ex-10_1.htm


    TBS INTERNATIONAL LIMITED
& SUBSIDIARIES                       EXHIBIT
10.1


     

    


    


    Date
March 29, 2007

    


    


    


    


    


    


    ARGYLE MARITIME
CORP.

    CATON MARITIME
CORP.

    DORCHESTER MARITIME
CORP.

    LONGWOODS MARITIME
CORP.

    McHENRY MARITIME
CORP.

    SUNSWYCK MARITIME
CORP.

    as Joint
and Several Obligors

    


    


    


    -and-

    


    


    


    THE ROYAL BANK OF SCOTLAND
PLC

    as
Issuer

    


    


    


    


    


    


    ___________________________________________

    


     

    GUARANTEE FACILITY
AGREEMENT

    ___________________________________________

    


    relating
to

    a
US$84,000,000 guarantee facility

    


    


    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    INDEX

    


    


    ClausePage

     

    1 INTERPRETATION

     

    2 GUARANTEE
FACILITY

     

    3 REDUCTION OF
GUARANTEES

     

    4 SETTLEMENT OF
GUARANTEES

     

    5 INDEMNITY OF THE
OBLIGORS

     

    6 DEFAULT
INTEREST

     

    7 CONDITIONS
PRECEDENT

     

    8 REPRESENTATIONS AND
WARRANTIES

     

    9 GENERAL UNDERTAKINGS AND
FINANCIAL COVENANTS

     

    10 CORPORATE
UNDERTAKINGS

     

    11 PAYMENTS AND
CALCULATIONS

     

    12 APPLICATION OF
RECEIPTS

     

    13 EVENTS OF
DEFAULT

     

    14 FEES AND
EXPENSES

     

    15 INDEMNITIES

     

    16 NO SET-OFF OR TAX
DEDUCTION

     

    17 ILLEGALITY,
ETC

     

    18 INCREASED
COSTS

     

    19 SET-OFF

     

    20 TRANSFERS AND CHANGES IN
ISSUING OFFICE

     

    21 VARIATIONS AND
WAIVERS

     

    22 NOTICES

     

    23 JOINT AND SEVERAL
LIABILITY

     

    24 SUPPLEMENTAL

     

    25 LAW AND
JURISDICTION

     

    SCHEDULE 1 GUARANTEE ISSUE
REQUEST 

     

    SCHEDULE 2 CONDITION
PRECEDENT DOCUMENTS 

     

    SCHEDULE 3 FINANCIAL
COVENANTS 

     

    SCHEDULE 4 FORM OF
COMPLIANCE CERTIFICATE 

     

    EXECUTION
PAGE 

     

    APPENDIX A FORM OF DELIVERY
SECURITY ASSIGNMENT 

     

    APPENDIX B FORM OF CORPORATE
GUARANTEE 

     

    APPENDIX C FORM OF
GUARANTEE 

     

    APPENDIX D FORM OF
INTERCREDITOR AGREEMENT 

    
 


    
      
        
          Watson, Farley &
Williams

          London

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    THIS AGREEMENT is made
on March 29, 2007

    


    BETWEEN

    


    
      	(1)  	
              ARGYLE MARITIME
      CORP.,
      CATON MARITIME
      CORP.,
      DORCHESTER MARITIME
      CORP.,
      LONGWOODS MARITIME
      CORP.,
      McHENRY MARITIME CORP.
      and
      SUNSWYCK MARITIME
      CORP.,
      as Joint and Several Obligors; and

            


    

     

    
      	(2)  	
              THE ROYAL BANK OF SCOTLAND
      PLC,
      as Issuer

            


    

     

    BACKGROUND

    


    The
Issuer has agreed to make available to the Obligors a guarantee facility of up
to $84,000,000 to provide performance guarantees in relation to the payment of
the second, third and fourth scheduled stage payments payable under the
shipbuilding contracts for each of six newbuilding multipurpose carriers to be
built at Yahua Shipyard, China having hull nos. NYHS200720, NYHS200721,
NYHS200722, NYHS200723, NYHS200724 and NYHS200725.

    


    IT IS AGREED as
follows:

    


    
      	1  	
              INTERPRETATION

            


    

     

    
      	1.1  	
              Definitions.
      Subject to Clause 1.5, in this
Agreement:

            


    

     

    “Approved Managers” means,
Roymar Ship Management Inc., a company incorporated under the laws of New York
and having a place of business at 612 East Grassy Sprain Road, Yonkers, New York
10710, USA or such other company as the Issuer may from time to time approve as
manager of the Ships;

    


    “Availability
Period” means
the period commencing on the date of this Agreement and ending on:

    


    
      	(a)  	
              30
      April 2007 (or such later date as the Issuer may agree with the Obligors);
      or

            


    

     

    
      	(b)  	
              if
      earlier, the date on which the Commitment is fully cancelled or
      terminated;

            


    

     

    “Available
Commitment” means,
at any time, the Commitment less the Outstandings at that time;

    


    “Bank of America
Facilities” means
the credit facilities made available to Albermarle Maritime Corp and others
pursuant to the credit agreement dated 31 July 2006 made between Albermarle
Maritime Corp, the Corporate Guarantor, Bank of America N.A. and
others;

     

    “Builder” means
Nantong Yahua Shipbuilding Co. Ltd., a corporation organised and existing under
the laws of the People’s Republic of Chins, having its registered office at 1
Hongzha Road, Jiuweigang, Nantong Jiangsu P.C. 226 361, The People’s Republic of
China;

     

    “Business Day” means a
day on which banks are open for general business in London and, in respect of a
day on which a payment is required to be made under a Finance Document, also in
New York City;

    


    “China
Communications” means
China Communications Construction Company Ltd, a corporation organised and
existing under the laws of the People’s Republic of China, having its registered
office at No. C88, An Ding Men Wai Street, Beijing 100011, the People’s Republic
of China;

     

    “Commitment” means
$84,000,000 as that amount may be reduced, cancelled or terminated in accordance
with this Agreement;

    


    “Contract Price” means,
in relation to each Ship, the aggregate amount payable to the Seller pursuant to
the terms of the Shipbuilding Contract for such Ship being in each case
$35,420,000;

    


    “Contractual
Currency” has the
meaning given in Clause 15.4;

    


    “Corporate
Guarantee” means a
guarantee in the form set out in Appendix B;

    


    “Corporate
Guarantor” means
TBS International Limited, a company incorporated under the laws of Bermuda
having its principal office at Suite 306, Commerce Building, One Chancery Lane,
Hamilton HM12, Bermuda;

    


    “Dollars” and
“$” means
the lawful currency for the time being of the United States of
America;

    


    “Event of Default” means
any of the events or circumstances described in Clause 13.1;

    


    “Fee Letter” means
any letter dated on or about the date of this Agreement between the Issuer and
the Obligors setting out any fees referred to in Clause 14.1;

     

    “Finance Documents”
means:

    


    
      	(a)  	
              this
      Agreement;

            


    

     

    
      	(b)  	
              the
      Corporate Guarantee;

            


    

     

    
      	(c)  	
              the
      Pre-delivery Security Assignments;
and

            


    

     

    
      	(d)  	
              the
      Fee Letter;

            


    

     

    
      	(e)  	
              the
      Intercreditor Agreement; and

            


    

     

    
      	(f)  	
              any
      other document (whether creating a Security Interest or not) which is
      executed at any time by the Obligor or any other person as security for,
      or to establish any form of subordination or priorities arrangement in
      relation to, any amount payable to the Issuer under this Agreement or any
      of the other documents referred to in this
  definition;

            


    

     

    “Financial
Indebtedness” means,
in relation to a person (the “debtor”), a
liability of the debtor:

    


    
      	(a)  	
              for
      principal, interest or any other sum payable in respect of any moneys
      borrowed or raised by the debtor;

            


    

     

    
      	(b)  	
              under
      any loan stock, bond, note or other security issued by the
      debtor;

            


    

     

    
      	(c)  	
              under
      any acceptance credit, guarantee or letter of credit facility made
      available to the debtor;

            


    

     

    
      	(d)  	
              under
      a financial lease, a deferred purchase consideration arrangement or any
      other agreement having the commercial effect of a borrowing or raising of
      money by the debtor (other than normal trade credit not exceeding 180
      days);

            


    

     

    
      	(e)  	
              under
      any foreign exchange transaction, any interest or currency swap or any
      other kind of derivative transaction entered into by the debtor
      or,
      if the agreement under which any such transaction is entered into requires
      netting of mutual liabilities, the liability of the debtor for the net
      amount;
      or 

            


    

     

    
      	(f)  	
              under
      a guarantee, indemnity or similar obligation entered into by the debtor in
      respect of a liability of another person which would fall within
      paragraphs (a) to (e) if the references to the debtor referred to the
      other person;

            


    

     

    “Guarantee” means
each guarantee issued or to be issued in favour of the Seller substantially in
the form set out in Appendix C;

    


    “Guarantee Issue
Date” means,
in relation to a Guarantee, the date requested by the relevant Obligor for the
Guarantee to be issued or (as the context requires) the date on which the
Guarantee is actually issued;

    


    “Guarantee Issue
Request” means,
in relation to a Guarantee, a notice in the form of Schedule 1 (or in any other
form which the Issuer approves or reasonably requires);

    


    “Guaranteed
Obligations” means,
in relation to a Guarantee, the actual and contingent, certain and future
obligations and liabilities owed by the relevant Obligor to the Seller and
secured by the Guarantee;

    


    “Intercreditor
Agreement” means
the intercreditor agreement executed or to be executed between the Obligors, the
Issuer and the Security Trustee in the form set out in Appendix D;

    


    “Issuer” means
The Royal Bank of Scotland plc, acting through the Shipping Business Centre,
5-10 Great Tower Street, London EC3R 3HX (or through another branch or office
notified to the Issuer under Clause 20.6) or its direct or indirect successor or
assign;

    


    “LIBOR” means,
for any period for which a rate of interest is to be determined under this
Agreement:

    


    
      	(a)  	
              the
      rate per annum equal to the offered quotation for deposits in Dollars for
      a period equal to, or as near as possible equal to, that
      period which
      appears on REUTERS
      BBA Page LIBOR 01 at
      or about 11.00 a.m. (London time) on the Quotation
      Date for that
      period
      (and, for the purposes of this Agreement, “REUTERS
      BBA Page LIBOR 01”
      means the display designated as “REUTERS
      BBA Page LIBOR 01”
      on the Reuters
      Money News Service
      or such other page as may replace REUTERS
      BBA Page LIBOR 01 on
      that service for the purpose of displaying rates comparable to that rate
      or on such other service as may be nominated by the British Bankers’
      Association as the information vendor for the purpose of displaying
      British Bankers’ Association Interest Settlement Rates for Dollars);
      or

            


    

     

    
      	(b)  	
              if
      no rate is quoted on REUTERS BBA Page LIBOR 01 the rate per annum
      determined by the Issuer to be the rate at which deposits in Dollars are
      offered to the Issuer by leading banks in the London Interbank Market at
      the Issuer’s request at or about 11.00 a.m. (London time) on the Quotation
      Date for that period for a period equal to that period and for delivery on
      the first Business Day of it;

            


    

     

    “Loan Agreement” means
the loan agreement of even date herewith made between (among others) the
Obligors as joint and several borrowers, the banks and financial institutions
listed in the Schedule 1 thereto as lenders and the Security Trustee relating to
a loan facility of up to $150,000,000;

    


    “Obligor A” means
Argyle Maritime Corp., being a corporation organised and existing under the laws
of the Marshall Islands and having its registered office at Trust Company
Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH
96960;

     

    “Obligor B” means
Caton Maritime Corp., being a corporation organised and existing under the laws
of the Marshall Islands and having its registered office at Trust Company
Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH
96960;

     

    “Obligor C” means
Dorchester Maritime Corp., being a corporation organised and existing under the
laws of the Marshall Islands and having its registered office at Trust Company
Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH
96960;

     

    “Obligor D” means
Longwoods Maritime Corp., being a corporation organised and existing under the
laws of the Marshall Islands and having its registered office at Trust Company
Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH
96960;

     

    “Obligor E” means
McHenry Maritime Corp., being a corporation organised and existing under the
laws of the Marshall Islands and having its registered office at Trust Company
Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH
96960;

     

    “Obligor F” means
Sunswyck Maritime Corp., being a corporation organised and existing under the
laws of the Marshall Islands and having its registered office at Trust Company
Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH
96960;

     

    “Obligors” means
together Obligor A, Obligor B, Obligor C, Obligor D, Obligor E and Obligor F
and, in the singular, means any of them;

     

    “Other Pre-delivery Security
Assignments” means the
Pre-delivery Security Assignments as defined in the Loan Agreement;

     

    “Outstanding Guarantee
Amount” means,
in relation to a Guarantee, the maximum amount for which the Guarantee was
issued less the aggregate amount of all reductions to it which have been made in
accordance with the provisions of Clause 3.1;

    


    “Outstandings” means,
at any time, the aggregate of the Outstanding Guarantee Amounts;

    


    “Overall
Agreement” means
the overall agreement dated 24 February 2007 relating to the Shipbuilding
Contracts and made between the Corporate Guarantor and the Seller;

    


    “Payment Currency” has the
meaning given in Clause 15.4;

    


    “Permitted Security
Interests”
means:

    


    
      	(a)  	
              Security
      Interests created by the Finance Documents and Other Pre-delivery Security
      Assignments;

            


    

     

    
      	(b)  	
              any
      Security Interest created in favour of a plaintiff or defendant in any
      proceedings or arbitration as security for costs and expenses where the
      relevant Obligor is actively prosecuting or defending such proceedings or
      arbitration in good faith; and

            


    

     

    
      	(c)  	
              Security
      Interests arising by operation of law in respect of taxes which are not
      overdue for payment or in respect of taxes being contested in good faith
      by appropriate steps and in respect of which appropriate reserves have
      been made;

            


    

     

    “Pertinent
Jurisdiction”, in
relation to a company, means:

    


    
      	(a)  	
              England
      and Wales;

            


    

     

    
      	(b)  	
              the
      country under the laws of which the company is incorporated or
      formed;

            


    

     

    
      	(c)  	
              a
      country in which the company’s central management and control is or has
      recently been exercised;

            


    

     

    
      	(d)  	
              a
      country in which the overall net income of the company is subject to
      corporation tax, income tax or any similar
tax;

            


    

     

    
      	(e)  	
              a
      country in which assets of the company (other than securities issued by,
      or loans to, related companies) having a substantial value are situated,
      in which the company maintains a permanent place of business, or in which
      a Security Interest created by the company must or should be registered in
      order to ensure its validity or priority;
and

            


    

     

    
      	(f)  	
              a
      country the courts of which have jurisdiction to make a winding up,
      administration or similar order in relation to the company or which would
      have such jurisdiction if their assistance were requested by the courts of
      a country referred to in paragraphs (b) or (c)
  above;

            


    

     

    “Potential Event of
Default” means
an event or circumstance which, with the giving of any notice, the lapse of
time, a determination (where required) of the Issuer and/or the satisfaction of
any other condition, would constitute an Event of Default;

    


    “Pre-delivery Security
Assignment” means,
in relation to each Shipbuilding Contract and corresponding Refund Guarantees,
an assignment of the relevant Obligor’s rights under such Shipbuilding Contract
and Refund Guarantees to be executed by the relevant Obligor in favour of the
Issuer in the form set out in Appendix A;

     

    “Quotation Date” means,
in relation to any period for which an interest rate is to be determined under
any provision of a Finance Document, the day on which quotations would
ordinarily be given by leading banks in the London Interbank Market for deposits
in the currency in relation to which such rate is to be determined for delivery
on the first day of that period;

    


    “Refund Guarantee” means,
in relation to each Ship each refund guarantee issued by the Refund Guarantor in
favour of the relevant Obligor pursuant to the Shipbuilding Agreement in respect
of such Ship;

     

    “Refund Guarantor” means
Bank of Communications acting through its branch at 33 Jin Rong Da Jie, Xichang
District, Beijing 100032, The People's Republic of China;

     

    “Relevant Person” has the
meaning given in Clause 13.7;

    


    “Security Interest”
means:

    


    
      	(a)  	
              a
      mortgage, charge (whether fixed or floating) or pledge, any maritime or
      other lien or assignment by way of security or any other security interest
      of any kind;

            


    

     

    
      	(b)  	
              the
      security rights of a plaintiff under an action in rem;
      and

            


    

     

    
      	(c)  	
              any
      arrangement entered into by a person (A) the effect of which is to place
      another person (B) in a position which is similar, in economic terms, to
      the position in which B would have been had he held a security interest
      over an asset of A; but this paragraph (c) does not apply to a right of
      set off or combination of accounts conferred by the standard terms of
      business of a bank or financial
institution;

            


    

     

    “Security Party” means
the Corporate Guarantor and any other person who, as a surety or mortgagor, as a
party to any subordination or priorities arrangement, or in any similar
capacity, executes a document falling within the last paragraph of the
definition of “Finance Documents” (but for the avoidance of doubt “Security
Party” shall not include the Issuer and the creditor parties under the Loan
Agreement);

    


    “Security Period” means
the period commencing on the date of this Agreement and ending on the date on
which the Issuer notifies the Obligors and the Security Parties
that:

    


    
      	(a)  	
              all
      amounts which have become due for payment by the Obligors or any Security
      Party under the Finance Documents have been
  paid;

            


    

     

    
      	(b)  	
              no
      amount is owing or has accrued (without yet having become due for payment)
      under any Finance Document;

            


    

     

    
      	(c)  	
              none
      of the Obligors nor any Security Party has any future or contingent
      liability under Clause 14, 15 or 16 or any other provision of this
      Agreement or another Finance
Document;

            


    

     

    
      	(d)  	
              the
      Issuer does not consider that there is a significant risk that any payment
      or transaction under a Finance Document would be set aside, or would have
      to be reversed or adjusted, in any present or possible future bankruptcy
      of an Obligor or a Security Party or in any present or possible future
      proceeding relating to a Finance Document or any asset covered (or
      previously covered) by a Security Interest created by a Finance Document;
      and

            


    

     

    
      	(e)  	
              each
      Guarantee has been returned to the Issuer by the Seller endorsed to the
      effect that it is cancelled;

            


    

     

    “Security Trustee” means
The Royal Bank of Scotland plc acting in the capacity of security trustee in
relation to the Loan Agreement and the loan facility to be made available
thereunder;

    


    “Seller” means
together China Communications and the Builder;

    


    “Settlement Amount” means,
in relation to a Guarantee, the amount payable or as the case may be paid by the
Issuer to the Seller in respect of the Guarantee;

    


    “Settlement Date” means,
in relation to a Guarantee, the date on which payment of the Settlement Amount
is due to the Seller in respect of the Guarantee;

    


    “Ship A” means
the multipurpose bulk carrier of about 35,000 dwt having Builder’s Hull No.
NYHS200720 to be constructed and sold by the Seller and to be purchased by
Obligor A pursuant to the relevant Shipbuilding Contract;

     

    “Ship B” means
the multipurpose bulk carrier of about 35,000 dwt having Builder’s Hull No.
NYHS200721 to be constructed and sold by the Seller and to be purchased by
Obligor B pursuant to the relevant Shipbuilding Contract;

     

    “Ship C” means
the multipurpose bulk carrier of about 35,000 dwt having Builder’s Hull No.
NYHS200722 to be constructed and sold by the Seller and to be purchased by
Obligor C pursuant to the relevant Shipbuilding Contract;

     

    “Ship D” means
the multipurpose bulk carrier of about 35,000 dwt having Builder’s Hull No.
NYHS200723 to be constructed and sold by the Seller and to be purchased by
Obligor D pursuant to the relevant Shipbuilding Contract;

     

    “Ship E” means
the multipurpose bulk carrier of about 35,000 dwt having Builder’s Hull No.
NYHS200724 to be constructed and sold by the Seller and to be purchased by
Obligor E pursuant to the relevant Shipbuilding Contract;

     

    “Ship F” means
the multipurpose bulk carrier of about 35,000 dwt having Builder’s Hull No.
NYHS200725 to be constructed and sold by the Seller and to be purchased by
Obligor F pursuant to the relevant Shipbuilding Contract;

     

    “Shipbuilding
Contract” means,
in relation to Ship A, the shipbuilding contract dated 24 February 2007 made
between the Seller and Obligor A in respect of such Ship, in relation to Ship B,
the shipbuilding contract dated 24 February 2007 made between the Seller and
Obligor B in respect of such Ship, in relation to Ship C, the shipbuilding
contract dated 24 February 2007 made between the Seller and Obligor C in respect
of such Ship, in relation to Ship D, the shipbuilding contract dated 24 February
2007 made between the Seller and Obligor D in respect of such Ship, in relation
to Ship E, the shipbuilding contract dated 24 February 2007 made between the
Seller and Obligor E in respect of such Ship and, in relation to Ship F, the
shipbuilding contract dated 24 February 2007 made between the Seller and Obligor
F in respect of such Ship and in each case, as supplemented by the Overall
Agreement;

     

    “Ships” means
together Ship A, Ship B, Ship C, Ship D, Ship E and Ship F and, in the singular,
means any of them; and

     

    “Termination Date”
means:

     

    
      	(a)  	
              in
      relation to the Guarantee to be issued in respect of Ship A, 28 February
      2010;

            


    

     

    
      	(b)  	
              in
      relation to the Guarantee to be issued in respect of Ship B, 31 August
      2010;

            


    

     

    
      	(c)  	
              in
      relation to the Guarantee to be issued in respect of Ship C, 31 January
      2011;

            


    

     

    
      	(d)  	
              in
      relation to the Guarantee to be issued in respect of Ship D, 31 May
      2011;

            


    

     

    
      	(e)  	
              in
      relation to the Guarantee to be issued in respect of Ship E, 30 March
      2011; and

            


    

     

    
      	(f)  	
              in
      relation to the Guarantee to be issued in respect of Ship F, 31 July
      2011.

            


    

     

    
      	1.2  	
              Construction of certain
      terms. In
      this Agreement:

            


    

     

    “asset”
includes every kind of property, asset, interest or right, including any
present, future or contingent right to any revenues or other
payment;

    


    “company”
includes any partnership, joint venture and unincorporated
association;

    


    “consent”
includes an authorisation, consent, approval, resolution, licence, exemption,
filing, registration, notarisation and legalisation;

    


    “contingent
liability” means a
liability which is not certain to arise and/or the amount of which remains
unascertained;

    


    “document”
includes a deed; also a letter, fax or telex;

    


    “expense” means
any order or decree, any kind of cost, charge or expense (including all legal
costs, charges and expenses) and any applicable value added or other
tax;

    


    “law”
includes any order or decree, any form of delegated legislation, any treaty or
international convention and any regulation, directive, decision or resolution
of the Council of the European Union, the European Commission, the United
Nations or its Security Council;

    


    “legal or administrative
action” means
any legal proceeding or arbitration and any administrative or regulatory action
or investigation;

    


    “liability”
includes every kind of debt or liability (present or future, certain or
contingent), whether incurred as principal or surety or otherwise;

    


    “months” shall
be construed in accordance with Clause 1.3;

    


    “parent company” has the
meaning given in Clause 1.4;

    


    “person”
includes any company; any state, political sub-division of a state and local or
municipal authority; and any international organisation;

    


    “policy”, in
relation to any insurance, includes a slip, cover note, certificate of entry or
other document evidencing the contract of insurance or its terms;

    


    “regulation”
includes any regulation, rule, official directive, request or guideline whether
or not having the force of law of any governmental, intergovernmental or
supranational body, agency, department or regulatory, self-regulatory or other
authority or organisation;

    


    “subsidiary” has the
meaning given in Clause 1.4; and

    


    “tax”
includes any present or future tax, duty, impost, levy or charge of any kind
which is imposed by any state, any political sub-division of a state or any
local or municipal authority (including any such imposed in connection with
exchange controls), and any connected penalty, interest or fine.

    


    
      	1.3  	
              Meaning of
      “month”. A
      period of one or more “months”
      ends on the day in the relevant calendar month numerically corresponding
      to the day of the calendar month on which the period started
      (“the numerically corresponding
      day”),
      but:

            


    

     

    
      	(a)  	
              on
      the Business Day following the numerically corresponding day if the
      numerically corresponding day is not a Business Day or, if there is no
      later Business Day in the same calendar month, on the Business Day
      preceding the numerically corresponding day;
or

            


    

     

    
      	(b)  	
              on
      the last Business Day in the relevant calendar month, if the period
      started on the last Business Day in a calendar month or if the last
      calendar month of the period has no numerically corresponding
      day;

            


    

     

    and
“month” and
“monthly” shall
be construed accordingly.

    


    
      	1.4  	
              Meaning of
      “subsidiary”. A
      company (S) is a subsidiary of another company (P)
  if:

            


    

     

    
      	(a)  	
              a
      majority of the issued shares in S (or a majority of the issued shares in
      S which carry unlimited rights to capital and income distributions) are
      directly owned by P or are indirectly attributable to P;
  or

            


    

     

    
      	(b)  	
              P
      has direct or indirect control over a majority of the voting rights
      attaching to the issued shares of S;
or

            


    

     

    (c)  P has the
direct or indirect power to appoint or remove a majority of the directors of S;
or

     

    
      	(d)  	
              P
      otherwise has the direct or indirect power to ensure that the affairs of S
      are conducted in accordance with the wishes of
  P;

            


    

     

    and any
company of which S is a subsidiary is a parent company of S.

    


    
      	1.5  	
              General
      Interpretation.
      In this Agreement:

            


    

     

    
      	(a)  	
              references
      in Clause 1.1 to a Finance Document or any other document being in the
      form of a particular appendix include references to that form with any
      modifications to that form which the Issuer approves or reasonably
      requires;

            


    

     

    
      	(b)  	
              references
      to, or to a provision of, a Finance Document or any other document are
      references to it as amended or supplemented, whether before the date of
      this Agreement or otherwise;

            


    

     

    
      	(c)  	
              references
      to, or to a provision of, any law include any amendment, extension,
      re-enactment or replacement, whether made before the date of this
      Agreement or otherwise; 

            


    

     

    
      	(d)  	
              words
      denoting the singular number shall include the plural and vice versa;
      and

            


    

     

    
      	(e)  	
              Clauses
      1.1 to 1.5 apply unless the contrary intention
  appears.

            


    

     

    
      	1.6  	
              Headings. In
      interpreting a Finance Document or any provision of a Finance Document,
      all clause, sub-clause and other headings in that and any other Finance
      Document shall be entirely
disregarded.

            


    

     

    
      	2  	
              GUARANTEE
      FACILITY

            


    

     

    
      	2.1  	
              Availability of guarantee
      facility.
      Subject to the other provisions of this Agreement, the Issuer shall make
      available to the Obligors a guarantee facility in an amount of $84,000,000
      which shall be made available by the following
  Guarantees:

            


    

     

    
      	(a)  	
              a
      Guarantee in an amount not exceeding $14,000,000 as a performance
      guarantee in favour of the Seller to secure the second, third and fourth
      instalments of the Contract Price due from the relevant Obligor under the
      Shipbuilding Contract for Ship A;

            


    

     

    
      	(b)  	
              a
      Guarantee in an amount not exceeding $14,000,000 as a performance
      guarantee in favour of the Seller to secure the second, third and fourth
      instalments of the Contract Price due from the relevant Obligor under the
      Shipbuilding Contract for Ship B;

            


    

     

    
      	(c)  	
              a
      Guarantee in an amount not exceeding $14,000,000 as a performance
      guarantee in favour of the Seller to secure the second, third and fourth
      instalments of the Contract Price due from the relevant Obligor under the
      Shipbuilding Contract for Ship C;

            


    

     

    
      	(d)  	
              a
      Guarantee in an amount not exceeding $14,000,000 as a performance
      guarantee in favour of the Seller to secure the second, third and fourth
      instalments of the Contract Price due from the relevant Obligor under the
      Shipbuilding Contract for Ship D;

            


    

     

    
      	(e)  	
              a
      Guarantee in an amount not exceeding $14,000,000 as a performance
      guarantee in favour of the Seller to secure the second, third and fourth
      instalments of the Contract Price due from the relevant Obligor under the
      Shipbuilding Contract for Ship E;

            


    

     

    
      	(f)  	
              a
      Guarantee in an amount not exceeding $14,000,000 as a performance
      guarantee in favour of the Seller to secure the second, third and fourth
      instalments of the Contract Price due from the relevant Obligor under the
      Shipbuilding Contract for Ship F.

            


    

     

    
      	2.2  	
              Request for issue of
      Guarantees.
      Subject to the following conditions, an Obligor may make a request for a
      Guarantee to be issued by ensuring that the Issuer receives a completed
      Guarantee Issue Request not later than 11 a.m. (London time) 3 Business
      Days prior to the intended Guarantee Issue
Date.

            


    

     

    
      	2.3  	
              Availability.
      The conditions referred to in Clause 2.2 are
  that:

            


    

     

    
      	(a)  	
              a
      Guarantee Issue Date has to be a Business Day during the Availability
      Period; 

            


    

     

    
      	(b)  	
              the
      maximum amount of a Guarantee shall be $14,000,000 and shall not, when
      aggregated with the amount of all other issued Guarantees, exceed the
      Commitment;

            


    

     

    
      	(c)  	
              the
      Issuer must receive, together with the Guarantee Issue Request, a final
      draft of the form of Guarantee which it is being requested to issue on the
      intended Guarantee Issue Date; and

            


    

     

    
      	(d)  	
              the
      form of each Guarantee has to be approved in writing by the Issuer at
      least 2 Business Days prior to the intended Guarantee Issue Date but it
      must in any event contain express
provisions:

            


    

     

    
      	(i)  	
              limiting
      the total amount payable by the Issuer under it to a stated maximum amount
      in Dollars; and

            


    

     

    
      	(ii)  	
              stating
      that it shall expire or be reduced to zero not later than the relevant
      Termination Date.

            


    

     

    
      	2.4  	
              Cancellation of guarantee
      facility.
      The Obligor may cancel the Available Commitment in whole or in part
      subject to the condition that the Issuer has received from the Obligor at
      least 7 Business Days’ prior written notice specifying the amount to be
      cancelled and the date on which the cancellation is to take effect. The
      Commitment shall be reduced permanently by the amount of the Available
      Commitment so cancelled.

            


    

     

    
      	2.5  	
              Change of beneficial ownership
      of Obligors or the Corporate Guarantor. If
      without the consent of the Issuer a change occurs after the date of this
      Agreement in the ultimate beneficial ownership of any shares in any
      Obligor or the Corporate Guarantor or in the ultimate voting rights
      attaching to any of those shares from that disclosed to the Issuer
      pursuant to Schedule 2 Part A 10:

            


    

     

    
      	(a)  	
              the
      Obligors shall promptly notify the Issuer upon becoming aware of that
      event; and

            


    

     

    
      	(b)  	
              the
      Issuer shall not be obliged to provide a Guarantee requested in a
      Guarantee Issue Request and the Issuer may, by not more than 10 days’
      notice to the Obligors cancel the Available Commitment and require the
      Obligors either to procure the cancellation of any issued Guarantees or to
      provide cash security in respect of such issued Guarantees on the same
      terms mutatis mutandis as set out in Clause
5.6.

            


    

     

    
      	3  	
              REDUCTION OF
      GUARANTEES

            


    

     

    
      	3.1  	
              Reduction of Outstanding
      Guarantee Amounts.
      The Outstanding Guarantee Amount of a Guarantee shall not be treated as
      reduced for the purposes of this Agreement unless and
    until:

            


    

     

    
      	(a)  	
              the
      Issuer has received a written confirmation from the Seller of the amount
      of such reduction; or

            


    

     

    
      	(b)  	
              the
      Issuer has notified the relevant Obligor in writing that (notwithstanding
      the absence of a written confirmation from the Seller) it is satisfied
      that its liability under the Guarantee has been irrevocably reduced or
      discharged; or

            


    

     

    
      	(c)  	
              the
      amount of the Guarantee irrevocably and unconditionally reduces in
      accordance with its terms; or

            


    

     

    
      	(d)  	
              the
      expiry date of the Guarantee elapses and the Issuer has notified the
      relevant Obligor in writing that it is satisfied that no claim or demand
      has been made, or may thereafter be made, under the Guarantee, such
      notification not to be unreasonably withheld or
  delayed.

            


    

     

    
      	4  	
              SETTLEMENT OF
      GUARANTEES

            


    

     

    
      	4.1  	
              Notification of Settlement
      Amounts.
      The Issuer shall, immediately after receiving a demand from, or after
      being notified by, the Seller that it is required to make payment under a
      Guarantee, notify the relevant Obligor that such payment is due and of the
      Settlement Amount and the Settlement
Date.

            


    

     

    
      	4.2  	
              Relevant Obligor’s settlement
      obligation.
      The relevant Obligor shall: 

            


    

     

    
      	(a)  	
              immediately
      after notification from the Issuer under Clause 4.1, acknowledge to the
      Issuer that it will reimburse the Settlement Amount; and
  

            


    

     

    
      	(b)  	
              pay
      to the Issuer the Settlement Amount in Dollars on the Settlement
      Date.

            


    

     

    
      	4.3  	
              Relevant Obligor’s failure to
      reimburse. If
      the relevant Obligor fails to reimburse the Settlement Amount to the
      Issuer on the Settlement Date pursuant to Clause 4.2, it shall pay to the
      Issuer interest on the Settlement Amount from the Settlement Date to the
      date the Issuer is reimbursed by the relevant Obligor at the rate
      described in Clause 6 such interest to be compounded in accordance with
      Clause 6.6 and payable on demand.

            


    

     

    
      	5  	
              INDEMNITY OF THE
      OBLIGORS

            


    

     

    
      	5.1  	
              Obligors’ undertaking to
      indemnify.
      Each Obligor agrees that it shall:

            


    

     

    
      	(a)  	
              pay
      to the Issuer upon demand by the Issuer an amount equal to each
      amount:

            


    

     

    
      	(i)  	
              demanded
      from the Issuer under a Guarantee;
or

            


    

     

    
      	(ii)  	
              paid
      by the Issuer to the Seller under Clause
5.8;

            


    

     

    and which
is not otherwise fully reimbursed, paid or repaid by the Obligors under this
Agreement;

    


    
      	(b)  	
              indemnify,
      as a principal and independent debtor, the Issuer on demand against all
      actions, claims, demands, liabilities, costs, losses, damages and expenses
      incurred, suffered or sustained or any penalty or other expenditure which
      may result or which the Issuer may incur, suffer or sustain in connection
      with or arising out of or in relation to any Guaranteed Obligations and/or
      the payment under or other performance of a Guarantee (including without
      limitation any correspondent bank
charges).

            


    

     

    
      	5.2  	
              Guarantee
      payments.
      Each Obligor:

            


    

     

    
      	(a)  	
              irrevocably
      authorises the Issuer to make any payment demanded from it pursuant to a
      Guarantee if that demand is made in accordance with its
    terms;

            


    

     

    
      	(b)  	
              accepts
      that any demand for payment made by the Seller pursuant to a Guarantee and
      which is made in accordance with its terms shall be conclusive evidence
      that the Issuer was liable to make payment under the Guarantee and any
      payment which the Issuer makes pursuant to any such demand shall be
      accepted by the Obligors as binding upon the Obligors;
  and

            


    

     

    
      	(c)  	
              acknowledges
      and agrees that the Issuer shall not in any circumstances whatsoever be
      liable to the Obligors in respect of any loss or damage suffered by the
      Obligors by reason of the Issuer making a payment to the Seller in
      connection with any payment demanded under a Guarantee.
  

            


    

     

    
      	5.3  	
              Continuing
      indemnities.
      The liabilities and obligations of the Obligors under the indemnities set
      out in Clause 5.1 shall remain in force as a continuing security
      until:

            


    

     

    
      	(a)  	
              the
      full, prompt and complete performance of all the terms of such indemnities
      including the proper and valid payment of all amounts that may become due
      to the Issuer under this Clause 5.3;
and

            


    

     

    
      	(b)  	
              subject
      to Clause 5.4, an absolute discharge or release of the Obligors signed by
      the Issuer;

            


    

     

    and
accordingly the Obligors shall not have, as regards those indemnities, any of
the rights or defences of a surety.

    


    
      	5.4  	
              Discharges.
      Any such discharge or release referred to in Clause 5.3, and any
      composition or arrangement which the Obligors may effect with the Issuer,
      shall be deemed to be made subject to the condition that it will be void
      if any payment or security which the Issuer, may previously have received
      or may thereafter receive is set aside under any applicable law or proves
      to have been for any reason invalid.  

            


    

     

    
      	5.5  	
              No
      impairment.
      Without limiting the generality of Clauses 5.3 and 5.4, the Obligors shall
      neither be discharged from any of their liabilities or obligations under
      Clause 5.1 by, nor have any claim against the Issuer in respect of:
      

            


    

     

    
      	(a)  	
              any
      misrepresentation or non-disclosure respecting the affairs or condition of
      the Issuer made to the Obligors by any person;
  or

            


    

     

    
      	(b)  	
              the
      Seller and/or the Issuer releasing or granting any time or any indulgence
      whatsoever or making any settlement, composition or arrangement with the
      Obligors, the Seller or any other person; or


            


    

     

    
      	(c)  	
              the
      Seller and/or the Issuer asserting or pursuing, failing or neglecting to
      assert or pursue, or delaying in asserting or pursuing, or waiving, any of
      their rights or remedies against the Obligors, the Seller or any other
      person; or

            


    

     

    
      	(d)  	
              the
      Seller and/or the Issuer and/or the Obligors, with the consent of the
      Obligors (or with or without the consent of the Obligors in the case of
      any variation agreed between the Seller and the Obligors or the person
      whose obligations are guaranteed thereby), making, whether expressly or by
      conduct, any variation to any Guaranteed Obligations or a Guarantee;
      or

            


    

     

    
      	(e)  	
              the
      Seller and/or the Issuer and/or the Obligors:


            


    

     

    
      	(i)  	
              taking,
      accepting, varying, dealing with, enforcing, abstaining from enforcing,
      surrendering or releasing any security in relation to the Seller or the
      Issuer or any Obligor or any other person in such manner as it or they
      think fit; or 

            


    

     

    
      	(ii)  	
              claiming,
      proving for, accepting or transferring any payment in respect of the
      obligations and liabilities of any Obligor and/or the Seller relative to
      any Guaranteed Obligations or under this Agreement in any composition by,
      or winding up of, any Obligor and/or any third party or abstaining from so
      claiming, proving, accepting or transferring;
or

            


    

     

    
      	(f)  	
              any
      assignment or transfer by the Seller of, or any succession to, any of its
      rights relative to any Guaranteed Obligations or a
    Guarantee.

            


    

     

    
      	5.6  	
              Provision of cash collateral
      security.
      Forthwith upon, or at any time following the occurrence of an Event of
      Default which is continuing the Issuer shall be entitled (but not obliged)
      to demand payment by the Obligors of, and the Obligors forthwith upon such
      demand shall pay to the Issuer for credit to an account of the Obligors
      with the Issuer (subject to such Security Interest as the Issuer may
      reasonably specify or require), such amount as shall be the aggregate
      of:

            


    

     

    


    
      	(i)  	
              any
      Settlement Amount then due from the Obligors to the Issuer pursuant to
      Clause 4.2 and not reimbursed; and

            


    

     

    
      	(ii)  	
              the
      Outstandings.

            


    

     

    
      	5.7  	
              Application of cash collateral
      security.
      Subject always to the overriding provisions of Clause 15, moneys received
      by the Issuer pursuant to Clause 5.6 shall be applied (as between the
      Obligors on the one hand and the Issuer on the other) in the following
      manner:

            


    

     

    
      	(a)  	
              firstly,
      in or towards payment of any Settlement Amount then due from the Obligors
      to the Issuer pursuant to Clause 4.2 and not
  reimbursed;

            


    

     

    
      	(b)  	
              secondly,
      in payment to the Issuer for application from time to time by it (and the
      Obligors hereby irrevocably authorise the Issuer so to apply any such
      moneys) in or towards payment of, or reimbursement to the Issuer for, any
      amount which the Issuer shall or may at any time and from time to time
      thereafter pay or be or become liable to pay to the Seller under or
      pursuant to or in connection with a Guarantee (including any amount
      payable under Clause 5.8); and

            


    

     

    
      	(c)  	
              thirdly,
      in or towards payment of all other sums which may be owing to the Issuer
      under or in connection with a
Guarantee.

            


    

     

    
      	5.8  	
              Negotiation with the
      Seller.
      Each Obligor: 

            


    

     

    
      	(a)  	
              irrevocably
      authorises the Issuer to negotiate with the Seller at any time after the
      occurrence of any Event of Default which is continuing with a view to
      arranging for the prepayment by the Issuer, for the account of the
      Obligors of any Guaranteed Obligations; and


            


    

     

    
      	(b)  	
              agrees
      that at any time after the occurrence of any Event of Default which is
      continuing the Issuer shall be entitled (but not, so far as the Obligors
      are concerned, bound) to pay to the Seller, in such manner and upon such
      terms as the Issuer and
      the Seller shall agree, any Guaranteed
  Obligations.

            


    

     

    
      	6  	
              DEFAULT
      INTEREST

            


    

     

    
      	6.1  	
              Payment of default interest on
      overdue amounts.
      The Obligors shall pay interest in accordance with the following
      provisions of this Clause 6 on any amount payable by the Obligors under
      any Finance Document which the Issuer does not receive on or before the
      relevant date, that is:

            


    

     

    
      	(a)  	
              the
      date on which the Finance Documents provide that such amount is due for
      payment; or

            


    

     

    
      	(b)  	
              if
      a Finance Document provides that such amount is payable on demand, the
      date on which the demand is served on the Obligors;
  or

            


    

     

    
      	(c)  	
              if
      such amount has become immediately due and payable under Clause 13.4, the
      date on which it became immediately due and
  payable.

            


    

     

    
      	6.2  	
              Default rate of
      interest.
      Interest shall accrue on an overdue amount from (and including) the
      relevant date until the date of actual payment (as well after as before
      judgment) at the rate per annum determined by the Issuer to be 1.5 per
      cent. above, the rate set out in Clause
6.3.

            


    

     

    
      	6.3  	
              Calculation of default rate of
      interest.
      The rate referred to in Clause 6.2 is, in respect of successive periods of
      any duration (including at call) up to 3 months which the Issuer may
      select from time to time:

            


    

     

    
      	(a)  	
              LIBOR;
      or

            


    

     

    
      	(b)  	
              if
      the Issuer determines that Dollar deposits for any such period are not
      being made available to it by leading banks in the London Interbank Market
      in the ordinary course of business, a rate from time to time determined by
      the Issuer by reference to the cost of funds to it from such other sources
      as the Issuer may from time to time
determine.

            


    

     

    
      	6.4  	
              Notification of interest
      periods and default rates.
      The Issuer shall promptly notify the Obligors of each interest rate
      determined by it under Clause 6.3 and of each period selected by it for
      the purposes of that Clause; but this shall not be taken to imply that the
      Obligors are liable to pay such interest only with effect from the date of
      the Issuer’s notification.

            


    

     

    
      	6.5  	
              Payment of accrued default
      interest.
      Subject to the other provisions of this Agreement, any interest due under
      this Clause shall be paid on the last day of the period by reference to
      which it was determined.

            


    

     

    
      	6.6  	
              Compounding of default
      interest.
      Any such interest which is not paid at the end of the period by reference
      to which it was determined shall thereupon be
  compounded.

            


    

     

    
      	7  	
              CONDITIONS
      PRECEDENT

            


    

     

    
      	7.1  	
              Documents, fees and no
      default.
      The Issuer’s obligation to issue any Guarantee is subject to the following
      conditions precedent: 

            


    

     

    
      	(a)  	
              that,
      on or before the service of the first Guarantee Issue Request, the Issuer
      receives the documents described in Part A of Schedule 2 in form and
      substance satisfactory to it;

            


    

     

    
      	(b)  	
              that,
      on or before a Guarantee Issue Date but prior to the issue of a Guarantee,
      the Issuer receives the documents described in Part B of Schedule 2 in a
      form satisfactory to it;

            


    

     

    
      	(c)  	
              that,
      on or before each Guarantee Issue Date, the Issuer has received all
      arrangement and commitment fees payable pursuant to Clause 18.1;
      

            


    

     

    
      	(d)  	
              that
      both at the date of each Guarantee Issue Request and at each Guarantee
      Issue Date:

            


    

     

    
      	(i)  	
              no
      Event of Default or Potential Event of Default has occurred and is
      continuing or would result from the issue of the Guarantee;
      and

            


    

     

    
      	(ii)  	
              the
      representations and warranties in Clause 8.1 and those of the Obligors or
      any Security Party which are set out in the other Finance Documents would
      be true and not misleading if repeated on each of those dates with
      reference to the circumstances then existing;


            


    

     

    
      	(e)  	
              that
      the Issuer has received, and found to be acceptable to it, any further
      opinions, consents, agreements and documents in connection with the
      Finance Documents which the Issuer may reasonably request by notice to the
      Obligors prior to the Guarantee Issue
Date.

            


    

     

    
      	7.2  	
              Waivers of conditions
      precedent. If
      the Issuer, at its discretion, permits any Guarantee to be issued before
      certain of the conditions referred to in Clause 7.1 are satisfied, the
      Obligor shall ensure that those conditions are satisfied within 14
      Business days after the Guarantee Issue Date (or such longer period as the
      Issuer may specify).

            


    

     

    
      	8  	
              REPRESENTATIONS AND
      WARRANTIES

            


    

     

    
      	8.1  	
              General.
      Each Obligor represents and warrants to the Issuer as
    follows.

            


    

     

    
      	8.2  	
              Status. It
      is duly incorporated and validly existing and in good standing under the
      laws of the Marshall Islands.

            


    

     

    
      	8.3  	
              Share capital and
      ownership. It
      has an authorised share capital of 500 registered and/or bearer shares
      without par value, all of which shares have been issued, and the legal
      title and beneficial ownership of all those shares is held, free of any
      Security Interest or other claim, by Westbrook Holdings
      Limited.

            


    

     

    
      	8.4  	
              Corporate
      power. It
      has the corporate capacity, and has taken all corporate action and
      obtained all consents necessary for
it:

            


    

     

    
      	(a)  	
              to
      execute the Shipbuilding Contract to which it is a party and to purchase
      and pay for its Ship under that Shipbuilding
  Contract;

            


    

     

    
      	(b)  	
              to
      execute the Finance Documents to which it is a party;
  and

            


    

     

    
      	(c)  	
              to
      make all the payments contemplated by, and to comply with, those Finance
      Documents.

            


    

     

    
      	8.5  	
              Consents in
      force.
      All the consents referred to in Clause 8.4 remain in force and nothing to
      the best of the Obligors’ knowledge and belief has occurred which makes
      any of them liable to revocation.

            


    

     

    
      	8.6  	
              Legal validity; effective
      Security Interests.
      The Finance Documents to which it is a party, do now or, as the case may
      be, will, upon execution and delivery (and, where applicable, registration
      as provided for in the Finance Documents):


            


    

     

    
      	(a)  	
              constitute
      its legal, valid and binding obligations enforceable against it in
      accordance with their respective terms;
and

            


    

     

    
      	(b)  	
              create
      legal, valid and binding Security Interests enforceable in accordance with
      their respective terms over all the assets to which they, by their terms,
      relate;

            


    

     

    subject
to any relevant insolvency laws affecting creditors’ rights generally and
subject to any qualifications as to matters of law which are specifically
referred to in any legal opinion delivered to the Issuer pursuant to Schedule
2.

    


    
      	8.7  	
              No third party Security
      Interests.
      Without limiting the generality of Clause 8.6, at the time of the
      execution and delivery of each Finance
Document:

            


    

     

    
      	(a)  	
              the
      relevant Obligor or Obligors which are a party to that Finance Document
      will have the right to create all the Security Interests which that
      Finance Document purports to create;
and

            


    

     

    
      	(b)  	
              no
      third party will to the best of the Obligors’ knowledge and belief have
      any Security Interest (except for Permitted Security Interests) or any
      other interest, right or claim over, in or in relation to any asset to
      which a Security Interest created by a Finance Document,
      relates.

            


    

     

    
      	8.8  	
              No
      conflicts.
      The execution by that Obligor of each Finance Document to which it is a
      party and its compliance with each Finance Document to which it is a party
      will not involve or lead to a contravention
of:

            


    

     

    
      	(a)  	
              any
      law or regulation in force at the date of this Agreement;
    or

            


    

     

    
      	(b)  	
              the
      constitutional documents of that Obligor;
or

            


    

     

    
      	(c)  	
              any
      contractual or other obligation or restriction which is binding on that
      Obligor or any of its assets.

            


    

     

    
      	8.9  	
              No withholding
      taxes. No
      tax is imposed in any jurisdiction in which that Obligor is ordinarily
      resident for tax by way of withholding or deduction or otherwise on any
      payment to be made under this
Agreement.

            


    

     

    
      	8.10  	
              No default. No
      Event of Default or Potential Event of Default has occurred and is
      continuing.

            


    

     

    
      	8.11  	
              Information.
      All information which has been provided in writing by or on behalf of the
      Obligors or any Security Party to the Issuer in connection with any
      Finance Document was to the best of the Obligors’ knowledge and belief
      true and not misleading as at the time it was given; all audited and
      unaudited accounts which have been so provided satisfied the requirements
      of Clause 9.6; and there has been no material adverse change in the
      financial position or state of affairs of the Obligors from that disclosed
      in the latest of those accounts.

            


    

     

    
      	8.12  	
              No
      litigation. No
      legal or administrative action involving the Obligors has been commenced
      or taken or, to that Obligor’s knowledge, is likely to be commenced or
      taken which, in either case, would be likely to have a material adverse
      effect on the Obligors’ financial position or
    profitability.

            


    

     

    
      	8.13  	
              Validity and completeness of
      Shipbuilding Contracts.
      Each Shipbuilding Contract constitutes valid, binding and enforceable
      obligations of the Seller and the relevant Obligor respectively in
      accordance with its terms subject to any relevant insolvency laws
      affecting creditors’ rights generally
and:

            


    

     

    
      	(a)  	
              each
      copy of the Shipbuilding Contracts delivered to the Issuer before the date
      of this Agreement is a true and complete copy;
  and

            


    

     

    
      	(b)  	
              no
      amendments or additions to the Shipbuilding Contracts have been agreed nor
      has any Obligor or the Seller waived any of their respective rights under
      the Shipbuilding Contracts.

            


    

     

    
      	8.14  	
              No rebates
      etc.
      There is no agreement or understanding to allow or pay any rebate,
      premium, commission, discount or other benefit or payment (howsoever
      described) to the Obligors, the Seller or a third party in connection with
      the purchase by the Obligors of the Ships, other than as disclosed to the
      Issuer in writing on or prior to the date of this
    Agreement.

            


    

     

    
      	8.15  	
              Compliance with certain
      undertakings. At
      the date of this Agreement, each Obligor is in compliance with Clause 9.12
      and (save as disclosed in writing to the Issuer) Clauses 9.3 and
      9.8.

            


    

     

    
      	8.16  	
              Taxes paid.
      Each Obligor has paid all taxes applicable to, or imposed on or in
      relation to it or its business.

            


    

     

    
      	8.17  	
              Conformity of Financial
      Covenants. The
      financial covenants set out in Schedule 3 conform to the financial
      covenants given by the Corporate Guarantor and its subsidiaries under the
      Bank of America Facilities.

            


    

     

    
      	9  	
              GENERAL
      UNDERTAKINGS AND FINANCIAL
      COVENANTS

            


    

     

    
      	9.1  	
              General.
      Each Obligor undertakes with the Issuer to comply with the following
      provisions of this Clause 9 at all times during the Security Period,
      except as the Issuer may otherwise
permit.

            


    

     

    
      	9.2  	
              No disposal of
      assets. 

            


    

     

    
      	(a)  	
              No
      Obligor will transfer or otherwise dispose
of:

            


    

     

    
      	(i)  	
              its
      rights under the Shipbuilding Contract to which it is a party, whether by
      one transaction or a number of transactions, whether related or not save
      where the Guarantee relating thereto has been cancelled or where that
      Obligor has provided cash security in relation to such Guarantee on the
      same terms mutatis mutandis as set out in Clause 5.6;
  or

            


    

     

    
      	(ii)  	
              any
      debt payable to it or any other right (present, future or contingent
      right) to receive a payment, including any right to damages or
      compensation.

            


    

     

    
      	(b)  	
              No
      Obligor will create or permit to arise any Security Interest (except for
      Permitted Security Interests) over its rights under the Shipbuilding
      Contract and the Refund Guarantees to which it is a
  party.

            


    

     

    
      	9.3  	
              No other liabilities or
      obligations to be incurred. No
      Obligor will incur any liability or obligation
  except:

            


    

     

    
      	(a)  	
              liabilities
      and obligations under the Shipbuilding Contract, the Finance Documents,
      the Loan Agreement and the Finance Document (as defined in the Loan
      Agreement) to which it is a party;
and

            


    

     

    
      	(b)  	
              liabilities
      or obligations incurred in the ordinary course of supervising the
      construction of, providing supplies for, operating and chartering its Ship
      (and for the avoidance of doubt the management fees payable by the
      Obligors to the Approved Managers shall be a permitted expense);
      and

            


    

     

    
      	(c)  	
              provided
      the terms of Clause 10.3(c) are complied with, inter-company Indebtedness
      from other companies which are in the same ultimate beneficial ownership
      as the Obligors.

            


    

     

    
      	9.4  	
              Information provided to be
      accurate.
      All financial and other information which is provided in writing by or on
      behalf of each Obligor under or in connection with any Finance Document
      will to the best of that Obligor’s knowledge and belief be true and not
      misleading and will not omit any material fact or consideration which, if
      disclosed would reasonably be expected to adversely affect the decision of
      a person considering whether to enter into this
  Agreement.

            


    

     

    
      	9.5  	
              Provision of financial
      statements.
      Each Obligor will procure that there is sent to the
  Issuer:

            


    

     

    
      	(a)  	
              as
      soon as possible, but in no event later than 120 days after the end of
      each of the Corporate Guarantor’s financial years, the annual audited
      accounts of the Corporate Guarantor and its consolidated
      subsidiaries;

            


    

     

    
      	(b)  	
              as
      soon as possible, but in no event later than 30 days after the end of each
      quarter in each of the Corporate Guarantor’s financial years unaudited
      accounts of the Corporate Guarantor and its consolidated subsidiaries
      which are certified as to their correctness by its chief financial
      officer.

            


    

     

    
      	9.6  	
              Form of financial
      statements.
      All accounts (audited and unaudited) delivered under Clause 9.5
      will:

            


    

     

    
      	(a)  	
              be
      prepared in accordance with all applicable laws and generally accepted
      accounting principles of the U.S.A. consistently
  applied;

            


    

     

    
      	(b)  	
              give
      a true and fair view of the financial condition of the relevant Obligor at
      the date of those accounts and of its profit for the period to which those
      accounts relate; and

            


    

     

    
      	(c)  	
              fully
      disclose or provide for all significant liabilities of the relevant
      Obligor.

            


    

     

    
      	9.7  	
              Shareholder and creditor
      notices.
      Each Obligor will send the Issuer, at the same time as they are
      despatched, copies of all communications which are despatched to its
      shareholders or creditors or any class of
them.

            


    

     

    
      	9.8  	
              Consents.
      Each Obligor will maintain in force and promptly obtain or renew, and will
      promptly send certified copies to the Issuer of, all consents
      required:

            


    

     

    
      	(a)  	
              for
      that Obligor to perform its obligations under any Finance Document to
      which it is a party;

            


    

     

    
      	(b)  	
              for
      the validity or enforceability of any Finance Document to which it is a
      party;

            


    

     

    and the
Obligor will comply with the terms of all such consents.

    


    
      	9.9  	
              Maintenance of Security
      Interests.
      Each Obligor will:

            


    

     

    
      	(a)  	
              at
      its own cost, do all that it reasonably can to ensure that any Finance
      Document validly creates the obligations and the Security Interests which
      it purports to create; and

            


    

     

    
      	(b)  	
              without
      limiting the generality of paragraph (a), at its own cost, promptly
      register, file, record or enrol any Finance Document with any applicable
      court or authority, pay any applicable stamp, registration or similar tax
      in respect of any Finance Document, give any notice or take any other step
      which, in the reasonable opinion of the Issuer is or has become necessary
      or desirable for any Finance Document to be valid, enforceable or
      admissible in evidence or to ensure or protect the priority of any
      Security Interest which it creates.


            


    

     

    
      	9.10  	
              Notification of
      litigation.
      Each Obligor will provide the Issuer with details of any legal or
      administrative action involving any Obligor or any Security Party promptly
      upon becoming aware of the same where such legal or administrative action
      might, if adversely determined, have a material adverse effect on the
      ability of that Obligor to perform its obligations under any Finance
      Document to which it is a party 

            


    

     

    
      	9.11  	
              No amendment to Shipbuilding
      Contracts. No
      Obligor will agree to any amendment or supplement to, or waive or fail to
      enforce, the Shipbuilding Contract to which it is a party or any of its
      provisions (and for the purposes of this Clause 9.11 an amendment of a
      Shipbuilding Contract will always be material if alone or with any
      previous variations it increases the Contract Price thereunder by more
      than 5%).

            


    

     

    
      	9.12  	
              Chief Executive
      Office.
      Each Obligor will maintain its chief executive office, and keep its
      corporate documents and records, at Suite 306, Commerce Building, One
      Chancery Lane, Hamilton, MH12,
Bermuda.

            


    

     

    
      	9.13  	
              Confirmation of no
      default.
      Each Obligor will, within 2 Business Days after service by the Issuer of a
      written request, serve on the Issuer a notice which is signed by the
      representative director of such Obligor and
  which:

            


    

     

    
      	(a)  	
              states
      that no Event of Default or Potential Event of Default has occurred and is
      continuing; or

            


    

     

    
      	(b)  	
              states
      that no Event of Default or Potential Event of Default has occurred,
      except for a specified event or matter, of which all material details are
      given.

            


    

     

    
      	9.14  	
              Notification of
      default.
      Each Obligor will notify the Issuer as soon as it becomes aware
      of:

            


    

     

    
      	(a)  	
              the
      occurrence of an Event of Default or a Potential Event of Default;
      or

            


    

     

    
      	(b)  	
              any
      matter which indicates that an Event of Default or a Potential Event of
      Default may have occurred and is
continuing;

            


    

     

    and will
keep the Issuer fully up-to-date with all developments.

    


    
      	9.15  	
              Provision of further
      information.
      Each Obligor will, as soon as practicable after receiving the request,
      provide the Issuer with any additional financial or other information
      relating:

            


    

     

    
      	(a)  	
              to
      it and its Shipbuilding Contract;
or

            


    

     

    
      	(b)  	
              to
      any other matter relevant to, or to any provision of, a Finance
      Document;

            


    

     

    which may
be reasonably requested by the Issuer at any time.

    


    
      	9.16  	
              Financial
      Covenants.

            


    

     

    
      	(a)  	
              the
      Obligors undertake to comply at all times with the financial covenants set
      out in Schedule 3;

            


    

     

    
      	(b)  	
              the
      Obligors shall provide to the Issuer within 60 days after the end of each
      financial quarter of the Corporate Guarantor’s financial year a compliance
      certificate in the form set out in Schedule 4 executed by the chief
      financial officer of the Corporate Guarantor and confirming that the
      financial covenants set out in Schedule 3 have been complied with during
      each financial quarter; and

            


    

     

    
      	(c)  	
              a
      formal review of the financial covenants set out in Schedule 3 will be
      undertaken by the Issuer upon expiry and prepayment of the Bank of America
      Facilities whichever is earlier.

            


    

     

    
      	9.17  	
              Dividends.
      The Obligors shall procure that the Corporate Guarantor does not pay any
      dividend or make any other form of distribution except where the following
      conditions are met:

            


    

     

    
      	(a)  	
              no
      Event of Default has occurred and is continuing at the time that the
      proposed dividend or distribution is to be
made;

            


    

     

    
      	(b)  	
              the
      aggregate amount of all dividends or distributions in respect of any
      financial year of the Corporate Guarantor shall not exceed 50% of the
      Consolidated Net Income for such financial
year;

            


    

     

    
      	(c)  	
              prior
      to the making of the proposed dividend or distribution the Obligors have
      provided to the Issuer a certificate executed by the chief financial
      officer of the Corporate Guarantor confirming that the Corporate Guarantor
      is in compliance with the minimum Consolidated Fixed Charge Coverage Ratio
      as set out in Schedule 3 for the Measurement Period immediately preceding
      the date of the proposed dividend or
  distribution.

            


    

     

    For the
purpose of this Clause 9.17, “Consolidated Net Income”, “Consolidated Fixed
Charge Coverage Ratio” and “Measurement Period” each shall have the meaning
given to such term in Schedule 3.

     

    
      	10  	
              CORPORATE
      UNDERTAKINGS

            


    

     

    
      	10.1  	
              General.
      Each Obligor also undertakes with the Issuer to comply with the following
      provisions of this Clause 10 at all times during the Security Period
      except as the Issuer may otherwise
permit.

            


    

     

    
      	10.2  	
              Maintenance of
      status.
      Each Obligor will maintain its separate corporate existence and remain in
      good standing under the laws of the Marshall
  Islands.

            


    

     

    
      	10.3  	
              Negative
      undertakings. No
      Obligor will:

            


    

     

    
      	(a)  	
              carry
      on any business other than in relation to the construction, purchase and
      eventual ownership, chartering and operation of its Ship; or
    

            


    

     

    
      	(b)  	
              effect
      any form of redemption, purchase or return of share capital;
      or

            


    

     

    
      	(c)  	
              provide
      any form of credit or financial assistance
to:

            


    

     

    
      	(i)  	
              a
      person who is directly or indirectly interested in that Obligor’s share or
      loan capital; or

            


    

     

    
      	(ii)  	
              any
      company in or with which such a person is directly or indirectly
      interested or connected;

            


    

     

    or enter
into any transaction with or involving such a person or company on terms which
are, in any respect, less favourable to that Obligor than those which it could
obtain in a bargain made at arms’ length provided however that prior to an Event
of Default which is continuing that Obligor may provide loans to or incur
inter-company Indebtedness from other subsidiaries of the Corporate Guarantor
and may service such inter-company Indebtedness provided that in the case of any
such inter- company Indebtedness the relevant lending company has first executed
an agreement in favour of the Issuer fully subordinating the rights of such
lending company in respect of such Indebtedness to those of the Issuer under the
Finance Documents.

    


    
      	(d)  	
              issue,
      allot or grant any person a right to any shares in its capital or
      repurchase or reduce its issued share
capital;

            


    

     

    
      	(e)  	
              acquire
      any shares or other securities other than US or UK Treasury bills and
      certificates of deposit issued by major North American or European banks,
      or enter into any transaction in a derivative;
  or

            


    

     

    
      	(f)  	
              enter
      into any form of amalgamation, merger or de-merger or any form of
      reconstruction or reorganisation.

            


    

     

    
      	11  	
              PAYMENTS AND
      CALCULATIONS

            


    

     

    
      	11.1  	
              Currency and method of
      payments.
      All payments to be made by the Obligors to the Issuer under a Finance
      Document shall be made to the
Issuer:

            


    

     

    
      	(a)  	
              by
      not later than 11.00 a.m. (New York City time) on the due
      date;

            


    

     

    
      	(b)  	
              in
      same day Dollar funds settled through the New York Clearing House
      Interbank Payments System (or in such other Dollar funds and/or settled in
      such other manner as the Issuer shall specify as being customary at the
      time for the settlement of international transactions of the type
      contemplated by this Agreement);
and

            


    

     

    
      	(c)  	
              to
      the account of the Issuer at American Express Bank Limited, 3 World
      Financial Centre, 23rd Floor, New York, NY 10285-2300 USA Account No
      000261123 for credit to the Issuer reference “TBS : Argyle and Others :
      Guarantee Facility”, or to such other account with such other bank as the
      Issuer may from time to time notify to the
  Obligors.

            


    

     

    
      	11.2  	
              Payment on non-Business
      Day. If
      any payment by the Obligors under a Finance Document would otherwise fall
      due on a day which is not a Business
Day:

            


    

     

    
      	(a)  	
              the
      due date shall be extended to the next succeeding Business Day;
      or

            


    

     

    
      	(b)  	
              if
      the next succeeding Business Day falls in the next calendar month, the due
      date shall be brought forward to the immediately preceding Business
      Day;

            


    

     

    and
interest shall be payable during any extension under paragraph (a) at the rate
payable on the original due date.

    


    
      	11.3  	
              Basis for calculation of
      periodic payments.
      All interest and commitment fee and any other payments under any Finance
      Document which are of an annual or periodic nature shall accrue from day
      to day and shall be calculated on the basis of the actual number of days
      elapsed and a 360 day year.

            


    

     

    
      	11.4  	
              Issuer
      accounts.
      The Issuer shall maintain an account showing any and all sums owing to the
      Issuer from the Obligors and each Security Party under the Finance
      Documents and all payments in respect of those amounts made by the
      Obligors and any Security Party.

            


    

     

    
      	11.5  	
              Accounts prima facie
      evidence. If
      the account maintained under Clause 11.4 shows an amount to be owing by
      the Obligors or a Security Party to the Issuer, that account shall be
      prima facie evidence that that amount is owing to the
    Issuer.

            


    

     

    
      	12  	
              APPLICATION OF
      RECEIPTS

            


    

     

    
      	12.1  	
              Normal order of
      application.
      Except as any Finance Document may otherwise provide, any sums which are
      received or recovered by the Issuer under or by virtue of any Finance
      Document shall be applied:

            


    

     

    
      	(a)  	
              FIRST:
      in or towards satisfaction of any amounts then due and payable under the
      Finance Documents (or any of them) in such order of application and/or
      such proportions as the Issuer may specify by notice to the Obligors and
      the Security Parties;

            


    

     

    
      	(b)  	
              SECONDLY:
      in retention of an amount equal to any amount not then due and payable
      under any Finance Document but which the Issuer, by notice to the Obligors
      and the Security Parties, states in its opinion will or may become due and
      payable in the future and, upon those amounts becoming due and payable, in
      or towards satisfaction of them in accordance with the provisions of this
      Clause; and 

            


    

     

    
      	(c)  	
              THIRDLY:
      any surplus shall be paid to the Obligors or to any other person appearing
      to be entitled to it.

            


    

     

    


    
      	12.2  	
              Variation of order of
      application.
      The Issuer may, by notice to the Obligors and the Security Parties,
      provide for a different manner of application from that set out in Clause
      12.1 either as regards a specified sum or sums or as regards sums in a
      specified category or categories.

            


    

     

    
      	12.3  	
              Notice of variation of order of
      application.
      The Issuer may give notices under Clause 12.2 from time to time; and such
      a notice may be stated to apply not only to sums which may be received or
      recovered in the future, but also to any sum which has been received or
      recovered on or after the third Business Day before the date on which the
      notice is served. 

            


    

     

    
      	12.4  	
              Appropriation rights
      overridden.
      This Clause 12 and any notice which the Issuer gives under Clause 12.2
      shall override any right of appropriation possessed, and any appropriation
      made, by the Obligors or any Security
Party.

            


    

     

    
      	13  	
              EVENTS OF
      DEFAULT

            


    

     

    
      	13.1  	
              Events of
      Default. An
      Event of Default
      occurs if:

            


    

     

    
      	(a)  	
              any
      Obligor or any Security Party fails to pay when due or (if so payable) on
      demand any sum payable under a Finance Document (and so that for this
      purpose (i) sums payable on demand shall be treated as having been paid
      when due within 3 Business Days of receipt of the demand and (ii) if the
      failure is caused by a disruption to the payments system referred to in
      Clause 11.1(b) which disruption is beyond the control of the Obligors,
      such failure shall not constitute an Event of Default if payment is made
      within 3 Business days of its due date);
or

            


    

     

    
      	(b)  	
              any
      breach occurs of Clause 7.2, 9.3, 10.2 or 10.3;
  or

            


    

     

    
      	(c)  	
              any
      breach occurs of Clause 9.16(a); or

            


    

     

    
      	(d)  	
              any
      breach by any Obligor or any Security Party occurs of any provision of a
      Finance Document (other than a breach covered by paragraph (a) or (b)) and
      if, in the opinion of the Issuer, such default is capable of remedy, such
      default continues unremedied 10 Business days after written notice from
      the Issuer requesting action to remedy the same;
  or

            


    

     

    
      	(e)  	
              any
      representation, warranty or statement made by, or by an officer of, any
      Obligor or a Security Party in a Finance Document or in a Guarantee Issue
      Request or any other notice or document relating to a Finance Document is
      untrue or misleading in any material respect when it is made;
      or

            


    

     

    
      	(f)  	
              any
      of the following occurs in relation to any Financial Indebtedness of a
      Relevant Person:

            


    

     

    
      	(i)  	
              any
      Financial Indebtedness of a Relevant Person is not paid when due or, if so
      payable, on demand (or in either such case, within any applicable grace
      period); or

            


    

     

    
      	(ii)  	
              any
      Financial Indebtedness of a Relevant Person becomes due and payable or
      capable of being declared due and payable prior to its stated maturity
      date as a consequence of any event of default;
  or

            


    

     

    
      	(iii)  	
              a
      lease, hire purchase agreement or charter creating any Financial
      Indebtedness of a Relevant Person is terminated by the lessor or owner or
      becomes capable of being terminated as a consequence of any termination
      event; or

            


    

     

    
      	(iv)  	
              any
      overdraft, loan, note issuance, acceptance credit, letter of credit,
      guarantee, foreign exchange or other facility, or any swap or other
      derivative contract or transaction, relating to any Financial Indebtedness
      of a Relevant Person ceases to be available or becomes capable of being
      terminated as a result of any event of default, or cash cover is required,
      or becomes capable of being required, in respect of such a facility as a
      result of any event of default; or

            


    

     

    
      	(v)  	
              any
      Security Interest securing any Financial Indebtedness of a Relevant Person
      becomes enforceable;

            


    

     

    Provided
that no Event of Default will occur under this Clause 13.1(f) in relation to the
Corporate Guarantor if the amount of Financial Indebtedness falling within
paragraphs (i) to (v) above is less than $2,500,000 (or its equivalent in any
other currency or currencies),

     

    
      	(g)  	
              any
      of the following occurs in relation to a Relevant
  Person:

            


    

     

    
      	(i)  	
              a
      Relevant Person becomes, in the opinion of the Issuer, unable to pay its
      debts as they fall due; or

            


    

     

    
      	(ii)  	
              all
      or substantially all of the assets of a Relevant Person are subject to any
      form of execution, attachment, arrest, sequestration or distress in
      respect of a sum of, or sums aggregating, $500,000 or more or the
      equivalent in another currency and is not discharged within 1 month of the
      same being levied or sued out; or

            


    

     

    
      	(iii)  	
              any
      administrative or other receiver is appointed over any substantial part of
      the assets of a Relevant Person; or

            


    

     

    
      	(iv)  	
              an
      administrator is appointed (whether by the court or otherwise) in respect
      of a Relevant Person; or

            


    

     

    
      	(v)  	
              any
      formal declaration of bankruptcy or any formal statement to the effect
      that a Relevant Person is insolvent or likely to become insolvent is made
      by a Relevant Person or by the directors of a Relevant Person or, in any
      proceedings, by a lawyer acting for a Relevant Person; or
  

            


    

     

    
      	(vi)  	
              a
      provisional liquidator is appointed in respect of a Relevant Person, a
      winding up order is made in relation to a Relevant Person or a winding up
      resolution is passed by a Relevant Person; or


            


    

     

    
      	(vii)  	
              a
      resolution is passed, an administration notice is given or filed, an
      application or petition to a court is made or presented or any other step
      is taken by (aa) a Relevant Person, (bb) the members or directors of a
      Relevant Person, (cc) a holder of Security Interests which together relate
      to all or substantially all of the assets of a Relevant Person, or (dd) a
      government minister or public or regulatory authority of a Pertinent
      Jurisdiction having jurisdiction over that Relevant Person for or with a
      view to the winding up of that or another Relevant Person or the
      appointment of a provisional liquidator or administrator in respect of
      that or another Relevant Person, or that or another Relevant Person
      ceasing or suspending business operations or payments to creditors, save
      that this paragraph does not apply to a fully solvent winding up of a
      Relevant Person other than an Obligor which is, or is to be, effected for
      the purposes of an amalgamation or reconstruction previously approved by
      the Issuer and effected not later than 3 months after the commencement of
      the winding up; or

            


    

     

    
      	(viii)  	
              an
      administration notice is given or filed, an application or petition to a
      court is made or presented or any other step is taken by a creditor of a
      Relevant Person (other than a holder of Security Interests which together
      relate to all or substantially all of the assets of a Relevant Person) for
      the winding up of a Relevant Person or the appointment of a provisional
      liquidator or administrator in respect of a Relevant Person in any
      Pertinent Jurisdiction having jurisdiction over that Relevant Person,
      unless the proposed winding up, appointment of a provisional liquidator or
      administration is being contested in good faith, on substantial grounds
      and not with a view to some other insolvency law procedure being
      implemented instead and either (aa) the application or petition is
      dismissed or withdrawn within 30 days of being made or presented, or (bb)
      within 30 days of the administration notice being given or filed, or the
      other relevant steps being taken, other action is taken which will ensure
      that there will be no administration and (in both cases (aa) or (bb)) the
      Relevant Person will continue to carry on business in the ordinary way and
      without being the subject of any actual, interim or pending insolvency law
      procedure; or

            


    

     

    
      	(ix)  	
              a
      Relevant Person or its directors take any steps (whether by making or
      presenting an application or petition to a court, or submitting or
      presenting a document setting out a proposal or proposed terms, or
      otherwise) with a view to obtaining, in relation to that or another
      Relevant Person, any form of moratorium, suspension or deferral of
      payments, reorganisation of debt (or certain debt) by reason of financial
      difficulties or arrangement with all or a substantial proportion (by
      number or value) of creditors or of any class of them or any such
      moratorium, suspension or deferral of payments, reorganisation or
      arrangement is effected by court order, by the filing of documents with a
      court, by means of a contract or in any other way at all;
    or

            


    

     

    
      	(x)  	
              any
      meeting of the members or directors, or of any committee of the board or
      senior management, of a Relevant Person is held or summoned for the
      purpose of considering a resolution or proposal to authorise or take any
      action of a type described in paragraphs (iv) to (ix) or a step
      preparatory to such action, or (with or without such a meeting) the
      members, directors or such a committee resolve or agree that such an
      action or step should be taken or should be taken if certain conditions
      materialise or fail to materialise;
or

            


    

     

    
      	(xi)  	
              in
      a Pertinent Jurisdiction other than England or Wales or to the
      jurisdiction of whose courts any part of that Relevant Person’s assets are
      subject, any event occurs, any proceedings are opened or commenced or any
      step is taken which, in the opinion of the Issuer is similar to any of the
      foregoing; or

            


    

     

    
      	(h)  	
              any
      Obligor ceases or suspends carrying on its business or a part of its
      business which, in the opinion of the Issuer, is material in the context
      of this Agreement; or

            


    

     

    
      	(i)  	
              it
      becomes unlawful in any Pertinent Jurisdiction or
    impossible:

            


    

     

    
      	(i)  	
              for
      any Obligor or any Security Party to discharge any liability under a
      Finance Document or to comply with any other obligation which the Issuer
      considers material under a Finance Document unless provided that none of
      the interests of the Issuer is prejudiced in any way during the relevant
      period, the discharge of that liability or compliance with that obligation
      or exercise or enforcement of those rights ceases to be unlawful within 30
      days; or 

            


    

     

    
      	(ii)  	
              for
      the Issuer to exercise or enforce any right under, or to enforce any
      Security Interest created by, a Finance Document;
  or

            


    

     

    
      	(j)  	
              any
      official consent necessary to enable any Obligor or any Security Party to
      comply with any provision which the Issuer considers material of a Finance
      Document or any of the Shipbuilding Contracts is not granted, expires
      without being renewed, is revoked or becomes liable to revocation or any
      condition of such a consent is not fulfilled; or
  

            


    

     

    
      	(k)  	
              any
      provision which the Issuer considers in its reasonable opinion material of
      a Finance Document proves to have been or becomes invalid or
      unenforceable, or a Security Interest created by a Finance Document proves
      to have been or becomes invalid or unenforceable or such a Security
      Interest proves to have ranked after, or loses its priority to, another
      Security Interest or any other third party claim or interest;
      or

            


    

     

    
      	(l)  	
              the
      security constituted by a Finance Document is in any way imperilled or in
      jeopardy; or

            


    

     

    
      	(m)  	
              an
      Event of Default (as defined in the Loan Agreement) occurs;
    or

            


    

     

    
      	(n)  	
              any
      other event occurs or any other circumstances arise or develop including,
      without limitation a change in the financial position, state of affairs or
      prospects of any Obligor in the light of which the Issuer considers that
      there is a significant risk that any Obligor is, or will later become,
      unable to discharge its liabilities under the Finance Documents as they
      fall due.

            


    

     

    
      	13.2  	
              Actions following an Event of
      Default.
      On, or at any time after, the occurrence of an Event of Default and while
      the Event of Default is continuing the Issuer
      may:

            


    

     

    
      	(a)  	
              serve
      on the Obligors a notice stating that all obligations of the Issuer to the
      Obligors under this Agreement are terminated;
  and/or

            


    

     

    
      	(b)  	
              serve
      on the Obligors a notice stating that all other amounts accrued or owing
      under this Agreement are immediately due and payable or are due and
      payable on demand; and/or

            


    

     

    
      	(c)  	
              take
      any other action which, as a result of the Event of Default or any notice
      served under paragraph (a) or (b), the Issuer is entitled to take under
      any Finance Document or any applicable
law.

            


    

     

    
      	13.3  	
              Termination of
      obligations. On
      the service of a notice under Clause 13.2(a), all the obligations of the
      Issuer to the Obligors under this Agreement shall terminate and the amount
      specified in Clause 5.6 shall become immediately due and payable or, as
      the case may be, payable on demand.

            


    

     

    
      	13.4  	
              Acceleration of
      liabilities. On
      the service of a notice under Clause 13.2(b), all amounts accrued or owing
      from the Obligors or any Security Party under this Agreement and every
      other Finance Document shall become immediately due and payable or, as the
      case may be, payable on demand.

            


    

     

    
      	13.5  	
              Multiple notices; action
      without notice.
      The Issuer may serve notices under Clauses 13.2(a) and (b) simultaneously
      or on different dates and it may take any action referred to in Clauses
      13.2 if no such notice is served or simultaneously with or at any time
      after the service of both or either of such
  notices.

            


    

     

    
      	13.6  	
              Exclusion of Issuer
      liability.
      Neither the Issuer nor any receiver or manager appointed by the Issuer,
      shall have any liability to
      the Obligors or a Security Party:

            


    

     

    
      	(a)  	
              for
      any loss caused by an exercise of rights under, or enforcement of a
      Security Interest created by, a Finance Document or by any failure or
      delay to exercise such a right or to enforce such a Security Interest;
      or

            


    

     

    
      	(b)  	
              as
      mortgagee in possession or otherwise, for any income or principal amount
      which might have been produced by or realised from any asset comprised in
      such a Security Interest or for any reduction (however caused) in the
      value of such an asset;

            


    

     

    
      	 	
              except
      that this does not exempt the Issuer or a receiver or manager from
      liability for losses shown to have been caused directly and mainly by the
      dishonesty or the wilful misconduct of the Issuer’s own officers and
      employees or (as the case may be) such receiver’s or manager’s own
      partners or employees.

            


    

    


    
      	13.7  	
              Relevant
      Persons. In
      this Clause 13 a “Relevant
      Person”
      means any Obligor and any Security
Party.

            


    

     

    
      	13.8  	
              Interpretation. In
      Clause 13.1(f) references to an event of default or a termination event
      include any event, howsoever described, which is similar to an event of
      default in a facility agreement or a termination event in a finance lease;
      and in Clause 13.1(g) “petition”
      includes an application.

            


    

     

    
      	14  	
              FEES AND
      EXPENSES

            


    

     

    
      	14.1  	
              Arrangement and commitment
      fees. The
      Obligors shall pay to the Issuer:

            


    

     

    
      	(a)  	
              on
      Guarantee Issue Date in respect of each Guarantee an arrangement fee in
      respect of such Guarantee in the amount specified in the Fee Letter;
      and

            


    

     

    
      	(b)  	
              quarterly
      in arrears during the period from (and including) the first Guarantee
      Issue Date to the date of cancellation or termination of the last
      Guarantee and on the last day of that period a commitment fee at the rate
      specified in the Fee Letter.

            


    

     

    
      	14.2  	
              Costs of negotiation,
      preparation etc.
      The Obligors shall pay to the Issuer on its demand the amount of all
      expenses incurred by the Issuer in connection with the negotiation,
      preparation, execution or registration of any Finance Document or any
      related document or with any transaction contemplated by a Finance
      Document or a related document.

            


    

     

    
      	14.3  	
              Costs of variation, amendments,
      enforcement etc.
      The Obligors shall pay to the Issuer, on the Issuer’s demand, the amount
      of all expenses incurred by the Issuer (in the case of paragraphs (a) and
      (b) such expenses to be reasonably incurred) in connection with:
      

            


    

     

    
      	(a)  	
              any
      amendment or supplement to a Finance Document, or any proposal for such an
      amendment to be made; 

            


    

     

    
      	(b)  	
              any
      consent or waiver by the Issuer under or in connection with a Finance
      Document, or any request for such a consent or
  waiver;

            


    

     

    
      	(c)  	
              any
      step taken by the Issuer with a view to the protection, exercise or
      enforcement of any right or Security Interest created by a Finance
      Document or for any similar
purpose.

            


    

     

    
      	 	
              There
      shall be recoverable under paragraph (c) the full amount of all legal
      expenses, whether or not such as would be allowed under rules of court or
      any taxation or other procedure carried out under such
    rules.

            


    

    


    
      	14.4  	
              Documentary
      taxes.
      The Obligors shall promptly pay any tax payable on or by reference to any
      Finance Document, and shall, on the Issuer’s demand, fully indemnify the
      Issuer against any claims, expenses, liabilities and losses resulting from
      any failure or delay by the Obligors to pay such a
  tax.

            


    

     

    
      	14.5  	
              Certification of
      amounts. A
      notice which is signed by 2 officers of the Issuer, which states that a
      specified amount, or aggregate amount, is due to the Issuer under this
      Clause 14 and which indicates (without necessarily specifying a detailed
      breakdown) the matters in respect of which the amount, or aggregate
      amount, is due shall (save in the case of manifest error) be prima facie
      evidence that the amount, or aggregate amount, is
  due.

            


    

     

    
      	15  	
              INDEMNITIES

            


    

     

    
      	15.1  	
              Indemnities regarding issue of
      Guarantees.
      Without prejudice to the Obligors’ indemnity contained in Clause 5, the
      Obligors shall fully indemnify the Issuer on its demand in respect of all
      claims, expenses, liabilities and losses which are made or brought against
      or incurred by the Issuer, or which the Issuer reasonably and with due
      diligence estimates that it will incur, as a result of or in connection
      with:

            


    

     

    
      	(a)  	
              a
      Guarantee not being issued on the date specified in the relevant Guarantee
      Issue Request for any reason other than a default by the
      Issuer;

            


    

     

    
      	(b)  	
              any
      failure (for whatever reason) by the Obligors to make payment of any
      amount due under a Finance Document on the due date or, if so payable, on
      demand (after giving credit for any default interest paid by the Obligors
      on the amount concerned under Clause
6);

            


    

     

    
      	(c)  	
              the
      occurrence and/or continuance of an Event of Default or a Potential Event
      of Default; 

            


    

     

    
      	 	
              and
      in respect of any tax (other than tax on its overall net income) for which
      the Issuer is liable in connection with any amount paid or payable to the
      Issuer (whether for its own account or otherwise) under any Finance
      Document.

            


    

    


    
      	15.2  	
              Breakage
      costs.
      Without limiting its generality, Clause 15.1 covers any claim, expense,
      liability or loss, including a loss of a prospective profit, incurred by
      the Issuer in liquidating or employing deposits from third parties
      acquired or arranged to fund or maintain any overdue
    amount.

            


    

     

    
      	15.3  	
              Miscellaneous
      indemnities.
      The Obligors shall fully indemnify the Issuer on its demand in respect of
      all claims, expenses, liabilities and losses which may be made or brought
      against or incurred by the Issuer, in any country, as a result of or in
      connection with any action taken, or omitted or neglected to be taken,
      under or in connection with any Finance Document by the Issuer or by any
      receiver appointed under a Finance Document other than claims, expenses,
      liabilities and losses which are shown to have been directly and mainly
      caused by the dishonesty or wilful misconduct or reckless action with
      knowledge of the probable consequences of the officers or employees of the
      Issuer.

            


    

     

    
      	15.4  	
              Currency
      indemnity. If
      any sum due from the Obligors or any Security Party to the Issuer under a
      Finance Document or under any order or judgment relating to a Finance
      Document has to be converted from the currency in which the Finance
      Document provided for the sum to be paid (the “Contractual
      Currency”)
      into another currency (the “Payment
      Currency”)
      for the purpose of:

            


    

     

    
      	(a)  	
              making
      or lodging any claim or proof against the Obligors or any Security Party,
      whether in its liquidation, any arrangement involving it or otherwise;
      or

            


    

     

    
      	(b)  	
              obtaining
      an order or judgment from any court or other tribunal;
  or

            


    

     

    
      	(c)  	
              enforcing
      any such order or judgment;

            


    

     

    
      	 	
              the
      Obligors shall indemnify the Issuer against the loss arising when the
      amount of the payment actually received by the Issuer is converted at the
      available rate of exchange into the Contractual
  Currency.

            


    

    


    
      	 	
              In
      this Clause 15.4, the “available rate of
      exchange”
      means the rate at which the Issuer is able at the opening of business
      (London time) on the Business Day after it receives the sum concerned to
      purchase the Contractual Currency with the Payment
    Currency.

            


    

    


    
      	 	
              This
      Clause 15.4 creates a separate liability of the Obligors which is distinct
      from their other liabilities under the Finance Documents and which shall
      not be merged in any judgment or order relating to those other
      liabilities.

            


    

    


    
      	15.5  	
              Certification of
      amounts. A
      notice which is signed by 2 officers of the Issuer, which states that a
      specified amount, or aggregate amount, is due to the Issuer under this
      Clause 15 and which indicates (without necessarily specifying a detailed
      breakdown) the matters in respect of which the amount, or aggregate
      amount, is due shall (save in the case of manifest error) be prima facie
      evidence that the amount, or aggregate amount, is
  due.

            


    

     

    
      	16  	
              NO SET-OFF OR TAX
      DEDUCTION

            


    

     

    
      	16.1  	
              No
      deductions.
      All amounts
      due from an Obligor under a Finance Document shall be
  paid:

            


    

     

    
      	(a)  	
              without
      any form of set-off, cross-claim or condition; and
  

            


    

     

    
      	(b)  	
              free
      and clear of any tax deduction except a tax deduction which that Obligor
      is required by law to make.

            


    

     

    
      	16.2  	
              Grossing-up for
      taxes. If
      an Obligor is required by law to make a tax deduction from any
      payment:

            


    

     

    
      	(a)  	
              that
      Obligor shall notify the Issuer as soon as it becomes aware of the
      requirement;

            


    

     

    
      	(b)  	
              that
      Obligor shall pay the tax deducted to the appropriate taxation authority
      promptly, and in any event before any fine or penalty
    arises;

            


    

     

    
      	(c)  	
              the
      amount due in respect of the payment shall be increased by the amount
      necessary to ensure that the Issuer receives and retains (free from any
      liability relating to the tax deduction) a net amount which, after the tax
      deduction, is equal to the full amount which it would otherwise have
      received.

            


    

     

    No
Obligor shall be obliged to pay any additional amount pursuant to paragraph (c)
above in respect of any deduction which would not have been required if the
Issuer had completed a declaration, claim, exemption, or other form which it has
been requested by the Obligors or an applicable taxation authority to complete
and which it is able to complete.

     

    
      	16.3  	
              Evidence of payment of
      taxes.
      Within one month after making any tax deduction, the Obligor concerned
      shall deliver to the Issuer documentary evidence satisfactory to the
      Issuer that the tax had been paid to the appropriate taxation
      authority.

            


    

     

    
      	16.4  	
              Tax credits. If
      the Issuer receives for its own account a repayment or obtains relief or
      credit in respect of tax paid or otherwise payable by it in respect of or
      calculated by reference to the increased payment made by an Obligor under
      Clause 16.2, it shall pay to the relevant Obligor a sum equal to the
      proportion of the repayment, relief or credit which it allocates to the
      amount due from that Obligor in respect of which that Obligor made the
      increased payment:

            


    

     

    
      	(a)  	
              the
      Issuer shall not be obliged to allocate to this transaction any part of a
      tax repayment, relief or credit which is referable to a class or number of
      transactions;

            


    

     

    
      	(b)  	
              nothing
      in this Clause 16.4 shall oblige the Issuer to arrange its tax affairs in
      any particular manner, to claim any type of relief, credit, allowance or
      deduction instead of, or in priority to, another or to make any such claim
      within any particular time;

            


    

     

    
      	(c)  	
              nothing
      in this Clause 16.4 shall oblige the Issuer to make a payment which would
      leave it in a worse position than it would have been in if the relevant
      Obligor had not been required to make a tax deduction from a payment;
      and

            


    

     

    
      	(d)  	
              any
      allocation or determination made by the Issuer under or in connection with
      this Clause 16.4 shall (save in the case of manifest error) be conclusive
      and binding on the Obligors.

            


    

     

    
      	16.5  	
              Exclusion of tax on overall net
      income. In
      this Clause 16 “tax
      deduction”
      means any deduction or withholding for or on account of any present or
      future tax except tax on the Issuer’s overall net
  income.

            


    

     

    
      	17  	
              ILLEGALITY,
      ETC

            


    

     

    
      	17.1  	
              Illegality.
      This Clause 17 applies if the Issuer notifies the Obligors that it has
      become, or will with effect from a specified
      date, become:

            


    

     

    
      	(a)  	
              unlawful
      or prohibited as a result of the introduction of a new law, an amendment
      to an existing law or a change in the manner in which an existing law is
      or will be interpreted or applied; or


            


    

     

    
      	(b)  	
              contrary
      to, or inconsistent with, any
regulation,

            


    

     

    
      	 	
              for
      the Issuer to maintain or give effect to any of its obligations under this
      Agreement or any Guarantee in the manner contemplated by this
      Agreement.

            


    

    


    
      	17.2  	
              Notification and effect of
      illegality. On
      the Issuer notifying the Obligors under Clause
  17.1:

            


    

     

    
      	(a)  	
              the
      Commitment shall be cancelled;

            


    

     

    
      	(b)  	
              the
      Obligors shall use their best endeavours to procure the prompt
      cancellation of the Outstandings and the return of each Guarantee to the
      Issuer endorsed by the Seller to the effect that it is cancelled;
      and

            


    

     

    
      	(c)  	
              by
      no later than the date specified in the Issuer’s notice under Clause 17.1
      as the date on which the notified event would become effective, the
      Obligors shall pay to the Issuer the amount due under Clause
      5.6.

            


    

     

    
      	17.3  	
              Mitigation.
      If circumstances arise which would result in a notification under Clause
      17.1 then, without in any way limiting the rights of the Issuer under
      Clause 17.2, the Issuer shall notify the Obligor and shall use reasonable
      endeavours to transfer its obligations and liabilities under this
      Agreement and the Guarantees and its rights under this Agreement and the
      Finance Documents to another office or financial institution not affected
      by the circumstances but the Issuer shall not be under any obligation to
      take any such action if, in its opinion, to do so would or
      might:

            


    

     

    
      	(a)  	
              have
      an adverse effect on its business, operations or financial condition;
      or

            


    

     

    
      	(b)  	
              involve
      it in any activity which is unlawful or prohibited or any activity that is
      contrary to, or inconsistent with, any official requirement; or
      

            


    

     

    
      	(c)  	
              involve
      it in any expense (unless indemnified to its satisfaction) or tax
      disadvantage.

            


    

     

    
      	18  	
              INCREASED
      COSTS

            


    

     

    
      	18.1  	
              Increased
      costs.
      This Clause 18
      applies if the Issuer notifies the Obligors that it considers that as a
      result of:

            


    

     

    
      	(a)  	
              the
      introduction or alteration after the date of this Agreement of a law or an
      alteration after the date of this Agreement in the manner in which a law
      is interpreted or applied (disregarding any effect which relates to the
      application to payments under this Agreement of a tax on the Issuer’s
      overall net income); or

            


    

     

    
      	(b)  	
              complying
      with any regulation (including any which relates to capital adequacy or
      liquidity controls or which affects the manner in which the Issuer
      allocates capital resources to its obligations under this Agreement) which
      is introduced, or altered, or the interpretation or application of which
      is altered, after the date of this
Agreement,

            


    

     

    
      	 	
              the
      Issuer (or a parent company of it) has incurred or will incur an
      “increased
      cost”.

            


    

    


    
      	18.2  	
              Meaning of “increased
      costs”. In
      this Clause 18, “increased
      costs”
      means:

            


    

     

    
      	(a)  	
              an
      additional or increased cost incurred as a result of, or in connection
      with, the Issuer having entered into, or being a party to, this Agreement
      or having taken an assignment of rights under this Agreement, of funding
      or maintaining the Outstandings or other unpaid sums or performing its
      obligations under this Agreement, or of having outstanding all or any part
      of the Outstandings or other unpaid sums;
or

            


    

     

    
      	(b)  	
              a
      reduction in the amount of any payment to the Issuer under this Agreement
      or in the effective return which such a payment represents to the Issuer
      or on its capital;

            


    

     

    
      	(c)  	
              an
      additional or increased cost of funding all or maintaining all or any part
      of the Outstandings or other unpaid sums or (as the case may require) the
      proportion of that cost attributable to the Outstandings or other unpaid
      sums; or

            


    

     

    
      	(d)  	
              a
      liability to make a payment, or a return foregone, which is calculated by
      reference to any amounts received or receivable by the Issuer under this
      Agreement;

            


    

     

    but not
an item attributable to a change in the rate of tax on the overall net income of
the Issuer (or a parent company of it) or an item covered by the indemnity for
tax in Clause 15.1 or by Clause 16 or an item arising directly out of the
implementation by the applicable authorities having jurisdiction over the Issuer
of the matters set out in the statement of the Basle Committee on Banking
Regulations and Supervisory Practices dated July, 1988 and entitled
“International Convergence of Capital Measurement and Capital Standards”, to the
extent and according to the timetable provided for in the
statement.

    


    
      	 	
              For
      the purposes of this Clause 18.2 the Issuer may in good faith allocate or
      spread costs and/or losses among its assets and liabilities (or any class
      of its assets and liabilities) on such basis as it considers
      appropriate.

            


    

    


    
      	18.3  	
              Payment of increased
      costs.
      The Obligors shall pay to the Issuer, on its demand, the amounts which the
      Issuer from time to time notifies the Obligors that it has specified to be
      necessary to compensate it for the increased cost (provided that such
      demand is accompanied by a certificate from the Issuer confirming the
      amount of its increased cost and including a calculation
      thereof).

            


    

     

    
      	18.4  	
              Notice of
      cancellation. If
      the Obligors are not willing to continue to compensate the Issuer for the
      increased cost under Clause 18.3, the Obligors may give the Issuer not
      less than 14 days’ notice of its intention to cancel the Commitment and
      procure the cancellation of the
Outstandings.

            


    

     

    
      	18.5  	
              Cancellation. A
      notice under Clause 18.4 shall be irrevocable; and on the date specified
      in its notice of intended cancellation:
      

            


    

     

    
      	(a)  	
              the
      Commitment shall be cancelled; 

            


    

     

    
      	(b)  	
              the
      Obligors shall procure the cancellation of the Outstandings and the return
      of each Guarantee to the Issuer endorsed by the Seller to the effect that
      it is cancelled; and

            


    

     

    
      	(c)  	
              the
      Obligors shall pay to the Issuer the amount due under Clause
      5.6.

            


    

     

    
      	18.6  	
              Mitigation.
      If circumstances arise which would result in a notification under Clause
      18.1 then, without in any way limiting the rights of the Issuer under
      Clause 18.3, the Issuer shall notify the Obligor and shall use reasonable
      endeavours to transfer its obligations and liabilities under this
      Agreement and the Guarantees and its rights under this Agreement and the
      Finance Documents to another office or financial institution not affected
      by the circumstances but the Issuer shall not be under any obligation to
      take any such action if, in its opinion, to do so would or
      might:

            


    

     

    
      	(a)  	
              have
      an adverse effect on its business, operations or financial condition;
      or

            


    

     

    
      	(b)  	
              involve
      it in any activity which is unlawful or prohibited or any activity that is
      contrary to, or inconsistent with, any official requirement; or
      

            


    

     

    
      	(c)  	
              involve
      it in any expense (unless indemnified to its satisfaction) or tax
      disadvantage.

            


    

     

    
      	19  	
              SET-OFF

            


    

     

    
      	19.1  	
              Application of credit
      balances.
      The Issuer
      may without prior notice following the occurrence of an Event of Default
      which is continuing:

            


    

     

    
      	(a)  	
              apply
      any balance (whether or not then due) which at any time stands to the
      credit of any account in the name of any Obligors at any office in any
      country of the Issuer in or towards satisfaction of any sum then due from
      the Obligors to the Issuer under any of the Finance Documents;
      and

            


    

     

    
      	(b)  	
              for
      that purpose:

            


    

     

    
      	(i)  	
              break,
      or alter the maturity of, all or any part of a deposit of any
      Obligor;

            


    

     

    
      	(ii)  	
              convert
      or translate all or any part of a deposit or other credit balance into
      Dollars; 

            


    

     

    
      	(iii)  	
              enter
      into any other transaction or make any entry with regard to the credit
      balance which the Issuer considers appropriate.


            


    

     

    
      	19.2  	
              Existing rights
      unaffected.
      The Issuer shall not be obliged to exercise any of its rights under Clause
      19.1; and those rights shall be without prejudice and in addition to any
      right of set-off, combination of accounts, charge, lien or other right or
      remedy to which the Issuer is entitled (whether under the general law or
      any document).

            


    

     

    
      	19.3  	
              No Security
      Interest.
      This Clause 19 gives the Issuer a contractual right of set-off only, and
      does not create any equitable charge or other Security Interest over any
      credit balance of the Obligors.

            


    

     

    
      	20  	
              TRANSFERS AND CHANGES IN
      ISSUING OFFICE

            


    

     

    
      	20.1  	
              Transfer by
      Obligor. No
      Obligor
      may, without the consent of the Issuer transfer any of its rights,
      liabilities or obligations under any Finance
  Document.

            


    

     

    
      	20.2  	
              Transfer by
      Issuer.
      The Issuer may transfer all or any of the rights and interests which it
      has under or by virtue of the Finance Documents with the prior written
      consent of the Obligors, (not to be unreasonably withheld or delayed) or
      without the consent of the Obligors if an Event of Default or a Potential
      Event of Default has occurred and is
continuing.

            


    

     

    
      	20.3  	
              Rights of
      transferee. In
      respect of any breach of a warranty, undertaking, condition or other
      provision of a Finance Document, or any misrepresentation made in or in
      connection with a Finance Document, a transferee of any of the Issuer’s
      rights or interests under or by virtue of the Finance Documents shall be
      entitled to recover damages by reference to the loss incurred by that
      transferee as a result of the breach or misrepresentation irrespective of
      whether the Issuer would have incurred a loss of that kind or
      amount.

            


    

     

    
      	20.4  	
              Sub-participation; subrogation
      assignment.
      The Issuer may sub-participate all or any part of its rights and/or
      obligations under or in connection with the Finance Documents without the
      consent of, or any notice to, the Obligors; and the Issuer may assign, in
      any manner and terms agreed by it, all or any part of those rights to an
      insurer or surety who has become subrogated to
  them.

            


    

     

    
      	20.5  	
              Disclosure of
      information.
      The Issuer may disclose to a potential assignee or sub-participant any
      information which the Issuer has received in relation to the Obligors, any
      Security Party or their affairs under or in connection with any Finance
      Document.

            


    

     

    
      	20.6  	
              Change of issuing
      office.
      The Issuer may change its issuing office by giving notice to the Obligors
      and the change shall become
      effective on the later of:

            


    

     

    
      	(a)  	
              the
      date on which the Obligors receive the notice;
  and

            


    

     

    
      	(b)  	
              the
      date, if any, specified in the notice as the date on which the change will
      come into effect.

            


    

     

    
      	20.7  	
              No additional
      costs. If
      the Issuer transfers or sub-participates any part of its rights and/or
      obligations under the Finance Documents or changes its issuing office
      pursuant to this Clause 20 and as a result of circumstances existing at
      the date the transfer, sub-participation or change occurs, the Obligors
      would be obliged to make an increased payment to the Issuer under any
      applicable Clauses of this Agreement then the Issuer is only entitled to
      recover payment under those Clauses to the same extent as the Issuer would
      have been if the transfer, sub-participation or change of issuing office
      had not occurred.

            


    

     

    
      	21  	
              VARIATIONS AND
      WAIVERS

            


    

     

    
      	21.1  	
              Variations, waivers etc. by
      Issuer. A
      document shall be effective to vary, waive, suspend or limit any provision
      of a Finance Document, or the Issuer’s rights or remedies under such a
      provision or the general law, only if the document is signed, or
      specifically agreed to by fax, by the Obligors and the Issuer and, if the
      document relates to a Finance Document to which a Security Party is party,
      by that Security Party.

            


    

     

    
      	21.2  	
              Exclusion of other or implied
      variations.
      Except for a document which satisfies the requirements of Clauses 21.1, no
      document, and no act, course of conduct, failure or neglect to act, delay
      or acquiescence on the part of the Issuer (or any person acting on its
      behalf) shall result in the Issuer (or any person acting on its behalf)
      being taken to have varied, waived, suspended or limited, or being
      precluded (permanently or temporarily) from enforcing, relying on or
      exercising:

            


    

     

    
      	(a)  	
              a
      provision of this Agreement or another Finance Document;
  or

            


    

     

    
      	(b)  	
              an
      Event of Default; or 

            


    

     

    
      	(c)  	
              a
      breach by any Obligor or a Security Party of an obligation under a Finance
      Document or the general law; or

            


    

     

    
      	(d)  	
              any
      right or remedy conferred by any Finance Document or by the general
      law;

            


    

     

    
      	 	
              and
      there shall not be implied into any Finance Document any term or condition
      requiring any such provision to be enforced, or such right or remedy to be
      exercised, within a certain or reasonable
time.

            


    

    


    
      	22  	
              NOTICES

            


    

     

    
      	22.1  	
              General.
      Unless otherwise specifically provided, any notice under or in connection
      with any Finance Document shall be given by letter or fax and references
      in the Finance Documents to written notices, notices in writing and
      notices signed by particular persons shall be construed
      accordingly.

            


    

     

    
      	22.2  	
              Addresses for
      communications. A
      notice
      shall be sent:

            


    

     

    
      	(a)  	
              to
      the Obligors:Suite
      306

            


    

    Commerce
Building 

    One
Chancery Lane

    Hamilton
HM12

    Bermuda

    


    Mailing
Address:

    P.O. Box
HM 2522

    Hamilton
HMGX

    Bermuda

    


    Attention:
   William
J. Carr

    Fax:   +1-441-295-4957

     

    With a copy
to:

    TBS
Shipping Services Inc.

    612 East
Grassy Sprain Road

    Yonkers,
NY 10710 U.S.A.

    Attention:
Ferdinand V. Lepere

    


    Fax :
   +1-914-961-5121

    


    


    
      	(b)  	
              to
      the Issuer:The
      Royal Bank of Scotland plc

            


    

    Shipping
Business Centre

    5-10
Great Tower Street

    London
EC3R 3HX

    


    Fax No:
 +44 207
283 7538

    


    Attention:
Ship Finance Portfolio Management

    


    or to
such other address as the relevant party may notify the other.

    


    
      	22.3  	
              Effective date of
      notices.
      Subject to Clauses
      22.4 and 22.5:

            


    

     

    
      	(a)  	
              a
      notice which is delivered personally or posted shall be deemed to be
      served, and shall take effect, at the time when it is
      delivered;

            


    

     

    
      	(b)  	
              a
      notice which is sent by fax shall be deemed to be served, and shall take
      effect, 2 hours after its transmission is completed.
  

            


    

     

    
      	22.4  	
              Service outside business
      hours. However,
      if under Clause 22.3 a notice would be deemed to be
  served:

            


    

     

    
      	(a)  	
              on
      a day which is not a business day in the place of receipt;
    or

            


    

     

    
      	(b)  	
              on
      such a business day, but after 5 p.m. local
  time;

            


    

     

    
      	 	
              the
      notice shall (subject to Clause 22.5) be deemed to be served, and shall
      take effect, at 9 a.m. on the next day which is such a business
      day.

            


    

    


    
      	22.5  	
              Illegible
      notices.
      Clauses 22.3 and 22.4 do not apply if the recipient of a notice notifies
      the sender within 1 hour after the time at which the notice would
      otherwise be deemed to be served that the notice has been received in a
      form which is illegible in a material
respect.

            


    

     

    
      	22.6  	
              Valid
      notices. A
      notice under or in connection with a Finance Document shall not be invalid
      by reason that its contents or the manner of serving it do not comply with
      the requirements of this Agreement or, where appropriate, any other
      Finance Document under which it is served
if:

            


    

     

    
      	(a)  	
              the
      failure to serve it in accordance with the requirements of this Agreement
      or other Finance Document, as the case may be, has not caused any party to
      suffer any significant loss or prejudice;
or

            


    

     

    
      	(b)  	
              in
      the case of incorrect and/or incomplete contents, it should have been
      reasonably clear to the party on which the notice was served what the
      correct or missing particulars should have
been.

            


    

     

    
      	22.7  	
              English
      language.
      Any notice under or in connection with a Finance Document shall be in
      English.

            


    

     

    
      	22.8  	
              Meaning of
      “notice”. In
      this Clause 22 “notice”
      includes any demand, consent, authorisation, approval, instruction, waiver
      or other communication. 

            


    

     

    
      	23  	
              JOINT AND SEVERAL
      LIABILITY

            


    

     

    
      	23.1  	
              General.
      All liabilities and obligations of the Obligors under this Agreement
      shall, whether expressed to be so or not, be several and, if and to the
      extent consistent with Clause 23.2,
joint.

            


    

     

    
      	23.2  	
              No impairment of Obligor's
      obligations.
      The liabilities and obligations of an Obligor shall not be impaired
      by:

            


    

     

    
      	(a)  	
              this
      Agreement being or later becoming void, unenforceable or illegal as
      regards any other Obligor;

            


    

     

    
      	(b)  	
              the
      Issuer entering into any rescheduling, refinancing or other arrangement of
      any kind with any other Obligor;

            


    

     

    
      	(c)  	
              the
      Issuer releasing any other Obligor or any Security Interest created by a
      Finance Document; or

            


    

     

    
      	(d)  	
              any
      combination of the foregoing.

            


    

     

    
      	23.3  	
              Principal
      debtors.
      Each Obligor declares that it is and will, throughout the Security Period,
      remain a principal debtor for all amounts owing under this Agreement and
      the Finance Documents and no Obligor shall in any circumstances be
      construed to be a surety for the obligations of any other Obligor under
      this Agreement.

            


    

     

    
      	23.4  	
              Subordination.
      Subject to Clause 23.5, during the Security Period, no Obligor
      shall:

            


    

     

    
      	(a)  	
              claim
      any amount which may be due to it from any other Obligor whether in
      respect of a payment made, or matter arising out of, this Agreement or any
      Finance Document, or any matter unconnected with this Agreement or any
      Finance Document; or

            


    

     

    
      	(b)  	
              take
      or enforce any form of security from any other Obligor for such an amount,
      or in any other way seek to have recourse in respect of such an amount
      against any asset of any other Obligor;
or

            


    

     

    
      	(c)  	
              set
      off such an amount against any sum due from it to any other Obligor;
      or

            


    

     

    
      	(d)  	
              prove
      or claim for such an amount in any liquidation, administration,
      arrangement or similar procedure involving any other Obligor or other
      Security Party; or

            


    

     

    
      	(e)  	
              exercise
      or assert any combination of the
foregoing.

            


    

     

    
      	23.5  	
              Obligor's required
      action. If
      during the Security Period, the Issuer, by notice to a Obligor, requires
      it to take any action referred to in paragraphs (a) to (d) of Clause 23.4,
      in relation to any other Obligor, that Obligor shall take that action as
      soon as practicable after receiving the Issuer’s
  notice.

            


    

     

    
      	24  	
              SUPPLEMENTAL

            


    

     

    
      	24.1  	
              Rights cumulative,
      non-exclusive.
      The rights and remedies which the Finance Documents give to the Issuer
      are:

            


    

     

    
      	(a)  	
              cumulative;

            


    

     

    
      	(b)  	
              may
      be exercised as often as appears expedient;
and

            


    

     

    
      	(c)  	
              shall
      not, unless a Finance Document explicitly and specifically states so, be
      taken to exclude or limit any right or remedy conferred by any
      law.

            


    

     

    
      	24.2  	
              Severability of
      provisions. If
      any provision of a Finance Document is or subsequently becomes void,
      unenforceable or illegal, that shall not affect the validity,
      enforceability or legality of the other provisions of that Finance
      Document or of the provisions of any other Finance
    Document.

            


    

     

    
      	24.3  	
              Counterparts. A
      Finance Document may be executed in any number of
      counterparts.

            


    

     

    
      	24.4  	
              Third party
      rights. A
      person who is not a party to this Agreement has no right under the
      Contracts (of Third Parties) Act 1999 to enforce or to enjoy the benefit
      of any term of this Agreement.

            


    

     

    
      	25  	
              LAW AND
      JURISDICTION

            


    

     

    
      	25.1  	
              English law.
      This Agreement shall be governed by, and construed in accordance with,
      English law.

            


    

     

    
      	25.2  	
              Exclusive English
      jurisdiction.
      Subject to Clause 25.3, the courts of England shall have exclusive
      jurisdiction to settle any disputes which may arise out of or in
      connection with this Agreement.

            


    

     

    
      	25.3  	
              Choice of forum for the
      exclusive benefit of the Issuer.
      Clause 25.2 is for the exclusive benefit of the Issuer, which reserves
      the rights:

            


    

     

    
      	(a)  	
              to
      commence proceedings in relation to any matter which arises out of or in
      connection with this Agreement in the courts of any country other than
      England and which have or claim jurisdiction to that matter;
      and

            


    

     

    
      	(b)  	
              to
      commence such proceedings in the courts of any such country or countries
      concurrently with or in addition to proceedings in England or without
      commencing proceedings in England.

            


    

     

    No
Obligor shall commence any proceedings in any country other than England in
relation to a matter which arises out of or in connection with this
Agreement.

    


    
      	25.4  	
              Process
      agent.
      Each Obligor irrevocably appoints Curtis Davis Garrard LLP at its
      registered office for the time being, presently at Waterview House,
      Roundwood Avenue, Stockley Park, Uxbridge UB11 1AU, to act as its agent to
      receive and accept on its behalf any process or other document relating to
      any proceedings in the English courts which are connected with this
      Agreement.

            


    

     

    
      	25.5  	
              Issuer’s rights
      unaffected.
      Nothing in this Clause 25 shall exclude or limit any right which the
      Issuer may have (whether under the law of any country, an international
      convention or otherwise) with regard to the bringing of proceedings, the
      service of process, the recognition or enforcement of a judgment or any
      similar or related matter in any
jurisdiction.

            


    

     

    
      	25.6  	
              Meaning of
      “proceedings”. In
      this Clause 25, “proceedings”
      means proceedings of any kind, including an application for a provisional
      or protective measure.

            


    

     

    THIS AGREEMENT has been
entered into on the date stated at the beginning of this
Agreement.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE 1

     

    


     

    GUARANTEE ISSUE
REQUEST

     

    


    


    To: The Royal
Bank of Scotland plc

    5-10
Great Tower Street

    London
EC3R 3HX

    


    Attention:
[l]

    


    


    [l]
2007

    


    


    GUARANTEE ISSUE
REQUEST

    


    
      	1  	
              We
      refer to the facility agreement (the “Facility
      Agreement”)
      dated [l]
      and made between Argyle Maritime Corp., Caton Maritime Corp., Dorchester
      Maritime Corp., Longwoods Maritime Corp., McHenry Maritime Corp. and
      Sunswyck Maritime Corp., as Obligors, and yourselves, as Issuer, in
      connection with a guarantee facility of up to US$84,000,000. Terms defined
      in the Facility Agreement have their defined meanings when used in this
      Guarantee Issue Request.

            


    

     

    2  We
request the issue of a Guarantee in the form attached as follows:

     

    
      	(a)  	
              Amount
      of the Guarantee: [l];

            


    

     

    
      	(b)  	
              Guarantee
      Issue Date: [l];

            


    

     

    
      	(c)  	
              Expiry
      date of the Guarantee: [l];

            


    

     

    
      	(d)  	
              Delivery
      Instructions: [l].

            


    

     

    3  We
represent and warrant that:

     

    
      	(a)  	
              the
      representations and warranties in Clause 8 of the Facility Agreement would
      remain true and not misleading if repeated on the date of this notice with
      reference to the circumstances now
existing;

            


    

     

    
      	(b)  	
              no
      Event of Default or Potential Event of Default has occurred and is
      continuing or will result from the issue of the
  Guarantee.

            


    

     

    4  This
notice cannot be revoked without the prior consent of the Issuer.

     

    


    [Name of
Signatory]

    


    For and
on behalf of

    [relevant
Obligor]

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE 2

     

    


     

    CONDITION PRECEDENT
DOCUMENTS

     

    PART A

    


    


    


    The
following are the documents referred to in Clause 7.1(a) required before service
of the first Guarantee Issue Request

    


    
      	1  	
              A
      duly executed original of each Finance Document (and of each document
      required to be delivered by each Finance Document) other than those
      referred to in Part B

            


    

     

    
      	2  	
              Copies
      of the certificate of incorporation and constitutional documents and
      evidence of the goodstanding (or its equivalent) of each Obligor and each
      Security Party.

            


    

     

    
      	3  	
              Copies
      of resolutions of the directors of each Obligor and each Security Party
      and copies of the resolutions of the shareholders of each Obligor, in each
      case authorising the execution of each of the Finance Documents to which
      that Obligor or that Security Party is a party and, in the case of each
      Obligor, authorising named officers to make Guarantee Issue Requests and
      ratifying execution of the Shipbuilding
  Contracts.

            


    

     

    
      	4  	
              The
      original of any power of attorney under which any Finance Document is
      executed on behalf of the Obligor or a Security
  Party.

            


    

     

    
      	5  	
              Copies
      of all consents which any Obligor or any Security Party requires to enter
      into, or make any payment under, any Finance Document or the Shipbuilding
      Contracts.

            


    

     

    
      	6  	
              Copies
      of the Shipbuilding Contracts of the Overall
  Agreement.

            


    

     

    
      	7  	
              Such
      documentary evidence as the Issuer and its legal advisers may require in
      relation to the due authorisation and execution by the Seller of the
      Shipbuilding Contracts of the Overall
Agreement.

            


    

     

    
      	8  	
              Documentary
      evidence that the agent for service of process named in Clause 28 has
      accepted its appointment.

            


    

     

    
      	9  	
              Favourable
      legal opinions from lawyers appointed by the Issuer on such matters
      concerning the laws of Bermuda and Marshall
  Islands.

            


    

     

    
      	10  	
              A
      written statement from a person acceptable to the Issuer confirming the
      identity of the ultimate beneficial owner or owners of the shares in the
      Obligors, the Corporate Guarantor and each other Security Party and of the
      identity of the person or persons controlling the voting rights attached
      to those shares.

            


    

     

    
      	11  	
              Such
      documents and evidence as the Issuer shall require in relation to each
      Security Party based on applicable law and regulations, and the Issuer’s
      owner internal guidelines, relating to the Issuer’s knowledge of its
      customers.

            


    

     

    
      	12  	
              Such
      documentary evidence as the Issuer and its legal advisers may require in
      relation to the due authorisation and execution by the parties to the
      Intercreditor Agreement (other than the
Issuer).

            


    

     

    
      	13  	
              If
      the Issuer so requires, in respect of any of the documents referred to
      above, a certified English translation prepared by a translator approved
      by the Issuer.

            


    

     

    
      	 	
              Each
      of the documents specified in paragraphs 2, 3, 5, 6 and every other copy
      document delivered under this Schedule shall be certified as a true and up
      to date copy by a director, representative director or the secretary (or
      equivalent officer) of the relevant
Obligor.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    PART B

    


    


    


    The
following are the documents referred to in Clause 7.1(b) required before the
issue of a Guarantee:

    


    
      	1  	
              the
      Pre-delivery Security Assignment in respect of the Shipbuilding Contract
      relating to such Ship (and of each document to be delivered thereunder);
      and

            


    

     

    
      	2  	
              favourable
      legal opinions from lawyers appointed by the Issuer on such matters
      concerning the laws of the Marshall Islands and
  China.

            


    

     

    
      	3  	
              a
      copy of the relevant Refund Guarantee together with such documentary
      evidence as the Agent, and its legal advisers may require in relation to
      the due authorisation and execution by the Refund Guarantor of that Refund
      Guarantee and that such Refund Guarantee has been registered with the
      State Administration of Foreign Exchange in
  China;

            


    

     

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE 3

     

    


     

    FINANCIAL
COVENANTS

     

    


    


    Pursuant
to Clause 9.16 the Obligors undertake to comply at all times with the following
financial covenants: 

    


    
      	(a)  	
              Minimum
      Consolidated Tangible Net Worth. Permit Consolidated Tangible Net Worth at
      any time to be less than the sum of (i) $170,000,000, plus (ii) an amount
      equal to 75% of the Consolidated Net Income earned in each full fiscal
      quarter ending after 30 June 2006 (with no deduction for a net loss in any
      such fiscal quarter) and (iii) an amount equal to 100% of the aggregate
      increases in Shareholders’ Equity of Holdings and its Subsidiaries after
      the date hereof by reason of the issuance and sale of Equity Interests of
      Holdings or any Subsidiary (other than issuances to Holdings or a
      wholly-owned Subsidiary), including upon any conversion of debt securities
      of Holdings into such Equity
Interests.

            


    

     

    
      	(b)  	
              Minimum
      Cash Liquidity. For each calendar month ending on or after the date
      hereof, Qualified Cash, plus Availability in an average daily amount
      during such calendar month not less than
  $10,000,000.

            


    

     

    
      	(c)  	
              Maximum
      Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio at any
      time during any period of four fiscal quarters of Holdings and its
      Subsidiaries to be greater than
2.50:1.00.

            


    

     

    
      	(d)  	
              Minimum
      Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed
      Charge Coverage Ratio as of the end of any fiscal quarter of Holdings to
      be less than the ratio set forth below opposite such fiscal
      quarter:

            


    

     

    
      	
               

              Trading 4 Financial
      Quarters

               

            	
               

              Minimum Consolidated
      

               

               

              Fixed Charge Coverage
      Ratio

               

            
	
               

              Closing
      Date through

               

               

              30
      September 2007

               

            	
               

              1.4
      : 1.0

               

            
	
               

              31
      December 2007 and 

               

               

              each
      fixed quarter thereafter

               

            	
               

              1.5
      : 1.0

               

            


    

    


    For the
purposes of this Schedule 3 the following terms shall have the following
meanings.

    


    “Cash Equivalents” means
any of the following types of Investments, to the extent owned by the Obligors
or any of their Subsidiaries free and clear of all Security Interests (other
than Permitted Security Interests):

     

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

            


    

     

    
      	(b)  	
              time
      deposits with, or insured certificates of deposit or bankers’ acceptances
      of, any commercial bank that (i) (A) is a Lender or (B) is organized under
      the laws of the United States of America, any state thereof or the
      District of Columbia or is the principal banking subsidiary of a bank
      holding company organized under the laws of the United States of America,
      any state thereof or the District of Columbia, and is a member of the
      Federal Reserve System, (ii) issues (or the parent of which issues)
      commercial paper rated as described in Clause (c) of this definition and
      (iii) has combined capital and surplus of at least $1,000,000,000, in each
      case with maturities of not more than 90 days from the date of acquisition
      thereof;

            


    

     

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

            


    

     

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

            


    

     

    “Consolidated
EBITDA” means,
at any date of determination, an amount equal to Consolidated Net Income of
Holdings and its Subsidiaries on a consolidated basis for the most recently
completed Measurement Period, plus

     

    
      	(a)  	
              the
      following to the extent deducted in calculating such Consolidated Net
      Income (and without duplication): (i) Consolidated Interest Charges, (ii)
      the provision for Federal, state, local and foreign income taxes payable,
      (iii) depreciation and amortisation expense and (iv) prepayment of fees
      and write-offs of deferred financing fees in connection with the
      refinancing of the Existing Credit Agreements, (v) consulting fees in
      respect of the business re-engineering incurred in the second and third
      fiscal quarters of the 2006 fiscal year in an aggregate amount not to
      exceed $2,500,000 and (vi) net losses from the sales of Vessels as
      permitted under this Agreement (in each case of or by Holdings and its
      Subsidiaries for such Measurement Period) and
  minus

            


    

     

    
      	(b)  	
              the
      following to the extent included in calculating such Consolidated Net
      Income, all net gains from the sales of Vessels as permitted under this
      Agreement (in each case of or by Holdings and its Subsidiaries for such
      Measurement Period);

            


    

     

    “Consolidated Fixed Charge Coverage
Ratio” means,
at any date of determination, the ratio of:

     

    
      	(a)  	
              the
      result of (i) Consolidated EBITDA, less (ii) the sum of (x) Federal,
      state, local and foreign income taxes paid in cash and (y) Restricted
      Payments made, in each case, for the most recently completed Measurement
      Period, to

            


    

     

    
      	(b)  	
              the
      sum of (i) Consolidated Interest Charges for the most recently completed
      Measurement Period, (ii) the aggregate principal amount of all regularly
      scheduled principal payments or redemptions or similar acquisitions for
      value of outstanding debt for borrowed money for the period of twelve (12)
      consecutive months following such date of determination, but excluding any
      principal payments scheduled to be made in respect of the Revolving Credit
      Facility;

            


    

     

    “Consolidated Funded
Indebtedness” means,
as of any date of determination, for Holdings and its Subsidiaries on a
consolidated basis, the sum of:

     

    
      	(a)  	
              the
      outstanding principal amount of all obligations, whether current or
      long-term, for borrowed money (including Obligations hereunder) and all
      obligations evidenced by bonds, debentures, notes, loan agreements or
      other similar instruments,

            


    

     

    
      	(b)  	
              all
      purchase money Indebtedness,

            


    

     

    
      	(c)  	
              all
      direct obligations arising under letters of credit (including standby and
      commercial), bankers’ acceptances, bank guaranties, surety bonds and
      similar instruments,

            


    

     

    
      	(d)  	
              all
      obligations in respect of the deferred purchase price of property or
      services (other than trade accounts payable in the ordinary course of
      business),

            


    

     

    
      	(e)  	
              all
      Attributable Indebtedness,

            


    

     

    
      	(f)  	
              without
      duplication, all Guarantees with respect to outstanding Indebtedness of
      the types specified in Clauses (a) through (e) above of Persons other than
      the Obligors or any Subsidiary, and

            


    

     

    
      	(g)  	
              all
      Indebtedness of the types referred to in Clauses (a) through (f) above of
      any partnership or joint venture (other than a joint venture that is
      itself a corporation or limited liability company) in which a Obligor or a
      Subsidiary is a general partner or joint venturer, unless such
      Indebtedness is expressly made non-recourse to such Obligor or such
      Subsidiary; provided, however, for purposes of calculating the
      “Consolidated Leverage Ratio”, Consolidated Funded Indebtedness shall not
      include any portion of Permitted New Vessel Construction Indebtedness in
      an aggregate amount up to $75,000,000 at any time outstanding and used to
      finance a multi-purpose tweendeck or bulk carrier shipping vessel so long
      as such vessel remains in the construction phase (i.e., such vessel has
      not been delivered to Holdings or its Subsidiaries ready for fleet service
      and operation).

            


    

     

    “Consolidated Interest
Charges” means,
for any Measurement Period, the sum of:

     

    
      	(a)  	
              all
      interest, premium payments, debt discount, fees, charges and related
      expenses in connection with borrowed money (including capitalized interest
      but excluding capitalized interest on Permitted New Vessel Construction
      Indebtedness) or in connection with the deferred purchase price of assets,
      in each case to the extent treated as interest in accordance with
      GAAP,

            


    

     

    
      	(b)  	
              all
      interest paid or payable with respect to discontinued operations
      and,

            


    

     

    
      	(c)  	
              the
      portion of rent expense under Capitalized Leases that is treated as
      interest in accordance with GAAP, in each case, of or by Holdings and its
      Subsidiaries on a consolidated basis for the most recently completed
      Measurement Period.

            


    

     

    “Consolidated Leverage
Ratio” means,
as of any date of determination, the ratio of:

     

    
      	(a)  	
              Consolidated
      Funded Indebtedness as of such date
to,

            


    

     

    
      	(b)  	
              Consolidated
      EBITDA of Holdings and its Subsidiaries on a consolidated basis for the
      most recently completed Measurement
Period.

            


    

     

    “Consolidated Net
Income” means,
at any date of determination, the net income (or loss) of Holdings and its
Subsidiaries on a consolidated basis for the most recently completed Measurement
Period; provided that Consolidated Net Income shall exclude:

     

    
      	(a)  	
              extraordinary
      gains and extraordinary losses for such Measurement
  Period,

            


    

     

    
      	(b)  	
              the
      net income of any Subsidiary during such Measurement Period to the extent
      that the declaration or payment of dividends or similar distributions by
      such Subsidiary of such income is not permitted by operation of the terms
      of its Organisation Documents or any agreement, instrument or Law
      applicable to such Subsidiary during such Measurement Period, except that
      Holdings’ equity in any net loss of any such Subsidiary for
      such-Measurement
      Period shall be included in determining Consolidated Net Income,
      and

            


    

     

    
      	(c)  	
              any
      income (or loss) for such Period of any Person if such Person is not a
      Subsidiary, except that Holdings’ equity in the net income of any such
      Person for such Measurement Period shall be included in Consolidated Net
      Income up to the aggregate amount of cash actually distributed by such
      Person during such Period to Holdings or a Subsidiary as a dividend or
      other distribution (and in the case of a dividend or other distribution to
      a Subsidiary, such Subsidiary is not precluded from further distributing
      such amount to Holdings as described in Clause (b) of this
      proviso).

            


    

     

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

     

    “GAAP” means
generally accepted accounting principles in the United States set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or such other principles as may be
approved by a significant segment of the accounting profession in the United
States, that are applicable to the circumstances as of the date of
determination, consistently applied.

     

    “Holdings” means
the Corporate Guarantor;

     

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

     

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

     

    “Qualified Cash” means,
as of any date of determination, the amount of cash and Cash Equivalents which
is freely transferable and not subject to a Security Interest (other than a
Permitted Security Interest) pledge, security interest, encumbrance, escrow or
cash collateral arrangement or any other restriction on its use.

     

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

     

    “Subsidiary” of a
Person means a corporation, partnership, joint venture, limited liability
company or other business entity of which a majority of the shares of securities
or other interests having ordinary voting power for the election of directors or
other governing body (other than securities or interests having such power only
by reason of the happening of a contingency) are at the time beneficially owned,
or the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by such Person. Unless otherwise
specified, all references herein to a “Subsidiary” or to
“Subsidiaries” shall
refer to a Subsidiary or Subsidiaries of Holdings.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE 4

     

    


     

    FORM OF COMPLIANCE
CERTIFICATE

     

    


    


    


    To: The Royal
Bank of Scotland plc

    Shipping
Business Centre

    5-10
Great Tower Street

    London
EC3P 3HX

    


    Attention:
Ship Finance Portfolio Management

    


    From: TSB
International Limited

    


    


    OFFICER’S
CERTIFICATE

    


    This
Certificate is rendered pursuant to clause 9.16(b) of the facility agreement
dated [l] 2007
(the “Facility Agreement”) and
entered into between (i) Argyle Maritime Corp, Caton Maritime Corp, Dorchester
Maritime Corp, Longwood Maritime Corp, McHenry Maritime Corp and Sunswyck
Maritime Corp and (ii) The Royal Bank of Scotland plc as Issuer relating to a
guarantee facility of US$84,000,000. Words and expressions defined in the
Facility Agreement shall have the same meanings when used herein.

    


    I, the
Chief Financial Officer of the Corporate Guarantor, hereby certify
that:

    


    
      	1  	
              Attached
      to this Certificate are the latest [audited][unaudited] accounts of the
      Guarantor and its consolidated subsidiaries for the financial year
      [quarter] ending on [l].

            


    

     

    
      	2  	
              Set
      out below are the respective amounts, in US Dollars, of Cash Equivalents,
      Consolidated EBITDA, Consolidated Interest Charges, Consolidated Net
      Income, Consolidated Tangible Net Worth and Qualified
  Cash:

            


    

     

    
      	 	
               

              US
      Dollars

               

            
	
               

              Cash
      Equivalents

               

            	
               

              [l]

               

            
	
               

              Consolidated
      EBITDA

               

            	
               

              [l]

               

            
	
               

              Consolidated
      Interest Charges

               

            	
               

              [l]

               

            
	
               

              Consolidated
      Net Income

               

            	
               

              [l]

               

            
	
               

              Consolidated
      Tangible Net Worth

               

            	
               

              [l]

               

            
	
               

              Qualified
      Cash

               

            	
               

              [l]

               

            


    

    


    
      	3  	
              Accordingly,
      as at the date of this Certificate the financial covenants set out in
      Appendix 8 of the Loan Agreement [are][are not] complied with, in
      that as at [l]:

            


    

     

    
      	(a)  	
              Minimum
      Consolidated Tangible Net WorthUS$[l];

            


    

     

    
      	(b)  	
              Minimum
      Cash LiquidityUS$[l];

            


    

     

    
      	(c)  	
              Maximum
      Consolidated Leverage Ratio[x.xx]

            


    

     

    
      	(d)  	
              Minimum
      Consolidated Fixed Charge Coverage Ratio[x.xx]

            


    

     

    
      	4  	
              As
      at [l]
      no Event of Default has occurred and is continuing [or, specify / identify
      any Event of Default]. 

            


    

     

    


     

    


    


    


    


    


    


    ...................................

    Chief
financial officer

    TBS
International Limited

    


    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXECUTION PAGE

     

    


    


    OBLIGORS

    


    SIGNED by 

    


      /s/Anne-Laure Marie Roche

      Attorney-in-Fact

    

    for and
on behalf of

    ARGYLE MARITIME
CORP. 

    in the
presence of:

    
      /s/
Robert Fidoe

      Robert
Fidoe

      Solicitor

      15 Appold
Street

      London
EC2A 2HB


SIGNED by 

    


      /s/Anne-Laure Marie Roche

      Attorney-in-Fact

    

    for and
on behalf of 

    CATON MARITIME
CORP.

    in the
presence of:

    
      /s/
Robert Fidoe

      Robert
Fidoe

      Solicitor

      15 Appold
Street

      London
EC2A 2HB


SIGNED by 

    


      /s/Anne-Laure Marie Roche

      Attorney-in-Fact

    

    for and
on behalf of 

    DORCHESTER MARITIME
CORP. 

    in the
presence of:

    
      /s/
Robert Fidoe

      Robert
Fidoe

      Solicitor

      15 Appold
Street

      London
EC2A 2HB


SIGNED by 

    


      /s/Anne-Laure Marie Roche

      Attorney-in-Fact

    

    for and
on behalf of

    LONGWOODS MARITIME
CORP. 

    in the
presence of:

    
      /s/
Robert Fidoe

      Robert
Fidoe

      Solicitor

      15 Appold
Street

      London
EC2A 2HB


SIGNED by 

    


      /s/Anne-Laure Marie Roche

      Attorney-in-Fact

    

    for and
on behalf of 

    MCHENRY MARITIME
CORP. 

    in the
presence of:

    
      /s/
Robert Fidoe

      Robert
Fidoe

      Solicitor

      15 Appold
Street

      London
EC2A 2HB


SIGNED by 

    


      /s/Anne-Laure Marie Roche

      Attorney-in-Fact

    

    for and
on behalf of

    SUNSWYCK MARITIME
CORP.

    in the
presence of:

    
      /s/
Robert Fidoe

      Robert
Fidoe

      Solicitor

      15 Appold
Street

      London
EC2A 2HB





    ISSUER

    


    SIGNED by 

    /s/ Robin Leigh Perkin

    for and
on behalf of

    THE ROYAL BANK OF SCOTLAND
PLC

    in the
presence of: 

    
      /s/
Robert Fidoe

      Robert
Fidoe

      Solicitor

      15 Appold
Street

      London
EC2A 2HB

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    APPENDIX
A

    FORM
OF DELIVERY SECURITY ASSIGNMENT

    


    
      
      

    

     

    
      
      

    

    



    


     

    Date
[l]
2007

     

    [l]

     

    as
Owner

     

    -and-

     

    THE
ROYAL BANK OF SCOTLAND plc

     

    as
Issuer

    
      


       

      PREDELIVERY
SECURITY ASSIGNMENT

    

     

    relating
to Yard No. [l]

     

    at
Nantong Yahua Shipbuilding Co. Ltd.

    


    
      
        
          
            Watson,
Farley & Williams

            London

          

           


        

        
           


          
            

          

        

        
           


        

      

    

    


    INDEX

     

    Clause Page

     

     

    1           DEFINITIONS AND
INTERPRETATION [INSERT PAGE
NUMBER]

     

    2           COVENANT TO PAY [INSERT PAGE NUMBER]

     

    3           ASSIGNMENT [INSERT PAGE NUMBER]

     

    4           REPRESENTATIONS AND
WARRANTIES [INSERT PAGE
NUMBER]

     

    5           COVENANTS [INSERT PAGE NUMBER]

     

    6           PROTECTION OF SECURITY [INSERT PAGE NUMBER]

     

    7           ENFORCEABILITY AND ISSUER’S
POWERS [INSERT PAGE
NUMBER]

     

    8           APPLICATION OF MONEYS [INSERT PAGE NUMBER]

     

    9           FURTHER ASSURANCES [INSERT PAGE NUMBER]

     

    10           POWER OF ATTORNEY [INSERT PAGE NUMBER]

     

    11           INCORPORATION OF GUARANTEE FACILITY
AGREEMENT PROVISIONS [INSERT PAGE
NUMBER]

     

    12           SUPPLEMENTAL [INSERT PAGE NUMBER]

     

    13           LAW AND JURISDICTION [INSERT PAGE NUMBER]

     

    EXECUTION
PAGE [INSERT PAGE NUMBER]

     

    APPENDIX
I  PART I  NOTICE OF ASSIGNMENT TO SELLER[INSERT PAGE NUMBER]

     

    APPENDIX
I  PART II  ACKNOWLEDGEMENT BY THE SELLER [INSERT PAGE NUMBER]

     

    APPPENDIX
1 PART III NOTICE OF APPOINTMENT OF ATTORNEY TO REFUND GUARANTOR [INSERT PAGE NUMBER]

     

    APPENDIX
I  PART IV  REFUND GUARANTOR’S ACKNOWLEDGEMENT [INSERT PAGE NUMBER]

     

    


    


    
      
        
          
             
RBS Guarantee (2).doc


          

           


        

        
           


          
            

          

        

        
           


        

      

    

    


    THIS DEED
is made on [l]
2007

     

    BETWEEN

     

    
      	
              (1)

            	
              [l],
      a corporation organised and existing under the laws of the Marshall
      Islands whose registered office is at Trust Company Complex, Ajeltake
      Road, Ajeltake Island, Majuro, Marshall Islands M #96960 (the “Owner”);
      and

            


    

     

    
      	
              (2)

            	
              THE ROYAL BANK OF SCOTLAND
      plc, a company incorporated in Scotland acting through its office
      at Shipping Business Centre, 5-10 Great Tower Street, London EC3P 3HX (the
      “Issuer”, which
      expression includes its successors and
assigns).

            


    

     

    BACKGROUND

     

    
      	
              (A)

            	
              By
      a guarantee facility agreement dated [l]
      2007 and made between (i) the Borrowers (including the Owner) and (ii) the
      Issuer it was agreed that the Issuer would make available to the Obligors
      a guarantee facility of up to
US$84,000,000.

            


    

     

    
      	
              (B)

            	
              It
      is one of the conditions precedent to the availability of the guarantee
      facility under the Guarantee Facility Agreement that the Owner enters into
      this Deed as security for the Secured
  Liabilities.

            


    

     

    
      	
              (C)

            	
              This
      Deed supplements the Guarantee Facility Agreement and is one of the
      Predelivery Security Assignments referred to in
  it.

            


    

     

    IT IS AGREED as
follows:

     

    
      	
              1  

            	
              DEFINITIONS
      AND INTERPRETATION

            


    

     

    
      	
              1.1  

            	
              Defined
      expressions.

            


    

     

      Words and expressions
defined in the Guarantee Facility Agreement shall have the same meanings when
used in this Deed unless the context otherwise requires.

     

    
      	
              1.2  

            	
              Definitions.

            


    

     

      In this Deed, unless
the contrary intention appears:

     

    “Assigned Contracts”
means:

     

    
      	
               
      

            	
              (a)

            	
              the
      Shipbuilding Contract; and

            


    

     

    
      	
               
      

            	
              (b)

            	
              the
      Refund Guarantees;

            


    

     

    “Assigned Property” means all
rights and interests of every kind which the Owner now or at any later time has
to, in or in connection with each of the Assigned Contracts or in relation to
any matter arising out of or in connection with any Assigned Contract,
including, but without in any way limiting the generality of the preceding
words:

     

    
      	
               
      

            	
              (a)

            	
              all
      rights and interests relating to any amount of any kind payable under the
      terms of any Assigned Contract;

            


    

     

    
      	
               
      

            	
              (b)

            	
              all
      rights to reject or take delivery of the Ship pursuant to the Shipbuilding
      Contract;

            


    

     

    
      	
               
      

            	
              (c)

            	
              all
      rights to commence, conduct, defend, compromise or abandon any legal or
      arbitration proceedings relating to any Assigned Contract or to any matter
      arising out of or in connection with an Assigned Contract;
    and

            


    

     

    
      	
               
      

            	
              (d)

            	
              all
      rights to damages, interest, costs or other sums payable under any
      judgment or order of any court, or any arbitration award, relating to any
      Assigned Contract or to any matter arising out of or in connection with an
      Assigned Contract;

            


    

     

    “Builder” means Nantong Yahua
Shipbuilding Co. Ltd, a company incorporated in China whose registered office is
at 1# Hongzha Road, Jinweigang, Nantong-Jiangsu P.C. 226 361, the People’s
Republic of China;

     

    “China Communications” means
China Communications Construction Company Ltd, a corporation organised and
existing under the laws of the People’s Republic of China, having its registered
office at No. C88, An Ding Men Wai Street, Beijing, 100011, the People’s
Republic of China;

     

    “Guarantee Facility Agreement”
means the guarantee facility agreement referred to in Recital (A);

     

    “Receiver” means any receiver
and/or manager (or joint receivers and/or managers) appointed under Clause
7.3;

     

    “Refund Guarantees” means the
guarantees issued or to be issued by the Refund Guarantor in favour of the Owner
in respect of the Builder’s refund obligations under the Shipbuilding
Contract;

     

    “Refund Guarantor” means Bank
of Communications acting through its branch at 33 Jin Rong Da Jie, Xichang
District, Beijing 100032, The People’s Republic of China;

     

    “Secured Liabilities” means
all liabilities which the Owner, the Security Parties or any of them have, at
the date of this Deed or at any later time or times, to the Issuer under or in
connection with any Finance Document or any judgment relating to any Finance
Document; and for this purpose, there shall be disregarded any total or partial
discharge of these liabilities, or variation of their terms, which is effected
by, or in connection with, any bankruptcy, liquidation, arrangement or other
procedure under the insolvency laws of any country;

     

    “Seller” means together China
Communications and the Builder;

     

    “Ship” means the multipurpose
bulk carrier of about 35,000 dwt having the Builder’s yard number [l]
more particularly described in, and being the subject of, the Shipbuilding
Contract; and

     

    “Shipbuilding Contract” means
a shipbuilding contract dated 24 February 2007 and made between the Owner and
the Seller in respect of the Ship as the same may be supplemented and/or amended
from time to time.

     

    
      	
              1.3  

            	
              Application
      of construction and interpretation provisions of Guarantee Facility
      Agreement.

            


    

     

      Clauses
1.2 and 1.5 of the Guarantee Facility Agreement apply, with any necessary
modifications, to this Deed.

     

    
      	
              1.4  

            	
              Inconsistency
      between Guarantee Facility Agreement provisions and this
    Deed.

            


    

     

      This
Deed shall be read together with the other Finance Documents, but in case of any
conflict between the Guarantee Facility Agreement and this Deed, the provisions
of the Guarantee Facility Agreement shall prevail.

     

    
      	
              2  

            	
              COVENANT
      TO PAY

            


    

     

    
      	
              2.1  

            	
              Covenant
      to pay Secured Liabilities.

            


    

     

      The
Owner covenants with the Issuer:

     

    
      	
              (a)  

            	
              duly
      and punctually to pay the Secured Liabilities;
  and

            


    

     

    
      	
              (b)  

            	
              to
      observe and perform all its other obligations under the Finance
      Documents.

            


    

     

    
      	
              3  

            	
              ASSIGNMENT

            


    

     

    
      	
              3.1  

            	
              Assignment.

            


    

     

      The
Owner, with full title guarantee, assigns to the Issuer absolutely all rights
and interests which now or at any later time it has to, in or in connection
with, the Assigned Property

     

    
      	
              3.2  

            	
              Continuing
      security.

            


    

     

      The
Security Interests created by Clause 3.1 are fixed; and this Deed shall remain
in force until the end of the Security Period as a continuing security and, in
particular:

     

    
      	
              (a)  

            	
              the
      Security Interests created by Clause 3.1 shall not be satisfied by any
      intermediate payment or satisfaction of the Secured
      Liabilities;

            


    

     

    
      	
              (b)  

            	
              the
      Security Interests created by Clause 3.1, and the rights of the Issuer
      under this Deed, are only capable of being extinguished, limited or
      otherwise adversely affected by an express and specific term in a document
      signed by or on behalf of the
Issuer;

            


    

     

    
      	
              (c)  

            	
              no
      failure or delay by or on behalf of the Issuer to enforce or exercise a
      Security Interest created by Clause 3.1 or a right of the Issuer under
      this Deed, and no act, course of conduct, acquiescence or failure to act
      (or to prevent the Owner from taking certain action) which is inconsistent
      with such a Security Interest or such a right or with such a Security
      Interest being a fixed security shall preclude or estop the Issuer (either
      permanently or temporarily) from enforcing or exercising it or result in a
      Security Interest expressed to be a fixed security taking effect as a
      floating security; and

            


    

     

    
      	
              (d)  

            	
              this
      Deed shall be additional to, and shall not in any way impair or be
      impaired by:

            


    

     

    
      	
              (i)  

            	
              any
      other Security Interest whether in relation to property of the Owner or
      that of a third party; or

            


    

     

    
      	
              (ii)  

            	
              any
      other right of recourse as against the Owner or any third
      party,

            


    

     

    which the
Issuer now or subsequently has in respect of any of the Secured
Liabilities.

     

    
      	
              3.3  

            	
              No
      obligations imposed on Issuer.

            


    

     

      The
Owner shall remain liable to perform all obligations connected with the Assigned
Property and the Issuer shall not, in any circumstances, have or incur any
obligation of any kind in connection with the Assigned Property.

     

    
      	
              3.4  

            	
              Notice
      of assignment and notice of appointment of
  attorney.

            


    

     

    


     

    
      	
              (a)  

            	
              Immediately
      after the execution of this Deed:

            


    

     

    
      	
              (i)  

            	
              the
      Owner shall give to the Seller notice of the assignments contained in
      Clause 3.1 in the form set out in Appendix 1 and shall obtain from the
      Seller a signed acknowledgement in the form set out in that Appendix;
      and

            


    

     

    
      	
              (ii)  

            	
              the
      Owner shall give to the Refund Guarantor in relation to the first Refund
      Guarantee a notice of appointment of attorney in the form set out in
      Appendix 1 and shall obtain from the Refund Guarantor a signed
      acknowledgement in the form set out in that
  Appendix.

            


    

     

    
      	
              (b)  

            	
              Immediately
      upon receipt of the second Refund Guarantee the Owner shall give to the
      Refund Guarantor in relation to such Refund Guarantee a notice of
      appointment of attorney in the form set out in Appendix 1 and shall obtain
      from the Refund Guarantor a signed acknowledgement in the form set out in
      that Appendix.

            


    

     

    
      	
              3.5  

            	
              Negative
      pledge; disposal of assets.

            


    

     

      The
Owner shall not sell, create any Security Interest not exclusively securing the
Secured Liabilities over or otherwise dispose of any Assigned Property or any
right relating to any Assigned Property.

     

    
      	
              3.6  

            	
              Release
      of security.

            


    

     

      At
the end of the Security Period, the Issuer will, at the request and cost of the
Owner, re-assign (without any warranty, representation, covenant or other
recourse) to the Owner such rights as the Issuer then has to, or in connection
with, the Assigned Property.

     

    
      	
              4  

            	
              REPRESENTATIONS
      AND WARRANTIES

            


    

     

    
      	
              4.1  

            	
              General.

            


    

     

      The
Owner represents and warrants to the Issuer as follows.

     

    
      	
              4.2  

            	
              Repetition
      of Guarantee Facility Agreement representations and
      warranties.

            


    

     

      The
representations and warranties in clause 8 of the Guarantee Facility Agreement
remain true and not misleading if repeated on the date of this Deed with
reference to the circumstances now existing.

     

    
      	
              4.3  

            	
              Title
      to Assigned Property.

            


    

     

      The
Owner is the sole legal and beneficial owner of all rights and interests which
each of the Assigned Contracts creates in favour of the Owner.

     

    
      	
              4.4  

            	
              No
      restrictions on right to assign.

            


    

     

      The
Owner has the right, without requiring the concurrence, consent or authority of
any other person, to create, in respect of all the Assigned Property, the
Security Interests which Clause 3 purports to create.

     

    
      	
              4.5  

            	
              No
      third party Security Interests.

            


    

     

      No
third party has any Security Interest or any other right, interest or claim
over, in or in relation to any Assigned Contract.

     

    
      	
              4.6  

            	
              Validity
      and completeness of Assigned
Contracts.

            


    

     

    


     

    
      	
              (a)  

            	
              The
      copies of the Assigned Contracts delivered to the Issuer in connection
      with this Deed are true and complete copies, and there does not exist any
      addendum, supplemental agreement or other document of any kind which has
      the effect of varying the terms of any Assigned Contract or of excluding,
      restricting or qualifying any right or interest which an Assigned Contract
      creates in favour of the Owner; and

            


    

     

    
      	
              (b)  

            	
              each
      Assigned Contract is in full force and is binding on and enforceable
      against each of the parties to it in accordance with its terms but subject
      to general principles of equity and laws effecting creditors’ rights
      generally, and to the best of the Owner’s knowledge and belief no event
      has occurred or matter arisen as a result of which any party to an
      Assigned Contract is, may be or may later become entitled to rescind or
      terminate any Assigned Contract or to refuse or suspend performance of its
      obligations thereunder, or to raise any set-off or other defence in
      respect of such obligations; and

            


    

     

    
      	
              (c)  

            	
              without
      limiting the generality of paragraph (b), the Seller and the Refund
      Guarantor are each in compliance with their respective obligations under
      the Assigned Contracts.

            


    

     

    
      	
              5  

            	
              COVENANTS

            


    

     

    
      	
              5.1  

            	
              General.

            


    

     

      The
Owner shall comply with the following provisions of this Clause 5 at all times
during the Security Period except as the Issuer may otherwise
permit.

     

    
      	
              5.2  

            	
              Performance
      of Assigned Contracts.

            


    

     

      The
Owner shall:

     

    
      	
              (a)  

            	
              observe
      and perform all its obligations and meet all its liabilities under or in
      connection with each Assigned
Contract;

            


    

     

    
      	
              (b)  

            	
              use
      its best endeavours to ensure performance and observance by the other
      parties of their obligations and liabilities under each Assigned
      Contract;

            


    

     

    
      	
              (c)  

            	
              take
      any action, or refrain from taking any action, which the Issuer may
      reasonably specify in connection with any material breach, or possible
      future material breach, of an Assigned Contract by the Owner or any other
      party or with any other matter which arises or may later arise out of or
      in connection with an Assigned
Contract.

            


    

     

    
      	
              5.3  

            	
              No
      variation, release etc. of Assigned
Contracts.

            


    

     

    
      	
              5.4  

            	
                Subject to
      clause 9.11 of the Guarantee Facility Agreement, the Owner shall not,
      whether by a document, by conduct, by acquiescence or in any other
      way:

            


    

     

    
      	
              (a)  

            	
              vary
      any Assigned Contract;

            


    

     

    
      	
              (b)  

            	
              release,
      waive, suspend or subordinate or permit to be lost or impaired any
      interest or right forming part of or relating to any Assigned
      Property;

            


    

     

    
      	
              (c)  

            	
              waive
      any person’s material breach of any Assigned
  Contract;

            


    

     

    
      	
              (d)  

            	
              rescind
      or terminate any Assigned Contract or treat itself as discharged or
      relieved from further performance of any of its obligations or liabilities
      under an Assigned Contract;

            


    

     

    
      	
              (e)  

            	
              purport
      to vary or revoke any notice or instruction relating to this Deed which
      the Owner has given or may later give to any
  person.

            


    

     

    
      	
              5.5  

            	
              Payment
      of moneys received under Assigned
Contracts.

            


    

     

      After
the occurrence of a Potential Event of Default or an Event of Default the Owner
shall forthwith, upon receipt by it (or by any person acting on its behalf), pay
over or transfer to the Issuer (or as the Issuer may direct) any moneys or other
property which the Owner (or any person acting on its behalf) may receive or
recover in connection with any Assigned Contract and all property which may,
directly or indirectly, represent, accrue on or be derived from any such moneys
or property.

     

    
      	
              5.6  

            	
              Action
      to protect validity of Assigned
Contracts.

            


    

     

      The
Owner shall:

     

    
      	
              (a)  

            	
              use
      its best endeavours to ensure that all interests and rights conferred by
      each Assigned Contract remain valid and enforceable in all respects in
      accordance with its terms but subject to general principles of equity and
      laws affecting creditors’ rights generally and retain the priority which
      they were intended to have; and

            


    

     

    
      	
              (b)  

            	
              without
      prejudice to the Owner’s obligations under paragraph (a), take any action
      which the Issuer may reasonably specify with a view to ensuring or
      protecting the validity, enforceability and/or priority of any such
      interest or right.

            


    

     

    
      	
              5.7  

            	
              Action
      to enforce Assigned Contracts.

            


    

     

      The
Owner shall:

     

    
      	
              (a)  

            	
              take
      any action which the Issuer may reasonably direct for the purpose of
      enforcing (through legal process, arbitration or otherwise) any right
      which is part of, or which relates to, the Assigned Property;
      and

            


    

     

    
      	
              (b)  

            	
              in
      the absence of any such direction, not take any such
    action.

            


    

     

    
      	
              5.8  

            	
              Termination
      of, and proceedings relating to, Assigned
  Contracts.

            


    

     

      Without
limiting its generality, Clause 5.6 applies to:

     

    
      	
              (a)  

            	
              the
      termination of any Assigned
Contract;

            


    

     

    
      	
              (b)  

            	
              the
      commencement of, or any other action relating to, any legal proceedings or
      arbitration relating to any Assigned Property or to any matter arising out
      of or in connection with any Assigned
Property.

            


    

     

    
      	
              5.9  

            	
              Provision
      of information relating to Assigned
Contracts.

            


    

     

      The
Owner shall forthwith:

     

    
      	
              (a)  

            	
              inform
      the Issuer if any material breach of any Assigned Contract occurs or a
      serious risk of such a breach arises and of any other event or matter
      affecting an Assigned Contract which is material to the
      Issuer;

            


    

     

    
      	
              (b)  

            	
              provide
      the Issuer, promptly after service, with copies of all notices served on
      or by the Owner under or in connection with any Assigned
      Contract;

            


    

     

    
      	
              (c)  

            	
              provide
      the Issuer with any information which it reasonably requests about any
      Assigned Property or any matter relating to or affecting any Assigned
      Property including the progress of the construction of the Ship;
      and

            


    

     

    
      	
              (d)  

            	
              generally
      provide the Issuer and its officers and representatives with full and
      prompt co-operation and assistance relating to any Assigned
      Property.

            


    

     

    
      	
              5.10  

            	
              Builder’s
      Certificate.

            


    

     

      The
Owner shall give irrevocable instructions to the Seller to hold the Ship to the
order and at the disposal of the Issuer and to deliver the Builder’s Certificate
and any other document of title to the Ship to the Issuer and ensure that the
Builder complies with such instructions.

     

    
      	
              5.11  

            	
              Provision
      of copies of Assigned Contracts.

            


    

     

      The
Owner shall forthwith upon the Issuer’s request:

     

    
      	
              (a)  

            	
              deliver
      to the Issuer a certified copy of any Assigned Contract to which the Owner
      is a party; or

            


    

     

    
      	
              (b)  

            	
              provide
      the Issuer with a certified copy of any other Assigned
      Contract.

            


    

     

    
      	
              5.12  

            	
              No
      action to jeopardise security.

            


    

     

      The
Owner shall not knowingly do or fail to do or knowingly cause or permit another
person to do or omit to do anything which is liable to jeopardise the
effectiveness or priority, in relation to any Assigned Property, of any Security
Interest created by this Deed.

     

    
      	
              6  

            	
              PROTECTION
      OF SECURITY

            


    

     

    
      	
              6.1  

            	
              Issuer’s
      right to protect or maintain
security.

            


    

     

      The
Issuer may take any action which it may think fit for the purpose of protecting
or maintaining the security created by this Deed or for any similar or related
purpose.

     

    
      	
              7  

            	
              ENFORCEABILITY
      AND ISSUER’S POWERS

            


    

     

    
      	
              7.1  

            	
              Right
      to enforce security.

            


    

     

      On
the occurrence of an Event of Default which is continuing but without the
necessity for any court order in any jurisdiction to the effect that an Event of
Default has occurred or that the security constituted by this Deed has become
enforceable, and irrespective of whether a notice has been served under clause
13.2 of the Guarantee Facility Agreement:

     

    
      	
              (a)  

            	
              the
      security constituted by this Deed shall immediately become enforceable;
      and

            


    

     

    
      	
              (b)  

            	
              the
      Issuer shall be entitled at any time or times to exercise the powers set
      out in Clauses 7.2 and 7.3 and in any other Finance Document;
      and

            


    

     

    
      	
              (c)  

            	
              the
      Issuer shall be entitled at any time or
times:

            


    

     

    
      	
              (i)  

            	
              to
      exercise the powers possessed by it as assignee of the Assigned Property
      conferred by the law of any country or territory in which the Assigned
      Property is physically present or deemed to be sited the courts of which
      have or claim any jurisdiction in respect of the Owner, the Ship or any
      item of Assigned Property; and

            


    

     

    
      	
              (ii)  

            	
              without
      limiting the scope of the Issuer’s powers under sub-paragraph (i) above,
      to exercise the powers possessed by it as a creditor or as a person with a
      Security Interest in the Assigned Property conferred by English
      law.

            


    

     

    
      	
              7.2  

            	
              Right
      to take possession, exercise rights
etc.

            


    

     

      On
the occurrence of an Event of Default which is continuing, the Issuer shall be
entitled then or at any later time or times:

     

    
      	
              (a)  

            	
              to
      exercise any right forming part of the Assigned Property, including any
      right to terminate an Assigned
Contract;

            


    

     

    
      	
              (b)  

            	
              to
      implement the Shipbuilding Contract and to take delivery of the Ship in
      its own name and thereafter to lay up or employ the Ship as the Issuer may
      see fit;

            


    

     

    
      	
              (c)  

            	
              to
      undertake the supervision of the construction of the
  Ship;

            


    

     

    
      	
              (d)  

            	
              to
      collect and require payment of any amount payable under, or the right to
      which is assigned or charged by, any Assigned Contract or which otherwise
      forms part of the Assigned Property, and to take possession of any other
      Assigned Property;

            


    

     

    
      	
              (e)  

            	
              to
      vary the terms of any Assigned Contract, to enter into any arrangement of
      any kind connected with an Assigned Contract, to replace, novate or
      terminate any Assigned Contract and to release any person liable under any
      Assigned Contract and/or any Security Interest relating to any person’s
      obligations or liabilities under an Assigned
  Contract;

            


    

     

    
      	
              (f)  

            	
              to
      sell, mortgage, exchange, invest or in any other way deal with any
      Assigned Property in any manner and for any consideration (including
      shares, notes or other securities) and to do so, in the case of the Ship,
      either on or after its delivery under the Shipbuilding
      Contract;

            


    

     

    
      	
              (g)  

            	
              following
      delivery of the Ship, to manage, insure, maintain and repair the Ship and
      to employ, sail or lay up the Ship in such manner and for such period as
      the Issuer may think fit;

            


    

     

    
      	
              (h)  

            	
              to
      petition or apply for, or prove or claim in, any winding up,
      administration, bankruptcy or similar procedure in respect of any person
      having any liability under any Assigned
  Contract;

            


    

     

    
      	
              (i)  

            	
              to
      vote for or against and participate in, any composition, voluntary
      arrangement, scheme of arrangement or reorganisation of any person having
      a liability under any Assigned
Contract;

            


    

     

    
      	
              (j)  

            	
              to
      enter into all kinds of transactions for the purpose of hedging risks
      which have arisen or which the Issuer considers may arise in respect of
      any Assigned Property out of movements in exchange rates, interest rates
      or other risks of any kind;

            


    

     

    
      	
              (k)  

            	
              to
      employ the services of any lawyers, ship-brokers or other experts or
      advisers of any type or description, whether or not similar to the
      foregoing;

            


    

     

    
      	
              (l)  

            	
              to
      appoint all kinds of agents, whether to enforce or exercise any right
      under or in connection with any Assigned Contract or for any other
      purpose; and

            


    

     

    
      	
              (m)  

            	
              to
      take over or commence or defend (if necessary using the name of the Owner)
      any claims or legal or arbitration proceedings relating to, or affecting,
      any Assigned Property which the Issuer may think fit and to abandon,
      release or settle in any way any such claims or proceedings;
      and

            


    

     

    
      	
              (n)  

            	
              generally,
      to enter into any transaction or arrangement of any kind and to do
      anything in relation to any Assigned Property which the Issuer may think
      fit.

            


    

     

    
      	
              7.3  

            	
              Right
      to appoint Receiver.

            


    

     

      On
the occurrence of an Event of Default which is continuing, the Issuer may
appoint a receiver and/or manager (or joint receivers and/or managers) of the
Assigned Property, and the following shall apply:

     

    
      	
              (a)  

            	
              the
      Issuer may exercise any of the powers conferred by this Deed while a
      Receiver is in office and is
acting;

            


    

     

    
      	
              (b)  

            	
              an
      appointment of a Receiver shall be by deed or, at the Issuer’s option, by
      a document signed by any of its officers; and an appointment in respect of
      some only of the Assigned Property may later be extended to all or any
      part of the remaining Assigned
Property;

            


    

     

    
      	
              (c)  

            	
              the
      remuneration of a Receiver shall be fixed by the
  Issuer;

            


    

     

    
      	
              (d)  

            	
              to
      the fullest extent permitted by law, a Receiver shall be the Owner’s
      agent, and the Owner shall be responsible, to the exclusion of any
      liability on the part of the Issuer, for his remuneration and for his
      contracts, acts and defaults;

            


    

     

    
      	
              (e)  

            	
              a
      Receiver shall have all the powers conferred by Clause 7.2 as if the
      reference to the Issuer in Clause 7.2 were a reference to the Receiver,
      and all the powers conferred on a Receiver by the Law of Property Act
      1925;

            


    

     

    
      	
              (f)  

            	
              in
      addition, a Receiver who is an administrative receiver for the purposes of
      the Insolvency Act 1986 shall have all the powers which an administrative
      receiver has under that Act;

            


    

     

    
      	
              (g)  

            	
              the
      Owner irrevocably and by way of security appoints every Receiver its
      attorney on its behalf and in its name or otherwise to execute or sign any
      document and do any act or thing which that Receiver considers necessary
      or desirable with a view to or in connection with any exercise or proposed
      exercise of any of his powers;

            


    

     

    
      	
              (h)  

            	
              a
      Receiver may delegate to any person or persons of any of the powers
      (including the discretions) conferred on him by, or pursuant to, this Deed
      and may do so on terms authorising successive
    sub-delegations;

            


    

     

    
      	
              (i)  

            	
              in
      the case of joint Receivers any of the powers (including the discretions)
      conferred by this Deed or by the general law (including the Insolvency Act
      1986) may be exercised by any one or more of them, unless their
      appointment specifically states the
contrary;

            


    

     

    
      	
              (j)  

            	
              the
      Issuer may remove a Receiver, with or without appointing another Receiver;
      such a removal may be effected by a document signed by any of the Issuer’s
      officers; but this paragraph does not apply to a Receiver who is an
      administrative receiver under the Insolvency Act
  1986;

            


    

     

    
      	
              (k)  

            	
              the
      Issuer may appoint a Receiver to replace a Receiver who has resigned or
      for any other reason ceased to hold office;
and

            


    

     

    
      	
              (l)  

            	
              a
      Receiver shall be entitled to retain out of any money received by him such
      amounts in respect of his expenses (or to cover estimated future expenses)
      as he may from time to time agree with the
  Issuer.

            


    

     

    
      	
              7.4  

            	
              Law
      of Property Act 1925 not
applicable.

            


    

     

      The
Owner hereby waives the entitlement conferred by section 93 of the Law of
Property Act 1925 and agrees that section 103 of that Act shall not apply to the
security created by this Deed.

     

    
      	
              7.5  

            	
              No
      liability of Issuer or Receiver.

            


    

     

      Neither
the Issuer nor any Receiver shall be obliged to check the nature or sufficiency
of any payment received by it or him under this Deed or to preserve, exercise or
enforce any right forming part of, or relating to, any Assigned
Property.

     

    
      	
              8  

            	
              APPLICATION
      OF MONEYS

            


    

     

    
      	
              8.1  

            	
              General.

            


    

     

      All
sums received by the Issuer or by a Receiver in respect of any Assigned Property
shall be held by the Issuer or the Receiver upon trust in the first place to pay
or discharge any expenses or liabilities (including any interest) which have
been paid or incurred by the Issuer or any Receiver in or in connection with the
exercise of their respective powers and to apply the balance in accordance with
clause 12 of the Guarantee Facility Agreement.

     

    
      	
              9  

            	
              FURTHER
      ASSURANCES

            


    

     

    
      	
              9.1  

            	
              Owner’s
      obligation to execute further documents
etc.

            


    

     

      The
Owner shall:

     

    
      	
              (a)  

            	
              execute
      and deliver to the Issuer (or as it may reasonably direct) any assignment,
      mortgage, power of attorney, proxy or other document, governed by the law
      of England or such other country as the Issuer may, in any particular
      case, specify;

            


    

     

    
      	
              (b)  

            	
              effect
      any registration or notarisation, give any notice or take any other
      step;

            


    

     

    which the
Issuer may, by notice to the Owner, reasonably specify for any of the purposes
described in Clause 9.2 or for any similar or related purpose.

     

    
      	
              9.2  

            	
              Purposes
      of further assurances.

            


    

     

      Those
purposes are:

     

    
      	
              (a)  

            	
              validly
      and effectively to create any Security Interest or right of any kind which
      the Issuer intended should be created by or pursuant to this Deed or any
      other Finance Document;

            


    

     

    
      	
              (b)  

            	
              to
      create a specific mortgage or assignment of any particular Assigned
      Property or otherwise to vest in the Issuer the title to any particular
      Assigned Property;

            


    

     

    
      	
              (c)  

            	
              to
      protect the priority, or increase the effectiveness, in any jurisdiction
      of any Security Interest which is created, or which the Issuer intended
      should be created, by or pursuant to this Deed or any other Finance
      Document;

            


    

     

    
      	
              (d)  

            	
              to
      enable or assist the Issuer or a Receiver to sell or otherwise deal with
      any Assigned Property, to transfer title to, or grant any interest or
      right relating to, any Assigned Property or to exercise any power which is
      referred to in Clause 7.1 above or which is conferred by any Finance
      Document;

            


    

     

    
      	
              (e)  

            	
              to
      enable or assist the Issuer to enter into any transaction to commence,
      defend or conduct any proceedings and/or to take any other action relating
      to any Assigned Property in any country or under the law of any
      country.

            


    

     

    
      	
              9.3  

            	
              Terms
      of further assurances.

            


    

     

      The
Issuer may specify the terms of any document to be executed by the Owner under
Clause 9.1, and those terms may include any covenants, powers and provisions
which the Issuer considers appropriate to protect its or a Receiver’s
interests.

     

    
      	
              9.4  

            	
              Obligation
      to comply with notice.

            


    

     

      The
Owner shall comply with a notice under Clause 9.1 by the date specified in the
notice.

     

    
      	
              9.5  

            	
              Additional
      corporate action.

            


    

     

      At
the same time as the Owner delivers to the Issuer any document executed under
Clause 9.1(a), the Owner shall also deliver to the Issuer a certificate signed
by 2 of the Owner’s directors which shall:

     

    
      	
              (a)  

            	
              set
      out the text of a resolution of the Owner’s directors specifically
      authorising the execution of the document specified by the Issuer;
      and

            


    

     

    
      	
              (b)  

            	
              state
      that either the resolution was duly passed at a meeting of the directors
      validly convened and held throughout which a quorum of directors entitled
      to vote on the resolution was present or that the resolution has been
      signed by all the directors and is valid under the Owner’s articles of
      association or other constitutional
documents.

            


    

     

    
      	
              10  

            	
              POWER
      OF ATTORNEY

            


    

     

    
      	
              10.1  

            	
              Appointment.

            


    

     

      For
the purpose of securing the Issuer’s interest in the Assigned Property and the
due and punctual performance of its obligations to the Issuer under this Deed
and every other Finance Document, the Owner irrevocably and by way of security
appoints the Issuer its attorney, on behalf of the Owner and in its name or
otherwise, to execute or sign any document and do any act or thing which the
Owner is obliged to do under any Finance Document (but which, prior to the
occurrence of an Event of Default the Owner has failed, for whatever reason, to
take).

     

    
      	
              10.2  

            	
              Ratification
      of actions of attorney.

            


    

     

      For
the avoidance of doubt and without limiting the generality of Clause 10.1, it is
confirmed that it authorises the Issuer to execute on behalf of the Owner a
document ratifying by the Owner any transaction or action which the Issuer
and/or a Receiver has purported to enter into or to take and which the Issuer
considers was or might have been outside his powers or otherwise
invalid.

     

    
      	
              10.3  

            	
              Delegation.

            


    

     

      The
Issuer may sub-delegate to any person or persons (including a Receiver and
persons designated by him) all or any of the powers (including the discretions)
conferred on the Issuer by Clauses 10.1 and/or 10.2, and may do so on terms
authorising successive sub-delegations.

     

    
      	
              11  

            	
              INCORPORATION
      OF GUARANTEE FACILITY AGREEMENT
PROVISIONS

            


    

     

    
      	
              11.1  

            	
              Incorporation
      of specific provisions.

            


    

     

      The
following provisions of the Guarantee Facility Agreement apply to this Deed as
if they were expressly incorporated therein with any necessary
modifications:

     

    clause
19, no set-off or tax deduction;

     

    clause
21, variations and waivers;

     

    clause
22, notices;

     

    clause
24, supplemental.

     

    
      	
              11.2  

            	
              Incorporation
      of general provisions.

            


    

     

      Clause
11.1 is without prejudice to the application to this Deed of any provision of
the Guarantee Facility Agreement which, by its terms, applies or relates to the
Finance Documents generally.

     

    
      	
              12  

            	
              SUPPLEMENTAL

            


    

     

    
      	
              12.1  

            	
              No
      restriction on other rights.

            


    

     

      Nothing
in this Deed shall be taken to exclude or restrict any power, right or remedy
which the Issuer may at any time have under:

     

    
      	
              (a)  

            	
              any
      other Finance Document; or

            


    

     

    
      	
              (b)  

            	
              the
      law of any country or territory the courts of which have or claim any
      jurisdiction in respect of the Owner, the Ship or any Assigned
      Property.

            


    

     

    
      	
              12.2  

            	
              Exercise
      of other rights.

            


    

     

      The
Issuer may exercise any right under this Deed before it has exercised any right
referred to in Clause 12.1(a) or (b) above.

     

    
      	
              12.3  

            	
              Settlement
      or discharge conditional.

            


    

     

      Any
settlement or discharge under this Deed between the Issuer and the Owner shall
be conditional upon no security or payment to the Issuer by the Owner or any
other person being set aside, adjusted or ordered to be repaid, whether under
any insolvency law or otherwise.

     

    
      	
              12.4  

            	
              Third
      party rights.

            


    

     

      A
person who is not a party to this Deed has no right under the Contracts (Rights
of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of
this Deed.

     

    
      	
              13  

            	
              LAW
      AND JURISDICTION

            


    

     

    
      	
              13.1  

            	
              English
      law.

            


    

     

      This
Deed shall be governed by, and construed in accordance with, English
law.

     

    
      	
              13.2  

            	
              Exclusive
      English jurisdiction.

            


    

     

      Subject
to Clause 13.3, the courts of England shall have exclusive jurisdiction to
settle any disputes which may arise out of or in connection with this
Deed.

     

    
      	
              13.3  

            	
              Choice
      of forum for the exclusive benefit of the
  Issuer.

            


    

     

      Clause
13.2 is for the exclusive benefit of the Issuer, which reserves the
rights:

     

    
      	
              (a)  

            	
              to
      commence proceedings in relation to any matter which arises out of or in
      connection with this Deed in the courts of any country other than England
      and which have or claim jurisdiction to that matter;
  and

            


    

     

    
      	
              (b)  

            	
              to
      commence such proceedings in the courts of any such country or countries
      concurrently with or in addition to proceedings in England or without
      commencing proceedings in England.

            


    

     

    The Owner
shall not commence any proceedings in any country other than England in relation
to a matter which arises out of or in connection with this Deed.

     

    
      	
              13.4  

            	
              Process
      agent.

            


    

     

      The
Owner irrevocably appoints Curtis Davis Garrard LLP at its registered office for
the time being, presently at Waterview House, Roundwood Avenue, Stockley Park,
Uxbridge UB11 1AU, to act as its agent to receive and accept on its behalf any
process or other document relating to any proceedings in the English courts
which are connected with this Deed.

     

    
      	
              13.5  

            	
              Issuer’s
      rights unaffected.

            


    

     

      Nothing
in this Clause 13 shall exclude or limit any right which the Issuer may have
(whether under the law of any country, an international convention or otherwise)
with regard to the bringing of proceedings, the service of process, the
recognition or enforcement of a judgment or any similar or related matter in any
jurisdiction.

     

    
      	
              13.6  

            	
              Meaning
      of “proceedings”.

            


    

     

      In
this Clause 13, “proceedings” means proceedings of any kind, including an
application for a provisional or protective measure.

     

    THIS DEED has been executed by
or on behalf of the parties and has, on the date stated at the beginning of this
Deed, been delivered as a Deed.

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


     EXECUTION
PAGE

    
      	
              OWNER

            	 
      	 
      
	
              EXECUTED as a DEED

              by
      [l]
      acting by

              expressly
      authorised in accordance with

              the
      laws of the Marshall Islands

              by
      virtue of a power of attorney granted

              by
      [l]

              on
      [l]

              such
      execution being witnessed by:

            	
              )

              )

              )

              )

              )

              )

              )

              )

            	 
      
	
              Signature
      of witness

            	 
      	 
      
	
              ISSUER

            	 
      	 
      
	
              EXECUTED as a DEED

              by
      ROYAL BANK OF SCOTLAND
      plc

              acting
      by

              expressly
      authorised in accordance with

              the
      laws of Scotland

            	
              )

              )

              )

              )

              )

            	 
      
	
              Signature
      of witness

            	 
      	 
      


    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


     APPENDIX
I

    


    PART
I

    


    NOTICE
OF ASSIGNMENT TO SELLER

     

    
      	
               
      

            	
              To:

            	
              (1)

            	
              China
      Communications Construction Company
Ltd

            


    

     

    
      	
               
      

            	
              No.
      C88, An Ding Men Wai Street

            


    

     

    
      	
               
      

            	
              Beijing

            


    

     

    
      	
               
      

            	
              10011

            


    

     

    
      	
               
      

            	
              The
      People’s Republic of China

            


    

     

    
      	
               
      

            	
              (2)

            	
              Nantong
      Yahua Shipbuilding Co. Ltd.

            


    

     

    
      	
               
      

            	
              1#
      Hongzha Road

            


    

     

    
      	
               
      

            	
              Jinweigang

            


    

     

    
      	
               
      

            	
              Nantong-Jiangsu

            


    

     

    
      	
               
      

            	
              P.C.
      226361

            


    

     

    
      	
               
      

            	
              The
      People’s Republic of China

            


    

     

    We,
[l], of
Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands
MH96 960 GIVE NOTICE
that, by an assignment in writing dated [l]
2007 (the “Assignment”),
we assigned irrevocably and absolutely to THE ROYAL BANK OF SCOTLAND plc
of Shipping Business Centre, 5-10 Great Tower Street, London EC3P 3HX (the “Assignee”) all our right,
title and interest in and to, and all benefits accruing to us under or pursuant
to, the contract dated 24 February 2007 made between yourselves and ourselves
(as supplemented and/or amended from time to time, the “Building Contract”) for the
design, construction and delivery of one [l]
having hull number [l]
(the “Vessel”) including
(without limitation) all our rights in and to the Vessel as she is constructed,
our right to take delivery of the Vessel, all sums payable or which may become
payable to us or to our order under or pursuant to the Building Contract and all
damages and other payments (whether awarded by arbitral tribunal or by agreement
or otherwise) for breach, termination or variation of the Building Contract
(collectively the “Building
Contract Rights”).

     

    Without
prejudice to your rights, benefits and remedies under the Building Contract we
irrevocably and absolutely authorize and instruct you:-

     

    
      	
              (i)

            	
              to
      hold the Vessel (as defined in the Building Contract) to the order of the
      Assignee;

            


    

     

    
      	
              (ii)

            	
              to
      deliver to or to the order of the Assignee the Builder’s Certificate and
      any other document of title to the
Vessel;

            


    

     

    
      	
              (iii)

            	
              to
      pay to the Assignee all sums which you may become due to pay to us or to
      our order forming part of the Building Contract
  Rights.

            


    

     

    Notwithstanding
the Assignment, we hereby irrevocably and unconditionally assure and undertake
to you that (a) we will continue to be responsible to you for performance of all
the obligations of the Buyer under the Building Contract in accordance with the
terms and conditions therein, including but not limited to the supervision and
technical management of the construction of the Vessel and the full payment of
the contract price of the Vessel; (b) your rights and benefits and interests
under the Building Contract will not in any event be affected or prejudiced; (c)
this assignment will not impose on you any further additional obligations or
liabilities other than those expressly set forth in the Building Contract; and
(d) any cost, expenses and charges, or loss of time incurred in or in connection
with this assignment shall be on our account.

     

    Please
note that:

     

    
      	
              (i)

            	
              nothing
      in this notice nor in the Assignment should be interpreted as imposing any
      obligation on the Assignee to you in respect of or relating to the
      Building Contract or the Building Contract
  Rights;

            


    

     

    
      	
              (ii)

            	
              unless
      and until you receive written notice from the Assignee to the contrary,
      you should continue to deal with us in relation to the supervision of the
      construction of the Vessel and the performance of our obligations under or
      pursuant to the Building Contract;

            


    

     

    
      	
              (iii)

            	
              the
      Building Contract may not be substantially altered, amended or
      supplemented, nor may we waive performance of any of your obligations
      under or pursuant to the Building Contract, without in each case the prior
      written consent of the Assignee;

            


    

     

    
      	
              (iv)

            	
              without
      the prior written consent of the Assignee, we may have the rights to agree
      and give consents for changes to the Specifications for the purpose of
      changing technical aspects of the construction of the Vessel which do not
      change the main characteristics of the Vessel.  Such agreement
      or consent given by us shall be legally binding upon the Assignee even if
      these affect the contract price or scheduled delivery of the Vessel, until
      such time as the Assignee gives you written notice that the security of
      the Assignment has become enforceable, after which we shall cease to be
      able to exercise even these rights;
and

            


    

     

    
      	
              (v)

            	
              we
      may not exercise any right or purported right which we may have to
      terminate the Building Contract without the prior written consent of the
      Assignee.

            


    

     

    We hereby
undertake to procure a written consent in the form attached in the Appendix
hereto from The Royal Bank of Scotland plc acting through the Shipping Business
Centre, 5-10 Great Tower Street, London EC3P 311X (the “Payment Guarantor”) who will
issue or has issued the Payment Guarantee as defined in the Building
Contract.

     

    We
further confirm to you that your acknowledgement of and consent to the
assignment as set forth herein shall not become effective until your receipt of
the aforesaid statement from the Payment Guarantor.

     

    The
authority and instructions contained in this notice may not be varied or revoked
without the prior written consent of the Assignee.

     

    Kindly
acknowledge receipt of this notice by completing the acknowledgment in the form
set out below on the two enclosed copies of this notice and forwarding one copy
to us and the other to the Assignee.

     

    This
Notice is governed by the Laws of England.

     

    
      	
              Signed.

            	 	 


    

     

    
      	
               
      

            	
              For
      and on behalf of

            


    

     

    
      	
               
      

            	
              [l]

            


    

     

    Dated                                  2007

     

    Confirmed
and acknowledged by

     

    


     

    for and
on behalf of

     

    The Royal Bank of Scotland
plc

     

    (the
Assignee)

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


     APPENDIX
I

    


    PART
II

    


    ACKNOWLEDGEMENT
BY THE SELLER

     

    
      	
              To:

            	
              [l]

            


    

     

    
      	
               
      

            	
              and

            


    

     

    
      	
               
      

            	
              THE
      ROYAL BANK OF SCOTLAND plc

            


    

     

    We
acknowledge receipt of the notice set out above and confirm our consent to the
assignment referred to in that notice.  We also agree to comply in all
respects with the instructions contained in that notice.

     

    We
confirm that we have received no notice of any previous assignment of, or other
third party right affecting, any of the Building Contract Rights, and we
undertake:

     

    
      	
              (i)

            	
              to
      inform the Assignee in writing should any default be made by [l]
      in the payment of any sum due to us under or in connection with the
      Building Contract or should there occur any default or other event as a
      result of which we claim to be entitled to terminate or cancel the
      Building Contract; and

            


    

     

    
      	
              (ii)

            	
              that
      before exercising any right to terminate or cancel the Building Contract,
      we will give to the Assignee at least fourteen days’ written notice of our
      intention to do so and the opportunity during that period to rectify any
      default.

            


    

     

    This
acknowledgement shall not become effective until our receipt of a written
statement from the Payment Guarantor in the form attached in the Appendix
hereto.

     

    Furthermore,
all our rights, benefits and remedies under the Building Contract (whether in
respect of the right to terminate the Building Contract, sale of the Vessel,
retaining proceeds following any Buyer’s default, all as described in detail in
Article XI of the Building Contract) shall not be prejudiced or diminished in
any respect whatsoever on account of the assignment.

     

    This
acknowledgement is governed by the laws of England.

     

    
      	
              Signed.

            	 	 


    

     

    
      	
               
      

            	
              For
      and on behalf of

            


    

     

    
      	
               
      

            	
              China
      Communications Construction Company
Ltd

            


    

     

    
      	
              Signed.

            	 	 


    

     

    
      	
               
      

            	
              For
      and on behalf of

            


    

     

    
      	
               
      

            	
              Nantong
      Yahua Shipbuilding Co. Ltd.

            


    

     

    Dated                                2007

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    APPENDIX

     

    Letterhead
of The Royal Bank of Scotland plc (Payment Guarantor)

     

    
      	
               
      

            	
              To:

            	
              (1)

            	
              China
      Communications Construction Company
Ltd

            


    

     

    
      	
               
      

            	
              No.
      C88, An Ding Men Wai Street

            


    

     

    
      	
               
      

            	
              Beijing

            


    

     

    
      	
               
      

            	
              10011

            


    

     

    
      	
               
      

            	
              The
      People’s Republic of China

            


    

     

    
      	
               
      

            	
              (2)

            	
              Nantong
      Yahua Shipbuilding Co. Ltd.

            


    

     

    
      	
               
      

            	
              1#
      Hongzha Road

            


    

     

    
      	
               
      

            	
              Jinweigang

            


    

     

    
      	
               
      

            	
              Nantong-Jiangsu

            


    

     

    
      	
               
      

            	
              P.C.
      226361

            


    

     

    
      	
               
      

            	
              The
      People’s Republic of China

            


    

     

    
      	
              cc:

            	
              [Refund
      Guarantor]

            


    

     

    Date:                           2007

     

    Dear
Sirs,

     

    Re:
Our Payment Guarantee
No.                                                                      

     

    We refer
to our Letter of Guarantee No. __________ (“Payment Guarantee”) issued in
favour of China Communications Construction Company Ltd and Nantong Yahua
Shipbuilding Co. Ltd. (together the “Seller”) under a Shipbuilding
Contract dated 24 February 2007 (as supplemented and/or amended from time to
time, the “Contract”) in
respect of Hull No. [l]
between the Seller and [l]
(the “Buyer”).

     

    We
acknowledge our receipt of the Notice of Assignment issued by the Buyer advising
of the assignment deed (the “Assignment”) dated [l]
2007, by which the Buyer has assigned all its rights and benefits to The Royal
Bank of Scotland plc acting through its office at Shipping Business Centre, 5-10
Great Tower Street, London EC3P 3HX (“Assignee”).

     

    We hereby
give our consent to and agree with the Assignment as set out above.

     

    We
confirm that notwithstanding the Assignment as set out in the Assignment, the
Payment Guarantee remains valid in favour of you and binding on ourselves in all
respects.

     

    
      	
              Signed:

            	 	 


    

     

    
      	
               
      

            	
              For
      and on behalf of

            


    

     

    
      	
               
      

            	
              The
      Royal Bank of Scotland plc

            


    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    APPENDIX
I

    


    PART
III

    


    NOTICE
OF ASSIGNMENT TO REFUND GUARANTOR

     

    
      	
              To:

            	
              Bank
      of Communications

            


    

     

    
      	
               
      

            	
              Beijing
      Branch

            


    

     

    March
2007

     

    Dear
Sirs

     

    Guarantee number [l]
dated                                                                           March 2007

     

    Please
note that, by a Predelivery Security Assignment dated March 2007 (the “Security Assignment”), we
assigned irrevocably and absolutely to THE ROYAL BANK OF SCOTLAND plc (the “Bank”) all our interests and
rights except the right for making demand which shall remain with ourselves
under, in or in connection with a guarantee dated March 2007 and given by you to
ourselves in connection with a shipbuilding contract dated 24 February 2007 (as
supplemented and/or amended from time to time, the “Shipbuilding Contract”) and
entered into by ourselves with China Communications Construction Company Ltd and
Nantong Yahua Shipbuilding Co. Ltd. (together the “Seller”) in respect of Hull
No. NYHS[l], as
that guarantee may from time to time be varied, supplemented or replaced (the
“Refund
Guarantee”).

     

    We
irrevocably and absolutely authorise and instruct you to pay to the Bank all
sums, which you may become due to pay to us or to our order in connection with
the Refund Guarantee provided that such sum becomes repayable in accordance with
the terms of the Shipbuilding Contract.

     

    Please
note that :

     

    
      	
              (a)

            	
              nothing
      in this notice nor in the Security Assignment should be interpreted as
      imposing any obligation on the Bank to you in respect of or relating to
      the Refund Guarantee;

            


    

     

    
      	
              (b)

            	
              the
      Refund Guarantee and instructions herein contained may not be altered,
      amended or supplemented without the prior written consent of the
      Bank;

            


    

     

    
      	
              (c)

            	
              we
      may not make any demand for payment under the Refund Guarantee without the
      prior written consent of the Bank;

            


    

     

    The
authority and instructions contained in this notice may not be varied or revoked
without the prior written consent of the Bank.

     

    This
notice is governed by the laws of England.

     

    We
request you to issue to the Bank a Refund Guarantor’s Acknowledgement in the
form below.

     

    Yours
faithfully

     

    


     

    for and
on behalf of

     

    [l] MARITIME
CORP.

     

    Dated:                                March
2007

     

    Confirmed
and acknowledged by

     

    


     

    for and
on behalf of

     

    The
Royal Bank of Scotland plc

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


     APPENDIX
I

    


    PART
IV

    


    REFUND
GUARANTOR’S ACKNOWLEDGEMENT

     

    
      	
              To:

            	
              THE
      ROYAL BANK OF SCOTLAND plc

            


    

     

    
      	
               
      

            	
              Shipping
      Business Centre

            


    

     

    
      	
               
      

            	
              5-10
      Great Tower Street

            


    

     

    
      	
               
      

            	
              London

            


    

     

    
      	
               
      

            	
              EC3P
      3HX

            


    

     

    March
2007

     

    Dear
Sirs

     

    [l] MARITIME CORP. (the
“Company”)

     

    We
acknowledge receipt of a Notice of Assignment to Refund Guarantor from the
Company dated
             
March 2007 which notified us that the Company has authorized you to receive
interests and rights except the right for making demand which shall remain with
the Company under or in connection with a guarantee dated
             
March 2007 issued by us in respect of a shipbuilding contract (as supplemented
and/or amended from time to time, the “Shipbuilding Contract”)
entered into by the Company with China Communications Construction Company Ltd
and Nantong Yahua Shipbuilding Co. Ltd. (together the “Seller”) in respect of Hull
No. NYHS[l],
which guarantee as from time to time varied, supplemented or replaced is
referred to below as the “Refund
Guarantee”.

     

    We hereby
give our consent to the Notice of Assignment and agree that all sums which
become due and payable under the Refund Guarantee in accordance with the terms
and conditions of the Shipbuilding Contract shall be paid to you upon our
receipt of the Company’s demand in accordance with the terms of the Refund
Guarantee.

     

    This
acknowledgement shall not become effective until the Seller’s receipt of the 1st
instalment of the contract price payable under the Shipbuilding Contract and a
written statement from the Payment Guarantor in the form set out in the Appendix
hereto.

     

    We
confirm that no consents, authorisations or permissions are required from any
authority, person or body in the People’s Republic of China to enable us to
effect payment under the Refund Guarantee to the Bank.

     

    Yours
faithfully

     

    


     

    for and
on behalf of

     

    BANK
OF COMMUNICATIONS, BEIJING BRANCH

     

    Dated:                                      2007

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    APPENDIX

     

    Letterhead
of The Royal Bank of Scotland plc (Payment Guarantor)

     

    
      	
               
      

            	
              To:

            	
              (1)

            	
              China
      Communications Construction Company
Ltd

            


    

     

    
      	
               
      

            	
              No.
      C88, An Ding Men Wai Street

            


    

     

    
      	
               
      

            	
              Beijing

            


    

     

    
      	
               
      

            	
              10011

            


    

     

    
      	
               
      

            	
              The
      People’s Republic of China

            


    

     

    
      	
               
      

            	
              (2)

            	
              Nantong
      Yahua Shipbuilding Co. Ltd. 1# Hongzha
Road

            


    

     

    
      	
               
      

            	
              Jinweigang

            


    

     

    
      	
               
      

            	
              Nantong-Jiangsu

            


    

     

    
      	
               
      

            	
              P.C.
      226361

            


    

     

    
      	
               
      

            	
              The
      People’s Republic of China

            


    

     

    
      	
              cc:

            	
              Bank
      of Communications

            


    

     

    
      	
               
      

            	
              Beijing
      Branch

            


    

     

    Date:                           2007

     

    Dear
Sirs,

     

    Re:
Our Payment Guarantee
No.                                                                      

     

    We refer
to our Letter of Guarantee No. __________ (“Payment Guarantee”) issued in
favour of China Communications Construction Company Ltd and Nantong Yahua
Shipbuilding Co. Ltd. (together “Seller”) under a Shipbuilding
Contract dated 24 February 2007 (as supplemented and/or amended from time to
time, the “Contract”) in
respect of Hull No. NYHS[l]
between the Seller and [l]
Maritime Corp. (the “Buyer”).

     

    We
acknowledge our receipt of the Notice of Assignment issued by the Buyer advising
of the assignment deed (the “Assignment”) dated March
2007, by which the Buyer has assigned all its rights and benefits to The Royal
Bank of Scotland plc acting through its office at Shipping Business Centre, 5-10
Great Tower Street, London EC3P 3HX (“Assignee”).

     

    We hereby
give our consent to and agree with the Assignment as set out above.

     

    We
confirm that notwithstanding the Assignment as set out in the Assignment, the
Payment Guarantee remains valid in favour of you and binding on ourselves in all
respects.

     

    
      	
              Signed:

            	 	 


    

     

    
      	
               
      

            	
              For
      and on behalf of

            


    

     

    
      	
               
      

            	
              The
      Royal Bank of Scotland plc

            


    

     

    


    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

     

    
      APPENDIX
B

    

    
      FORM
OF CORPORATE GUARANTEE

    

    


    
      
      

    

     

    Date
[l]
2007

     

    TBS
INTERNATIONAL LIMITED

     

    as
Guarantor

     

    -and-

     

    THE
ROYAL BANK OF SCOTLAND plc

     

    as
Issuer

    
      


       

      GUARANTEE

    

     

    relating
to a Guarantee Facility Agreement

     

    dated
[l]
2007

    


    
      
        
          
            Watson,
Farley & Williams

            London

          

           


        

        
           


          
            

          

        

        
           


        

      

    

    


    INDEX

     

    Clause Page

     

     

    1           INTERPRETATION [INSERT PAGE NUMBER]

     

    2           GUARANTEE [INSERT PAGE NUMBER]

     

    3           LIABILITY AS PRINCIPAL AND INDEPENDENT
DEBTOR[INSERT PAGE NUMBER]

     

    4           EXPENSES [INSERT PAGE NUMBER]

     

    5           ADJUSTMENT OF
TRANSACTIONS [INSERT PAGE
NUMBER]

     

    6           PAYMENTS [INSERT PAGE NUMBER]

     

    7           INTEREST [INSERT PAGE NUMBER]

     

    8           SUBORDINATION [INSERT PAGE NUMBER]

     

    9           ENFORCEMENT [INSERT PAGE NUMBER]

     

    10           REPRESENTATIONS AND
WARRANTIES [INSERT PAGE
NUMBER]

     

    11           UNDERTAKINGS [INSERT PAGE NUMBER]

     

    12           JUDGMENTS AND CURRENCY
INDEMNITY [INSERT PAGE
NUMBER]

     

    13           SET-OFF [INSERT PAGE NUMBER]

     

    14           SUPPLEMENTAL [INSERT PAGE NUMBER]

     

    15           ASSIGNMENT [INSERT PAGE NUMBER]

     

    16           NOTICES [INSERT PAGE NUMBER]

     

    17           INVALIDITY OF GUARANTEE FACILITY
AGREEMENT[INSERT PAGE NUMBER]

     

    18           GOVERNING LAW AND
JURISDICTION [INSERT PAGE
NUMBER]

     

    EXECUTION
PAGE [INSERT PAGE NUMBER]

     

    


    


    
      
        
          
             
RBS Guarantee (2).doc


          

           


        

        
           


          
            

          

        

        
           


        

      

    

    


    THIS
GUARANTEE is made on [l]

     

    BETWEEN

     

    
      	
              (1)

            	
              TBS INTERNATIONAL
      LIMITED, a company incorporated in Bermuda whose principal office
      is at Suite 306, Commerce Building, One Chancery Lane, Hamilton HM12,
      Bermuda (the “Guarantor”);
      and

            


    

     

    
      	
              (2)

            	
              THE ROYAL BANK OF SCOTLAND
      plc, a company incorporated in Scotland, acting through its office
      at Shipping Business Centre, 5-10 Great Tower Street, London EC3P 3HX (the
      “Issuer”, which
      expression includes its successors and
assigns).

            


    

     

    BACKGROUND

     

    
      	
              (A)

            	
              By
      a guarantee facility agreement dated [l]
      2007 and made between (i) Argyle Maritime Corp., Caton Maritime Corp.,
      Dorchester Maritime Corp., Longwoods Maritime Corp., McHenry Maritime
      Corp. and Sunswyck Maritime Corp. as joint and several Obligors and (ii)
      the Issuer it was agreed that the Issuer would make available to the
      Obligors a guarantee facility of up to
  US$84,000,000.

            


    

     

    
      	
              (B)

            	
              The
      execution and delivery to the Issuer of this Guarantee is one of the
      conditions precedent to the availability of the guarantee facility under
      the said Guarantee Facility
Agreement.

            


    

     

    IT IS AGREED as
follows:

     

    
      	
              1  

            	
              INTERPRETATION

            


    

     

    
      	
              1.1  

            	
              Defined
      expressions.

            


    

     

      Words
and expressions defined in the Guarantee Facility Agreement shall have the same
meanings when used in this Guarantee unless the context otherwise
requires.

     

    
      	
              1.2  

            	
              Construction
      of certain terms.

            


    

     

      In
this Guarantee:

     

    “bankruptcy” includes a
liquidation, receivership or administration and any form of suspension of
payments, arrangement with creditors or reorganisation under any corporate or
insolvency law of any country;

     

    “Guarantee Facility Agreement”
means the guarantee facility agreement referred to in Recital (A) and includes
any existing or future amendments or supplements, whether made with the
Guarantor’s consent or otherwise.

     

    
      	
              1.3  

            	
              Application
      of construction and interpretation provisions of Guarantee Facility
      Agreement.

            


    

     

      Clause
1.2 and 1.5 of the Guarantee Facility Agreement apply, with any necessary
modifications, to this Guarantee.

     

    
      	
              2  

            	
              GUARANTEE

            


    

     

    
      	
              2.1  

            	
              Guarantee
      and indemnity.

            


    

     

      The
Guarantor unconditionally and irrevocably:

     

    
      	
              (a)  

            	
              guarantees
      the due payment of all amounts payable by the Obligors under or in
      connection with the Guarantee Facility Agreement and every other Finance
      Document;

            


    

     

    
      	
              (b)  

            	
              undertakes
      to pay to the Issuer, on the Issuer’s demand, any such amount which is not
      paid by the Obligors when due and payable;
and

            


    

     

    
      	
              (c)  

            	
              fully
      indemnifies the Issuer on its demand in respect of all claims, expenses,
      liabilities and losses which are made or brought against or incurred by
      the Issuer as a result of or in connection with any obligation or
      liability guaranteed by the Guarantor being or becoming unenforceable,
      invalid, void or illegal; and the amount recoverable under this indemnity
      shall be equal to the amount which the Issuer would otherwise have been
      entitled to recover.

            


    

     

    
      	
              2.2  

            	
              No
      limit on number of demands.

            


    

     

      The
Issuer may serve more than one demand under Clause 2.1.

     

    
      	
              3  

            	
              LIABILITY
      AS PRINCIPAL AND INDEPENDENT DEBTOR

            


    

     

    
      	
              3.1  

            	
              Principal
      and independent debtor.

            


    

     

      The
Guarantor shall be liable under this Guarantee as a principal and independent
debtor and accordingly it shall not have, as regards this Guarantee, any of the
rights or defences of a surety.

     

    
      	
              3.2  

            	
              Waiver
      of rights and defences.

            


    

     

      Without
limiting the generality of Clause 3.1, the Guarantor shall neither be discharged
by, nor have any claim against the Issuer in respect of:

     

    
      	
              (a)  

            	
              any
      amendment or supplement being made to the Finance
    Documents;

            


    

     

    
      	
              (b)  

            	
              any
      arrangement or concession (including a rescheduling or acceptance of
      partial payments) relating to, or affecting, the Finance
      Documents;

            


    

     

    
      	
              (c)  

            	
              any
      release or loss (even though negligent) of any right or Security Interest
      created by the Finance Documents;

            


    

     

    
      	
              (d)  

            	
              any
      failure (even though negligent) promptly or properly to exercise or
      enforce any such right or Security Interest, including a failure to
      realise for its full market value an asset covered by such a Security
      Interest; or

            


    

     

    
      	
              (e)  

            	
              any
      other Finance Document or any Security Interest now being or later
      becoming void, unenforceable, illegal or invalid or otherwise defective
      for any reason, including a neglect to register
  it.

            


    

     

    
      	
              4  

            	
              EXPENSES

            


    

     

    
      	
              4.1  

            	
              Costs
      of preservation of rights, enforcement
etc.

            


    

     

      The
Guarantor shall pay to the Issuer on its demand the amount of all expenses
incurred by the Issuer in connection with any matter arising out of this
Guarantee, including any advice, claim or proceedings relating to this
Guarantee.

     

    
      	
              4.2  

            	
              Fees
      and expenses payable under Guarantee Facility
  Agreement.

            


    

     

      Clause
4.1 is without prejudice to the Guarantor’s liabilities in respect of the
Obligors’ obligations under clause 14 of the Guarantee Facility Agreement (fees
and expenses) and under similar provisions of other Finance
Documents.

     

    
      	
              5  

            	
              ADJUSTMENT
      OF TRANSACTIONS

            


    

     

    
      	
              5.1  

            	
              Reinstatement
      of obligation to pay.

            


    

     

      The
Guarantor shall pay to the Issuer on its demand any amount which the Issuer is
required, or agrees, to pay pursuant to any claim by, or settlement with, a
trustee in bankruptcy of an Obligor or of another Security Party (or similar
person) on the ground that the Guarantee Facility Agreement, or a payment by an
Obligor or of another Security Party, was invalid or on any similar
ground.

     

    
      	
              6  

            	
              PAYMENTS

            


    

     

    
      	
              6.1  

            	
              Method
      of payments.

            


    

     

      Any
amount due under this Guarantee shall be paid:

     

    
      	
              (a)  

            	
              in
      immediately available funds;

            


    

     

    
      	
              (b)  

            	
              to
      such account as the Issuer may from time to time notify to the
      Guarantor;

            


    

     

    
      	
              (c)  

            	
              without
      any form of set-off, cross-claim or condition;
  and

            


    

     

    
      	
              (d)  

            	
              free
      and clear of any tax deduction except a tax deduction which the Guarantor
      is required by law to make.

            


    

     

    
      	
              6.2  

            	
              Grossing-up
      for taxes.

            


    

     

      If
the Guarantor is required by law to make a tax deduction, the amount due to the
Issuer shall be increased by the amount necessary to ensure that the Issuer
receives and retains a net amount which, after the tax deduction, is equal to
the full amount that it would otherwise have received.

     

    
      	
              6.3  

            	
              Tax
      Credits.

            


    

     

      The
provisions of Clause 16.4 of the Guarantee Facility Agreement shall apply to
this Guarantee and in relation to any increased payments made by the Guarantor
under Clause 6.2 as if the same were set out in full herein with the necessary
changes.

     

    
      	
              7  

            	
              INTEREST

            


    

     

    
      	
              7.1  

            	
              Accrual
      of interest.

            


    

     

      Any
amount due under this Guarantee shall carry interest after the second Business
Day following the date on which the Issuer demands payment of it until it is
actually paid, unless interest on that same amount also accrues under the
Guarantee Facility Agreement.

     

    
      	
              7.2  

            	
              Calculation
      of interest.

            


    

     

      Interest
under this Guarantee shall be calculated and accrue in the same way as interest
under clause 6 of the Guarantee Facility Agreement.

     

    
      	
              7.3  

            	
              Guarantee
      extends to interest payable under Guarantee Facility
      Agreement.

            


    

     

      For
the avoidance of doubt, it is confirmed that this Guarantee covers all interest
payable under the Guarantee Facility Agreement, including that payable under
clause 6 of the Guarantee Facility Agreement.

     

    
      	
              8  

            	
              SUBORDINATION

            


    

     

    
      	
              8.1  

            	
              Subordination
      of rights of Guarantor.

            


    

     

      All
rights which the Guarantor at any time has (whether in respect of this Guarantee
or any other transaction) against an Obligor, any other Security Party or their
respective assets shall be fully subordinated to the rights of the Issuer under
the Finance Documents; and in particular, the Guarantor shall not:

     

    
      	
              (a)  

            	
              claim,
      or in a bankruptcy of any Obligor or any other Security Party prove for,
      any amount payable to the Guarantor by an Obligor or any other Security
      Party, whether in respect of this Guarantee or any other
      transaction;

            


    

     

    
      	
              (b)  

            	
              take
      or enforce any Security Interest for any such
  amount;

            


    

     

    
      	
              (c)  

            	
              claim
      to set-off any such amount against any amount payable by the Guarantor to
      an Obligor or any other Security Party;
or

            


    

     

    
      	
              (d)  

            	
              claim
      any subrogation or other right in respect of any Finance Document or any
      sum received or recovered by the Issuer under a Finance
      Document.

            


    

     

    
      	
              9  

            	
              ENFORCEMENT

            


    

     

    
      	
              9.1  

            	
              No
      requirement to commence proceedings against
  Obligors.

            


    

     

      The
Issuer will not need to commence any proceedings under, or enforce any Security
Interest created by, the Guarantee Facility Agreement or any other Finance
Document before claiming or commencing proceedings under this
Guarantee.

     

    
      	
              9.2  

            	
              Conclusive
      evidence of certain matters.

            


    

     

      However,
as against the Guarantor:

     

    
      	
              (a)  

            	
              any
      judgment or order of a court in England or the Marshall Islands in
      connection with the Guarantee Facility Agreement;
  and

            


    

     

    
      	
              (b)  

            	
              any
      statement or admission of an Obligor in connection with the Guarantee
      Facility Agreement,

            


    

     

    shall be
binding and conclusive as to all matters of fact and law to which it
relates.

     

    
      	
              9.3  

            	
              Suspense
      account.

            


    

     

      The
Issuer may, for the purpose of claiming or proving in a bankruptcy of an Obligor
or any other Security Party, place any sum received or recovered under or by
virtue of this Guarantee on a separate suspense or other interest bearing
nominal account without applying it in satisfaction of the Obligors’ obligations
under the Guarantee Facility Agreement.

     

    
      	
              10  

            	
              REPRESENTATIONS
      AND WARRANTIES

            


    

     

    
      	
              10.1  

            	
              General.

            


    

     

      The
Guarantor represents and warrants to the Issuer as follows.

     

    
      	
              10.2  

            	
              Status.

            


    

     

      The
Guarantor is duly incorporated and validly existing and in good standing under
the laws of Bermuda.

     

    
      	
              10.3  

            	
              Corporate
      power.

            


    

     

      The
Guarantor has the corporate capacity, and has taken all corporate action and
obtained all consents necessary for it:

     

    
      	
              (a)  

            	
              to
      execute this Guarantee; and

            


    

     

    
      	
              (b)  

            	
              to
      make all the payments contemplated by, and to comply with this
      Guarantee.

            


    

     

    
      	
              10.4  

            	
              Consents
      in force.

            


    

     

      All
the consents referred to in Clause 10.3 remain in force and nothing to the best
of the Guarantor’s knowledge and belief has occurred which makes any of them
liable to revocation.

     

    
      	
              10.5  

            	
              Legal
      validity.

            


    

     

      This
Guarantee constitutes the Guarantor’s legal, valid and binding obligations
enforceable against the Guarantor in accordance with its terms subject to any
relevant insolvency laws affecting creditors’ rights generally and subject to
any qualifications as to matters of law which are specifically referred to in
any legal opinion delivered to the Agent pursuant to Schedule 2 of the Guarantee
Facility Agreement.

     

    
      	
              10.6  

            	
              No
      conflicts.

            


    

     

      The
execution by the Guarantor of this Guarantee and its compliance with this
Guarantee to which it is a party will not involve or lead to a contravention
of

     

    
      	
              (a)  

            	
              any
      law or regulation in force at the date of this Guarantee;
    or

            


    

     

    
      	
              (b)  

            	
              the
      constitutional documents of the Guarantor;
or

            


    

     

    
      	
              (c)  

            	
              any
      contractual or other obligation or restriction which is binding on the
      Guarantor or any of its assets.

            


    

     

    
      	
              10.7  

            	
              No
      withholding taxes.

            


    

     

      No
tax is imposed in any jurisdiction in which the Guarantor is ordinarily resident
for tax by way of withholding or deduction on any payment to be made under this
Guarantee.

     

    
      	
              10.8  

            	
              No
      default.

            


    

     

      To
the knowledge of the Guarantor, no Event of Default or Potential Event of
Default has occurred and is continuing.

     

    
      	
              10.9  

            	
              Information.

            


    

     

      All
information which has been provided in writing by or on behalf of the Guarantor
to the Issuer in connection with any Finance Document was to the best of the
Guarantor’s knowledge and belief true and not misleading as at the time it was
given; all audited and unaudited accounts which have been so provided satisfied
the requirements of Clause 11.4; and there has been no material adverse change
in the financial position or state of affairs of the Guarantor from that
disclosed in the latest of those accounts.

     

    
      	
              10.10  

            	
              No
      litigation.

            


    

     

      No
legal or administrative action involving the Guarantor has been commenced or
taken or, to the Guarantor’s knowledge, is likely to be commenced or taken
which, in either case, would be likely to have a material adverse effect on the
Guarantor’s financial position or profitability.

     

    
      	
              11  

            	
              UNDERTAKINGS

            


    

     

    
      	
              11.1  

            	
              General.

            


    

     

      The
Guarantor undertakes with the Issuer to comply with the following provisions of
this Clause 11 at all times during the Security Period, except as the Issuer may
otherwise permit.

     

    
      	
              11.2  

            	
              Information
      provided to be accurate.

            


    

     

      All
financial and other information which is provided in writing by or on behalf of
the Guarantor under or in connection with this Guarantee will, to the best of
the Guarantor’s knowledge and belief, be true and not misleading and will not
omit any material fact or consideration which, if disclosed, would reasonably be
expected to adversely affect the decision of a person considering whether to
enter into the Guarantee Facility Agreement.

     

    
      	
              11.3  

            	
              Provision
      of financial statements.

            


    

     

      The
Guarantor will send to the Issuer:

     

    
      	
              (a)  

            	
              as
      soon as possible, but in no event later than 120 days after the end of
      each financial year of the Guarantor, the annual audited accounts of the
      Guarantor and its consolidated subsidiaries;
and

            


    

     

    
      	
              (b)  

            	
              as
      soon as possible, but in no event later than 30 days after the end of each
      quarter in each financial year of the Guarantor the unaudited consolidated
      accounts of the Guarantor and its consolidated subsidiaries which are
      certified as to their correctness by its chief financial
      officer.

            


    

     

    
      	
              11.4  

            	
              Form
      of financial statements.

            


    

     

      All
accounts (audited and unaudited) delivered under Clause 11.3 will:

     

    
      	
              (a)  

            	
              be
      prepared in accordance with all applicable laws and generally accepted
      accounting principles of the U.S.A. consistently
  applied;

            


    

     

    
      	
              (b)  

            	
              give
      a true and fair view of the financial condition of the Guarantor and its
      subsidiaries at the date of those accounts and of their profit for the
      period to which those accounts relate;
and

            


    

     

    
      	
              (c)  

            	
              fully
      disclose or provide for all significant liabilities of the Guarantor and
      its subsidiaries.

            


    

     

    
      	
              11.5  

            	
              Shareholder
      and creditor notices.

            


    

     

      The
Guarantor will send the Issuer, at the same time as they are despatched, copies
of all communications which are despatched to the Guarantor’s shareholders or
creditors or any class of them.

     

    
      	
              11.6  

            	
              Consents.

            


    

     

      The
Guarantor will maintain in force and promptly obtain or renew, and will promptly
send certified copies to the Issuer of, all consents required:

     

    
      	
              (a)  

            	
              for
      the Guarantor to perform its obligations under this
    Guarantee;

            


    

     

    
      	
              (b)  

            	
              for
      the validity or enforceability of this
  Guarantee;

            


    

     

    and the
Guarantor will comply with the terms of all such consents.

     

    
      	
              11.7  

            	
              Further
      assurance.

            


    

     

      The
Guarantor will:

     

    
      	
              (a)  

            	
              at
      its own cost, do all that it reasonably can to ensure that this Guarantee
      validly creates the obligations which it purports to create;
      and

            


    

     

    
      	
              (b)  

            	
              without
      limiting the generality of paragraph (a) above, at its own cost, promptly
      register, file, record or enrol this Guarantee with any applicable court
      or authority, pay any applicable stamp, registration or similar tax in
      respect of this Guarantee, give any notice or take any other step which
      may be or become necessary or desirable for this Guarantee to be valid,
      enforceable or admissible in
evidence.

            


    

     

    
      	
              11.8  

            	
              Notification
      of litigation.

            


    

     

      The
Guarantor will provide the Issuer with details of any legal or administrative
action involving the Guarantor promptly upon becoming aware of the same where
such legal or administrative action might, if adversely determined, have a
material adverse effect on the ability of the Guarantor to perform its
obligations under this Guarantee.

     

    
      	
              11.9  

            	
              Notification
      of default.

            


    

     

      The
Guarantor will notify the Issuer as soon as the Guarantor becomes aware
of:

     

    
      	
              (a)  

            	
              the
      occurrence of an Event of Default or a Potential Event of Default;
      or

            


    

     

    
      	
              (b)  

            	
              any
      matter which indicates that an Event of Default or a Potential Event of
      Default may have occurred and is
continuing;

            


    

     

    and will
thereafter keep the Issuer fully up-to-date with all developments.

     

    
      	
              11.10  

            	
              Maintenance
      of status.

            


    

     

      The
Guarantor will maintain its separate corporate existence and remain in good
standing under the laws of Bermuda.

     

    
      	
              11.11  

            	
              No
      disposal of assets, change of
business.

            


    

     

      The
Guarantor will not:

     

    
      	
              (a)  

            	
              transfer,
      lease or otherwise dispose of all or a substantial part of its assets,
      whether by one transaction or a number of transactions, whether related or
      not except in the usual course of its trading operations;
    or

            


    

     

    
      	
              (b)  

            	
              make
      any substantial change to the nature of its business from that existing at
      the date of this Guarantee.

            


    

     

    
      	
              11.12  

            	
              No
      merger etc.

            


    

     

      The
Guarantor shall not, and shall procure that none of its subsidiaries will, enter
into any form of merger, sub-division, amalgamation or other
reorganisation.

     

    
      	
              11.13  

            	
              Chief
      Executive Office.

            


    

     

      The
Guarantor will maintain is chief executive office, and keep its corporate
documents and records, at Suite 306, Commerce Building, One Chancery Lane,
Hamilton HM12, Bermuda.

     

    
      	
              12  

            	
              JUDGMENTS
      AND CURRENCY INDEMNITY

            


    

     

    
      	
              12.1  

            	
              Judgments
      relating to Guarantee Facility
Agreement.

            


    

     

      This
Guarantee shall cover any amount payable by the Obligors under or in connection
with any judgment relating to the Guarantee Facility Agreement.

     

    
      	
              12.2  

            	
              Currency
      indemnity.

            


    

     

      In
addition, clause 15.4 (currency indemnity) of the Guarantee Facility Agreement
shall apply, with any necessary adaptations, in relation to this
Guarantee.

     

    
      	
              13  

            	
              SET-OFF

            


    

     

    
      	
              13.1  

            	
              Application
      of credit balances.

            


    

     

      The
Issuer may without prior notice following the occurrence of an Event of Default
which is continuing:

     

    
      	
              (a)  

            	
              apply
      any balance (whether or not then due) which at any time stands to the
      credit of any account in the name of the Guarantor at any office in any
      country of the Issuer in or towards satisfaction of any sum then due from
      the Guarantor to the Issuer under this Guarantee;
  and

            


    

     

    
      	
              (b)  

            	
              for
      that purpose:

            


    

     

    
      	
              (i)  

            	
              break,
      or alter the maturity of, all or any part of a deposit of the
      Guarantor;

            


    

     

    
      	
              (ii)  

            	
              convert
      or translate all or any part of a deposit or other credit balance into
      Dollars;

            


    

     

    
      	
              (iii)  

            	
              enter
      into any other transaction or make any entry with regard to the credit
      balance which the Issuer considers
appropriate.

            


    

     

    
      	
              13.2  

            	
              Existing
      rights unaffected.

            


    

     

      The
Issuer shall not be obliged to exercise any of its rights under Clause 13.1; and
those rights shall be without prejudice and in addition to any right of set-off,
combination of accounts, charge, lien or other right or remedy to which the
Issuer is entitled (whether under the general law or any document).

     

    
      	
              14  

            	
              SUPPLEMENTAL

            


    

     

    
      	
              14.1  

            	
              Continuing
      guarantee.

            


    

     

      This
Guarantee shall remain in force as a continuing security at all times during the
Security Period.

     

    
      	
              14.2  

            	
              Rights
      cumulative, non-exclusive.

            


    

     

      The
Issuer’s rights under and in connection with this Guarantee are cumulative, may
be exercised as often as appears expedient and shall not be taken to exclude or
limit any right or remedy conferred by law.

     

    
      	
              14.3  

            	
              No
      impairment of rights under
Guarantee.

            


    

     

      If
the Issuer omits to exercise, delays in exercising or invalidly exercises any of
its rights under this Guarantee, that shall not impair that or any other right
of the Issuer under this Guarantee.

     

    
      	
              14.4  

            	
              Severability
      of provisions.

            


    

     

      If
any provision of this Guarantee is or subsequently becomes void, illegal,
unenforceable or otherwise invalid, that shall not affect the validity, legality
or enforceability of its other provisions.

     

    
      	
              14.5  

            	
              Guarantee
      not affected by other security.

            


    

     

      This
Guarantee shall not impair, nor be impaired by, any other guarantee, any
Security Interest or any right of set-off or netting or to combine accounts
which the Issuer may now or later hold in connection with the Guarantee Facility
Agreement.

     

    
      	
              14.6  

            	
              Guarantor
      bound by Guarantee Facility
Agreement.

            


    

     

      The
Guarantor agrees with the Issuer to be bound by all provisions of the Guarantee
Facility Agreement which are applicable to the Security Parties in the same way
as if those provisions had been set out (with any necessary modifications) in
this Guarantee.

     

    
      	
              14.7  

            	
              Applicability
      of provisions of Guarantee to other
rights.

            


    

     

      Clauses
3 and 17 shall also apply to any right of set-off or netting or to combine
accounts which the Guarantor creates by an agreement entered into at the time of
this Guarantee or at any later time (notwithstanding that the agreement does not
include provisions similar to Clauses 3 and 17), being an agreement referring to
this Guarantee.

     

    
      	
              14.8  

            	
              Third
      party rights.

            


    

     

      A
person who is not a party to this Guarantee has no right under the Contracts
(Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any
term of this Guarantee.

     

    
      	
              15  

            	
              ASSIGNMENT

            


    

     

    
      	
              15.1  

            	
              Assignment
      by Issuer.

            


    

     

      The
Issuer may assign its rights under and in connection with this Guarantee to the
same extent as it may assign its rights under the Guarantee Facility
Agreement.

     

    
      	
              16  

            	
              NOTICES

            


    

     

    
      	
              16.1  

            	
              Notices
      to Guarantor.

            


    

     

      Any
notice or demand to the Guarantor under or in connection with this Guarantee
shall be given by letter or fax at:

     

    TBS
International Limited

     

    Suite 306
Commerce Building

     

    One
Chancery Lane

     

    Hamilton
HM12

     

    Bermuda

     

    Fax No:
+44 1 295 4957

     

    or to
such other address which the Guarantor may notify to the Issuer.

     

    
      	
              16.2  

            	
              Application
      of certain provisions of Guarantee Facility
  Agreement.

            


    

     

      Clauses
22.3, 22.4 and 22.5 of the Guarantee Facility Agreement apply to any notice or
demand under or in connection with this Guarantee.

     

    
      	
              16.3  

            	
              Validity
      of demands.

            


    

     

      A
demand under this Guarantee shall be valid notwithstanding that it is
served:

     

    
      	
              (a)  

            	
              on
      the date on which the amount to which it relates is payable by the
      Obligors under the Guarantee Facility
Agreement;

            


    

     

    
      	
              (b)  

            	
              at
      the same time as the service of a notice under clause 13.2 (events of
      default) of the Guarantee Facility
Agreement;

            


    

     

    and a
demand under this Guarantee may refer to all amounts payable under or in
connection with the Guarantee Facility Agreement without specifying a particular
sum or aggregate sum.

     

    
      	
              16.4  

            	
              Notices
      to Issuer.

            


    

     

      Any
notice to the Issuer under or in connection with this Guarantee shall be sent to
the same address and in the same manner as notices to the Issuer under the
Guarantee Facility Agreement.

     

    
      	
              17  

            	
              INVALIDITY
      OF GUARANTEE FACILITY AGREEMENT

            


    

     

    
      	
              17.1  

            	
              Invalidity
      of Guarantee Facility Agreement.

            


    

     

      In
the event of:

     

    
      	
              (a)  

            	
              the
      Guarantee Facility Agreement now being or later becoming, with immediate
      or retrospective effect, void, illegal, unenforceable or otherwise invalid
      for any other reason whatsoever, whether of a similar kind or not;
      or

            


    

     

    
      	
              (b)  

            	
              without
      limiting the scope of paragraph (a), a bankruptcy of an Obligor, the
      introduction of any law or any other matter resulting in an Obligor being
      discharged from liability under the Guarantee Facility Agreement, or the
      Guarantee Facility Agreement ceasing to operate (for example, by interest
      ceasing to accrue);

            


    

     

    this
Guarantee shall cover any amount which would have been or become payable under
or in connection with the Guarantee Facility Agreement if the Guarantee Facility
Agreement had been and remained entirely valid, legal and enforceable, or that
Obligor had not suffered bankruptcy, or any combination of such events or
circumstances, as the case may be, and that Obligor had remained fully liable
under it for liabilities whether invalidly incurred or validly incurred but
subsequently retrospectively invalidated; and references in this Guarantee to
amounts payable by the Obligors under or in connection with the Guarantee
Facility Agreement shall include references to any amount which would have so
been or become payable as aforesaid.

     

    
      	
              17.2  

            	
              Invalidity
      of Finance Documents.

            


    

     

      Clause
17.1 also applies to each of the other Finance Documents to which the Obligor
are a party.

     

    
      	
              18  

            	
              GOVERNING
      LAW AND JURISDICTION

            


    

     

    
      	
              18.1  

            	
              English
      law.

            


    

     

      This
Guarantee shall be governed by, and construed in accordance with, English
law.

     

    
      	
              18.2  

            	
              Exclusive
      English jurisdiction.

            


    

     

      Subject
to Clause 18.3, the courts of England shall have exclusive jurisdiction to
settle any disputes which may arise out of or in connection with this
Guarantee.

     

    
      	
              18.3  

            	
              Choice
      of forum for the exclusive benefit of the
  Issuer.

            


    

     

      Clause
18.2 is for the exclusive benefit of the Issuer, which reserves the
rights:

     

    
      	
              (a)  

            	
              to
      commence proceedings in relation to any matter which arises out of or in
      connection with this Guarantee in the courts of any country other than
      England and which have or claim jurisdiction to that matter;
      and

            


    

     

    
      	
              (b)  

            	
              to
      commence such proceedings in the courts of any such country or countries
      concurrently with or in addition to proceedings in England or without
      commencing proceedings in England.

            


    

     

    The
Guarantor shall not commence any proceedings in any country other than England
in relation to a matter which arises out of or in connection with this
Guarantee.

     

    
      	
              18.4  

            	
              Process
      agent.

            


    

     

      The
Guarantor irrevocably appoints Curtis Davis Garrard LLP at its registered office
for the time being, presently at Waterview House, Roundwood Avenue, Stockley
Park, Uxbridge UB11 1AU, to act as its agent to receive and accept on its behalf
any process or other document relating to any proceedings in the English courts
which are connected with this Guarantee.

     

    
      	
              18.5  

            	
              Issuer’
      rights unaffected.

            


    

     

      Nothing
in this Clause 18 shall exclude or limit any right which the Issuer may have
(whether under the law of any country, an international convention or otherwise)
with regard to the bringing of proceedings, the service of process, the
recognition or enforcement of a judgment or any similar or related matter in any
jurisdiction.

     

    
      	
              18.6  

            	
              Meaning
      of “proceedings”.

            


    

     

      In
this Clause 18, “proceedings” means
proceedings of any kind, including an application for a provisional or
protective measure.

     

    THIS GUARANTEE has been
entered into on the date stated at the beginning of this Guarantee.

    


    
      
        
          
             
RBS Guarantee (2).doc


          

           


        

        
           


          
            

          

        

        
           


        

      

    

    


     EXECUTION
PAGE

    
      	
              GUARANTOR

            	 
      	 
      
	
              SIGNED by

              for
      and on behalf of

              TBS
      INTERNATIONAL LIMITED

              in
      the presence of:

            	
              )

              )

              )

              )

            	 
      
	
              ISSUER

            	 
      	 
      
	
              SIGNED by

              for
      and on behalf of

              THE
      ROYAL BANK OF

              SCOTLAND
plc

              in
      the presence of:

            	
              )

              )

              )

              )

              )

            	 
      


    

     

    


    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    APPENDIX
C

    FORM
OF GUARANTEE

    
       

    

     

    
      
      

    

    



    IRREVOCABLE
PAYMENT LETTER OF GUARANTEE

    FOR
THE 2nd, 3rd and 4th INSTALMENTS

     

    
      	
              From:

            	
              The
      Royal Bank of Scotland plc

            


    

     

    
      	
              To:

            	
              China
      Communications Construction Company Ltd. ("CCCC");

            


    

     

    Date:

     

    Dear
Sirs,

     

    1.           In
consideration of your entering into a Shipbuilding Contract dated 24 February
2007 (the "Shipbuilding
Contract") with Nantong Yahua Shipbuilding Co., Ltd. of 1# Hongzha Road,
Jiuweigang, Nantong, Jiangsu P.C. 226361 (the "BUILDER") and [l]
Maritime Corp. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro,
Marshall Islands MH96960 as the buyer (the "BUYER") for the construction
of one (1) multi-purpose vessel known as the Builder's Hull No. NYHS[l]
(the "VESSEL"), we,
The Royal Bank of Scotland
plc acting through the Shipping Business Centre, 5-10 Great Tower Street,
London EC3R 3HX, hereby IRREVOCABLY, ABSOLUTELY and UNCONDITIONALLY guarantee,
as the primary obligor and not merely as the surety, the due, and punctual
payment by the BUYER, as and when the same shall fall due, of each and all of
the 2nd, 3rd and 4th instalments (the "Instalments" and each, an
"Instalment") of the
Contract Price amounting to a total sum of United States Dollars twenty one
million (US$ 21,000,000) as specified in (2) below, being part of a total
Contract Price of United States Dollars thirty five million four hundred and
twenty thousand (US$ 35,420,000).  Terms used herein shall bear the
same meaning as in the Shipbuilding Contract, a copy of which has been provided
to us.

     

    2.           The
Instalments guaranteed hereunder, pursuant to the terms of the Shipbuilding
Contract, comprise:

     

    
      	
               
      

            	
              (a)

            	
              the
      2nd Instalment in the amount of U.S. Dollars seven million only (US$
      7,000,000) payable by the BUYER within five (5) New York business days of
      the receipt by the BUYER of (i) the Refund Guarantee issued by the
      SELLER's Bank in respect of the 2nd, 3rd and 4th Instalments together with
      documentary evidence that this has been duly registered with the State
      Administration for Foreign Exchange ("SAFE") and (ii) a
      telefax notice attaching the Stage Certificate issued by you and the
      BUILDER in the form of the draft attached as Appendix A to the Overall
      Agreement, countersigned by the Classification Surveyor, certifying that
      the steel cutting of the first plate of the VESSEL in the BUILDER's
      Shipyard has commenced,

            


    

     

    
      	
               
      

            	
              (b)

            	
              the
      3rd Instalment in the amount of U.S. Dollars seven million only (US$
      7,000,000) payable by the BUYER within five (5) New York business days of
      the receipt by the BUYER of a telefax notice attaching the Stage
      Certificate issued by you and the BUILDER in the form of the draft
      attached as Exhibit D to the Shipbuilding Contract, countersigned by the
      Classification Society, certifying that the VESSEL's keel has been laid
      within the meaning of Article 2.3 of the Shipbuilding Contract;
      and

            


    

     

    
      	
               
      

            	
              (c)

            	
              the
      4th Instalment in the amount of U.S. Dollars seven million only (USD
      7,000,000) payable by the BUYER within five (5) New York business days of
      the receipt by the BUYER of a telefax notice attaching the Stage
      Certificate issued by you and the BUILDER in the form of the draft
      attached as Exhibit D to the Shipbuilding Contract, countersigned by the
      Classification Surveyor, certifying that the VESSEL has been successfully
      launched.

            


    

     

    PROVIDED
HOWEVER that it is expressly understood and agreed that our maximum liability
under this Letter of Guarantee shall at all times be limited to the aggregate
of:

     

    (a) the
lesser of (i) United States Dollars fourteen million (USD 14,000,000) and (ii)
the difference between the Contract Price and an amount corresponding to the
aggregate of each Instalment payment made from time to time by the BUYER to the
SELLER under the Shipbuilding Contract; and

     

    (b)
interest thereon as specified in paragraph 3 below.

     

    For the
avoidance of doubt, our liability under this Letter of Guarantee shall be
limited to United States Dollars fourteen million (USD 14,000,000) plus interest
thereon as specified in paragraph 3 below until such time as the BUYER pays the
3rd instalment of the Contract Price of the VESSEL, which shall reduce our
liability under this Letter of Guarantee to United States Dollars seven million
(USD 7 million) plus interest.  Our liability shall remain at United
States Dollars seven million (USD 7 million) plus interest until the payment by
the BUYER of the 4th instalment of the Contract Price, whereupon we shall have
no further liability to you under this Letter of Guarantee
whatsoever.

     

    3.           We
also IRREVOCABLY, ABSOLUTELY and UNCONDITIONALLY guarantee, as primary obligor
and not merely as surety, the due and punctual payment by the BUYER of interest
on each Instalment guaranteed hereunder at the rate of five percent (5%) per
annum from and including the first day after the date this Instalment fell due
under the Shipbuilding Contract until the date of full payment by us of such
amount guaranteed hereunder.

     

    4.           In
the event that the BUYER fails to punctually pay any Instalment guaranteed
hereunder or the BUYER fails to pay any interest thereon, and such default
continues for a period of fifteen (15) calendar days from the date of notice
thereof from yourselves to the BUYER, then, upon receipt by us of your first
written demand, we shall pay to you or your Assignee duly notified in your
demand, within fifteen (15) calendar days all unpaid 2nd, 3rd and 4th
Instalments, together with the interest as specified in paragraph (3) hereof,
without requesting you to take any or further action, procedure or step against
the BUYER or with respect to any other security which you may hold, provided
that:

     

    (a) Your
demand is accompanied by an original of the relevant Stage Certificate(s)
referred to in paragraph 2 above, issued in compliance with the Stage
Certificate formalities stated in the Overall Agreement or Shipbuilding
Contract, as the case may be; and

     

    (b) Your
demand is made not earlier than 20 days after receipt by us of a valid Refund
Guarantee duly registered with SAFE in respect of each Instalment claimed under
your demand, issued in compliance with the requirements of the Shipbuilding
Contract.

     

    5.           Any
payment by us under this Letter of Guarantee shall be made in United States
Dollars by telegraphic transfer to , as receiving bank nominated by you for
credit to the account of you with Bank of Communications (Beijing Branch), the
People's Republic of China or through such other receiving bank to be nominated
in writing by you from time to time, in favour of you or your
Assignee.

     

    6.           Our
obligations under this Letter of Guarantee shall not be affected or prejudiced
by any dispute between you as the SELLER and the BUYER under the Shipbuilding
Contract or by the BUILDER's delay in the construction and/or delivery of the
VESSEL due to whatever causes or by any variation or extension of their terms
thereof or by any security or other indemnity now or hereafter held by you in
respect thereof, or by any time or indulgence granted by you or any other person
in connection therewith, or by any invalidity or unenforceability of the terms
thereof.

     

    7.           Any
claim or demand shall be in writing signed by one of your officers and may be
served on us for the attention of the Letter of Guarantee Department either by
authenticated SWIFT message via Bank of Communications (Beijing Branch), or by
hand, or by post and if sent by post to 33 Jin Rong Street, Xicheng District,
Beijing 100032, The People's Republic of China (or such other address as we may
notify to you in writing).

     

    8.           This
Letter of Guarantee shall come into full force and effect upon delivery to you
of this Letter of Guarantee and shall continue in force and effect until the
earliest of the following:

     

    (a) the
date on which the VESSEL is delivered to and accepted by the BUYER;
or

     

    (b) the
date on which full payment of the 2nd, 3rd and 4th Instalments together with the
aforesaid interest shall have been made to you by the BUYER or
ourselves,

     

    whichever
first occurs; or

     

    (c) the
date on which the Shipbuilding Contract has been rescinded in compliance with
its terms; or

     

    (d)
[l].

     

    However,
in the event that by [l] (i)
the Vessel has not been successfully launched or (ii) the full payment of the
2nd, 3rd and 4th Instalments together with interest has not been made to you by
the BUYER or ourselves or (iii) the Shipbuilding Contract has not been rescinded
in compliance with its terms, then the validity of this Letter of Guarantee
shall be automatically extended until [l].

     

    9.           All
payments by us under this Letter of Guarantee shall be made without any set-off
or counterclaim and without deduction or withholding for or on account of any
taxes, duties, or charges whatsoever unless we are compelled by law to deduct or
withhold the same.  In the latter event we shall make the minimum
deduction or withholding permitted and will pay such additional amounts as may
be necessary in order that the net amount received by you after such deductions
or withholdings shall equal the amount which would have been received had no
such deduction or withholding been required to be made.

     

    10.           We
hereby confirm that you may assign this Letter of Guarantee to your financiers
by way of security.  No other assignment of your rights under this
Letter of Guarantee shall be permissible without our prior written consent, such
consent not to be unreasonably withheld.  In any event, the right for
making a demand under this Letter of Guarantee shall exclusively remain with
you.  The term "Assignee" where used in this
Letter of Guarantee shall be construed by reference to this paragraph
10.

     

    11.           This
Letter of Guarantee shall be construed in accordance with and governed by the
laws of England: We hereby submit to the exclusive jurisdiction of the English
courts for the purposes of any legal action or proceedings in connection with
this Letter of Guarantee.

     

    12.           As
soon as this Letter of Guarantee expires as aforesaid, you shall return the same
to us without any request or demand from us.

    



     

    IN
WITNESS WHEREOF, we have caused this Letter of Guarantee to be executed and
delivered by our duly authorized representative the day and year above
written.

     

    Very
Truly Yours,

     

    For The Royal Bank of Scotland
plc

     

    
      	
              By:

            	 


    

     

    
      	
               
      

            	
              (Signature)

            


    

     

    Name:

     

    Title:

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    APPENDIX
D

    FORM
OF INTERCREDITOR AGREEMENT

    


    
      
      

    

     

    
       

    

    


     

    Date                 March
2007

     

    ARGYLE
MARITIME CORP.

     

    CATON
MARITIME CORP.

     

    DORCHESTER
MARITIME CORP.

     

    LONGWOODS
MARITIME CORP.

     

    McHENRY
MARITIME CORP.

     

    SUNSWYCK
MARITIME CORP.

     

    as
Owners

     

    -and-

     

    THE
ROYAL BANK OF SCOTLAND plc

     

    as
Security Trustee

     

    -and-

     

    THE
ROYAL BANK OF SCOTLAND plc

     

    as
Issuer

    
      


       

      INTERCREDITOR
DEED

    

     

    relating
to pre-delivery security granted by the Owners

     

    in
respect of Hull Nos NYH5200720, NYH5200721, NYH5200722,

     

    NYK5200723,
NYK5200724 and NYH5200725 at Yahua Shipyard

    


    
      
        
          
            Watson,
Farley & Williams

            London

          

           


        

        
           


          
            

          

        

        
           


        

      

    

    


    INDEX

     

    Clause Page

     

     

    1           DEFINITIONS AND
INTERPRETATION [INSERT PAGE
NUMBER]

     

    2           REPRESENTATIONS AND
WARRANTIES [INSERT PAGE
NUMBER]

     

    3           RANKING OF SECURITY [INSERT PAGE NUMBER]

     

    4           AMENDMENTS TO THE LOAN AGREEMENT AND
GUARANTEE FACILITY AGREEMENT [INSERT PAGE
NUMBER]

     

    5           TRANSFER OF RIGHTS AND OBLIGATIONS
UNDER THE LOAN AGREEMENT AND GUARANTEE FACILITY AGREEMENT [INSERT PAGE NUMBER]

     

    6           NOTICES [INSERT PAGE NUMBER]

     

    7           MISCELLANEOUS [INSERT PAGE NUMBER]

     

    8           LAW AND JURISDICTION [INSERT PAGE NUMBER]

     

    EXECUTION
PAGE [INSERT PAGE NUMBER]

     

    


    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    THIS DEED
is made
on                                                      March
2007

     

    BETWEEN

     

    
      	
              (1)

            	
              ARGYLE MARITIME CORP.
      (“Owner A”), CATON MARITIME CORP.
      (“Owner B”), DORCHESTER MARITIME
      CORP. (“Owner
      C”), LONGWOODS
      MARITIME CORP. (“Owner D”), McHENRY MARITIME CORP.
      (“Owner E”), and
      SUNSWYCK MARITIME
      CORP. (“Owner
      F”), each a corporation organised and existing under the laws of
      the Marshall Islands and having its registered office at Trust Company
      Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960
      (together the “Owners” and
      individually an “Owner”);

            


    

     

    
      	
              (2)

            	
              THE ROYAL BANK OF SCOTLAND
      plc acting through its office at Level 5, 135 Bishopsgate, London
      EC2M 3UR (the “Security
      Trustee”);

            


    

     

    
      	
              (3)

            	
              THE ROYAL BANK OF SCOTLAND
      plc acting through the Shipping Business Centre, 5-10 Great Tower
      Street, London EC3R 3HX (the “Issuer”);

            


    

     

    BACKGROUND

     

    
      	
              (A)

            	
              By
      a loan agreement (the “Loan Agreement”) dated
            March 2007 and made between (i) the Owners
      as joint and several borrowers (ii) the banks and financial institutions
      listed in Schedule 1 thereto (the “Lenders”) (iii) The
      Royal Bank of Scotland plc as mandated lead arranger (iv) The Royal Bank
      of Scotland plc as bookrunner, agent and swap bank and (iv) the Security
      Trustee, the Lenders have agreed subject to the terms and conditions
      specified therein to make a $150,000,000 term loan facility available to
      the Owners for the purpose of part financing the acquisition cost of each
      of six newbuilding multipurpose carriers being built in Yahua Shipyard,
      China having hull nos. NYH5200720, NYH5200721, NYH5200722, NYH5200723,
      NYH5200724 and NYH5200725 (hereinafter referred to as “Ship A”, “Ship B”, “Ship C”, “Ship D”, “Ship E” and “Ship F” respectively
      and together the “Ships” and singly a “Ship”);

            


    

     

    
      	
              (B)

            	
              Pursuant
      to the Loan Agreement:

            


    

     

    
      	
               
      

            	
              (i)

            	
              Owner
      A has or shall execute in favour of the Security Trustee a pre-delivery
      security assignment assigning its rights under the shipbuilding contract
      and refund guarantees in respect of Ship A (the “Ship A Loan Agreement
      Pre-delivery Security
Assignment”);

            


    

     

    
      	
               
      

            	
              (ii)

            	
              Owner
      B has or shall execute in favour of the Security Trustee a pre-delivery
      security assignment assigning its rights under the shipbuilding contract
      and refund guarantees in respect of Ship B (the “Ship B Loan Agreement
      Pre-delivery Security
Assignment”);

            


    

     

    
      	
               
      

            	
              (iii)

            	
              Owner
      C has or shall execute in favour of the Security Trustee a pre-delivery
      security assignment assigning its rights under the shipbuilding contract
      and refund guarantees in respect of Ship C (the “Ship C Loan Agreement
      Pre-delivery Security
Assignment”);

            


    

     

    
      	
               
      

            	
              (iv)

            	
              Owner
      D has or shall execute in favour of the Security Trustee a pre-delivery
      security assignment assigning its rights under the shipbuilding contract
      and refund guarantees in respect of Ship D (the “Ship D Loan Agreement
      Pre-delivery Security
Assignment”);

            


    

     

    
      	
               
      

            	
              (v)

            	
              Owner
      E has or shall execute in favour of the Security Trustee a pre-delivery
      security assignment assigning its rights under the shipbuilding contract
      and refund guarantees in respect of Ship E (the “Ship E Loan Agreement
      Pre-delivery Security
Assignment”);

            


    

     

    
      	
               
      

            	
              (vi)

            	
              Owner
      F has or shall execute in favour of the Security Trustee a pre-delivery
      security assignment assigning its rights under the shipbuilding contract
      and refund guarantees in respect of Ship F (the “Ship F Loan Agreement
      Pre-delivery Security Assignment” and together with the Ship A Loan
      Agreement Pre-delivery Security Assignment, the Ship B Loan Agreement
      Pre-delivery Security Assignment, the Ship C Loan Agreement Pre-delivery
      Security Assignment, the Ship D Loan Agreement Pre-delivery Security
      Assignment, the Ship E Loan Agreement Pre-delivery Security Assignment and
      the “Loan Agreement
      Pre-delivery Security Assignments” and singly a “Loan Agreement Pre-delivery
      Security Assignment”);

            


    

     

    
      	
              (C)

            	
              By
      a guarantee facility agreement (the “Guarantee Facility
      Agreement”) dated    March 2007 and made between (i) the
      Owners as joint and several obligors (ii) the Issuing Bank, the Issuing
      Bank has agreed subject to the terms and conditions specified therein to
      make a $84,000,000 guarantee facility available to the Owners for the
      purpose of providing performance guarantees in relation to the payment of
      the second, third and fourth scheduled stage payments payable under the
      shipbuilding contracts for each of the six
  Ships;

            


    

     

    
      	
              (D)

            	
              Pursuant
      to the Guarantee Facility
Agreement:

            


    

     

    
      	
               
      

            	
              (vii)

            	
              Owner
      A has or shall execute in favour of the Security Trustee a pre-delivery
      security assignment assigning its rights under the shipbuilding contract
      and refund guarantees in respect of Ship A (the “Ship A Guarantee Facility
      Agreement Pre-delivery Security
  Assignment”);

            


    

     

    
      	
              (viii)

            	
              Owner
      B has or shall execute in favour of the Security Trustee a pre-delivery
      security assignment assigning its rights under the shipbuilding contract
      and refund guarantees in respect of Ship B (the “Ship B Guarantee Facility
      Agreement Pre-delivery Security
  Assignment”);

            


    

     

    
      	
               
      

            	
              (ix)

            	
              Owner
      C has or shall execute in favour of the Security Trustee a pre-delivery
      security assignment assigning its rights under the shipbuilding contract
      and refund guarantees in respect of Ship C (the “Ship C Guarantee Facility
      Agreement Pre-delivery Security
  Assignment”);

            


    

     

    
      	
               
      

            	
              (x)

            	
              Owner
      D has or shall execute in favour of the Security Trustee a pre-delivery
      security assignment assigning its rights under the shipbuilding contract
      and refund guarantees in respect of Ship D (the “Ship D Guarantee Facility
      Agreement Pre-delivery Security
  Assignment”);

            


    

     

    
      	
               
      

            	
              (xi)

            	
              Owner
      E has or shall execute in favour of the Security Trustee a pre-delivery
      security assignment assigning its rights under the shipbuilding contract
      and refund guarantees in respect of Ship E (the “Ship E Guarantee Facility
      Agreement Pre-delivery Security
  Assignment”);

            


    

     

    
      	
               
      

            	
              (xii)

            	
              Owner
      F has or shall execute in favour of the Security Trustee a pre-delivery
      security assignment assigning its rights under the shipbuilding contract
      and refund guarantees in respect of Ship F (the “Ship F Guarantee Facility
      Agreement Pre-delivery Security Assignment” and together with the
      Ship A Guarantee Facility Agreement Pre-delivery Security Assignment, the
      Ship B Guarantee Facility Agreement Pre-delivery Security Assignment, the
      Ship C Guarantee Facility Agreement Pre-delivery Security Assignment, the
      Ship D Guarantee Facility Agreement Pre-delivery Security Assignment and
      the Ship E Guarantee Facility Agreement Pre-delivery Security Assignment,
      the “Guarantee Facility
      Agreement Pre-delivery Security Assignments, and singly a “Guarantee Facility Agreement
      Pre-delivery Security
Assignment”);

            


    

     

    
      	
              (E)

            	
              The
      Security Trustee (on behalf of the Lenders) and the Issuer have agreed to
      share pari passu in the security created in favour of the Security Trustee
      under the Loan Agreement Pre-delivery Security Assignments and the
      security created in favour of the Issuer under the Guarantee Facility
      Agreement Pre-delivery Security
Assignments.

            


    

     

    IT IS AGREED as
follows:

     

    
      	
              1  

            	
              DEFINITIONS
      AND INTERPRETATION

            


    

     

    
      	
              1.1  

            	
              Defined
      expressions.

            


    

     

      Words
and expressions defined in the Loan Agreement and/or the Guarantee Facility
Agreement have the same meaning when used in this Deed unless the context
otherwise requires.

     

    
      	
              1.2  

            	
              General
      Interpretation.

            


    

     

      In
this Deed:

     

    
      	
              (a)  

            	
              Clause
      headings are inserted for convenience only and shall not affect the
      construction of this Deed and, unless otherwise specified, all references
      to clauses and appendices are to clauses of, and appendices to, this
      Deed;

            


    

     

    
      	
              (b)  

            	
              unless
      the context otherwise requires, words denoting the singular number shall
      include the plural and vice versa;

            


    

     

    
      	
              (c)  

            	
              references
      to persons include bodies corporate and
  unincorporate;

            


    

     

    
      	
              (d)  

            	
              references
      to assets include property, rights and assets of every
      description;

            


    

     

    
      	
              (e)  

            	
              references
      to any document are to be construed as references to such document as
      amended or supplemented from time to time;
and

            


    

     

    
      	
              (f)  

            	
              references
      to any enactment include re-enactments, amendments and extensions
      thereof.

            


    

     

    
      	
              2  

            	
              REPRESENTATIONS
      AND WARRANTIES

            


    

     

    
      	
              2.1  

            	
              General.

            


    

     

      Each
party hereto (each a “Warrantor”) represents and
warrants to the others as follows.

     

    
      	
              2.2  

            	
              Status.

            


    

     

      It
is duly incorporated and validly existing under the country of its
incorporation.

     

    
      	
              2.3  

            	
              Corporate
      power.

            


    

     

      It
has the corporate capacity, and has taken all corporate action and obtained all
consents necessary for it, to execute and to comply with this Deed.

     

    
      	
              2.4  

            	
              Consents
      in force.

            


    

     

      All
the consents referred to in Clause 2.3 to the best of its knowledge and belief
remain in force and nothing has occurred which makes any of them liable to
revocation.

     

    
      	
              2.5  

            	
              Legal
      validity.

            


    

     

      This
Deed constitutes legal, valid and binding obligations enforceable against it in
accordance with its terms subject to any relevant insolvency laws affecting
creditors’ rights generally and subject to any qualifications as to matters of
law which are specifically referred to in any legal opinion obtained by any
party in relation hereto.

     

    
      	
              2.6  

            	
              No
      conflicts.

            


    

     

      The
execution by it of this Deed and its compliance with this Deed will not involve
or lead to a contravention of:

     

    
      	
              (a)  

            	
              any
      law or regulation in force at the date of this Agreement;
    or

            


    

     

    
      	
              (b)  

            	
              its
      constitutional documents; or

            


    

     

    
      	
              (c)  

            	
              any
      contractual or other obligation or restriction which is binding on it or
      any of its assets.

            


    

     

    
      	
              3  

            	
              RANKING
      OF SECURITY

            


    

     

    
      	
              3.1  

            	
              Ranking
      of security.

            


    

     

      Subject
to the provisions of Clause 3.2, the Security Trustee (on behalf of the Lenders
under the Loan Agreement) and the Issuer have agreed to share pari passu in the
security created by the Loan Agreement Pre-delivery Security Assignments and the
Guarantee Facility Pre-delivery Security Assignments so that:

     

    
      	
              (i)  

            	
              upon
      the occurrence of an Event of Default which is continuing as defined in
      the Loan Agreement and the Security Trustee taking steps to enforce the
      security created by the Loan Agreement Pre-delivery Security Assignments
      the Issuer shall co-operate in relation to such enforcement and if
      required by the Security Trustee shall take similar steps to enforce the
      security created by the Guarantee Facility Pre-delivery Security
      Assignments; and

            


    

     

    
      	
              (ii)  

            	
              upon
      the occurrence of an Event of Default which is continuing as so defined in
      the Guarantee Facility Agreement and the Issuer taking steps to enforce
      the security created by the Guarantee Facility Pre-delivery Security
      Assignments, the Security Trustee shall co-operate in relation to such
      enforcement and if required by the Security Trustee shall take similar
      steps to enforce the security created by the Loan Agreement Pre-delivery
      Security Assignments,

            


    

     

    and so
that in each case the proceeds of realisation of that security shall be shared
between the Lenders and the Issuer pro rata in relation to the amounts owing by
the Owners under the Loan Agreement in respect of the pre-delivery Advances and
the amounts owing by the Owners under the Guarantee Facility
Agreement.

     

    
      	
              3.2  

            	
              Cash
      Collateral.

            


    

     

      In
the event cash collateral is provided to the Issuer in accordance with Clause
5.6 of the Guarantee Facility Agreement:

     

    
      	
              (a)  

            	
              the
      Issuer shall not share in the proceeds of realisation of the security
      created by the Loan Agreement Pre-delivery Security
      Assignments;

            


    

     

    
      	
              (b)  

            	
              none
      of the Security Trustee or the Lenders shall share in such cash
      collateral;

            


    

     

    
      	
              (c)  

            	
              the
      Issuer shall not be obliged to take any steps to enforce the security
      created by the Guarantee Facility Pre-delivery Security
      Assignments.

            


    

     

    
      	
              3.3  

            	
              Receipt
      of Proceeds

            


    

     

    
      	
              (a)  

            	
              Any
      proceeds of the realisation of the security created by the Loan Agreement
      Pre-delivery Security Assignments received by the Security Trustee shall
      be held in trust for the Lenders and the Issuer and that part of the
      proceeds to which the Issuer is entitled pursuant to Clause 3.1 above
      shall be paid by the Security Trustee to the Issuer for application in
      accordance with Clause 12 of the Guarantee Facility Agreement and that
      part of the proceeds to which the Lenders are entitled pursuant to Clause
      3.1 above shall be applied in accordance with Clause 17 of the Loan
      Agreement.

            


    

     

    
      	
              (b)  

            	
              Any
      proceeds of realisation of the security created by the Guarantee Facility
      Agreement Pre-delivery Security Assignments received by the Issuer shall
      be held on trust for itself and the Lenders and that part of the proceeds
      to which the Lenders are entitled pursuant to Clause 3.1 above shall be
      paid by the Issuer to the Security Trustee for application in accordance
      with Clause 17 of the Loan Agreement and that part of the proceeds to
      which the Issuer is entitled pursuant to Clause 3.1 above shall be applied
      in accordance with Clause 12 of the Guarantee Facility
      Agreement.

            


    

     

    
      	
              4  

            	
              AMENDMENTS
      TO THE LOAN AGREEMENT AND GUARANTEE FACILITY
  AGREEMENT

            


    

     

    
      	
              4.1  

            	
              Amendments
      to the Loan Agreement.

            


    

     

      The
Owners and the other Creditor Parties to the Loan Agreement may effect any form
of variation and/or supplement to the Loan Agreement and the Finance Documents
as defined thereunder without requiring any consent from the Issuer (but so that
any increase to the loan facility thereunder shall rank in priority after any
amounts owing under the Guarantee Facility Agreement for the purposes of the
sharing arrangements under Clause 3.1).

     

    
      	
              4.2  

            	
              No
      restrictions to the Guarantee Facility
  Agreement.

            


    

     

      The
Owners and the Issuer may effect any form of variation and/or supplement to the
Guarantee Facility Agreement and the Finance Documents as defined thereunder
without requiring any consent from the Creditor Parties under the Loan Agreement
(but so that any increase to the guarantee facility thereunder shall rank in
priority after any amounts owing under the Loan Agreement for the purposes of
the sharing arrangements under Clause 3.1).

     

    
      	
              5  

            	
              TRANSFER
      OF RIGHTS AND OBLIGATIONS UNDER THE LOAN AGREEMENT AND GUARANTEE FACILITY
      AGREEMENT

            


    

     

    
      	
              5.1  

            	
              Transfer
      of rights and obligations of Creditor Parties under the Loan Agreement and
      the Finance Documents (as defined
thereunder).

            


    

     

      The
Creditor Parties may transfer all or any of their rights and/or obligations
under the Loan Agreement and the Finance Documents (as defined thereunder)
without any consent from the Issuer provided that the transferee shall through
the transfer arrangements under Clause 26 of the Loan Agreement becomes bound by
this Deed.

     

    
      	
              5.2  

            	
              Transfer
      of rights and obligation of Issuer under the Guarantee Facility Agreement
      and the Finance Documents (as defined
  thereunder).

            


    

     

      The
Issuer may transfer all or any of its rights and/or obligations under the
Guarantee Facility Agreement and the Finance Documents (as defined thereunder)
without any consent from the Creditor Parties provided that the transferee
undertakes to comply with the obligations of the Issuer under this Deed and in
all other respects agrees to be bound by this Deed.

     

    
      	
              6  

            	
              NOTICES

            


    

     

    
      	
              6.1  

            	
              General.

            


    

     

      Unless
otherwise specifically provided, any notice under or in connection with this
Deed shall be given by letter or fax; and references in this Deed to written
notices, notices in writing and notices signed by particular persons shall be
construed accordingly.

     

    
      	
              6.2  

            	
              Addresses
      for communications.

            


    

     

      A
notice shall be sent:

     

    
      	
               
      

            	
              (a)

            	
              to
      the Owners:

            	
              P.O.
      Box HM 2522

            


    

     

    
      	
               
      

            	
              Hamilton
      HMGX

            


    

     

    
      	
               
      

            	
              Bermuda

            


    

     

    
      	
               
      

            	
              Fax
      No: +1 441 295 4957

            


    

     

    
      	
               
      

            	
              Attn:
      William J. Can

            


    

     

    
      	
               
      

            	
              with
      a copy to:

            	
              TBS
      Shipping Services Inc.

            


    

     

    
      	
               
      

            	
              612
      East Grassy Sprain Road

            


    

     

    
      	
               
      

            	
              Yonkers,
      NY 10710 USA

            


    

     

    
      	
               
      

            	
              Fax
      No: +1 914 961 5121

            


    

     

    
      	
               
      

            	
              Attn:
      Ferdinand V. Lepere

            


    

     

    
      	
               
      

            	
              (b)

            	
              to
      the Security Trustee:

            	
              The
      Royal Bank of Scotland plc

            


    

     

    
      	
               
      

            	
              Level
      5

            


    

     

    
      	
               
      

            	
              135
      Bishopsgate

            


    

     

    
      	
               
      

            	
              London
      EC2M 3UR

            


    

     

    
      	
               
      

            	
              Fax
      No: +44 207 207 085 4564

            


    

     

    
      	
               
      

            	
              Att:
      Syndicated Loans Agency

            


    

     

    
      	
               
      

            	
              (c)

            	
              to
      the issuer

            	
              The
      Royal Bank of Scotland plc

            


    

     

    
      	
               
      

            	
              Shopping
      Business Centre

            


    

     

    
      	
               
      

            	
              5-10
      Great Tower Street

            


    

     

    
      	
               
      

            	
              London
      EC3P 3UX 1

            


    

     

    
      	
               
      

            	
              Fax
      No: +44 207 283 7538

            


    

     

    or to
such other address as the relevant party may notify the others.

     

    
      	
              6.3  

            	
              Effective
      date of notices.

            


    

     

      Subject
to Clauses 6.4 and 6.5:

     

    
      	
              (a)  

            	
              a
      notice which is delivered personally or posted shall be deemed to be
      served, and shall take effect, at the time when it is
      delivered;

            


    

     

    
      	
              (b)  

            	
              a
      notice which is sent by fax shall be deemed to be served, and shall take
      effect, 2 hours after its transmission is
  completed.

            


    

     

    
      	
              6.4  

            	
              Service
      outside business hours.

            


    

     

      However,
if under Clause 6.3 a notice would be deemed to be served:

     

    
      	
              (a)  

            	
              on
      a day which is not a business day in the place of receipt;
    or

            


    

     

    
      	
              (b)  

            	
              on
      such a business day, but after 5 p.m. local
  time;

            


    

     

    the
notice shall (subject to Clause 6.5) be deemed to be served, and shall take
effect, at 9 a.m. on the next day which is such a business day.

     

    
      	
              6.5  

            	
              Illegible
      notices.

            


    

     

      Clauses
6.3 and 6.4 do not apply if the recipient of a notice notifies the sender within
one hour after the time at which the notice would otherwise be deemed to be
served that the notice has been received in a form which is illegible in a
material respect.

     

    
      	
              6.6  

            	
              Valid
      notices.

            


    

     

      A
notice under or in connection with this Deed shall not be invalid by reason that
its contents or the manner of serving it does not comply with the requirements
of this Deed if the failure to serve it in accordance with the requirements of
this Deed has not caused any party to suffer any significant loss or
prejudice.

     

    
      	
              6.7  

            	
              English
      language.

            


    

     

      Any
notice under or in connection with this Deed shall be in English.

     

    
      	
              6.8  

            	
              Meaning
      of “notice”.

            


    

     

      In
this Clause “notice”
includes any demand, consent, authorisation, approval, instruction, waiver or
other communication.

     

    
      	
              7  

            	
              MISCELLANEOUS

            


    

     

    
      	
              7.1  

            	
              Counterparty.

            


    

     

      This
Deed may be executed in several counterparts, each of which shall be an
original, but which together shall constitute but one and the same
document.

     

    
      	
              7.2  

            	
              Third
      party rights.

            


    

     

      Each
of the Creditor Parties (as defined in the Loan Agreement) shall have the right
to enforce the provisions of this Deed notwithstanding that it is not a party to
this Deed by virtue of the Contracts (Rights of Third Parties) Act
1999.  Save for this a person who is not a party to this Deed has no
right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to
enjoy the benefit of any term of this Deed.

     

    
      	
              8  

            	
              LAW
      AND JURISDICTION

            


    

     

    
      	
              8.1  

            	
              English
      law.

            


    

     

      This
Deed shall be governed by, and construed in accordance with, English
law.

     

    
      	
              8.2  

            	
              Exclusive
      English jurisdiction.

            


    

     

      Subject
to Clause 8.3, the courts of England shall have exclusive jurisdiction to settle
any disputes which may arise out of or in connection with this
Deed.

     

    
      	
              8.3  

            	
              Choice
      of forum for the exclusive benefit of the Security Trustee and the
      Issuer.

            


    

     

      Clause
8.2 is for the exclusive benefit of the Security Trustee and the Issuer, which
reserve the right:

     

    
      	
              (a)  

            	
              to
      commence proceedings in relation to any matter which arises out of or in
      connection with this Deed in the courts of any country other than England
      and which have or claim jurisdiction to that matter;
  and

            


    

     

    
      	
              (b)  

            	
              to
      commence such proceedings in the courts of any such country or countries
      concurrently with or in addition to proceedings in England or without
      commencing proceedings in England.

            


    

     

    
      	
              8.4  

            	
              Process
      agent for Owners.

            


    

     

      Each
Owner irrevocably appoints Curtis Davis Garrard LLP at its registered office for
the time being, presently at Waterview House, 1 Roundwood Avenue, Stockley Park,
Heathrow Airport, Uxbridge UB11 1AU, to act as its agent to receive and accept
on its behalf any process or other document relating to any proceedings in the
English courts which are connected with this Deed.

     

    
      	
              8.5  

            	
              Security
      Trustee’s and Issuer’s rights
unaffected.

            


    

     

      Nothing
in this Clause 8 shall exclude or limit any right which the Security Trustee and
the Issuer may have (whether under the law of any country, an international
convention or otherwise) with regard to the bringing of proceedings, the service
of process, the recognition or enforcement of a judgment or any similar or
related matter in any jurisdiction.

     

    
      	
              8.6  

            	
              Meaning
      of “proceedings”.

            


    

     

      In
this Clause 8, “proceedings” means
proceedings of any kind, including an application for a provisional or
protective measure.

     

    THIS DEED has been duly
executed as a deed on the date stated at the beginning of this
Deed.

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


     EXECUTION
PAGE

    
      	
              OWNERS

            	 
      	 
      
	
              EXECUTED
      AS A DEED

              by

              for
      and on behalf of ARGYLE
      MARITIME CORP.

              in
      the presence of:

            	
              )

              )

              )

              )

            	 
      
	
              EXECUTED
      AS A DEED

              by

              for
      and on behalf of CATON
      MARITIME CORP.

              in
      the presence of:

            	
              )

              )

              )

              )

            	 
      
	
              EXECUTED
      AS A DEED

              by

              for
      and on behalf of DORCHESTER MARITIME
      CORP.

              in
      the presence of:

            	
              )

              )

              )

              )

              )

            	 
      
	
              EXECUTED
      AS A DEED

              by

              for
      and on behalf of LONGWOODS MARITIME
      CORP.

              in
      the presence of:

            	
              )

              )

              )

              )

              )

            	 
      
	
              EXECUTED
      AS A DEED

              by

              for
      and on behalf of McHENRY
      MARITIME CORP.

              in
      the presence of:

            	
              )

              )

              )

              )

            	 
      
	
              EXECUTED
      AS A DEED

              by

              for
      and on behalf of SUNSWYCK
      MARITIME CORP.

              in
      the presence of:

            	
              )

              )

              )

              )

            	 
      
	
              SECURITY
      TRUSTEE

              EXECUTED
      AS A DEED

              by

              for
      and on behalf of THE
      ROYAL BANK OF SCOTLAND plc

              in
      the presence of:

            	
              )

              )

              )

              )

              )

            	 
      
	
              ISSUER

              EXECUTED
      AS A DEED

              by

              for
      and on behalf of THE
      ROYAL BANK OF SCOTLAND plc

              in
      the presence of:

            	
              )

              )

              )

              )

              )