not
      to
      (1) mislead others to believe that they are transacting business with
      or
      relying on the credit of any entity other than such Debtor, or (2) except
      as provided herein or in the other Loan Documents, suggest that such Debtor
      is
      responsible for the debts of any third party (including any Collateral Vessel
      Owner, Pledgor, any charterer of Assigned Charters, Guarantors, the Manager
      or
      any Affiliate of such Debtor, Pledgor or the Manager) or that any such third
      party is liable for the debts of Pledgor;

     

    (ii)  timely
      file all tax returns required by applicable Law;

     

    (iii)  allocate
      fairly and reasonably any overhead expenses that are shared with any Affiliate
      of any Debtor, any charterer under any Assigned Charter, Pledgor, Guarantor
      or
      the Manager;

     

    (iv)  maintain
      records and books of account and prepare financial statements showing its own
      assets and liabilities as being separate from those of such Debtor or any other
      Affiliate of Debtor, Collateral Vessel Owner, the Pledgor, any charterer under
      any Assigned Charter, Guarantor or the Manager, in each case sufficient to
      ensure that it will not be costly or difficult to ascertain the separate
      identity of such Debtor’s assets from those of any Affiliate or the separate
      financial condition of such Debtor from the financial condition of any
      Affiliate;

     

    (v)  pay
      its
      liabilities out of its own funds, including salaries of any employees of such
      Debtor, and not out of the funds of any Collateral Vessel Owner, the Pledgor,
      charterer under any Assigned Charter, Guarantor, the Manager or any other
      Affiliate of such Debtor or Pledgor;

     

    (vi)  use
      separate stationery and invoices;

     

    (vii)  take
      commercially reasonable steps to correct any known misunderstanding regarding
      the separate identity and financial condition of such Debtor; and

     

    (viii)  maintain
      adequate capital for the normal obligations reasonably foreseeable in a business
      of its size and character and in light of its contemplated
      business.

     

    5.20  Obtain
      Consents.

     

      

     

    Each
      Debtor will, and will cause each Guarantor, Pledgor, Collateral Vessel Owner
      to,
      without prejudice to Section 4 and this Section 5, obtain every
      consent and do all other acts and things which may from time to time be
      necessary or advisable for the continued due performance of all its and the
      Guarantors’, the Pledgor’s and the Collateral Vessel Owners’ respective
      obligations under the Loan Documents to which they are a party. 

     

    5.21  Taxes
      and Assessments.

     

    Each
      Debtor will pay and discharge, and cause each of the Guarantors, the Pledgor
      and
      the Collateral Vessel Owners to pay and discharge, all material taxes,
      assessments and governmental charges or levies imposed upon it or upon its
      income or property prior to the date upon which penalties attach thereto;
      provided, however, that it shall not be required to pay and discharge, or cause
      to be paid and discharged, any such tax, assessment, charge or levy so long
      as
      the legality thereof shall be contested in good faith and by appropriate
      proceedings or other acts and it shall set aside on its books adequate reserves
      with respect thereto.

     

    5.22  Insurance.

     

      

     

    Each
      Debtor shall maintain and shall cause each Collateral Vessel Owner to maintain,
      insurance on its Security Vessel in accordance with Section 1.22 of its
      respective Mortgage or Collateral Vessel Owners’ Second Mortgage and shall
      furnish Lender with all reports in accordance with Section 1.24 of such mortgage
      . Subject to the foregoing sentence, each Debtor shall maintain, and cause
      each
      Guarantor, the Pledgor and the Collateral Vessel Owners to maintain, with member
      clubs of the International Group of P&I Clubs insurance on all their
      respective properties and against all such risks and in at least such amounts
      as
      are usually insured against by companies of established reputation engaged
      in
      the same or similar business from time to time (including, without limitation,
      mortgagee's interest insurance additional perils (pollution) to be taken out
      by
      such mortgagee with costs to be born by the Debtors).

     

    5.23  ISM
      and ISPS Code and MTSA Matters.  

     

     

     

    Each
      Debtor will:

     

    (i)  procure
      that the relevant charterer will comply with and ensure that each Security
      Vessel will comply with the requirements of the ISM Code , ISPS Code and MTSA
      in
      accordance with the implementation schedule thereof, including (but not limited
      to) the maintenance and renewal of valid certificates pursuant thereto
      throughout the duration of this Agreement;

     

    (ii)  procure
      that any charterer will immediately inform Lender if there is any threatened
      or
      actual withdrawal of its DOC, SMC or the ISSC in respect of any Vessel;
      and

     

    (iii)  procure
      that the relevant charterer will promptly inform Lender upon the issue to the
      relevant Debtor or charterer of a DOC and to any Security Vessel of an SMC
      or
      ISSC.

     

    5.24  Charterer
      and Information.

     

      

     

    The
      Debtors shall deliver to Lender all financial information of the charterers
      of
      the Assigned Charters available to the Debtors as Lender may from time to time
      reasonably request (unless subject to a non-disclosure agreement prohibiting
      such disclosure).

     

    5.25  Stock
      Exchange Listing.

     

      

     

    If
      TBS is
      listed on NASDAQ Stock Exchange, do or cause to be done all things necessary
      to
      ensure that TBS remains listed on such stock exchange.

     

    5.26  Negative
      Covenants.
      Throughout the Note Term, no Debtor shall:

     

    (i)  engage
      in
      any activity other than the ownership and operation of its Vessel and those
      other activities expressly required or permitted in the Loan
      Documents;

     

    (ii)  other
      than as expressly provided in the Loan Documents, enter into any transaction
      with Pledgor, any Collateral Vessel Owner, any charterer under an Assigned
      Charter, any Guarantor, the Manager or any other Affiliate of Pledgor, any
      charterer under an Assigned Charter, the Manager or such Debtor except on
      arms-length terms;

     

    (iii)  make
      any
      loans or advances to any third party, including any Affiliate of such Debtor
      (except only as provided in the Pooling Agreement), or buy or hold evidence
      of
      indebtedness issued by any Affiliate; or

     

    (iv)  identify
      itself as a department or division of Pledgor, Guarantor, charterer under any
      Assigned Charter, the Manager or any other Person.

     

    5.27  Sale
      or Pledge of Shares.

     

      

     

    The
      Debtors will not, and will procure that the Collateral Vessel Owners will not,
      sell, assign, transfer, pledge or otherwise convey or dispose of any of the
      shares (including by way of spin-off, installment sale or otherwise) of the
      capital stock, or limited liability company interests, as the case may be,
      of
      either Debtor or the Collateral Vessel Owners.

     

    5.28  Change
      of Flag or Classification Society.

     

      

     

    The
      Debtors will not, and will procure that the Collateral Vessel Owners will not,
      change the flag, class or Classification Society of any Security
      Vessel.

     

    5.29  Capital
      Expenditures.

     

      

     

    The
      Debtors will not, and will procure that the Collateral Vessel Owners will not,
      make any investment or material capital expenditures, excluding expenditures
      for
      drydocking and repairs for the Security Vessels.

     

    5.30  Change
      of Vessel Management.

     

      

     

    The
      Debtors will not, and will procure that the Collateral Vessel Owners will not,
      change the charterer or otherwise change the technical or commercial management
      of any Security Vessel. 

     

    5.31  Use
      of Corporate Funds.

     

      

     

    5.32  
      Other
      than as provided in the Pooling Agreement, the Debtors will not permit any
      Debtor, and will procure that no Collateral Vessel Owner is permitted, to pay
      out any funds to any company or person except (i) in the ordinary course
      of
      business in connection with the management of the business of such Debtor or
      Collateral Vessel Owner, as the case may be, including the operation and/or
      repair of the Security Vessels and other vessels owned or operated by such
      parties, (ii) the servicing of the Indebtedness permitted hereunder
      (but
      excluding, any prepayments of any Indebtedness other than the Loan) and (iii)
      provided no Event of Default has occurred and is continuing, or will occur
      as a
      consequence of the payment thereof, the payment of dividends.

     

    5.32  Issuance
      of Shares.

     

      

     

    The
      Debtors will not issue or dispose of any shares of its own capital stock or
      limited liability company interests, as the case may be, to any
      Person.

     

    5.33  Transactions
      with Affiliates.

     

      

     

      

     

    Other
      than as provided in the Pooling Agreement, the Debtors will not enter into
      any
      transactions with any Affiliate unless on an arm's length basis, except, so
      long
      as no Event of Default, or event which, but for the giving of notice or passage
      of time or both, would constitute an Event of Default, shall have occurred,
      any
      of the Guarantors may make investments in, capital investments in respect of,
      or
      loans to, or issue guarantees for its subsidiaries (including in respect of
      construction financing).

     

    5.34  Indebtedness.

     

      

     

    Other
      than as provided in the Pooling Agreement, the Debtors will not incur any
      Indebtedness excluding Indebtedness hereunder to Lender and any Indebtedness
      existing (or for which a written commitment has been made on or before the
      date
      hereof) on the date hereof.

     

    5.35  Material
      Contract.

     

      

     

    The
      Debtors will not, and will procure that the Collateral Vessel Owner will not,
      amend or permit the amendment of any material provision of the Assigned
      Charters. 

     

    5.36  No
      Bankruptcy Petition.  

     

    Neither
      Debtor, nor any Collateral Vessel Owner, will file a petition, or permit its
      shareholders or directors to file a petition, under the United State Bankruptcy
      Code, and TBS shall not include the Debtors or Collateral Vessel Owners in
      any
      such filings they make (unless required by applicable law to do
      so).

     

    5.37  Valuation
      .
      The
      Appraisal Value of the Security Vessels during the Note Term Period shall be
      greater than or equal to a minimum of 160% of the Loan Balances during such
      period (the "Relevant Percentage"). The Appraisal Value of each Security Vessel
      shall be determined at Lender’s discretion, but no less frequently than annually
      on the anniversary of the Funding Date, on the basis of a valuation (the
      "Valuation") by an Approved Shipbroker provided to Lender. In the event Lender
      or the Debtors disagree with the Valuation, then the Debtors and Lender shall
      each obtain a separate valuation (the "Additional Valuations") from an Approved
      Shipbroker, and the Appraisal Value shall be determined to be the arithmetic
      average of the Additional Valuations. All costs relating to any Valuation or
      Additional Valuations shall be paid by the Debtors. 

     

    5.38  Collateral
      Maintenance.
      If the
      Appraisal Value of the Security Vessels, as determined pursuant to Section
       5.37 falls below the Relevant Percentage, within a period of ten (10)
      Banking Days following receipt by the Debtors of written notice from Lender
      notifying the Debtors of such shortfall and specifying the amount thereof (which
      amount shall, in the absence of manifest error, be deemed to be conclusive
      and
      binding on the Debtors) the Debtors shall (a) deliver to Lender, upon
      its
      request, additional collateral satisfactory to Lender, in its sole discretion
      (including the deposit of cash in a cash collateral account maintained with
      Lender), or (b) prepay the Loan or part thereof such that (x) the sum
      of
      (i) the value of the Security Vessels, as determined in accordance with
      the
      latest valuation delivered pursuant to Section 5.37, plus (ii) the value
      of
      additional collateral other than cash collateral, such value to be determined
      by
      Lender when divided by (y) the Loan (less any cash collateral held by Lender
      in
      a cash collateral account) shall be equal to or greater than the Relevant
      Percentage of the Loan. 

     

    5.39  Post-Funding
      Date Filing.
      Debtors’ covenant within 45 days of the Funding Date to have the lien of the
      Mortgages and the Collateral Mortgages noted on the Record Book of the Maritime
      Industry Authority of the Republic of the Philippines Department of
      Transportation and Communication and shall provide Lender with evidence of
      such
      notation.

     

    Section 6.  SECURITY
      INTEREST CONTINUING OBLIGATIONS OF DEBTORS.

     

    6.1  Grant
      of Security.
      In
      addition to, and not in lieu of, the grant of liens, rights and interests made
      by the Debtors pursuant to the Assignments, the Pledge and the Mortgage, and
      in
      order to further secure the prompt and complete (x) payment (whether at the
      stated maturity, by acceleration or otherwise) of all principal of, interest
      on,
      late fees and Breakage Costs with respect to the Loan and all other amounts
      payable by the Debtors under the Loan Documents now in existence or hereafter
      incurred, and (y) the performance and observance by each Debtor of all of the
      agreements and covenants to be performed or observed by it for the benefit
      of
      Lender contained in the Assignments, the Pledge, the Mortgage and the other
      Loan
      Documents and in consideration of the Note, the premises and of the covenants
      contained herein and in the other Loan Documents and of other good and valuable
      consideration given to the Debtors by Lender at or before the Funding Date,
      the
      receipt of which is hereby acknowledged, the Debtors do hereby grant, bargain,
      sell, convey, transfer, mortgage, assign, pledge, and confirm unto Lender and
      its permitted successors and assigns, for the security and benefit of Lender,
      a
      security interest in, and mortgage lien on, all estate, right, title and
      interest of any Debtor in, to and under, all and singular, the following
      described properties, rights, interests and privileges whether now or hereafter
      acquired:

     

    (a)  the
      Vessels; 

     

    (b)  continuing
      rights of any Debtor in respect of any warranty, indemnity or agreement, express
      or implied, as to title, materials, workmanship, design or patent infringement
      or related matters with respect to the Vessels, and (ii) all rights, powers,
      privileges, options and other benefits of Debtors thereunder (subject to such
      reservation) with respect to the Vessels, including, without limitation, the
      right to make all waivers and agreements, to give and receive all notices and
      other instruments or communications, to take such action upon the occurrence
      of
      a default thereunder, including the commencement, conduct and consummation
      of
      legal, administrative or other proceedings, as shall be permitted thereby or
      by
      law, and to do any and all other things which Debtors are or may be entitled
      to
      do thereunder (subject to such reservation); 

     

    (c)  all
      property that may, from time to time, hereafter in accordance with the provision
      of this Agreement, be expressly subjected to the Lien of this Agreement;


     

    (d)  all
      records reflecting or relating to the foregoing; and 

     

    (e)  all
      Proceeds of the foregoing;

     

    (all
      of
      the foregoing referred to in (a) through (e), together with the security
      interests granted pursuant to the Mortgages, the Collateral Vessel Owners Second
      Mortgage, the Pledge, the Assignments, the Collateral Vessel Owners Second
      Assignments, shall be referred to as the “Collateral”).

     

    provided,
      however, that, notwithstanding any of the foregoing provisions of this Section
      6.1, so long as no Event of Default shall have occurred and be continuing,
      each
      Debtor shall have the right, to the exclusion of Lender, to quiet enjoyment
      of
      its Vessel and the other Collateral and to possess, use, retain and control
      its
      Vessel and the other Collateral.

     

    TO
      HAVE
      AND TO HOLD all and singular the Collateral unto Lender, its permitted
      successors and assigns, forever, in trust, upon the terms and trusts herein
      set
      forth, for the benefit, security and protection of Lender from time to time,
      and
      for the uses and purposes and subject to the terms and provisions set forth
      in
      this Agreement.

     

    It
      is
      expressly agreed that notwithstanding anything herein to the contrary, each
      Debtor shall remain liable under the agreements and instruments granting the
      security interests in the Collateral to perform all of its obligations
      thereunder, and, except to the extent expressly provided herein or in any other
      Loan Document, Lender shall not be required or obligated in any manner to
      perform or fulfill any obligations of any Debtor under or pursuant to any
      thereof, or to make any inquiry as to the nature or sufficiency of any payment
      received by it, or present or file any claim or take any action to collect
      or
      enforce the payment of any amount which may have been assigned to it or to
      which
      it may be entitled at any time or times.

     

    6.2  Debtors
      Not Relieved of Obligations.

     

    (a)  It
      is
      expressly agreed that, anything contained herein to the contrary
      notwithstanding, (i) each Debtor shall at all times perform all of its
      duties and obligations under any contracts or charters of its Vessel, including,
      but not limited to, its Head Charter or similar contracts relating to the use
      or
      operation of its Vessel to the same extent as if this Agreement and the
      Assignments had not been made, (ii) the exercise by Lender of any of
      the
      rights assigned hereunder shall not release any Debtor from any of its duties
      or
      obligations under any Head Charter or similar contracts relating to the use
      or
      operation of its Vessel, and (iii) Lender shall not have any obligation
      or
      liability under any Head Charter or similar contracts relating to the use or
      operation of its Vessel by reason of this Agreement, the Assignments or the
      receipt by Lender of any payment or property under any such charter or similar
      contracts relating to the use or operation of its Vessel or pursuant hereto,
      nor
      shall Lender be obligated to perform or fulfill any of the duties or obligations
      of the “owner” under any Head Charter or similar contracts relating to the use
      or operation of its Vessel or to make any payment thereunder, or to make any
      inquiry as to the nature or sufficiency of any payment or property received
      by
      it thereunder, or the sufficiency of performance by any Person thereunder,
      or to
      present or file any claim, or to take any action to collect or enforce any
      performance or the payment of any amounts or the delivery of any property which
      may have been assigned to it or to which it may be entitled at any time or
      times.

     

    6.3  Lender
      Appointed as Attorney-in-Fact.

     

    Each
      Debtor hereby irrevocably constitutes and appoints Lender, with full power
      of
      substitution, as its true and lawful attorney-in-fact with full and irrevocable
      power and authority in the place and stead of such Debtor and in the name of
      such Debtor or in its own name, from time to time following the occurrence
      and
      during the continuance of an Event of Default in Lender’s sole discretion to the
      maximum extent permitted by applicable law, for the purpose of carrying out
      the
      terms of this Agreement or any other Loan Document, to take any and all
      appropriate action and to execute any and all documents and instruments which
      may be necessary or desirable to protect and preserve, and/or exercise its
      rights and remedies hereunder and with respect to the Collateral and, without
      limiting the generality of the foregoing, hereby gives Lender the power and
      right, on behalf of such Debtor and without notice to or assent by such Debtor,
      to do the following, upon the occurrence and during the continuance of an Event
      of Default: to demand, enforce, collect, receive, receipt, and give release
      for
      any monies due or to become due under or arising out of or with respect to,
      any
      of the Collateral, and to endorse all checks and other instruments, and to
      do
      and take all such other actions relating to any of the Collateral, to file
      any
      claims or institute any proceedings with respect to any of the foregoing which
      Lender deems necessary or desirable in its sole discretion, and to compromise
      any such demand, claim or action. Each Debtor hereby ratifies all that said
      attorney shall lawfully do or cause to be done by virtue hereof. This power
      of
      attorney is a power coupled with an interest and shall be
      irrevocable.

     

    The
      powers conferred on Lender hereunder are solely to protect Lender’s interest in
      the Collateral and shall not impose any duty upon it to exercise any such
      powers. Lender shall be accountable only for amounts that it actually receives
      as a result of the exercise of such powers and neither it nor any of its
      officers, directors, employees or agents shall be responsible to any Debtor
      for
      any act or failure to act (except for any act of willful misconduct or gross
      negligence).

     

    Section 7.  EVENTS
      OF DEFAULT.

     

    Each
      of
      the following events shall constitute an event of default (herein called
“Event
      of Default”)
      under
      this Agreement:

     

    (a)  The
      Debtors shall fail to pay any amount of principal or interest when due or to
      pay
      any other Obligation within five (5) Business Days after the same becomes due
      (whether on demand, at the stated maturity, by acceleration or otherwise);
      or

     

    (b)  Any
      representation or warranty made by any Debtor, Collateral Vessel Owner,
      Guarantor, charterer under an Assigned Charter, Pledgor or the Manager (as
      the
      case may be) in this Agreement, any Mortgage or any other Loan Document, or
      in
      any document, certificate or financial or other statement now or hereafter
      furnished by any Debtor, Collateral Vessel Owner, Guarantor, charterer under
      any
      Assigned Charter, Pledgor or the Manager in connection with this Agreement,
      the
      Mortgage or any other Loan Document shall at any time prove to be untrue or
      misleading in any material respect as of the time when made or when deemed
      to be
      made; provided, however, that, if any fact or state of affairs was
      misrepresented through demonstrable inadvertence and is corrected by the maker
      of such representation to comply with the requirements of this Agreement within
      ten (10) days of becoming aware thereof, such Event of Default shall be deemed
      cured; or

     

    (c)  Any
      Debtor shall fail to observe any covenant, condition or agreement contained
      in
      Sections 5.6, 5.7, 5.8, 5.10, 5.13, 5.14, 5.19, 5.22, 5.26, 5.36, 5.37,
      5.38 or 5.39 hereof, and such failure shall be continuing; or

     

    (d)  Any
      Debtor, charterer under an Assigned Charter, Pledgor, Collateral Vessel Owner,
      Guarantor or the Manager shall fail to observe or perform any other covenant,
      condition or agreement contained in this Agreement or any other Loan Document,
      and such failure shall continue unremedied for a period of thirty (30) days
      after the earlier of (i) the date on which a Debtor obtains knowledge
      of
      such failure, or (ii) the date on which notice thereof shall be given
      by
      Lender to the Debtors; or

     

    (e)  Any
      Debtor, Pledgor, Collateral Vessel Owner, Guarantor or charterer under an
      Assigned Charter shall (i) default in the payment of any Indebtedness
      to
      Lender or to any of Lender’s Affiliates beyond the period of grace, if any,
      provided with respect thereto, or (ii) default in the performance or
      observance of any other term, condition or agreement contained in any such
      obligation or in any agreement relating thereto, if the effect of such default
      is to cause, or permit, the holder or holders of such obligation (or a trustee
      on behalf of such holder or holders) to cause such obligation to become due
      prior to its stated maturity or to realize upon any collateral given as security
      therefor, or (iii) default in the payment of any Indebtedness singly
      or in
      the aggregate in a principal amount greater than U.S.$250,000 to any Person
      other than Lender or any of Lender’s Affiliates beyond the period of grace, if
      any, or (iv) default in the performance or observance of any other term,
      condition or agreement contained in any such obligation or in any agreement
      relating thereto, if the effect of such default is to cause, or permit, the
      holder or holders of such obligation (or a trustee on behalf of such holder
      or
      holders) to cause such obligation to become due prior to its stated maturity
      or
      to realize upon any collateral given as security therefor; or

     

    (f)  The
      institution by any Debtor, charterer under an Assigned Charter, Collateral
      Vessel Owner, Pledgor or Guarantor of proceedings to be adjudicated a bankrupt
      or insolvent, or the consent by any of them to the institution of bankruptcy
      or
      insolvency proceedings against it, or the commencement by any Debtor, Collateral
      Vessel Owner, Pledgor, charterer under an Assigned Charter or Guarantor of
      a
      voluntary proceeding or case under the federal bankruptcy laws, as now or
      hereafter constituted, or any other applicable federal, state or foreign
      bankruptcy, insolvency or other similar law, or the consent by any of them
      to
      the filing of any such petition or to the appointment of or taking possession
      by
      a receiver, liquidator, assignee, trustee, custodian or sequestrator (or other
      similar official) of any Debtor, Collateral Vessel Owner, Pledgor, charterer
      under an Assigned Charter or Guarantor or of any substantial part of their
      respective properties, or the making by any of them of any assignment for the
      benefit of creditors or the admission by any of them of an inability to pay
      its
      debts generally as they become due or its willingness to be adjudicated a
      bankrupt or the failure of any Debtor, Collateral Vessel Owner, Pledgor,
      charterer under an Assigned Charter or Guarantor generally to pay its debts
      as
      they become due or the taking of corporate action by any Debtor, Collateral
      Vessel Owner, Pledgor, charterer under an Assigned Charter or Guarantor in
      furtherance of any of the foregoing; or

     

    (g)  The
      entry
      of a decree or order for relief by a court having jurisdiction in respect of
      any
      Debtor, Collateral Vessel Owner, charterer under an Assigned Charter, Pledgor
      or
      Guarantor, adjudging such Person a bankrupt or insolvent, or approving as
      properly filed a petition seeking a reorganization, arrangement, adjustment
      or
      composition of or in respect of such Person in an involuntary proceeding or
      case
      under the federal bankruptcy laws, as now or hereafter constituted, or any
      other
      applicable federal, state or foreign bankruptcy, insolvency or other similar
      law, or appointing a receiver, liquidator, assignee, custodian, trustee or
      sequestrator (or other similar official) of the such Person, or of any
      substantial part of its property, or ordering the winding-up or liquidation
      of
      its affairs, and the continuance of any such decree or order unstayed and in
      effect for a period of sixty (60) days or an assignment for the benefit of
      creditors of a majority of all the assets of any Debtor, any Collateral Vessel
      Owner, any charterer under an Assigned Charter, Pledgor or Guarantor;
      or

     

    (h)  A
      Mortgage Event of Default (as defined in any Mortgage or Collateral Vessel
      Owners’ Second Mortgage) shall have occurred or be continuing; or

     

    (i)  The
      receipt by Lender of its first notice of an oil spill or discharge or a
      hazardous discharge by or an environmental complaint against any Security Vessel
      or any Debtor or Collateral Vessel Owner from a source other than a Debtor,
      where Lender does not receive notice (which may be given in oral form, provided
      same is followed with all due dispatch by written notice given by Certified
      Mail, Return Receipt Requested) of such hazardous discharge or environmental
      complaint from a Debtor or the Manager within three (3) Business Days from
      the
      time Lender first receives said notice from a source other than a Debtor or
      the
      Manager; or

     

    (j)  Assertion
      by any federal, state, or local agency of a Lien (i) upon any Collateral,
      or (ii) if it materially adversely affects any Debtor, Collateral Vessel Owner,
      charterer under any Assigned Charter or Guarantor, upon any of the other assets,
      equipment, property, leaseholds or other facilities of any Debtor by reason
      of
      the occurrence of a hazardous discharge or environmental complaint and such
      lien
      is not removed within ten (10) days of Debtors becoming aware thereof or as
      otherwise provided in the Mortgages or the Collateral Vessel Owners’ Mortgages;
      or

     

    (k)  Any
      party
      thereto shall terminate, purport to terminate, rescind or cease to perform
      in
      any material respect the provisions of any Assigned Charter; or

     

    (l)  This
      Agreement or any other Loan Document shall cease to be in full force and effect
      or shall be declared to be null and void, or the validity or enforceability
      thereof shall be contested by any Debtor, Pledgor, Collateral Vessel Owner,
      charterer under any Assigned Charter, Guarantor or Manager. 

     

    Section 8.  REMEDIES.

     

    8.1  If
      an
      Event of Default specified in Sections 7(f) or (g) above shall occur,
      then,
      and in any such event, the Commitment shall immediately terminate and the
      principal amount outstanding under the Note, together with accrued interest
      thereon, and all other amounts owing under or with respect to this Agreement
      and
      the other Loan Documents, shall become immediately due and payable without
      any
      notice or other action by Lender, and if any other Event of Default shall occur
      and be continuing, then, and in any such event, Lender may, by notice of default
      given to the Debtors, (a) terminate forthwith the Commitment and/or
      (b) declare the Note and all other amounts owing thereunder or with
      respect
      to this Agreement to be forthwith due and payable, whereupon the principal
      amount of the Note, together with accrued interest thereon and all other amounts
      owing thereunder or with respect to this Agreement and the other Loan Documents
      shall become immediately due and payable without presentment, demand, protest
      or
      other notice of any kind, all of which are hereby expressly waived to the extent
      permitted by applicable law. During the continuance of any Event of Default
      hereunder, Lender shall have the right to pursue and enforce any of its rights
      and remedies under this Section 8.

     

    8.2  If
      an
      Event of Default shall occur and be continuing, Lender may exercise, in addition
      to all other rights and remedies granted to it in this Agreement, the Note,
      the
      Mortgages, the Pledge , the Collateral Vessel Owners’ Guaranty, the Collateral
      Vessel Owners’ Second Mortgages, the Collateral Vessel Owners’ Second
      Assignments, the Guaranty, the Debtors’ Guaranty, the Assignments, any other
      Loan Document and in any other instrument or agreement securing, evidencing
      or
      relating to the Obligations, all rights and remedies of secured parties under
      the Code or under any other applicable law. Without limiting the generality
      of
      the foregoing, each Debtor agrees that in any such event, Lender may exercise
      any or all of such Debtor’s respective rights, and Lender, without demand of
      performance or other demand, advertisement or notice of any kind (except the
      notice specified below of time and place of public or private sale) to or upon
      the Debtors, the Collateral Vessel Owners, Pledgor, Guarantors, any charterer
      under any Assigned Charter or any other Person (all and each of which demands,
      advertisements and/or notices are hereby expressly waived), may forthwith
      collect, receive, appropriate and realize upon the Collateral, or any part
      thereof, and/or may forthwith sell, lease, assign, give an option or options
      to
      purchase or otherwise dispose of and deliver the Collateral (or contract to
      do
      so), or any part thereof, in one or more parcels at public or private sale
      or
      sales, at any exchange or broker’s board or at any of Lender’s offices or
      elsewhere at such prices as it may deem best, for cash or a credit or for future
      delivery without assumption of any credit risk. Lender shall have the right
      upon
      any such public sale or sales, and, to the extent permitted by law, upon any
      such private sale or sales, to purchase the whole or any part of the Collateral
      so sold, free of any right or equity of redemption in any Debtor, Collateral
      Vessel Owner or Pledgor, which right or equity is hereby expressly released
      to
      the extent permitted by applicable law. Each Debtor further agrees, at Lender’s
      request, to assemble and to cause Pledgor and the Collateral Vessel Owners
      to
      assemble the Collateral, make it available to Lender at places which Lender
      shall reasonably select, whether at any Debtor’s premises or elsewhere. Lender
      shall apply the net proceeds of any such collection, recovery, receipt,
      appropriation, realization or sale (after deducting all reasonable costs and
      expenses of every kind incurred therein or incidental to the care, safekeeping
      or otherwise of any or all of the Collateral or in any way relating to the
      rights of Lender hereunder, including reasonable attorneys’ fees and expenses)
      to the payment in whole or in part of the Obligations, in such order as Lender
      may elect and only after so applying such net proceeds and after the payment
      by
      Lender of any other amount required by any provision of law need Lender account
      for the surplus, if any, to the Debtor. To the extent permitted by applicable
      law, each Debtor waives all claims, damages, and demands against Lender arising
      out of the repossession, retention or sale of the Collateral. Each Debtor agrees
      that Lender need not give more than ten (10) days’ notice (which notification
      shall be deemed given when mailed, postage prepaid, addressed to such Debtor
      at
      its address set forth in Section 9.4 hereof) of the time and place of
      any
      public sale or of the time after which a private sale may take place and that
      such notice is reasonable notification of such matters. The Debtors shall be
      jointly and severally liable for any deficiency if the proceeds of any sale
      or
      disposition of the Collateral are insufficient to pay any and all Obligations
      due Lender under any of this Agreement, the Note and the other Loan
      Documents.

     

    8.3  The
      Debtors agree to pay all costs of Lender, including reasonable attorneys’ fees
      and disbursements, incurred with respect to the collection of any of the
      Obligations and the enforcement of any of their rights hereunder or under any
      other of the Loan Documents.

     

    8.4  The
      Debtors hereby waive presentment, demand, protest or any notice (to the extent
      permitted by applicable law) of any kind in connection with this Agreement,
      any
      other Loan Document or the Collateral.

     

    Section 9.  MISCELLANEOUS

     

    9.1  Limitation
      of Liability/Continuing Indemnities.
      Notwithstanding anything to the contrary contained in this Agreement, in the
      event that any court or other judicial body of competent jurisdiction determines
      that legal principles of fraudulent conveyances, fraudulent transfers or similar
      concepts are applicable in evaluating the enforceability against any Debtor
      or
      its respective assets of this Agreement and that under such principles, this
      Agreement would not be enforceable against such Debtor or its assets unless
      the
      following provisions of this Section 9.1 had effect, then, the maximum liability
      of each Debtor hereunder (the “Maximum
      Liability Amount”)
      shall
      be limited so that in no event shall such amount exceed the lesser of (i) the
      aggregate outstanding principal amount of the Loan and (ii) an amount equal
      to
      the aggregate, without double counting, of (a) ninety-five percent (95%) of
      such
      Debtor’s Adjusted Net Worth (as hereinafter defined) on the date hereof, or on
      the date enforcement of this Agreement is sought (the “Determination
      Date”),
      whichever is greater and (b) the amount of any Valuable Transfer (as hereinafter
      defined) to such Debtor; provided that
      such
      Debtor’s liability under this Agreement shall be further limited to the extent,
      if any, required so that the obligations of such Debtor under this Agreement
      shall not be subject to being set aside or annulled under any applicable law
      relating to fraudulent transfers or fraudulent conveyances. As used herein
      “Adjusted
      Net Worth”
      of the
      respective Debtor shall mean, as of any date of determination thereof, an amount
      equal to the lesser of (a) an amount equal to the excess of (i) the amount
      of
      the present fair saleable value of the assets of such Debtor over (ii) the
      amount that will be required to pay such Debtor’s probable liability on its then
      existing debts, including contingent liabilities (exclusive of its contingent
      liabilities hereunder), as they become absolute and matured, and (b) an amount
      equal to (i) the excess of the sum of such Debtor’s property at a fair valuation
      over (ii) the amount of all liabilities of such Debtor, contingent or otherwise
      (exclusive of its contingent liabilities hereunder), as such terms are construed
      in accordance with applicable laws governing determinations of the insolvency
      of
      debtors. In determining the Adjusted Net Worth of
      a
      Debtor for purposes of calculating the Maximum Liability Amount for such Debtor,
      the liabilities of such Debtor to be used in such determination pursuant to
      each
      clause (ii) of the preceding sentence shall in any event exclude (a) the
      liability of such Debtor under this Agreement and (b) the liabilities of such
      Debtor subordinated in right of payment to this Agreement. As used herein
“Valuable
      Transfer”
      shall
      mean, in respect of such Debtor, (a) all loans, advances or capital
      contributions made to such Debtor with proceeds of the Loan , (b) all debt
      securities or other obligations of such Debtor acquired from such Debtor or
      retired by such Debtor with proceeds of the Loan
      (c)
      the fair market value of all property acquired with proceeds of the Loan and
      transferred, absolutely and not as collateral, to such Debtor, (d) all equity
      securities of such Debtor acquired from such Debtor with proceeds of the Loan,
      and (e) the value of any other economic benefits in accordance with applicable
      laws governing determinations of the insolvency of debtors, in each such case
      accruing to such Debtor as a result of the Loan and this Agreement. 

     

    9.2  Customer
      Identification- USA Patriot Act Notice; OFAC and Bank Secrecy
      Act.
      Lender
      hereby notifies each of the Debtors that pursuant to the requirements of the
      USA
      Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001)
      (the
“Act”), and Lender’s policies and practices, Lender is required to obtain,
      verify and record certain information and documentation that identifies each
      Debtor, which information includes the name and address of each Debtor and
      such
      other information that will allow the Lender to identify each Debtor in
      accordance with the Act. In addition, each Debtor shall (a) ensure that no
      Person who owns a controlling interest in or otherwise controls any Debtor
      or
      any subsidiary of any Debtor is or shall be listed on the Specially Designated
      Nationals and Blocked Person List or other similar lists maintained by the
      Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or
      included in any Executive Orders, (b) not use or permit the use of the proceeds
      of the Loan to violate any of the foreign asset control regulations of OFAC
      or
      any enabling statute or Executive Order relating thereto, and (c) comply, and
      cause any of its subsidiaries to comply, with all applicable Bank Secrecy Act
      (“BSA”) laws and regulations, as amended.

     

    9.3  No
      Waiver; Cumulative Remedies.
      No
      failure or delay on the part of Lender in exercising any right, remedy, power
      or
      privilege hereunder or under the Note or any other Loan Document shall operate
      as a waiver thereof, nor shall any single or partial exercise of any right,
      remedy, power or privilege hereunder or thereunder preclude any other or further
      exercise thereof or the exercise of any other right, remedy, power or privilege.
      No right or remedy in this Agreement or any other Loan Document is intended
      to
      be exclusive but each shall be cumulative and in addition to any other remedy
      referred to herein or otherwise available to Lender at law or in equity; and
      the
      exercise by Lender of any one or more of such remedies shall not preclude the
      simultaneous or later exercise by Lender of any or all such other remedies.
      To
      the extent permitted by law, each Debtor waives any rights now or hereafter
      conferred by statute or otherwise which limit or modify any of Lender’s rights
      or remedies under this Agreement or any other Loan Document. 

     

    9.4  Notices.
      All
      notices, requests and demands to or upon any party hereto shall be deemed to
      have been duly given or made when sent by telecopier with telephonic
      confirmation, or deposited in the United States mail, first class postage
      prepaid, or sent by a nationally recognized overnight courier service, addressed
      to such party as follows, or to such other address as may be hereafter
      designated in writing by such party to the other party hereto: 

     

    
      	
              Debtors:

            	
              Sterling
                Shipping Corp.

              P.O.
                Box HM 2522 

              Hamilton
                HMGX

              BERMUDA
                

              Attention:
                William J. Carr 

              Facsimile
                No.: 1441-295-4957 

               

            
	 	
              Remsen
                Navigation Corp.

              P.O.
                Box HM 2522 

              Hamilton
                HMGX

              BERMUDA
                

              Attention:
                William J. Carr 

              Facsimile
                No.: 1441-295-4957 

               

            
	
              with
                a copy to:

            	
              TBS
                Shipping Services Inc.

              612
                East Grassy Sprain Rd. 

              Yonkers,
                NY 10710 USA 

              Attention:
                Ferdinand V. Lepere 

              Facsimile
                No.: 914/961-5121 

            
	
              and:

            	
              Cardillo
                & Corbett 

              29
                Broadway 

              New
                York, NY 10006 USA 

              Attention:
                Tulio R. Prieto, Esq. 

              Facsimile
                No.: 212/797-1212 

            
	
              Lender:

            	
              MERRILL
                LYNCH BUSINESS FINANCIAL SERVICES INC., ACTING THROUGH ITS DIVISION,
                MERRILL LYNCH CAPITAL

              222
                N. LaSalle St.

              Chicago,
                IL 60601 

              Attention:
                Group Senior Credit Officer 

              Facsimile
                No.: 312/750-6108

            
	
              with
                a copy to:

            	
              MERRILL
                LYNCH BUSINESS FINANCIAL SERVICES INC., ACTING THROUGH ITS DIVISION,
                MERRILL LYNCH CAPITAL

              222
                N. LaSalle St.

              Chicago,
                IL 60601 

              Attention:
                Portfolio Manager

              Facsimile
                No.: 312/750-6108

            


    

    


    	9.5  	
            Payment
              of Expenses and Taxes; Indemnity; Performance by Lender of the Debtors’
              Obligations.
              

          


     

    (a)  The
      Debtors agree, whether or not the transactions contemplated by this Agreement
      and the other Loan Documents shall be consummated, to be jointly and severally
      liable for and to pay (i) all reasonable costs and expenses of Lender
      in
      connection with the negotiation, preparation, execution and delivery of this
      Agreement and the other Loan Documents, and the other documents relating hereto,
      including, without limitation, the fees and disbursements of counsel to Lender;
      (ii) all fees and taxes in connection with the recording of this Agreement,
      the Mortgages, the Collateral Vessel Owners’ Second Mortgages, and the other
      Loan Documents or any other document or instrument required hereby or thereby;
      and (iii) all reasonable costs and expenses of Lender in connection
      with
      the enforcement of this Agreement, the Note and the other Loan Documents,
      including all reasonable legal fees and disbursements arising in connection
      therewith. The Debtors also jointly and severally agree to pay, and to jointly
      and severally indemnify and save Lender harmless from and against any and all
      taxes, including, without limitation, non-U.S. taxes imposed on Lender and
      measured by or with reference to income of Lender based on receipt of payments
      made or on behalf of any Debtor pursuant to this Agreement, the Note or other
      Loan Documents, sales, use, stamp and personal property taxes (other than any
      corporate income, capital, franchise or similar taxes payable by Lender with
      respect to the payments made to Lender hereunder or thereunder) and all license,
      filing, and registration fees and assessments and other charges, if any, which
      may be payable or determined to be payable in connection with the execution,
      delivery and performance of this Agreement, the Note or the other Loan Documents
      or any modification thereof or supplement thereto.

     

    (b)  The
      Debtors hereby further jointly and severally agree, whether or not the
      transactions contemplated by this Agreement shall be consummated, and whether
      or
      not the Loan has been made by Lender to the Debtors, to jointly and severally
      pay, indemnify, and hold Lender harmless from and against any and all other
      liabilities, obligations, losses, damages, penalties, claims, actions,
      judgments, suits, out-of-pocket costs, expenses (including legal expenses)
      or
      disbursements of any kind or nature whatsoever arising out of or with respect
      to
      this Agreement, the other Loan Documents, the Security Vessels, the other
      Collateral or Lender’s interest therein, including, without limitation, the
      execution, delivery, enforcement, performance, administration, amendment or
      modification of this Agreement, the Note and the other Loan Documents and the
      manufacture, purchase, ownership, possession, use, selection, operation or
      condition of any Security Vessel or any part thereof (the foregoing being
      referred to as the “indemnified liabilities”); provided, however, that the
      Debtors shall not have any obligation hereunder with respect to indemnified
      liabilities arising from the gross negligence or willful misconduct of
      Lender.

     

    (c)  If
      any
      Debtor fails to perform or comply, or otherwise cause performance or compliance,
      with such agreement, the expenses of Lender incurred in connection with such
      performance or compliance, together with interest thereon at the rate provided
      for in the Note shall be payable by the Debtor to Lender on demand and until
      such payment shall constitute Obligations secured hereby.

     

    9.6  Proposal
      Fee.
      Debtors
      have already paid, and Lender acknowledges receipt of the U.S.$87,500 Proposal
      Fee. 

     

    9.7  Survival
      of Representations and Warranties.
      All
      representations and warranties made in this Agreement or any of the other Loan
      Documents and any certificates delivered pursuant hereto or thereto shall
      survive the execution and delivery of this Agreement and the making of the
      Loan
      hereunder and the agreements contained in Section 9.3 hereof shall survive
      payment of the Note. 

     

    9.8  Amendments;
      Waivers.
      No
      provision of this Agreement, the Note, any other Loan Document or any related
      agreements may be amended or modified in any way, nor may noncompliance
      therewith be waived, except pursuant to a written instrument executed by Lender
      and the Debtors. In the case of any waiver, Lender and the Debtors shall be
      restored to their former position and rights hereunder, under the Note, any
      other Loan Document and under any related agreements, and any Default or Event
      of Default waived shall be deemed to be cured and not continuing, but no such
      waiver shall in any way be, or be construed to be, a waiver of any other or
      subsequent Default or Event of Default, or impair any right consequent thereon.
      

     

    9.9  Counterparts.
      This
      Agreement may be executed by the parties hereto on any number of separate
      counterparts, each of which when so executed and delivered shall be an original,
      but all such counterparts shall together constitute but one and the same
      instrument. 

     

    9.10  Authorization
      to Date, Complete Blanks and Correct Errors.
      Each
      Debtor hereby irrevocably authorizes Lender and Lender’s agents, representatives
      and employees to date, to complete any blank spaces contained in, and to correct
      any typographical or mathematical errors appearing in, this Agreement, the
      Note
      or in any other Loan Documents or other documents pertaining hereto or thereto.
      

     

    9.11  Merger
      Clause.
      This
      Agreement and the other Loan Documents contain the complete, final and exclusive
      statement of the terms of the agreement between Lender and the Debtors relating
      to the transactions hereby contemplated

     

    9.12  Successors
      or Assigns.
      This
      Agreement shall inure to the benefit of Lender, its successors and assigns,
      and
      shall be binding upon the successors of either of the Debtors. The rights and
      obligations of the Debtors under this Agreement may not be assigned or
      delegated. Lender reserves the right to sell, assign, transfer, negotiate or
      grant participations in all or any part of, or any interest in, Lender’s rights
      and obligations hereunder, in the Note, in any other Loan Document, in the
      Collateral and/or the Obligations held by it to others at any time and from
      time
      to time; and Lender may disclose to any such purchaser, assignee, transferee
      or
      participant (the “Participant”), or potential Participant, this Agreement and
      all information, reports, financial statements and documents executed or
      obtained in connection with this Agreement which Lender now or hereafter may
      have relating to the Loan, either of the Debtors, or the business of either
      Debtor. Lender shall, acting for this purpose as an agent of each of the
      Debtors, maintain at its offices a register for the recordation of the names
      and
      addresses of its participants or assignees, and the amount and terms of its
      participations and assignments including specifying any such participant’s or
      assignee’s entitlement to payments of principal and interest, and any payments
      made, with respect to each such participation or assignment. The Debtors hereby
      grant to any Participant all liens, rights and remedies of Lender under the
      provisions of this Agreement or any other documents relating hereto or under
      applicable laws. Each of the Debtors agrees that any Participant may enforce
      such liens and exercise such rights and remedies in the same manner as if such
      Participant were Lender and a direct creditor of the Debtors. 

     

    9.13  Construction.
      Any
      provision of this Agreement which is prohibited or unenforceable in any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining
      provisions hereof, and any such prohibition or unenforceability shall not
      invalidate or render unenforceable such provision in any other jurisdiction.
      To
      the extent permitted by law, each Debtor hereby waives any provision of law
      which renders any provision hereof prohibited or unenforceable in any respect.
      THIS
      AGREEMENT AND (EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN ANY OTHER LOAN
      DOCUMENT) THE OTHER LOAN DOCUMENTS SHALL IN ALL RESPECTS BE GOVERNED BY, AND
      CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES
      OF AMERICA, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE
      (WITHOUT REFERENCE TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN TITLE 14
      OF
      ARTICLE 5 OF THE GENERAL OBLIGATIONS LAW). 

     

    9.14  Jurisdiction.
      EACH
      DEBTOR HEREBY IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION, SUIT,
      OR
      PROCEEDING ARISING OUT OF OR IN ANY WAY IN CONNECTION WITH THIS AGREEMENT MAY
      BE
      INSTITUTED OR BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, IN THE COUNTY
      OF
      NEW YORK, OR THE UNITED STATES COURTS FOR THE SOUTHERN DISTRICT OF NEW YORK,
      AS
      LENDER MAY ELECT, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH DEBTOR
      HEREBY IRREVOCABLY ACCEPTS AND SUBMITS TO, FOR ITSELF AND IN RESPECT OF ITS
      PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF
      ANY
      SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH COURTS. EACH DEBTOR IRREVOCABLY
      CONSENTS TO SERVICE OF ANY SUMMONS AND/OR LEGAL PROCESS BY REGISTERED OR
      CERTIFIED UNITED STATES AIR MAIL, POSTAGE PREPAID, TO SUCH DEBTOR AT THE ADDRESS
      SET FORTH IN SECTION 9.4 HEREOF, SUCH METHOD OF SERVICE TO CONSTITUTE,
      IN
      EVERY RESPECT, SUFFICIENT AND EFFECTIVE SERVICE OF PROCESS IN ANY SUCH LEGAL
      ACTION OR PROCEEDING. NOTHING IN THIS AGREEMENT SHALL AFFECT THE RIGHT TO
      SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR LIMIT THE RIGHT
      TO
      BRING ACTIONS, SUITS OR PROCEEDINGS IN THE COURTS OF ANY OTHER APPROPRIATE
      JURISDICTION. EACH DEBTOR FURTHER AGREES THAT FINAL JUDGMENT AGAINST IT IN
      ANY
      SUCH LEGAL ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
      ENFORCED IN ANY OTHER JURISDICTION, WITHIN OR OUTSIDE THE UNITED STATES OF
      AMERICA, BY SUIT ON THE JUDGMENT, A CERTIFIED OR EXEMPLIFIED COPY OF WHICH
      SHALL
      BE CONCLUSIVE EVIDENCE OF THE FACT AND THE AMOUNT OF THE LIABILITY.


     

    9.15  Waiver
      of Trial by Jury. EACH
      DEBTOR AND LENDER IN ANY LITIGATION RELATING TO OR IN CONNECTION WITH THIS
      AGREEMENT IN WHICH THEY SHALL BE ADVERSE PARTIES WAIVE TRIAL BY
      JURY. 

     

    9.16  Necessary
      or Indispensable Parties.
      EACH DEBTOR WAIVES ANY CLAIM OR DEFENSE IT MAY HAVE THAT ANY OTHER DEBTOR,
      PLEDGOR, GUARANTOR, COLLATERAL VESSEL OWNER, CHARTERER OF AN ASSIGNED CHARTER,
      OR ANY OTHER PERSON WHATSOEVER IS EITHER A NECESSARY OR INDISPENSABLE PARTY
      IN
      ANY ACTION COMMENCED BY LENDER AGAINST SUCH DEBTOR’S VESSEL OR AGAINST SUCH
      DEBTOR IN ANY WAY IN RESPECT OF THE LOAN, ANY VESSEL, THIS AGREEMENT, THE NOTE
      OR ANY OTHER LOAN DOCUMENT. 

     

    [signature
      page follows]

     

    



    
      
        
          


        

         

      

      
         

        
          

        

      

      
         

        
        

      

    



    IN
      WITNESS WHEREOF,
      the
      parties have caused this Agreement to be duly executed and delivered by their
      proper and duly authorized officers as of the day and year first above
      written.

     

    
      	 	
              STERLING
                SHIPPING CORP.

               

              By: 

               

              Name:
                Tara DeMakes

               

              Title:
                Attorney-in-Fact

               

            
	 	
              REMSEN
                NAVIGATION CORP.

               

              By: 

               

              Name:
                Tara DeMakes

               

              Title:
                Attorney-in-Fact

               

            
	 	
              MERRILL
                LYNCH BUSINESS FINANCIAL SERVICES INC., acting through its division,
                Merrill Lynch Capital 

               

              By: 

              Name:

              Title:
                

            


    

    



    
      
        
          


        

         

      

      
         

        
          

        

      

      
         

        
        

      

    



    ACKNOWLEDGMENT

     

    
      	
              STATE
                OF NEW YORK

            	
              )

            	 
	 	
              )

            	
              SS.:

            
	
              COUNTY
                OF NEW YORK

            	
              )

            	 


    

    


    On
      this
      15 day of December, 2005 before me personally appeared Tara DeMakes, who, being
      by me duly sworn, deposes and says that she resides
      at _______________________________,

    that
      he
      is Attorney-in-Fact of STERLING SHIPPING CORP. the corporation described in
      and
      which executed the foregoing instrument; and that he signed her name thereto
      by
      order of the Board of Directors of said corporation and the said instrument
      is
      the act and deed of said corporation. 

     

    In
      witness whereof, I have hereunto set my hand and affixed my official seal.
      

     

    ________________________________________

    Notary
      Public 

    


    



    
      
        
          


        

         

      

      
         

        
          

        

      

      
         

        
        

      

    



    ACKNOWLEDGMENT

     

    
      	
              STATE
                OF NEW YORK

            	
              )

            	 
	 	
              )

            	
              SS.:

            
	
              COUNTY
                OF NEW YORK

            	
              )

            	 


    

    


    On
      this
      ___ day of December, 2005 before me personally appeared Tara DeMakes, who,
      being
      by me duly sworn, deposes and says that she resides
      at _______________________________,

    that
      he
      is Attorney-in-Fact of REMSEN NAVIGATION CORP., the corporation described in
      and
      which executed the foregoing instrument; and that he signed her name thereto
      by
      order of the Board of Directors of said corporation and the said instrument
      is
      the act and deed of said corporation. 

     

    In
      witness whereof, I have hereunto set my hand and affixed my official seal.
      

     

    ________________________________________

    Notary