form10q63008.htm

0000278041-08-000044.txt : 20080808 0000278041-08-000044.hdr.sgml : 20080808 20080808135455 ACCESSION NUMBER: 0000278041-08-000044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20080808 FILED AS OF DATE: 20080808 DATE AS OF CHANGE: 20080808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL SHIPHOLDING CORP CENTRAL INDEX KEY: 0000278041 STANDARD INDUSTRIAL CLASSIFICATION: DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412] IRS NUMBER: 362989662 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10852 FILM NUMBER: 081001721 BUSINESS ADDRESS: STREET 1: 11 NORTH WATER STREET STREET 2: SUITE # 18290 CITY: MOBILE STATE: AL ZIP: 36602 BUSINESS PHONE: 2512439100 MAIL ADDRESS: STREET 1: P.O. BOX 2004 CITY: MOBILE STATE: AL ZIP: 36652 10-Q 1 form10q63008.htm FORM 10-Q, JUNE 30, 2008 form10q63008.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from . . . . . . . . . . . . to . . . . . . . . . . . . . .

Commission File No. 2-63322

International Shipholding Corporation

(Exact name of registrant as specified in its charter)

Delaware

36-2989662

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

11 North Water Street, Suite 18290,	Mobile, Alabama	36602
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (251) 243-9100

Former name, former address and former fiscal year, if changed since last report:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ

No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer ☐

Accelerated filer þ

Non-accelerated filer ☐

Smaller Reporting Company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☑

No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock, $1 par value. . . . . . . . 7,385,801 shares outstanding as of June 30, 2008

INTERNATIONAL SHIPHOLDING CORPORATION

TABLE OF CONTENTS

PART I –	FINANCIAL INFORMATION	3
ITEM 1 –	FINANCIAL STATEMENTS	3
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME	3
	CONDENSED CONSOLIDATED BALANCE SHEETS	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	5
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	6
ITEM 2 –	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	11
ITEM 3 –	QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK	15
ITEM 4 –	CONTROLS AND PROCEDURES	15
PART II –	OTHER INFORMATION	15
ITEM 2 –	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	15
ITEM 5 –	OTHER INFORMATION	15
ITEM 6 –	EXHIBITS	16

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(All Amounts in Thousands Except Share Data)
(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30
	2008			2007			2008			2007
Revenues	$	58,123		$	47,311		$	113,927		$	95,658

Operating Expenses:
Voyage Expenses		45,876			34,922			90,083			71,518
Vessel and Barge Depreciation		5,059			5,037			10,140			10,073

Gross Voyage Profit		7,188			7,352			13,704			14,067

Administrative and General Expenses		4,869			4,406			9,906			9,178

Operating Income		2,319			2,946			3,798			4,889

Interest and Other:
Interest Expense		1,576			2,555			3,631			5,165
Loss on Redemption of Preferred Stock		-			-			1,371			-
(Gain) Loss on Sale of Investment		91			(350	)		91			(350	)
Investment Income		(192	)		(552	)		(437	)		(1,211	)
		1,475			1,653			4,656			3,604
Income (Loss) from Continuing Operations Before (Benefit)
Provision for Income Taxes and Equity in Net Income
of Unconsolidated Entities		844			1,293			(858	)		1,285

(Benefit) Provision for Income Taxes:
Deferred		(614	)		(586	)		(1,814	)		(899	)
State		9			(7	)		25			(4	)
		(605	)		(593	)		(1,789	)		(903	)
Equity in Net Income of Unconsolidated
Entities (Net of Applicable Taxes)		16,576			1,580			17,782			2,616

Income from Continuing Operations		18,025			3,466			18,713			4,804

Gain from Discontinued Operations
(Loss) before benefits for income taxes		-			(929	)		-			(2,055	)
(Loss) Gain on Sale of Liner Assets		(9	)		4,425			4,588			8,953
(Provision) for Income Taxes		-			(9	)		(471	)		(9	)
Net (Loss) Income from Discontinued Operations		(9	)		3,487			4,117			6,889

Net Income	$	18,016		$	6,953		$	22,830		$	11,693

Preferred Stock Dividends		-			600			88			1,200

Net Income Available to Common Stockholders	$	18,016		$	6,353		$	22,742		$	10,493

Basic and Diluted Earnings Per Common Share:

Net Income Available to Common Stockholders
Continuing Operations	$	2.38		$	0.46		$	2.51		$	0.58
Discontinued Operations	$	0.00		$	0.55			0.55			1.11
	$	2.38		$	1.01		$	3.06		$	1.69

Net Income Available to Common Stockholders - Diluted
Continuing Operations	$	2.37		$	0.42		$	2.41		$	0.58
Discontinued Operations	$	0.00		$	0.42			0.53			0.84
	$	2.37		$	0.84		$	2.94		$	1.42

Weighted Average Shares of Common Stock Outstanding:
Basic		7,585,207			6,277,955			7,433,281			6,199,010
Diluted		7,602,314			8,281,163			7,775,169			8,217,540

The accompanying notes are an integral part of these statements.

Table of Contents

INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(All Amounts in Thousands Except Share Data)
(Unaudited)

	June 30,			December 31,
ASSETS	2008			2007

Current Assets:
Cash and Cash Equivalents	$	16,971		$	14,103
Marketable Securities		3,511			5,578
Accounts Receivable, Net of Allowance for Doubtful Accounts
of $182 and $227 in 2008 and 2007:
Traffic		5,989			9,637
Agents'		2,919			1,804
Other		8,864			9,233
Net Investment in Direct Financing Leases		7,761			7,391
Other Current Assets		2,211			2,327
Material and Supplies Inventory, at Lower of Cost or Market		2,666			2,665
Current Assets Held for Disposal		-			9,105
Total Current Assets		50,892			61,843

Investment in Unconsolidated Entities		32,023			16,326

Net Investment in Direct Financing Leases		105,380			107,208

Vessels, Property, and Other Equipment, at Cost:
Vessels and Barges		337,197			335,511
Leasehold Improvements		26,128			29,530
Other Equipment		2,076			2,077
Furniture and Equipment		5,600			6,009
		371,001			373,127
Less - Accumulated Depreciation		(159,282	)		(147,484	)
		211,719			225,643

Other Assets:
Deferred Charges, Net of Accumulated Amortization		12,986			15,337
of $17,594 and $9,781 in 2008 and 2007, Respectively
Acquired Contract Costs, Net of Accumulated Amortization		2,547			3,274
of $27,979 and $27,251 in 2008 and 2007, Respectively
Due from Related Parties		6,205			5,897
Other		5,023			5,127
		26,761			29,635

	$	426,775		$	440,655

The accompanying notes are an integral part of these statements.

INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(All Amounts in Thousands Except Share Data)
(Unaudited)

	June 30,			December 31,
	2008			2007
LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current Liabilities:
Current Maturities of Long-Term Debt	$	12,842		$	12,681
Accounts Payable and Accrued Liabilities		27,985			23,546
Current Liabilities on Assets Held for Disposal		-			2,427
Total Current Liabilities		40,827			38,654

Billings in Excess of Income Earned and Expenses Incurred		(335	)		(363	)

Long-Term Debt, Less Current Maturities		126,164			130,523

Other Long-Term Liabilities:
Deferred Income Taxes		7,309			9,072
Lease Incentive Obligation		8,979			13,789
Other		32,170			37,724
		48,458			60,585

Commitments and Contingent Liabilities

Convertible Exchangeable Preferred Stock		-			37,554

Stockholders' Investment:
Common Stock		8,357			7,193
Additional Paid-In Capital		80,834			60,177
Retained Earnings		139,750			117,008
Treasury Stock		(15,377	)		(8,704	)
Accumulated Other Comprehensive (Loss)		(1,903	)		(1,972	)
		211,661			173,702

	$	426,775		$	440,655

The accompanying notes are an integral part of these statements.

Table of Contents

INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All Amounts in Thousands)
(Unaudited)
	Six Months Ended June 30,
	2008			2007
Cash Flows from Operating Activities:
Net Income	$	22,830		$	11,693
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation		10,329			12,136
Amortization of Deferred Charges and Other Assets		4,307			4,665
Benefit for Deferred Federal Income Taxes		(1,343	)		(899	)
Loss on Early Redemption of Preferred Stock		1,371			-
Equity in Net Income of Unconsolidated Entities		(17,782	)		(2,616	)
Distributions from Unconsolidated Entities		2,500			1,000
(Gain) on Sale of Assets		(4,588	)		(8,941	)
(Gain) Loss on Sale of Investments		91			(357	)
Deferred Drydocking Charges		(1,473	)		(3,330	)
Changes in:
Accounts Receivable		2,902			4,656
Inventories and Other Current Assets		2,001			(298	)
Other Assets		19			206
Accounts Payable and Accrued Liabilities		1,923			67
Billings in Excess of Income Earned and Expenses Incurred		28			(701	)
Other Long-Term Liabilities		(3,379	)		(1,081	)
Net Cash Provided by Operating Activities		19,736			16,200

Cash Flows from Investing Activities:
Principal payments received under Direct Financing Leases		3,686			2,133
Capital Improvements to Vessels, Leasehold Improvements, and Other Assets		(2,414	)		(11,657	)
Proceeds from Sale of Assets		10,799			14,745
Purchase of and Proceeds from Short Term Investments		2,040			480
Investment in Unconsolidated Entities		-			11
Decrease in Related Party Note Receivables		15			15
Net Cash Provided by Investing Activities		14,126			5,727

Cash Flows from Financing Activities:
Redemption of Preferred Stock		(17,306	)		-
Common Stock Repurchase		(6,673	)
Proceeds from Issuance of Common Stock		-			5,429
Repayment of Debt		(6,443	)		(6,156	)
Additions to Deferred Financing Charges		(484	)		(97	)
Preferred Stock Dividends Paid		(88	)		(1,200	)
Other Financing Activities		-			(8	)
Net Cash Used by Financing Activities		(30,994	)		(2,032	)

Net Increase in Cash and Cash Equivalents		2,868			19,895
Cash and Cash Equivalents at Beginning of Period		14,103			44,273

Cash and Cash Equivalents at End of Period	$	16,971		$	64,168

The accompanying notes are an integral part of these statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2008

(Unaudited)

Note 1. Basis of Preparation

We have prepared the accompanying unaudited interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission, and we have omitted certain information and footnote disclosures required by U.S. Generally Accepted Accounting Principles for complete financial statements. The condensed consolidated balance sheet as of December 31, 2007 has been derived from the audited financial statements at that date. We suggest that you read these interim statements in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2007. We have made certain reclassifications to prior period financial information in order to conform to current year presentations, including the reclassification of relocation incentive payments received from Alabama agencies from “Other Revenue” to a credit offsetting Administrative and General expense and the removal of our LASH Liner service from “Continuing Operations” to “Discontinued Operations”.

The foregoing 2008 interim results are not necessarily indicative of the results of operations for the full year 2008. Management believes that it has made all adjustments necessary, consisting only of normal recurring adjustments, for a fair presentation of the information shown.

Our policy is to consolidate all subsidiaries in which we hold a greater than 50% voting interest or otherwise control its operating and financial activities. We use the equity method to account for investments in entities in which we hold a 20% to 50% voting interest and have the ability to exercise significant influence over their operating and financial activities. We use the cost method to account for investments in entities in which we hold less than 20% voting interest and in which we cannot exercise significant influence over operating and financial activities.

Revenues and expenses relating to our Rail-Ferry Service segment voyages are recorded over the duration of the voyage. Our voyage expenses are estimated at the beginning of the voyages based on historical actual costs or from industry sources familiar with those types of charges. As the voyage progresses, these estimated costs are revised with actual charges and timely adjustments are made. The expenses are ratably expensed over the voyage based on the number of days in progress at the end of the period. Based on our prior experience, we believe there is no material difference between recording estimated expenses ratably over the voyage versus recording expenses as incurred. Revenues and expenses relating to our other segments' voyages, which require no estimates or assumptions, are recorded when earned or incurred during the reporting period.

We have eliminated all significant intercompany accounts and transactions.

Note 2. Employee Benefit Plans

The following table provides the components of net periodic benefit cost for our pension plan:

(All Amounts in Thousands)
	Three Months Ended June 30,						Six Months Ended June 30,
Components of net periodic benefit cost:	2008			2007			2008			2007
Service cost	$	146		$	156		$	292		$	312
Interest cost		351			333			702			666
Expected return on plan assets		(440	)		(424	)		(880	)		(848	)
Net periodic benefit cost	$	57		$	65		$	114		$	130

The following table provides the components of net periodic benefit cost for our postretirement benefits plan:

(All Amounts in Thousands)
	Three Months Ended June 30,						Six Months Ended June 30,
Components of net periodic benefit cost:	2008			2007			2008			2007
Service cost	$	3		$	15		$	6		$	30
Interest cost		109			112			218			224
Amortization of prior service cost		(3	)		(4	)		(6	)		(8	)
Net periodic benefit cost	$	109		$	123		$	218		$	246

We expect to contribute approximately $600,000 to our pension plan in 2008, and we do not expect to make a contribution to our postretirement benefits plan.

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Note 3. Operating Segments

Our three operating segments, Time Charter Contracts, Contracts of Affreightment (“COA”), and Rail-Ferry Service, are identified primarily by the characteristics of the contracts and terms under which our vessels are operated. We report in the Other category results of several of our subsidiaries that provide ship charter brokerage and agency services. We manage each reportable segment separately, as each requires different resources depending on the nature of the contract or terms under which each vessel within the segment operates. As a result of our decision to discontinue all of the company’s Liner services in 2007, the results of our Liner service segment are now reflected as discontinued operations.

We allocate interest expense to the segments based on the book values of the vessels owned within each segment.

We do not allocate administrative and general expenses, investment income, gain on sale of investment, gain or loss on early extinguishment of debt, equity in net income of unconsolidated entities, or income taxes to our segments. Intersegment revenues are based on market prices and include revenues earned by our subsidiaries that provide specialized services to the operating segments.

The following table presents information about segment profit and loss for the three months ended June 30, 2008 and 2007:

	Time Charter				Rail-Ferry
(All Amounts in Thousands)	Contracts		COA		Service			Other			Total
2008
Revenues from External Customers	$	41,526	$	5,011	$	10,889		$	697		$	58,123
Intersegment Revenues (Eliminated)		-		-		-			3,122			3,122
Intersegment Expenses (Eliminated)		-		-		-			(3,122	)		(3,122	)
Voyage Expenses		32,116		4,992		8,632			136			45,876
Vessel and Barge Depreciation		3,713		-		1,342			4			5,059
Gross Voyage Profit		5,697		19		915			557			7,188
Interest Expense		1,190		-		389			(3	)		1,576
Segment Profit		4,507		19		526			560			5,612
2007
Revenues from External Customers	$	40,214	$	4,236	$	2,798		$	63		$	47,311
Intersegment Revenues Eliminated		-		-		-			2,856			2,856
Intersegment Expenses (Eliminated)		-		-		-			(2,856	)		(2,856	)
Voyage Expenses		28,987		2,827		3,256			(148	)		34,922
Vessel and Barge Depreciation		3,572		605		860			-			5,037
Gross Voyage (Loss) Profit		7,655		804		(1,318	)		211			7,352
Interest Expense		1,775		335		528			(83	)		2,555
Segment (Loss) Profit		5,880		469		(1,846	)		294			4,797

The following table presents information about segment profit and loss for the six months ended June 30, 2008 and 2007:

	Time Charter				Rail-Ferry
(All Amounts in Thousands)	Contracts		COA		Service			Other			Total
2008
Revenues from External Customers	$	83,048	$	9,860	$	19,138		$	1,881		$	113,927
Intersegment Revenues (Eliminated)		-		-		-			6,248			6,248
Intersegment Expenses (Eliminated)		-		-		-			(6,248	)		(6,248	)
Voyage Expenses		64,199		9,027		16,210			647			90,083
Vessel and Barge Depreciation		7,426		-		2,707			7			10,140
Gross Voyage Profit		11,423		833		221			1,227			13,704
Interest Expense		2,752		-		879			-			3,631
Segment (Loss) Profit		8,671		833		(658	)		1,227			10,073
2007
Revenues from External Customers	$	79,551	$	8,517	$	6,571		$	1,019		$	95,658
Intersegment Revenues Eliminated		-		-		-			3,887			3,887
Intersegment Expenses (Eliminated)		-		-		-			(3,887	)		(3,887	)
Voyage Expenses		58,214		5,441		7,054			809			71,518
Vessel and Barge Depreciation		7,143		1,209		1,721			-			10,073
Gross Voyage Profit (Loss)		14,194		1,867		(2,204	)		210			14,067
Interest Expense		3,445		647		1,011			62			5,165
Segment (Loss) Profit		10,749		1,220		(3,215	)		148			8,902

Following is a reconciliation of the totals reported for the operating segments to the applicable line items in the consolidated financial statements:

(All Amounts in Thousands)	Three Months Ended June 30,						Six Months Ended June 30,
Profit or Loss:	2008			2007			2008			2007
Total Profit for Reportable Segments	$	5,612		$	4,797		$	10,073		$	8,902
Unallocated Amounts:
Administrative and General Expenses		(4,869	)		(4,406	)		(9,906	)		(9,178	)
Gain (Loss) on Sale of Investment		(91	)		350			(91	)		350
Investment Income		192			552			437			1,211
Loss on Redemption of Preferred Stock		-			-			(1,371	)		-
Income (Loss) from Continuing Operations Before (Benefit) Provision for
Income Taxes and Equity in Net Income of Unconsolidated Entities	$	844		$	1,293		$	(858	)	$	1,285

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Note 4. Unconsolidated Entities

We have a 50% interest in Dry Bulk Cape Holding Inc. (“Dry Bulk”), which owns two Cape-Size Bulk Carriers, one Panamax Bulk Carrier and two Handymax Bulk Carrier Newbuildings on order. We account for this investment under the equity method and our share of earnings or losses is reported in our consolidated statements of income net of taxes. Our portion of the earnings of this investment was $16.4 million and $1.6 million for the three months ended June 30, 2008 and 2007, respectively. For the six months ended June 30, 2008 and 2007, our portion of the earnings of this investment was $17.6 million and $2.7 million, respectively. The 2008 earnings include an after-tax gain on the sale of one of Dry Bulk’s vessels, a Panamax Bulk Carrier in June 2008, of approximately $15.1 million.

We received a cash distribution from Dry Bulk of $2.5 million and $1.0 million in the first six months of 2008 and 2007, respectively. In addition, we also received a cash distribution for our share of the proceeds from the sale of the aforementioned Panamax Bulk Carrier in the amount of $25.5 million in early July 2008.

The unaudited condensed results of operations of Dry Bulk are summarized below:

	Three Months Ended June 30,				Six Months Ended June 30,
(Amounts in Thousands)	2008		2007		2008		2007
Operating Revenues	$	6,761	$	7,774	$	13,408	$	14,096
Operating Income	$	3,669	$	4,701	$	7,184	$	7,977
Net Income	$	32,811	$	3,129	$	34,937	$	4,729

Note 5. Earnings Per Share

Basic earnings per share was computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per share also considers dilutive potential common shares, including shares issuable under stock options,and restricted stock grants using the treasury stock method and convertible preferred stock using the if-converted method.

The calculation of basic and diluted earnings per share is as follows (in thousands except share amounts):

	Three Months Ended June 30,					Six Months Ended June 30,
	2008			2007		2008		2007
Numerator
Net Income (Loss) Available to Common Stockholders – Basic
Continuing *	$	18,025		$	2,866	$	18,625	$	3,604
Discontinued		(9	)		3,487		4,117		6,889
	$	18,016		$	6,353	$	22,742	$	10,493

Net Income (Loss) - Diluted
Continuing	$	18,025		$	3,466	$	18,713	$	4,804
Discontinued		(9	)		3,487		4,117		6,889
	$	18,016		$	6,953	$	22,830	$	11,693
Denominator
Weighted Avg Share of Common Stock Outstanding:
Basic		7,585,207			6,277,955		7,433,281		6,199,010
Plus:
Effect of dilutive restrictive stock		17,107			-		8,554		-
Effect of dilutive stock options		-			3,208		-		18,530
Effect of dilutive convertible shares from preferred stock		-			2,000,000		333,334		2,000,000
Diluted		7,602,314			8,281,163		7,775,169		8,217,540

Basic and Diluted Earnings Per Common Share
Net Income Available to Common Stockholders - Basic
Continuing Operations	$	2.38		$	0.46	$	2.51	$	0.58
Discontinued Operations		0.00			0.55		0.55		1.11
	$	2.38		$	1.01	$	3.06	$	1.69

Net Income Available to Common Stockholders - Diluted
Continuing Operations	$	2.37		$	0.42	$	2.41	$	0.58
Discontinued Operations		0.00			0.42		0.53		0.84
	$	2.37		$	0.84	$	2.94	$	1.42
* Income from Continuing Operations less Preferred Stock Dividends

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Note 6. Comprehensive Income

The following table summarizes components of comprehensive income for the three months ended June 30, 2008 and 2007:

	Three Months Ended June 30,
(Amounts in Thousands)	2008		2007
Net Income	$	18,016	$	6,953
Other Comprehensive Income (Loss):
Unrealized Holding Loss on Marketable Securities, Net of Deferred Taxes of $107 and ($348), Respectively		199		(646	)
Net Change in Fair Value of Derivatives, Net of Deferred Taxes of $184 and $97, Respectively		4,716		689
Total Comprehensive Income	$	22,931	$	6,996

The following table summarizes components of comprehensive income for the six months ended June 30, 2008 and 2007:

	Six Months Ended June 30,
(Amounts in Thousands)	2008			2007
Net Income	$	22,830		$	11,693
Other Comprehensive Income (Loss):
Unrealized Holding (Loss) on Marketable Securities, Net of Deferred Taxes of ($23) and ($202), Respectively		(46	)		(375	)
Net Change in Fair Value of Derivatives, Net of Deferred Taxes of $27 and $9, Respectively		115			355
Total Comprehensive Income	$	22,899		$	11,673

The net change in fair value of derivatives of $4.7 million for the second quarter of 2008 represents an increase in the fair value of the six interest rate swap agreements entered into on four of our loans. This increase is due to the reversal in the forward yield curve projections due to the anticipated Federal Reserve interest rate increases in the market place. (See further discussion of interest rate risk in Item 3 – Quantitative and Qualitative Information about Market Risk on page 15)

Note 7. Income Taxes

We recorded a benefit for federal income taxes of $1.8 million on our $858,000 loss from continuing operations before income from unconsolidated entities in the first six months of 2008, reflecting tax losses on operations taxed at the U.S. corporate statutory rate. For the first six months of 2007, our benefit was $899,000 on our $1.3 million of income from continuing operations before income from unconsolidated entities. Our tax benefit increased from the comparable prior year primarily as a result of favorable tax impacts of the sale and leaseback arrangement of our U.S. flag Molten Sulphur vessel and the investment in the Rail Ferry Service’s second decks. We recorded a provision for federal income taxes of $471,000 on our $4.6 million of income from discontinued operations in the first six months of 2008, due to the sale of Liner assets and recognition of sub-part F income. For the same period in 2007, the tax affect on discontinued operations was a provision of $9,000. In the first quarter of 2007 we formally adopted a plan to permanently re-invest all foreign earnings, and accordingly, we have not recorded a tax provision on 2007 or 2008 foreign earnings. For further information on certain tax laws and elections, see our annual report on Form 10-K for the year ended December 31, 2007, including Note G to the financial statements. Our qualifying U.S. flag operations continue to be taxed under a “tonnage tax” regime rather than under the normal U.S. corporate income tax regime.

Note 8. Fair Value Measurements

Effective January 1, 2008, we adopted the provisions of SFAS No. 157, "Fair Value Measurements," for financial assets and financial liabilities. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Under SFAS 157, the price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able and willing to complete a transaction.

SFAS 157 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present value on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, SFAS 157 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

w Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

w Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (including interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

w	Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

The following table summarizes our financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2008, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

(Amounts in thousands)	Level 1 Inputs		Level 2 Inputs			Level 3 Inputs		Total Fair Value

Marketable securities		3,511		-			-		3,511
Derivative assets		-		94			-		94
Derivative liabilities		-		(1,381	)		-		(1,381	)

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Note 9. New Accounting Pronouncements

In September of 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” which is effective for fiscal years beginning after November 15, 2007 and for interim periods within those years. As discussed further in Note 8, this statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. We adopted FAS 157 on January 1, 2008 and the adoption had no effect on our consolidated financial position and results of operation.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities – including an amendment of FASB Statement No. 155 (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities, and certain nonfinancial instruments that are similar to financial instruments, at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We adopted SFAS 159 on January 1, 2008 and the adoption had no effect on our consolidated financial position and results of operation.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging activities – an amendment of FASB Statement No. 133. SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008. We have not yet determined the impact, if any, the adoption of SFAS No. 161 will have on our consolidated financial position or results of operations.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 162 identifies the sources of accounting principles and provides entities with a framework for selecting the principles used in preparation of financial statements that are presented in conformity with GAAP. The current GAAP hierarchy has been criticized because it is directed to the auditor rather than the entity, it is complex, and it ranks FASB Statements of Financial Accounting Concepts, which are subject to the same level of due process as FASB Statements of Financial Accounting Standards, below industry practices that are widely recognized as generally accepted but that are not subject to due process. The Board believes the GAAP hierarchy should be directed to entities because it is the entity (not its auditors) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. The adoption of FASB 162 is not expected to have a material impact on the Company’s financial position.

Note 10. Discontinued Operations

Our LASH Liner service previously consisted of our U.S. flag LASH service and TransAtlantic LASH service. In 2007, we decided to discontinue both services based on unfavorable market conditions and higher operating costs. We sold two LASH vessels and 225 barges in the first six months of 2007 and the one remaining International flag vessel and the remaining 235 barges in the first quarter of 2008, generating a gain of $9.0 million and $4.6 million for 2007 and 2008, respectively. Total revenues associated with the LASH Liner services were $24.6 million and $0 for the first six months of 2007 and 2008, respectively.

Our U.S. flag LASH service and TransAtlantic LASH service were reported in “Continuing Operations” as a part of our Liner segment in periods prior to June 30, 2007. Both services have been restated to remove the effects of those operations from “Continuing Operations”.

Note 11. Changes in Accounting Estimate

In the first quarter of 2008, we adjusted the salvage value on our two container vessels and on our U.S. flag Coal Carrier. This decision was based on expected future market values for scrap steel and the relatively short remaining economic life of those three vessels. By reducing our depreciation expense, this adjustment increased our net income for the first six months of 2008 by $1.3 million or $.17 per share. The container vessels will be fully depreciated by the end of 2009 and the U.S. flag Coal Carrier by January of 2011.

Note 12. Convertible Exchangeable Preferred Stock

On December 27, 2007 we announced, and on February 1, 2008 we completed, the redemption of our 800,000 outstanding shares of 6% Convertible Exchangeable Preferred Stock. In lieu of cash redemption, holders of 462,382 shares of the Preferred Stock elected to convert their shares into 1,155,955 shares of our common stock. The remaining 337,618 outstanding shares of Preferred Stock were retired for cash (including accrued and unpaid dividends to, but excluding, the redemption date), pursuant to the terms of the Preferred Stock. As a result, we no longer have any shares of the 6% Convertible Exchangeable Preferred Stock outstanding. The total cash payment for the redemption of the Preferred Stock including the accrued and unpaid dividends was $17,306,299. We recognized a charge to earnings of $1.37 million in the first quarter of 2008 from the redemption of the Preferred Stock.

Note 13. Stock Based Compensation

On April 30, 2008, our Compensation Committee granted 175,000 shares of restricted stock to certain executive officers.

The shares vest ratably over the respective vesting period, which is approximately four years for 160,000 shares and approximately three years for 15,000 shares.

The fair value of the Company’s restricted stock, which is determined using the average stock price as of the date of the grant, is applied to the total shares that are expected to fully vest and is amortized to compensation expense on a straight-line basis over the vesting period.

A summary of the activity for restricted stock awards during the three months ended June 30, 2008 is as follows:

	Shares		Weighted Avg. Fair Value Per Share
Non-vested - April 1, 2008		-		-
Shares Granted		175,000	$	18.40
Shares Vested		-		-
Shares Forfeited		-		-
Non-vested - June 30, 2008		175,000	$	18.40

The following table summarizes the amortization of compensation cost, which will be included in administrative and general expenses, relating to all of the Company’s restricted stock grants as of June 30, 2008:

Grant Date	2008		2009		2010		2011		2012		Total

April 30, 2008	$	757,000	$	1,135,000	$	894,000	$	401,000	$	33,000	$	3,220,000

For the quarter ended June 30, 2008, the Company’s income before taxes and net income included $148,000 and $96,000, respectively, of stock-based compensation expense charges, while basic and diluted earnings per share were each charged $0.01 per share. There was no stock compensation expense or awards outstanding for the quarter ended June 30, 2007.

Note 14. Stock Repurchase Program

On January 25, 2008, the Company’s Board of Directors approved a share repurchase program for up to a total of 1,000,000 shares of the Company’s common stock. We expect that any share repurchases under this program will be made from time to time for cash in open market transactions at prevailing market prices. The timing and amount of any purchases under the program will be determined by management based upon market conditions and other factors. Purchases may be made pursuant to a program we have adopted under Rule 10b5-1 of the Securities Exchange Act. Through June 30, 2008, we repurchased 289,341 shares of our common stock for $6.7 million. From July 1, 2008 through July 30, 2008, we repurchased an additional 202,231 shares for $4.8 million. Unless and until the Board otherwise provides, this new authorization will remain open indefinitely, or until we reach the 1,000,000 share limit.

Note 15. Subsequent Events

We entered into a new lease agreement on our New York City office which will become effective October 1, 2008, when our existing lease expires. The length of the lease is nine years and nine months, with graduated payments starting after an initial nine month period of free rent. The agreement calls for total annual payments of $451,000 for years one through five and total annual payments of $488,000 for years six through nine. The rent expense will be amortized using the straight-line method over the lease term.

On April 30, 2008, our Compensation Committee authorized change of control agreements that will commit us to pay each of our top three executive officers who are terminated without cause or resigns under certain specified circumstances within specified periods following a change of control of the Company (i) a lump sum cash severance payment equal to a multiple of such officer’s annual salary and bonus, (ii) the officer’s currently pending bonus and (iii) certain other benefits. These agreements became effective August 6, 2008 and are included in the filing of this Form 10-Q under Item 6 – Exhibits on page 16.

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements made by us or on our behalf in this report or elsewhere that are not based on historical facts are intended to be “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on beliefs and assumptions about future events that are inherently unpredictable and are therefore subject to significant known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from the anticipated results expressed or implied by such forward-looking statements. In this report, the terms “we,” “us,” “our,” and “the Company” refer to International Shipholding Corporation and its subsidiaries.

Such statements include, without limitation, statements regarding (1) estimated fair values of capital assets, the recoverability of the cost of those assets, the estimated future cash flows attributable to those assets, and the appropriate discounts to be applied in determining the net present values of those estimated cash flows; (2) estimated scrap values of assets; (3) estimated proceeds from sale of assets and the anticipated cost of constructing or purchasing new or existing vessels; (4) estimated fair values of financial instruments, such as interest rate, commodity and currency swap agreements; (5) estimated losses (including independent actuarial estimates) under self-insurance arrangements, as well as estimated gains or losses on certain contracts, trade routes, lines of business or asset dispositions; (6) estimated losses attributable to asbestos claims; (7) estimated obligations, and the timing thereof, to the U.S. Customs Service relating to foreign repair work; (8) the adequacy of our capital resources and the availability of additional capital resources on commercially acceptable terms; (9) our ability to remain in compliance with our debt covenants; (10) anticipated trends in government sponsored military cargoes; (11) our ability to effectively service our debt; (12) financing opportunities and sources (including the impact of financings on our financial position, financial performance or credit ratings), (13) anticipated future operating and financial performance, financial position and liquidity, growth opportunities and growth rates, acquisition and divestiture opportunities, business prospects, regulatory and competitive outlook, investment and expenditure plans, investment results, pricing plans, strategic alternatives, business strategies, and other similar statements of expectations or objectives, and (14) assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan” or “anticipate” and other similar words.

Our forward-looking statements are based upon our judgment and assumptions as of the date such statements are made concerning future developments and events, many of which are outside of our control. These forward looking statements, and the assumptions upon which such statements are based, are inherently speculative and are subject to uncertainties that could cause our actual results to differ materially from such statements. Important factors that could cause our actual results to differ materially from our expectations may include, without limitation, our ability to (i) identify customers with marine transportation needs requiring specialized vessels or operating techniques; (ii) secure financing on satisfactory terms to acquire, modify, or construct vessels if such financing is necessary to service the potential needs of current or future customers; (iii) obtain new contracts or renew existing contracts which would employ certain of our vessels or other assets upon the expiration of contracts currently in place, on favorable economic terms; (iv) manage the amount and rate of growth of our administrative and general expenses and costs associated with operating certain of our vessels; and (v) manage our growth in terms of implementing internal controls and information systems and hiring or retaining key personnel, among other things.

Other factors include (vi) changes in cargo, charter hire, fuel, and vessel utilization rates; (vii) the rate at which competitors add or scrap vessels in the markets as well as demolition scrap prices and the availability of scrap facilities in the areas in which we operate; (viii) changes in interest rates which could increase or decrease the amount of interest we incur on borrowings with variable rates of interest, and the availability and cost of capital to us; (ix) the impact on our financial statements of nonrecurring accounting charges that may result from our ongoing evaluation of business strategies, asset valuations, and organizational structures; (x) changes in accounting policies and practices adopted voluntarily or as required by accounting principles generally accepted in the United States; (xi) changes in laws and regulations such as those related to government assistance programs and tax rates; (xii) the frequency and severity of claims against us, and unanticipated outcomes of current or possible future legal proceedings; (xiii) unplanned maintenance and out-of-service days on our vessels; (xiv) the ability of customers to fulfill obligations with us; (xv) the performance of unconsolidated subsidiaries; (xvi) our ability to effectively handle our leverage by servicing and meeting the covenant requirements in each of our debt instruments, thereby avoiding any defaults under those instruments and avoiding cross defaults under others; (xvii) other economic, competitive, governmental, and technological factors which may affect our operations; (xviii) political events in the United States and abroad, including terrorism, and the U.S. military's response to those events; (xix) election results, regulatory activities and the appropriation of funds by the U.S. Congress; and (xx) unanticipated trends in operating expenses such as fuel and labor costs and our ability to recover these fuel costs through fuel surcharges.

You should be aware that new factors may emerge from time to time and it is not possible for us to identify all such factors nor can we predict the impact of each such factor on our business or the extent to which any one or more factors may cause actual results to differ from those reflected in any forward-looking statements. You are further cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this report. We undertake no obligation to update any of our forward-looking statements for any reason.

Executive Summary

Net income for the quarter ended June 30, 2008, which includes an after-tax gain of $15.1 million on the sale of a Panamax Bulk Carrier, was $18.0 million as compared to net income of $7.0 million for the second quarter of 2007, which included net income from discontinued operations of $3.5 million. Excluding the aforementioned gain, net income for the three months ended June 30, 2008 was $2.9 million, compared to $3.5 million for the comparable 2007 period. Gross voyage profits decreased slightly from $7.4 million to $7.2 million for the second quarter of 2007 and 2008, respectively.

We continue to be positive on the outlook for our Rail Ferry segment which generated an improvement of $2.4 million in gross voyage profits for the second quarter of 2008 as compared to the same period of 2007. The significant improvement was achieved utilizing 84% of its cargo capacity up from 70% utilization in the first quarter of 2008. The overall results of the current quarter were negatively impacted by the drop in our Time Charter segment which decreased $2 million, $7.7 million in 2007 to $5.7 million in 2008, primarily due to a decrease in the carriage of supplemental cargoes on our U.S. Flag Pure Car Truck Carriers. This temporary downward result will reverse itself in the upcoming quarter as bookings in the third quarter show that nine month comparable levels will be achieved.

Administrative and general expenses increased from $4.4 million in the second quarter of 2007 to $4.9 million in the second quarter 2008 mainly due to annual salary increases and the introduction of a new executive stock compensation program.

Interest expense decreased from $2.6 million in the second quarter of 2007 to $1.6 million in the second quarter of 2008. The reduction in interest expense is due primarily to the retirement of our 7 ¾% senior notes in October 2007.

On June 27, 2008, Dry Bulk Cape Holding Inc., a company in which we hold a 50% interest, sold one of their vessels, a Panamax Bulk Carrier, for net proceeds of $51.0 million and recognized a gain of $30.2 million. Our share of the net proceeds and after-tax gain was $25.5 million and $15.1 million, respectively. The after-tax gain on the sale is reported under Equity in Net Income of Unconsolidated Entities.

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RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2008

COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2007

	Time Charter				Rail-Ferry
(All Amounts in Thousands)	Contracts		COA		Service			Other		Total
2008
Revenues from External Customers	$	83,048	$	9,860	$	19,138		$	1,881	$	113,927
Voyage Expenses		64,199		9,027		16,210			647		90,083
Vessel and Barge Depreciation		7,426		-		2,707			7		10,140
Gross Voyage Profit		11,423		833		221			1,227		13,704
2007
Revenues from External Customers	$	79,551	$	8,517	$	6,571		$	1,019	$	95,658
Voyage Expenses		58,214		5,441		7,054			809		71,518
Vessel and Barge Depreciation		7,143		1,209		1,721			-		10,073
Gross Voyage (Loss) Profit		14,194		1,867		(2,204	)		210		14,067

Gross voyage profits decreased from $14.1 million in the first six months of 2007 to $13.7 million in the first six months of 2008. Revenues increased from $95.7 million to $113.9 million and voyage expenses increased from $71.5 million to $90.1 million in the first six months of 2007 and 2008, respectively. The changes of revenues and expenses associated with each of our segments are discussed within the following analysis.

Time Charter Contracts: The decrease in this segment’s gross voyage profit from $14.2 million in the first six months of 2007 to $11.4 million in the first six months of 2008 was primarily due to a decrease in supplemental cargoes carried by our U.S. flag Pure Car Truck Carriers and damage to a vessel in our Indonesian service in 2008. We recorded a charge of approximately $1.0 million of additional insurance exposure on the damage, bringing our stop loss aggregate self-insurance reserves to their maximum of $2.0 million for the policy year ended on June 27, 2008. Revenues increased for this segment from $79.6 million in the first six months of 2007 to $83.0 million in the first six months of 2008. This improvement in revenues is primarily the result of operating additional Foreign flag Pure Car Truck Carriers, vessels we time charter in and out, and an additional U.S. flag Pure Car Truck Carrier in 2008 compared to the same period in 2007.

Contracts of Affreightment: Gross voyage profit for this segment declined from a profit of $1.9 million for the first six months of 2007 to $833,000 for the first six months of 2008 due to higher costs associated with operating the segment’s vessel under an operating lease in 2008 compared to owning the vessel in 2007. The benefits derived under an operating lease are reflected in a lower net effective tax rate. The increase in revenue from $8.5 million in 2007 to $9.9 million in 2008 was due to increased voyages and freight rate escalation for increasing fuel costs in 2008.

Rail-Ferry Service: Gross voyage profit for this segment improved from a $2.2 million loss in the first six months of 2007 to a $221,000 profit in the first six months of 2008. This increase was due to additional sailings in 2008 as well as increased cargo volumes which could be carried as a result of the addition of the second decks. Operation of the second decks began in the third quarter of 2007. Revenues for this segment increased from $6.6 million in the first six months of 2007 to $19.1 million in the first six months of 2008 due to the additional sailings and increased cargo volumes utilizing second deck capacity. During the first six months of 2008, the vessels operated at approximately 74% of capacity. We expect to improve our gross profits as we utilize the remaining second deck capacity.

Other: Gross profit increased from a profit of $210,000 in the first six months of 2007 to $1.2 million in the first six months of 2008. This increase was primarily due to 2007 adjusted earnings for Dry Bulk, recorded in 2008 and negative prior year insurance reserve adjustments in 2007.

Other Income and Expense

Administrative and general expenses increased from $9.2 million in the first six months of 2007 to $9.9 million in the first six months of 2008 primarily due to annual salary increases and our new executive stock compensation program. Although we originally reported the first six months of 2007 as having $11.1 million of A&G expense related to continuing operations, we have reclassified the $1.9 million of relocation incentive payments received from Alabama agencies as a reduction of our relocation expenses. Originally, relocation incentive payments were reported as “Other Revenue”. This reclassification had no net effect on Operating Income.

The following table shows the significant A&G components for the six months ended June 30, 2008 and 2007 respectively.

(Amounts in Thousands)	Year to Date as of June 30,
A&G Account	2008		2007		Variance

Wages & Benefits	$	5,037	$	4,520	$	517
Legal/Accounting Fees		760		540		220
Office Building (Leases)		506		510		(4	)
Relocation Expenses		459		630		(171	)
Other		3,144		2,978		166
TOTAL:	$	9,906	$	9,178	$	728

Interest expense decreased from $5.2 million in the first six months of 2007 to $3.6 million in the first six months of 2008 due primarily to the retirement of our 7 ¾ % senior notes in October 2007.

Loss on Redemption of Preferred Stock: On February 1, 2008, we redeemed 337,618 shares of our 6% Convertible Exchangeable Preferred Stock. The redemption price was $51 per share representing a $4.06 per share premium from its carrying book value. Accordingly, we recorded a $1.37 million loss in the first quarter from the redemption. The remaining 462,382 Preferred shares were converted by the holders of those shares into 1,155,955 shares of our Common Stock.

Investment Income decreased from $1.2 million in the first six months of 2007 to $437,000 in the first six months of 2008 due to a decrease in available cash and lower rate of return on our short-term investments.

Income Taxes

Equity in Net Income of Unconsolidated Entities

Equity in net income of unconsolidated entities, net of taxes, increased from $2.6 million in the first six months of 2007 to $17.8 million in the first six months of 2008. The improved results came from our 50% investment in Dry Bulk a company owning two Cape-Size Bulk Carriers and one remaining Panamax-Size Bulk Carrier. For the six months ended June 30, 2008 and 2007, our portion of the earnings of this investment was $17.6 million and $2.7 million, respectively. The 2008 earnings include an after-tax gain on the sale of one of Dry Bulk’s vessels, a Panamax Bulk Carrier, of approximately $15.1 million in June 2008.

During the second quarter of 2007, Dry Bulk entered into a ship purchase agreement with a Japanese company for two Handymax Bulk Carrier Newbuildings scheduled to be delivered in the first half of 2012. Total investment in the newbuildings is anticipated to be approximately $74.0 million, of which our share would be 50% or approximately $37.0 million. We expect to make our interim construction payments, scheduled to begin in April 2009, with cash generated from our Dry Bulk operations and bank financing, with long-term financing determined at delivery.

Discontinued Operations

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RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2008

COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2007

	Time Charter				Rail-Ferry
(All Amounts in Thousands)	Contracts		COA		Service			Other			Total
2008
Revenues from External Customers	$	41,526	$	5,011	$	10,889		$	697		$	58,123
Voyage Expenses		32,116		4,992		8,632			136			45,876
Vessel and Barge Depreciation		3,713		-		1,342			4			5,059
Gross Voyage Loss Profit		5,697		19		915			557			7,188
2007
Revenues from External Customers	$	40,214	$	4,236	$	2,798		$	63		$	47,311
Voyage Expenses		28,987		2,827		3,256			(148	)		34,922
Vessel and Barge Depreciation		3,572		605		860			-			5,037
Gross Voyage (Loss) Profit		7,655		804		(1,318	)		211			7,352

Gross voyage profit decreased from $7.4 million in the second quarter of 2007 to $7.2 million in the second quarter of 2008. Revenues increased from $47.3 million in the second quarter of 2007 to $58.1 million in the second quarter of 2008. Voyage expenses increased from $34.9 million in the second quarter of 2007 to $45.9 million in the second quarter of 2008. The changes of revenue and expenses associated with each of our segments are discussed within the following analysis below.

Time Charter Contracts: The decrease in this segment’s gross voyage profit from $7.7 million in the second quarter of 2007 to $5.7 million in the second quarter of 2008 was primarily due to decreased supplemental cargoes for our US flag Pure Car Truck Carriers in the second quarter of 2008. Revenues increased for this segment from $40.2 million in the second quarter of 2007 to $41.5 million in the second quarter of 2008. This improvement in revenues is primarily the result of operating additional Foreign flag Pure Car Truck Carriers, vessels we time charter in and out, and an additional U.S. flag Pure Car Truck Carrier in 2008 compared to the same period in 2007.

Contracts of Affreightment: Gross voyage profit decreased from $804,000 in the second quarter of 2007 to $19,000 in the second quarter of 2008 due to the higher costs associated with operating the segment’s vessel under an operating lease in 2008 compared to owning the vessel in 2007. The $775,000 increase of revenues for this segment was due to increased voyages in 2008 compared to the same period in 2007 due to an increase of available molten sulphur for carriage.

Rail-Ferry Service: Gross voyage results improved from a $1.3 million loss in the second quarter of 2007 to a $915,000 profit in the second quarter of 2008 due to additional sailings in 2008 as well as increased cargo volumes which could be carried as a result of the addition of the second decks. Operation of the second decks began in the third quarter of 2007. Revenues for this segment increased from $2.8 million in the second quarter of 2007 to $10.9 million in the second quarter of 2008 due to the additional sailings and increased cargo volumes utilizing second deck capacity. During the second quarter of 2008, the vessels operated at approximately 84% of capacity. We expect to improve our gross profits as we utilize the remaining second deck capacity.

Other: Gross profit increased from $211,000 in the second quarter of 2007 to $557,000 in the second quarter of 2008. This increase was primarily due to an increase in insurance reserves in 2007.

Other Income and Expense

Administrative and general expenses increased from $4.4 million in the second quarter of 2007 to $4.9 million in the second quarter of 2008 primarily due to annual salary increases and our new executive stock compensation program. Although we originally reported the second quarter of 2007 as having $5.4 million of A&G expense related to continuing operations, we have reclassified the $1.0 million of relocation incentive payments received from Alabama agencies as a reduction of our relocation expenses. Originally, the relocation incentive payments were reported as “Other Revenue”. This reclassification had no net effect on Operating Income.

The following table shows the significant A&G components for the second quarter of 2008 and 2007 respectively.

(Amounts in Thousands)	Three Months Ended June 30,
A&G Account	2008		2007		Variance

Wages & Benefits	$	2,605	$	2,308	$	297
Legal/Accounting Fees		348		278		70
Office Building (Leases)		233		291		(58	)
Relocation Expenses		197		115		82
Other		1,486		1,414		72
TOTAL:	$	4,869	$	4,406	$	463

Interest expense decreased from $2.6 million in the second quarter of 2007 to $1.6 million in the second quarter of 2008 mainly due primarily to the retirement of our 7 ¾ % senior notes during October 2007.

Income Taxes

We recorded a benefit for federal income taxes of $614,000 on our $844,000 income from continuing operations before income from unconsolidated entities in the second quarter of 2008, reflecting tax losses on operations taxed at the U.S. corporate statutory rate. For the second quarter of 2007, our benefit was $586,000 on our $1.3 million income from continuing operations before income from unconsolidated entities. In the first quarter of 2007 we formally adopted a plan to permanently re-invest all foreign earnings, and, accordingly, we have not recorded a tax provision on 2007 or 2008 foreign earnings. For further information on certain tax laws and elections, see our annual report on Form 10-K for the year ended December 31, 2007, including Note G to the financial statements. Our qualifying U.S. flag operations continue to be taxed under a “tonnage tax” regime rather than under the normal U.S. corporate income tax regime.

Equity in Net Income of Unconsolidated Entities

Equity in net income of unconsolidated entities, net of taxes, increased from $1.6 million in the second quarter of 2007 to $16.6 million in the second quarter of 2008. The improved results came from our 50% investment in Dry Bulk, a company owning two Cape-Size Bulk Carriers and one remaining Panamax-Size Bulk Carrier. For the second quarters of 2008 and 2007, our portion of the earnings of this investment was $16.4 million and $1.6 million, respectively. The 2008 earnings include an after-tax gain on the sale of one of Dry Bulk’s vessels, a Panamax Bulk Carrier, of approximately $15.1 million in June 2008.

Discontinued Operations

Our LASH Liner service previously consisted of our U.S. flag LASH service and TransAtlantic LASH service. In 2007, we decided to discontinue both services based on unfavorable market conditions and higher operating costs. We sold one U.S. flag LASH vessel and 56 barges in the second quarter of 2007, generating a gain of $4.4 million. Total revenues associated with the LASH Liner services were $8.8 million and $0 for the second quarter of 2007 and 2008, respectively.

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LIQUIDITY AND CAPITAL RESOURCES

The following discussion should be read in conjunction with the more detailed Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows included elsewhere herein as part of our Condensed Consolidated Financial Statements.

Our working capital (which we define as the difference between our total current assets and total current liabilities) decreased from $23.2 million at December 31, 2007, to $10.1 million at June 30, 2008, primarily from the early redemption of our Preferred Stock in February 2008 and repurchases of our common stock. Cash and cash equivalents increased in the first six months of 2008 by $2.9 million to a total of $17.0 million. This increase was a result of cash provided by operating activities of $19.7 million and cash provided by investing activities of $14.1 million, partially offset by cash used by financing activities of $31.0 million. Total current liabilities of $40.8 million as of June 30, 2008 included current maturities of long-term debt of $12.8 million.

Operating activities generated a positive cash flow after adjusting net income of $22.8 million for the first six months of 2008 for non-cash provisions such as depreciation and amortization. Net cash provided by operating activities also included the add back of the non-cash loss of $1.4 million on the early redemption of Preferred Stock, the deduction of the non-cash $4.6 million from the gain on the sale of LASH assets, and the deduction of the non-cash $17.8 million from the equity in net income of unconsolidated entities. We received cash dividends of $2.5 million from our investments in these unconsolidated entities.

Cash provided by investing activities of $14.1 million included proceeds from the sale of assets of $10.8 million, proceeds from the sale of short term investments of $2.0 million and principal payments received under direct financing leases of $3.7 million, partially offset by capital improvements of $2.4 million, including improvements to our information technology systems and additional tank work on our Rail-Ferry vessels.

Cash used for financing activities of $31.0 million included regularly scheduled debt payments of $6.4 million, payment of $17.3 million on the early redemption of our Preferred Stock, and $6.7 million of repurchases of our common stock.

In March of 2008, we signed an agreement with Regions Bank to provide us with an unsecured revolving line of credit for $35 million. This facility replaced the prior secured revolving line of credit for the like amount. As of June 30, 2008, $6.4 million of the $35 million revolving credit facility, which expires in April of 2010, was pledged as collateral for a letter of credit, and the remaining $28.6 million was available.

Debt and Lease Obligations – As of June 30, 2008, we held three vessels under operating leases, two vessels under bareboat charter agreements and six vessels under time charter agreements, including five Pure Car/Truck Carriers, one Breakbulk/Multi Purpose vessel, a Molten Sulphur Carrier, three Container vessels and a Tanker vessel. We also conduct certain of our operations from leased office facilities. Refer to our 2007 form 10-K for a schedule of our contractual obligations.

Debt Covenant Compliance Status – In the unanticipated event that our cash flow and capital resources are not sufficient to fund our debt service obligations, we could be forced to reduce or delay capital expenditures, sell assets, obtain additional equity capital, enter into financings of our unencumbered vessels, or restructure our debt.

Restructuring of Liner Services and Disposition of Certain LASH Assets – Our LASH Liner service previously consisted of our U.S. flag LASH service and TransAtlantic LASH service. In 2007, we decided to discontinue both services based on unfavorable market conditions and higher operating costs. We sold two LASH vessels and 225 barges in the first six months of 2007 and the one remaining International flag vessel and the remaining 235 barges in the first quarter of 2008, generating a gain of $9.0 million and $4.6 million for 2007 and 2008, respectively. Total revenues associated with the LASH Liner services were $24.6 million and $0 for the first six months of 2007 and 2008, respectively.

Bulk Carriers - We have a 50% interest in Dry Bulk, which owns two Cape-Size Bulk Carriers and one remaining Panamax-Size Bulk Carrier. This investment is accounted for under the equity method and our share of earnings or losses are reported in our consolidated statements of income net of taxes. Dry Bulk has entered into a ship purchase agreement with a Japanese company for two Handymax Bulk Carrier Newbuildings scheduled to be delivered in 2012. Total investment in the Newbuildings is anticipated to be approximately $74.0 million, of which our share would be 50% or approximately $37 million. During the period of construction up to delivery, where 50% of the projected overall costs will be expended, Dry Bulk plans to finance the interim construction costs with equity contributions of up to 15% with the 85% balance of the cost being financed with a bank financing bridge loan. While it is anticipated that the required equity contributions could be covered by Dry Bulk’s earnings, if they are not, our anticipated share of these interim equity contributions could be approximately $2.7 million. Upon completion and delivery, Dry Bulk plans to establish permanent long-term financing.

Dividend Payments – Our Preferred Stock accrued cash dividends at a rate of 6.0% per annum from the date of issuance in early January 2005 through January 31, 2008. All such shares were either redeemed or converted into shares of our common stock on February 1, 2008.

Environmental Issues – We have not been notified that we are a potentially responsible party in connection with any environmental matters, and we have determined that we have no known risks for which assertion of a claim is probable that are not covered by third party insurance, third party indemnification or our self-retention insurance reserves. Our environmental risks primarily relate to oil pollution from the operation of our vessels. We have pollution liability insurance coverage with a limit of $1 billion per occurrence, with deductible amounts not exceeding $500,000 for each incident.

In January 2008 we were notified that the United States Coast Guard was conducting an investigation on the SS MAJOR STEPHEN W. PLESS regarding an alleged discharge of untreated bilge water by one or more members of the crew. The USCG has inspected the ship and interviewed various crew members. The United State Attorney’s Office is completing its discovery process. We believe at this time that we are not a target of this investigation.

Stock Repurchase Program - On January 25, 2008, the Company’s Board of Directors approved a share repurchase program for up to a total of 1,000,000 shares of the Company’s common stock. We expect that any share repurchases under this program will be made from time to time for cash in open market transactions at prevailing market prices. The timing and amount of any purchases under the program will be determined by management based upon market conditions and other factors. Purchases may be made pursuant to a program we have adopted under Rule 10b5-1 of the Securities Exchange Act. Through June 30, 2008, we repurchased 289,341 shares of our common stock for $6.7 million. From July 1, 2008 through July 30, 2008, we repurchased an additional 202,231 shares for $4.8 million. Unless and until the Board otherwise provides, this new authorization will remain open indefinitely or until we reach the 1,000,000 share limit. (See Part II, Item 2– Unregistered Sales of Equity Securuties and Use of Proceeds on page 15)

New Accounting Pronouncements – In September of 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” which is effective for fiscal years beginning after November 15, 2007 and for interim periods within those years. This statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. We adopted FAS 157 on January 1, 2008 and the adoption had no effect on our consolidated financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities – including an amendment of FASB Statement No. 155 (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities, and certain nonfinancial instruments that are similar to financial instruments, at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We adopted FAS 159 on January 1, 2008 and the adoption had no effect on our consolidated financial position and results of operations.

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ITEM 3 – QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK

In the ordinary course of our business, we are exposed to foreign currency, interest rate, and commodity price risk. We utilize derivative financial instruments including interest rate swap agreements, commodity swap agreements, and forward exchange contracts to manage certain of these exposures. We hedge only firm commitments or anticipated transactions and do not use derivatives for speculation. We neither hold nor issue financial instruments for trading purposes.

Interest Rate Risk. The fair value of our cash and short-term investment portfolio at June 30, 2008, approximated its carrying value due to the short-term duration. The potential decrease in fair value resulting from a hypothetical 10% increase in interest rates at year-end for our investment portfolio is not material.

The fair value of long-term debt at June 30, 2008, including current maturities, was estimated to equal the carrying value of $139.0 million.

We have entered into eight interest rate swap agreements with commercial banks, two in September of 2005, one in November of 2005, two in September of 2007, one in November of 2007, one in January of 2008 and one in February of 2008 in order to reduce the possible impact of higher interest rates in the long-term market. The January of 2008 agreement does not become effective until March of 2009. For each of these “variable to fixed” swap agreements, we have swapped our exposure from variable rates to fixed rates. While these arrangements are structured to reduce our exposure to increases in interest rates, they also limit the benefit we might otherwise receive from any decreases in interest rates. As of June 30, 2008, 100% of our long-term and short-term debt obligations were at fixed rates as a result of the interest rate swap agreements, and 67.5% of this debt is U.S. Dollar denominated. Our weighted average cost of U.S. Dollar denominated debt is 5.11%, while our Yen denominated cost of debt is 2.0%.

The fair value of these agreements at June 30, 2008, estimated based on the amount that the banks would receive or pay to terminate the swap agreements at the reporting date, taking into account current market conditions and interest rates, is a liability of $1.4 million. A hypothetical 10% decrease in interest rates as of June 30, 2008 would have resulted in a $3.4 million liability.

Commodity Price Risk. As of June 30, 2008, we do not have commodity swap agreements in place to manage our exposure to price risk related to the purchase of the estimated 2008 fuel requirements for our Rail-Ferry Service segment. We have fuel surcharges in place for our Rail-Ferry Service, which we expect to effectively manage the price risk for those services during 2008. If we had commodity swap agreements, they could be structured to further reduce our exposure to increases in fuel prices. A 20% increase in the price of fuel for the period January 1, 2008 through June 30, 2008 would have resulted in an increase of approximately $300,000 in our fuel costs, excluding the fuel surcharges to our customers for the same period, and in a corresponding decrease of approximately $0.04 in our basic earnings per share based on the shares of our common stock outstanding as of June 30, 2008. Our charterers in the Time Charter and Contract of Affreightment segments are responsible for purchasing vessel fuel requirements or paying increased freight rates to cover the increased cost of fuel; thus, we have no fuel price risk in these segments.

Foreign Exchange Rate Risk. There have been no material changes in market risk exposure for the foreign currency risk described in our Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2007.

ITEM 4 – CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we conducted an evaluation of the effectiveness of our “disclosure controls and procedures,” as that phrase is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934. The evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).

Based on that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures have been effective as of the end of the period covered by this report in providing reasonable assurance that they have been timely alerted of material information required to be disclosed in this quarterly report. During the second quarter of 2008, we did not make any changes to our internal control over financial reporting that materially affected, or that we believe are reasonably likely to materially affect, our internal control over financial reporting.

The design of any system of controls is based in part upon certain assumptions about the likelihood of future events and contingencies, and there can be no assurance that any design will succeed in achieving its stated goals. Because of inherent limitations in any control system, misstatements due to error or fraud could occur and not be detected.

PART II – OTHER INFORMATION

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On January 25, 2008, the Company’s Board of Directors approved a share repurchase program for up to a total of 1,000,000 shares of the Company’s common stock. We expect that any share repurchases under this program will be made from time to time for cash in open market transactions at prevailing market prices. The timing and amount of any purchases under the program will be determined by management based upon market conditions and other factors. Purchases may be made pursuant to a program we have adopted under Rule 10b5-1 of the Securities Exchange Act. Through June 30, 2008, we repurchased 289,341 shares of our common stock for $6.7 million. Unless and until the Board otherwise provides, this new authorization will remain open indefinitely, or until we reach the 1,000,000 share limit.

ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plan		(d) Maximum Number of Shares that May Yet Be Purchased Under the Plan
May 1, 2008 - May 31, 2008		136,200	$	22.098		136,200		863,800
June 1, 2008 - June 30, 2008		153,141	$	24.053		153,141		710,659

ITEM 5 – OTHER INFORMATION

On July 30, 2008 the Company’s Board of Directors approved an amendment to the Company’s bylaws which increases from “fifty” to “sixty” the maximum number of days between a record date set by the board and the meeting or other action to which it relates.

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ITEM 6 – EXHIBITS

(a) EXHIBIT INDEX

Part II Exhibits:

3.1	Restated Certificate of Incorporation of the Registrant (filed with the Securities and Exchange Commission as Exhibit 3.1 to the Registrant's Form 10-Q for the quarterly period ended September 30, 2004 and incorporated herein by reference)

3.2*	By-Laws of the Registrant

4.1	Specimen of Common Stock Certificate (filed as an exhibit to the Registrant's Form 8-A filed with the Securities and Exchange Commission on April 25, 1980 and incorporated herein by reference)

10.1

Credit Agreement, dated as of September 30, 2003, by and among LCI Shipholdings, Inc. and Central Gulf Lines, Inc., as Joint and Several Borrowers, the banks and financial institutions listed therein, as Lenders, Deutsche Schiffsbank Aktiengesellschaft as Facility Agent and Security Trustee, DnB NOR Bank ASA, as Documentation Agent, and the Registrant, as Guarantor (filed with the Securities and Exchange Commission as Exhibit 10.2 to Pre-Effective Amendment No. 2, dated December 10, 2004 and filed with the Securities and Exchange Commission on December 10, 2004, to the Registrant's Registration Statement on Form S-1 (Registration No. 333-120161) and incorporated herein by reference)

10.2

Credit Agreement, dated as of December 6, 2004, by and among LCI Shipholdings, Inc., Central Gulf Lines, Inc. and Waterman Steamship Corporation, as Borrowers, the banks and financial institutions listed therein, as Lenders, Whitney National Bank, as Administrative Agent, Security Trustee and Arranger, and the Registrant, Enterprise Ship Company, Inc., Sulphur Carriers, Inc., Gulf South Shipping PTE Ltd. and CG Railway, Inc., as Guarantors (filed with the Securities and Exchange Commission as Exhibit 10.3 to Pre-Effective Amendment No. 2, dated December 10, 2004 and filed with the Securities and Exchange Commission on December 10, 2004, to the Registrant's Registration Statement on Form S-1 (Registration No. 333-120161) and incorporated herein by reference)

10.3

Credit Agreement, dated September 26, 2005, by and among Central Gulf Lines, Inc., as Borrower, the banks and financial institutions listed therein, as Lenders, DnB NOR Bank ASA, as Facility Agent and Arranger, and Deutsche Schiffsbank Aktiengesellschaft, as Security Trustee and Arranger, and the Registrant, as Guarantor (filed with the Securities and Exchange Commission as Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated September 30, 2005 and incorporated herein by reference)

10.4

Credit Agreement, dated December 13, 2005, by and among CG Railway, Inc., as Borrower, the investment company, Liberty Community Ventures III, L.L.C., as Lender, and the Registrant, as Guarantor (filed with the Securities and Exchange Commission as Exhibit 10.4 to the Registrant's Form 10-K for the annual period ended December 31, 2005 and incorporated herein by reference)

10.5	Consulting Agreement, dated January 1, 2006, between the Registrant and Niels W. Johnsen (filed with the Securities and Exchange Commission as Exhibit 10.5 to the Registrant's Form 10-K for the annual period ended December 31, 2005 and incorporated herein by reference)

10.6	Consulting Agreement, dated April 30, 2007, between the Registrant and Erik F. Johnsen (filed with the Securities and Exchange Commission as Exhibit 10.6 to the Registrant’s Form 10-K for the annual period ended December 31, 2007 and incorporated herein by reference)

10.7	International Shipholding Corporation Stock Incentive Plan (filed with the Securities and Exchange Commission as Exhibit 10.5 to the Registrant's Form 10-K for the annual period ended December 31, 2004 and incorporated herein by reference)

10.8

Form of Stock Option Agreement for the Grant of Non-Qualified Stock Options under the International Shipholding Corporation Stock Incentive Plan (filed with the Securities and Exchange Commission as Exhibit 10.6 to the Registrant's Form 10-K for the annual period ended December 31, 2004 and incorporated herein by reference)

10.9	Description of Life Insurance Benefits Provided by the Registrant to Niels W. Johnsen and Erik F. Johnsen Plan (filed with the Securities and Exchange Commission as Exhibit 10.8 to the Registrant's Form 10-K for the annual period ended December 31, 2004 and incorporated herein by reference)

10.10

Memorandum of Agreement of the Registrant, dated as of August 24, 2007, providing for the Registrant’s purchase of one 6400 CEU Panamanian flagged pure car and truck carrier (filed with the Securities and Exchange Commission as Exhibit 10.10 to the Registrant's Form 10-K for the annual period ended December 31, 2007 and incorporated herein by reference) (Confidential treatment requested on certain portions of this exhibit. An unredacted version of this exhibit has been filed separately with the Securities and Exchange Commission.)

10.11

Loan Agreement, dated as of September 10, 2007, by and amongWaterman Steamship Corporation, as borrower, the Registrant, as guarantor, DnB NOR Bank ASA, as facility agent and security trustee. (filed with the Securities and Exchange Commission as Exhibit 10.11 to the Registrant's Form 10-K for the annual period ended December 31, 2007 and incorporated herein by reference)

10.12

SHIPSALES Agreement, dated as of September 21, 2007, by and between East Gulf Shipholding, Inc., as buyer, and Clio Marine Inc., as seller. (filed with the Securities and Exchange Commission as Exhibit 10.12 to the Registrant's Form 10-K for the annual period ended December 31, 2007 and incorporated herein by reference) (Confidential treatment requested on certain portions of this exhibit. An unredacted version of this exhibit has been filed separately with the Securities and Exchange Commission.)

10.13

Facility Agreement, dated as of January 23, 2008, by and among East Gulf Shipholding, Inc., as borrower, the Registrant, as guarantor, the banks and financial institutions party thereto, as lenders, DnB NOR Bank ASA, as facility agent, and Deutsche Schiffsbank Aktiengesellschaft, as security trustee. (filed with the Securities and Exchange Commission as Exhibit 10.13 to the Registrant's Form 10-K for the annual period ended December 31, 2007 and incorporated herein by reference)

10.14*

Change of Control Agreement, by and between the registrant and Niels M. Johnsen, effective as of August 6, 2008.

10.15*

Change of Control Agreement, by and between the registrant and Erik L. Johnsen, effective as of August 6, 2008.

10.16*

Change of Control Agreement, by and between the registrant and Manuel G. Estrada, effective as of August 6, 2008.

31.1*

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* filed with this report

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INTERNATIONAL SHIPHOLDING CORPORATION

/s/ Manuel G. Estrada

_____________________________________________

Manuel G. Estrada

Vice President and Chief Financial Officer

Date: August 8, 2008

EX-3.2 2 exhibit32.htm BY - LAWS OF THE REGISTRANT exhibit32.htm

INTERNATIONAL SHIPHOLDING CORPORATION

BY-LAWS

ARTICLE I

MEETINGS OF STOCKHOLDERS

SECTION 1. ANNUAL MEETINGS. -- Annual meetings of stockholders for the election of directors and for such other business as may be stated in the notice of the meeting, shall be held at the office of the Company in New Orleans, Louisiana, at 9:30 a.m. on the fourth Thursday in April, or at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and set forth in the notice of the meeting.

SECTION 2. VOTING. - -- All elections for directors shall be decided by plurality vote; all other questions shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat, a quorum being present, except as otherwise provided by the Certificate of Incorporation or the laws of the State of Delaware. The vote for directors shall be by ballot.

A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of the stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

SECTION 3. QUORUM. - -- Except as otherwise required by law, by the Certificate of Incorporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding a majority of the stock of the Company entitled to vote shall constitute a quorum at all-meetings of the stockholders. In case a quorum shall not be present at any meeting, a majority in interest of the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present, except as otherwise provided by the Certificate of Incorporation or the laws of the State of Delaware.

SECTION 4. SPECIAL MEETINGS. - -- Special meetings of the stockholders may be called by the Chairman, President, or Secretary, or by resolution of the Board of Directors, and may be held at such time and in such place and for such purpose as is specified in the notice of meeting.

SECTION 5. NOTICE OF MEETINGS. - -- Unless waived, written notice, stating the place, date and time of the meeting, and the general nature of the business to be considered, shall be given to each stockholder entitled to vote thereat at his address as it appears on the records of the Company, not less than ten nor more than sixty days before the day of the meeting, and such notice shall be deemed to be given at the time when the same shall be deposited, with postage thereon prepaid, in the United States mail.

SECTION 6. ORDER OF BUSINESS. -- The order of business at each meeting of the stockholders shall be determined by the chairman of such meeting, but such order of business at any meeting at which a quorum is present may be changed by the vote of a majority in voting interest of those present in person or by proxy at such meeting and entitled to vote thereat.

ARTICLE II

Directors

SECTION 1. NUMBER AND TERM. -- The number of directors shall consist of such number of persons, not less than three (3), as shall from time to time be fixed by resolution of the Board of Directors.

SECTION 2. RESIGNATIONS. - -- Any director, member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the Chairman, President, or Secretary. The acceptance of a resignation shall be not be necessary to make it effective.

SECTION 3. COMMITTEES. - -- The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the directors of the Company. Any such committee, to the extent provided in the resolution, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Company, and may authorize the seal of the Company to be affixed to all papers which may require it. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee; provided, however, that in the absence of disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent of disqualified member.

SECTION 4. MEETINGS. - -- The newly elected directors may hold their first meeting for the purpose of organization and the transaction of business after the annual meeting of the stockholders, at such time and place as may be fixed by the Board.

Regular meetings of the Board may be held without notice at such places and times as shall be determined from time to time by resolution of the Board.

Special meetings of the Board may be called by the Chairman, the President, or the Secretary, and shall be called by them on the written request of any two directors. At least 12 hours notice (or at least 36 hours notice if given by mail) shall be given to each director unless waived and such meeting shall be held at such place as may be determined by the Board or as shall be stated in the notice of the meeting.

SECTION 5. QUORUM AND MANNER OF ACTING. -- A majority of the directors shall constitute a quorum for the transaction of business. The vote of a majority of a quorum of the Board shall be the act of the Board. If at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned.

SECTION 6. COMPENSATION. - -- The Board of Directors shall fix the amount of the fees or other compensation payable to each director who is not otherwise compensated as an officer or employee of the Company or of one of its subsidiaries. Nothing herein contained shall be construed to preclude any director from serving the Company in any other capacity as an officer, agent or otherwise, and receiving compensation therefor.

SECTION 7. INDEMNIFICATION. - -- (a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative ("proceeding"), by reason of the fact that he, or a person for whom he is the legal representative, is or was a director or officer of the Company or any of its subsidiaries (including nominees and designees who have not yet taken office) or is or was serving at the request of the Company (including any person who has not been duly elected or appointed) as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (the "Indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Company to the fullest extent authorized by the Delaware General Corporation Law ("GCL"), as presently existing or as it may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than the GCL permitted the Company to provide prior to such amendment), against any and all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties, amounts paid in connection with any arbitration or investigation and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith, Indemnitee's rights hereunder shall be contract rights and shall include the right to be paid by the Company for expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that the payment of such expenses incurred by an Indemnitee in advance of the final disposition of such proceeding, shall be made only upon delivery to the Company of an undertaking in a form satisfactory to counsel for the Company, by or on behalf of such Indemnitee, to repay all amounts so advanced if it should be ultimately determined that such Indemnitee is not entitled to be indemnified under this provision or otherwise. For purposes of this provision the term Company shall include any resulting or constituent entities.

(b) Nonexclusivity of Rights. The rights conferred herein on any person shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, contract or other agreement, vote of stockholders or disinterested directors or otherwise.

(c) Insurance. The Company may maintain insurance at its expense, to protect itself and any such director (including nominees and designees who have not yet taken office), officer, employee or agent of the Company or another corporation, partnership, joint venture, trust or other enterprise (including service with respect to employee benefit plans) against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the GCL.

ARTICLE III

Officers

SECTION 1. OFFICERS. - -- The officers of the Company shall be a Chairman, a President, a Vice President, or more than one Vice President, a Treasurer, and a Secretary, all of whom shall be elected by the Board of Directors and who shall hold office until their successors are elected and qualified. In addition, the Board of Directors may elect a Controller, and may appoint or may delegate the appointment of one or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers, and such other officers and agents as they may deem proper. The officers shall be elected at the first meeting of the Board of Directors after each annual meeting. All of the said elected officers shall hold their offices at the pleasure of the Board.

SECTION 2. CHAIRMAN. - -- The Chairman shall be the chief executive officer of the Company and shall have the general powers and duties of supervision and management usually vested in the office of the chief executive of a company. He shall preside at all meetings of the stockholders and of the Board of Directors, and shall have general supervision, direction and control of the business of the Company. Except as the Board of Directors shall authorize the execution thereof in some other manner, the Chairman may execute bonds, mortgages and any other contracts of any nature in behalf of the Company.

SECTION 3. PRESIDENT. - -- The President shall be the chief operating officer of the Company. At the request of the Chairman, or in his absence or during his disability, the President shall perform the duties and exercise the functions of the Chairman. Except as the Board of Directors shall authorize the execution thereof in some other manner, the President may execute bonds, mortgages and any other contracts of any nature in behalf of the Company.

SECTION 4. VICE PRESIDENT. -- In the event of death, absence or inability of the President to perform any duties imposed upon him by these By-Laws and the order of the Board of Directors, the Vice President, or if there be more than one, the Vice Presidents in the order of seniority, may exercise his powers and perform his duties subject to the control of the Chairman and the Board of Directors. Except as the Board of Directors shall authorize the execution thereof in some other manner, any Vice President may execute bonds, mortgages and any other contracts of any nature in behalf of the Company.

SECTION 5. SECRETARY. - -- The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by law or by these By-Laws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chairman, the President, or by the directors, upon whose requisition the meeting is called as provided in these By-Laws. He shall record all the proceedings of the meetings of the Company and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the directors or the Chairman. He shall have the custody of the seal of the Company and shall affix the same to all instruments requiring it, when authorized by the directors or the Chairman, and attest the same.

SECTION 6. TREASURER. - -- The Treasurer shall have the custody of the Company funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the Company. He shall deposit all monies and other valuables in the name and to the credit of the Company in such depositaries as may be designated by the Board of Directors.

The Treasurer shall disburse the funds of the Company as may be ordered by the Board of Directors, the Chairman, or the President, taking proper vouchers for such disbursements. If required by the Board of Directors, he shall give the Company a bond for the faithful discharge of his duties in such amount and with such surety as the Board shall prescribe.

The Treasurer shall sign all checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Company in such manner as shall be determined from time to time by resolution of the Board of Directors; provided, however, that the Directors shall have power by resolution to delegate any of the duties or powers of the Treasurer to other officers.

SECTION 7. CONTROLLER. - -- The Controller shall be in charge of all Company accounting books, records, and procedures, shall perform internal audits, shall prepare budgets, financial statements and reports for the Chairman, the President, and the Board of Directors. He shall keep his accounts in the name of the Company and shall render such reports as may be required by the Board of Directors, the Chairman, or the President.

The Controller shall perform such other duties as may, from time to time, be assigned to him by the Chairman or by the Board of Directors; and in the event the office of the Controller is vacant, such duties shall be performed by such person as may be designated by the Chairman.

SECTION 8. ASSISTANT SECRETARIES. -- Assistant Secretaries, if any shall be appointed, shall, during the absence or disability of the Secretary, perform all the duties of the Secretary and shall have such other powers and shall perform such other duties as shall be assigned to them.

SECTION 9. ASSISTANT TREASURERS. -- Assistant Treasurers, if any shall be appointed, shall, during the absence or disability of the Treasurer, perform all the duties of the Treasurer and shall have such other powers and shall perform such other duties as shall be assigned to them.

SECTION 10. ASSISTANT CONTROLLERS. -- Assistant Controllers, if any shall be appointed, shall, during the absence or disability of the Controller, perform all the duties of the Controller and shall have such other powers and shall perform such other duties as shall be assigned to them.

ARTICLE IV

Miscellaneous

SECTION 1. STOCKHOLDERS RECORD DATE. -- In order that the Company may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to Company action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that if the adjournment is for more than 30 days or if the Board of Directors fixes a new record date for the adjourned meeting, a notice thereof shall be given to each stockholder of record entitled to vote at the meeting.

SECTION 2. FISCAL YEAR. -- The fiscal year of the Company shall be the calendar year, unless otherwise determined by resolution of the Board of Directors.

ARTICLE V

Amendments

These By-Laws may be altered or repealed and By-Laws may be made by the affirmative vote of a majority of the Board of Directors, at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, if notice of the proposed alteration or repeal, or By-Law or By-Laws to be made, be contained in the notice of such special meeting.

EX-10.14 3 exhibit1014.htm CHANGE OF CONTROL AGREEMENT exhibit1014.htm

Exhibit 10.14

CHANGE OF CONTROL AGREEMENT

CHANGE OF CONTROL AGREEMENT (this “Agreement”), dated effective as of August 6, 2008 (the “Agreement Date”), between International Shipholding Corporation, a Delaware corporation (the “Company”), and Niels M. Johnsen (the “Employee”).

W I T N E S S E T H:

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its stockholders to take steps designed to retain the services of the Employee and to assure the full dedication of the Employee, free from personal distraction, in the event of an actual or pending change of control of the Company; and

WHEREAS, the Board believes that this agreement accomplishes these and other related objectives;

NOW, THEREFORE, the parties agree as follows:

ARTICLE 1

CERTAIN DEFINITIONS

Section 1.1 Affiliate. “Affiliate” (and variants thereof) shall mean a Person that controls, or is controlled by, or is under common control with, another specified Person, either directly or indirectly.

Section 1.2 Beneficial Owner. “Beneficial Owner” (and variants thereof), with respect to a security, shall mean a Person who, directly or indirectly (through any contract, understanding, relationship or otherwise), has or shares (i) the power to vote, or direct the voting of, the security, or (ii) the power to dispose of, or direct the disposition of, the security.

Section 1.3 Cause. (a) “Cause” shall mean:

(i) conviction of the Employee of a felony or the Employee’s entry of a guilty plea or a plea of no contest to a felony;

(ii) willful and continued engagement by the Employee in illegal conduct that is materially and demonstrably injurious to the Company;

(iii) habitual intoxication during working hours, or habitual abuse of or addiction to a controlled dangerous substance; or

(iv) the willful and continued failure of the Employee to perform substantially the Employee’s duties with the Company or its Affiliates (other than any such failure resulting from incapacity due to physical or mental illness or the Employee’s termination of employment for Good Reason) for a period of 15 days after a written demand for substantial performance is delivered to the Employee by the Board which specifically identifies the manner in which the Board believes that the Employee has not substantially performed the Employee’s duties.

(b) For purposes of this Section 1.3, no act or failure to act on the part of the Employee shall be considered “willful” unless it is done, or omitted to be done, by the Employee in bad faith and without reasonable belief that the Employee’s action or omission was in the best interests of the Company or its Affiliates. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of a senior officer of the Company or based upon the advice of counsel for the Company or its Affiliates shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company or its Affiliates. Any termination by the Company or any of its Affiliates of the Employee’s employment during the Employment Term (as defined in Section 1.8) shall not be deemed to be for Cause unless the Employee’s action or inaction meets the foregoing standard and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Employee and the Employee is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Employee is guilty of the conduct described in subparagraph (a) above, and specifying the particulars thereof in detail.

(c) No action or inaction shall be deemed the basis for Cause unless the Employee is terminated therefor within one year after such action or omission is known to the Chairman of the Compensation Committee of the Board.

(d) In the event that the existence of Cause shall become an issue in any action or proceeding between the Company and the Employee, the Company shall, notwithstanding the finding of the Board referenced above, have the burden of establishing that the actions or inactions deemed the basis for Cause did in fact occur and do constitute Cause and that the Company has satisfied the procedural requirements of this provision.

Section 1.4 Change of Control. “Change of Control” shall mean:

(a) the acquisition by any Person of Beneficial Ownership of 30% or more of the outstanding shares of the Company’s Common Stock, $1.00 par value per share (the “Common Stock”), or 30% or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors; provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control:

(i) any acquisition (other than a Business Combination which constitutes a Change of Control under Section 1.4(c) hereof) of Common Stock directly from the Company,

(ii) any acquisition of Common Stock by the Company or its subsidiaries,

(iii) any acquisition of Common Stock by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or

(iv) any acquisition of Common Stock by any entity pursuant to a Business Combination that does not constitute a Change of Control under Section 1.4(c) hereof; or

(b) individuals who, as of the Agreement Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Agreement Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board shall be considered a member of the Incumbent Board, unless such individual’s initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board; or

(c) consummation of a reorganization, share exchange, merger or consolidation (including any such transaction involving any direct or indirect subsidiary of the Company), or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”); provided, however, that in no such case shall any such transaction constitute a Change of Control if immediately following such Business Combination,

(i) the individuals and entities who were the Beneficial Owners of the Company’s outstanding common stock and the Company’s voting securities entitled to vote generally in the election of directors immediately prior to such Business Combination have direct or indirect Beneficial Ownership, respectively, of more than 50% of the then outstanding shares of common stock, and more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, of the Post-Transaction Corporation (as defined in Section 1.11 hereof), and

(ii) except to the extent that such ownership existed prior to the Business Combination, no Person (excluding the Post-Transaction Corporation and any employee benefit plan or related trust of either the Company, the Post-Transaction Corporation or any subsidiary of either corporation) Beneficially Owns, directly or indirectly, 20% or more of the then outstanding shares of common stock of the entity resulting from such Business Combination or 20% or more of the combined voting power of the then outstanding voting securities of such entity, and

(iii) at least a majority of the members of the board of directors of the Post-Transaction Corporation were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(d) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

Section 1.5 Code. “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

Section 1.6 Company. “Company” shall mean International Shipholding Corporation and shall include any successor to or assignee of (whether direct or indirect, by purchase, share exchange, merger, consolidation or otherwise) all or substantially all of the assets or business of the Company that assumes and agrees to perform this Agreement by operation of law or otherwise.

Section 1.7 Disability. “Disability” shall mean a condition that would entitle the Employee to receive benefits under the long-term disability insurance policy applicable to the Company’s officers at the time either because the Employee is totally disabled or partially disabled, as such terms are defined in the policy then in effect. If the Company has no long-term disability plan in effect, “Disability” shall occur if (a) the Employee is rendered incapable because of physical or mental illness of satisfactorily discharging his duties and responsibilities to the Company for a period of 180 consecutive days, (b) a duly qualified physician chosen by the Company and acceptable to the Employee or his legal representatives so certifies in writing, and (c) the Board determines that the Employee has become disabled.

Section 1.8 Employment Term. “Employment Term” shall mean the period commencing on the date of a Change of Control and ending on the third anniversary of such date.

Section 1.9 Good Reason. (a) Any act or failure to act by the Company or its Affiliates specified in this Section 1.9 shall constitute “Good Reason” unless the Employee shall otherwise expressly agree in a writing that specifically refers to this Section 1.9:

(i) Any failure of the Company or its Affiliates to provide the Employee with a position, authority, duties and responsibilities at least commensurate in all material respects with those held, exercised and assigned during the 180-day period immediately preceding the Change of Control. The Employee’s position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with the Employee’s position, authority, duties and responsibilities prior to a Change of Control unless after the Change of Control the Employee holds an equivalent position with, and exercises substantially equivalent authority, duties and responsibilities on behalf of, either the Post-Transaction Corporation or the Company;

(ii) The assignment to the Employee of any duties inconsistent in any material respect with the Employee’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3.1(b) of this Agreement, or any other action that results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that the Company remedies within 10 days after its receipt of written notice thereof from the Employee;

(iii) A material increase in the Employee’s responsibilities or duties without a commensurate increase in total compensation;

(iv) Any material failure by the Company to comply with and satisfy Section 5.1(c) of this Agreement;

(v) Any failure by the Company or its Affiliates to comply with any of the other provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that the Company remedies within 10 days after its receipt of written notice thereof from the Employee;

(vi) Any directive requiring the Employee to be based at any office or location other than as provided in Section 3.1(b)(ii) hereof or requiring the Employee to travel on business to a substantially greater extent than required immediately prior to the Change of Control; or

(vii) Any purported termination of the Employee’s employment otherwise than as expressly permitted by this Agreement.

(b) No action or inaction by the Company shall be deemed the basis for Good Reason unless the Employee asserts his right hereunder to terminate employment with Good Reason prior to the first anniversary of the date on which the Employee obtained actual knowledge of such act or omission. Except as otherwise provided in the prior sentence, neither the Employee’s continued employment with the Company or its Affiliates nor any delay in the Employee’s assertion of his rights to terminate employment with Good Reason shall be deemed to constitute a waiver of any of the Employee’s rights hereunder.

(c) Anything in this Agreement to the contrary notwithstanding, a resignation by the Employee during the 30-day period immediately following the first anniversary of the Change of Control shall be deemed to be a termination for Good Reason and the Employee shall be entitled to receive all payments and benefits hereunder associated therewith.

Section 1.10 Person. “Person” shall mean a natural person or entity, and shall also mean the group or syndicate created when two or more Persons act as a syndicate or other group (including, without limitation, a partnership or limited partnership) for the purpose of acquiring, holding, or disposing of a security, except that “Person” shall not include an underwriter temporarily holding a security pursuant to an offering of the security.

Section 1.11 Post-Transaction Corporation. Unless a Change of Control results from a Business Combination (as defined in Section 1.4(c) hereof), “Post-Transaction Corporation” shall mean the Company after the Change of Control. If a Change of Control results from a Business Combination, “Post-Transaction Corporation” shall mean the corporation or other entity resulting from the Business Combination unless, as a result of such Business Combination, an ultimate parent entity controls such resulting entity, the Company or all or substantially all of the Company’s assets either directly or indirectly, in which case “Post-Transaction Corporation” shall mean such ultimate parent entity.

Section 1.12 Specified Employee. “Specified Employee” shall mean the Employee if the Employee is a key employee under Treasury Regulations Section 1.409A-1(i) because of final and binding action taken by the Board or its Compensation Committee, or by operation of law or such regulation.

ARTICLE 2

STATUS OF CHANGE OF CONTROL AGREEMENTS

Notwithstanding any provisions thereof, this Agreement supersedes any and all prior agreements between the Company and the Employee that provide for severance benefits in the event of a Change of Control of the Company, as defined therein, and is effective as of the Agreement Date.

ARTICLE 3

CHANGE OF CONTROL BENEFITS

Section 3.1 Employment Term and Capacity after Change of Control.

(a) This Agreement shall commence on the Agreement Date and continue in effect through December 31, 2009; provided, however, that, commencing on January 1, 2010 and each January 1 thereafter, the term of this Agreement has been and shall automatically be extended for one additional year unless, not later than June 30 of the preceding year, the Company shall have given written notice that it does not wish to extend this Agreement; provided, further, that, notwithstanding any such non-extension notice by the Company, if a Change of Control of the Company shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect through the third anniversary of the Change of Control, subject to any earlier termination of the Employee’s status as an employee pursuant to this Agreement; provided, further, that in no event shall any termination of this Agreement result in any forfeiture of rights that accrued prior to the date of termination.

(b) During the Employment Term, the Company hereby agrees to continue the Employee in its employ, subject to the terms and conditions of this Agreement. During the Employment Term, (i) the Employee’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with those held, exercised and assigned during the 180-day period immediately preceding the Change of Control and (ii) the Employee’s services shall be performed during normal business hours at the location of the Company’s principal executive office at the time of the Change of Control, or the office or location where the Employee was employed immediately preceding the Change of Control or any relocation of any such site to a location that is not more than 35 miles from its location at the time of the Change of Control. The Employee’s position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with the Employee’s position, authority, duties and responsibilities prior to a Change of Control unless after the Change of Control the Employee holds an equivalent position with, and exercises substantially equivalent authority, duties and responsibilities on behalf of, either the Post-Transaction Corporation or the Company.

(c) During the Employment Term and excluding any periods of vacation and sick leave to which the Employee is entitled, the Employee agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Employee hereunder, to use the Employee’s reasonable best efforts to perform faithfully such responsibilities. During the Employment Term it shall not be a violation of this Agreement for the Employee to (A) serve on corporate, civic or charitable boards or committees, (B) fulfill speaking engagements, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Employee’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Employee prior to a Change of Control, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent thereto shall not thereafter be deemed to interfere with the performance of the Employee’s responsibilities to the Company.

Section 3.2 Compensation and Benefits. During the Employment Term, the Employee shall be entitled to the following compensation and benefits:

(a) Base Salary. The Employee shall receive an annual base salary (“Base Salary”), which shall be paid in at least monthly installments. The Base Salary shall initially be equal to 12 times the highest monthly base salary that was paid or is payable to the Employee, including any base salary which has been earned but deferred by the Employee, by the Company and its Affiliates with respect to any month in the 12-month period ending with the month that immediately precedes the month in which the Change of Control occurs. During the Employment Term, the Employee’s Base Salary shall be reviewed at such time as the Company undertakes a salary review of his peer employees (but at least annually), and, to the extent that salary increases are granted to his peer employees of the Company (or have been granted during the immediately preceding 12-month period to his peer employees of any Affiliate of the Company), the Employee shall be granted a salary increase commensurate with any increase granted to his peer employees of the Company and its Affiliates. Any increase in Base Salary shall not serve to limit or reduce any other obligation to the Employee under this Agreement. Base Salary shall not be reduced during the Employment Term (whether or not any increase in Base Salary occurs) and, if any increase in Base Salary occurs, the term Base Salary as utilized in this Agreement shall refer to Base Salary as so increased from time to time.

(b) Annual Bonus. In addition to Base Salary, the Employee shall be awarded, for each fiscal year ending during the Employment Term, an annual cash bonus (the “Bonus”) in an amount at least equal to the average of the annual bonuses paid to the Employee with respect to the three fiscal years that immediately precede the year in which the Change of Control occurs under the Company’s annual bonus plan, or any comparable bonus under a successor plan. Each such Bonus shall be paid after the end of the fiscal year and no later than the 15th day of the third month of the fiscal year next following the fiscal year for which the Bonus is awarded. For purposes of determining the value of any annual bonuses paid to the Employee in any year preceding the year in which the Change of Control occurs, all cash and stock bonuses earned by the Employee shall be valued as of the date of the grant. Notwithstanding anything to the contrary in this paragraph, the Employee shall be awarded a Bonus for each fiscal year during the Employment Term only if the Employee is employed by the Company at the end of such fiscal year.

(c) Fringe Benefits. The Employee shall be entitled to fringe benefits (including, but not limited to, any cash payments made in lieu thereof) commensurate with those provided to his peer employees of the Company and its Affiliates, but in no event shall such fringe benefits be less favorable than the most favorable of those provided by the Company and its Affiliates to the Employee at any time during the one-year period immediately preceding the Change of Control or, if more favorable to the Employee, those provided generally at any time after the Change of Control to his peer employees of the Company and its Affiliates.

(d) Expenses. The Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Employee in accordance with the most favorable agreements, policies, practices and procedures of the Company and its Affiliates in effect for the Employee at any time during the one-year period immediately preceding the Change of Control or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to his peer employees of the Company and its Affiliates.

(e) Benefit Plans. (i) The Employee shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to his peer employees of the Company and its Affiliates, but in no event shall such plans, practices, policies and programs provide the Employee with incentive opportunities (measured with respect to both regular and special incentive opportunities to the extent that any such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable than the most favorable of those provided by the Company and its Affiliates for the Employee under any agreements, plans, practices, policies and programs as in effect at any time during the one-year period immediately preceding the Change of Control or, if more favorable to the Employee, those provided generally at any time after the Change of Control to his peer employees of the Company and its Affiliates.

(ii) The Employee and his family shall be eligible for participation in and shall receive all benefits under any welfare benefit plans, practices, policies and programs provided by the Company and its Affiliates (including, without limitation, medical, prescription drug, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to his peer employees of the Company and its Affiliates, but in no event shall such plans, practices, policies and programs provide the Employee and his family with benefits, in each case, less favorable than the most favorable of those agreements, plans, practices, policies and programs in effect for the Employee and his family at any time during the one-year period immediately preceding the Change of Control or, if more favorable to the Employee and his family, those provided generally at any time after the Change of Control to his peer employees of the Company and its Affiliates.

(iii) Without limiting the generality of the Company’s obligations under this subsection (e), the Company shall comply with all of its obligations under the benefit plans, practices, policies and programs of the Company and its Affiliates that arise in connection with a Change of Control of the Company, including without limitation those obligations described in Section 3.5.

(f) Office and Support Staff. The Employee shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, commensurate with those provided to his peer employees of the Company and its Affiliates.

(g) Vacation. The Employee shall be entitled to paid vacation in accordance with the most favorable agreements, plans, policies, programs and practices of the Company and its Affiliates as in effect for the Employee at any time during the one-year period immediately preceding the Change of Control or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to his peer employees of the Company and its Affiliates.

Section 3.3 Obligations upon Termination after a Change of Control.

(a) Termination by Company for Reasons other than Death, Disability or Cause or by the Employee for Good Reason. If, after a Change of Control and during the Employment Term, the Company or any of its Affiliates terminates the Employee’s employment, as defined in Treasury Regulations 1.409A-1(h)(1) (“Separation from Service”), other than for Cause, death or Disability, or the Employee terminates employment for Good Reason,

(i) Subject to the other terms and conditions of this Agreement (including, if applicable, the limitations on the timing and the total amounts of payments imposed by Sections 3.3(d) and 3.9), the Company shall pay to the Employee in a lump sum in cash within five business days of the date of termination an amount equal to three times the sum of (i) the amount of Base Salary in effect pursuant to Section 3.2(a) hereof at the date of termination, plus (ii) the greater of (x) the average of the annual bonuses paid or to be paid to the Employee with respect to the immediately preceding three fiscal years or (y) the target Bonus for which the Employee is eligible for the fiscal year in which the date of termination occurs, assuming achievement at the target level of the objective performance goals established with respect to such bonus and achievement of 100% of any subjective performance goals or criteria otherwise applicable with respect to such bonus; provided, however, that, if the Employee has in effect a deferral election with respect to any percentage of the annual bonus which would otherwise become payable with respect to the fiscal year in which termination occurs, such lump sum payment shall be reduced by an amount equal to such percentage times the bonus component of the lump sum payment (which reduction amount shall be deferred in accordance with such election);

(ii) The Company shall pay to the Employee in a lump sum in cash within five business days of the date of termination, but in no case later than the 15th day of the third month following the end of the fiscal year of the Company in which the termination occurs, an amount calculated by multiplying the annual bonus that the Employee would have earned with respect to the entire fiscal year in which termination occurs, assuming achievement at the target level of the objective performance goals established with respect to such bonus and achievement of 100% of any subjective performance goals or criteria otherwise applicable with respect to such bonus, by the fraction obtained by dividing the number of days in such year through the date of termination by 365; provided, however, that, if the Employee has in effect a deferral election with respect to any percentage of the annual bonus which would otherwise become payable with respect to the fiscal year in which termination occurs, such lump sum payment shall be reduced by an amount equal to such percentage times the lump sum payment (which reduction amount shall be deferred in accordance with such election);

(iii) If, at the date of termination, the Company shall not yet have paid to the Employee (or deferred in accordance with any effective deferral election by the Employee) an annual bonus with respect to a fully completed fiscal year, the Company shall pay to the Employee in a lump sum in cash within five business days of the date of termination but in no case after the 15th day of the third month following the end of the fiscal year of the Company in which the termination occurs, an amount determined as follows: (i) if the Board (acting directly or indirectly through any committee or subcommittee) shall have already determined the amount of such annual bonus, such amount shall be paid, and (ii) if the Board shall not have already determined the amount of such annual bonus, the amount to be paid shall be the greater of the amount provided under Section 3.2(b) hereof or the annual bonus that the Employee would have earned with respect to such completed fiscal year, based solely upon the actual level of achievement of the objective performance goals established with respect to such bonus and assuming the achievement of 100% of any subjective performance goals or criteria otherwise applicable with respect to such bonus; provided, however, that, if the Employee has in effect a deferral election with respect to any percentage of the annual bonus which would otherwise become payable with respect to such completed fiscal year, such lump sum payment shall be reduced by an amount equal to such percentage times the lump sum payment (which reduction amount shall be deferred in accordance with such election); provided, further, that any payment under this subsection (iii) (or any payment under any other provision of this Agreement calculated by reference to prior or target bonus amounts) shall be payable notwithstanding any provision to the contrary set forth in any bonus plan or program of the Company;

(iv) For a period of three years following the date of termination of employment, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy (the “Continuation Period”), the Company shall at its expense continue on behalf of the Employee and his dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits (including any benefit under any individual benefit arrangement that covers medical, dental or hospitalization expenses not otherwise covered under any general Company plan) provided (x) to the Employee at any time during the one-year period prior to the Change in Control or at any time thereafter or (y) to other similarly-situated employees who continue in the employ of the Company or its Affiliates during the Continuation Period. If the Employee is a Specified Employee governed by Section 3.3(d), to the extent that any benefits provided to the Employee under this Section 3.3(a)(iv) are taxable to the Employee, then, with the exception of medical insurance benefits, the value of the aggregate amount of such taxable benefits provided to the Employee pursuant to this Section 3.3(a)(iv) during the six month period following the date of termination shall be limited to the amount specified by Code Section 402(g)(1)(B) for the year in which the termination occurred. Employee shall pay the cost of any benefits that exceed the amount specified in the previous sentence during the six month period following the date of termination, and shall be reimbursed in full by the Company during the seventh month after the date of termination. The coverage and benefits (including deductibles and costs) provided in this Section 3.3(a)(iv) during the Continuation Period shall be no less favorable to the Employee and his dependents and beneficiaries than the most favorable of such coverages and benefits during any of the periods referred to in clauses (x) or (y) above; provided, however, in the event of the Disability of the Employee during the Continuation Period, disability benefits shall, to the maximum extent possible, not be paid for the Continuation Period but shall instead commence immediately following the end of the Continuation Period. The Company’s obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Employee obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Employee hereunder as long as the aggregate coverages and benefits of the combined benefit plans is no less favorable to the Employee than the coverages and benefits required to be provided hereunder. At the end of the Continuation Period, the Employee shall have assigned to him, at no cost and with no apportionment of prepaid premiums, any assignable insurance owned by the Company that relates specifically to the Employee unless such assignment is inconsistent with the terms of any other written arrangement with the Employee. To the maximum extent permitted by law, the Employee will be eligible for coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) at the end of the Continuation Period or earlier cessation of the Company’s obligation under the foregoing provisions of this Section 3.3(a)(iv) (or, if the Employee shall not be so eligible for any reason, the Company will provide equivalent coverage).

(v) All benefits that the Employee is entitled to receive pursuant to benefit plans maintained by the Company, the Post-Transaction Corporation or their respective Affiliates under which benefits are calculated based upon years of service or age will be calculated by treating the Employee as having remained employed until the third anniversary of the Change of Control;

(vi) The Company at its cost shall provide to the Employee outplacement assistance by a reputable firm specializing in such services for the period beginning with the termination of employment and ending upon the lapse of the Employment Term; and

(vii) The Company shall discharge its obligations under all other applicable sections of this Article III, including Sections 3.4, 3.5, 3.6 and 3.10.

To the extent that any amounts payable under Section 3.3(a)(iv) and (vi) are taxable compensation and do not qualify as reimbursements and other separation payments under Treasury Regulations Section 1.409A-1(b)(9)(v), they shall be deemed to be reimbursements or in-kind benefits governed by Treasury Regulations Section 1.409A-3(i)(1)(iv) and, accordingly, (i) the amount of expenses eligible for reimbursement or in-kind benefits provided during the Employee’s taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits in any other taxable year, (ii) the reimbursement of an eligible expense must be made on or before the last day of the Employee’s taxable year following the taxable year in which the expense was incurred and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

To the extent any benefits described in Section 3.3(a)(iv) and (vi) cannot be provided pursuant to the appropriate plan or program maintained for employees, the Company shall provide such benefits outside such plan or program at no additional cost (including tax cost) to the Employee.

The payments and benefits provided in this Section 3.3(a) and under all of the Company’s employee benefit and compensation plans shall be without regard to any plan amendment made after any Change of Control that adversely affects in any manner the computation of payments and benefits due the Employee under such plan or the time or manner of payment of such payments and benefits. After a Change of Control no discretionary power of the Board or any committee thereof shall be used in a way (and no ambiguity in any such plan shall be construed in a way) which adversely affects in any manner any right or benefit of the Employee under any such plan. If the Employee becomes entitled to receive benefits under this Section 3.3(a), the Company shall not be required to make any cash severance payment under any other severance or salary continuation policy, plan, agreement or arrangement in favor of other officers or employees of the Company or its Affiliates unless such other policy, plan, agreement or arrangement expressly provides to the contrary in a provision that specifically states that it is intended to override the limitation of this sentence.

(b) Death; Disability; Termination for Cause; or Voluntary Termination. If, after a Change of Control and during the Employment Term, the Employee’s status as an employee is terminated (i) by reason of the Employee’s death or Disability, (ii) by the Company for Cause or (iii) voluntarily by the Employee other than for Good Reason, this Agreement shall terminate without further obligation to the Employee or the Employee’s legal representatives (other than the timely payment or provision of those already accrued to the Employee, imposed by law or imposed pursuant to employee benefit or compensation plans, programs, practices, policies or agreements maintained by the Company or its Affiliates).

(c) Notice of Termination. Any termination by the Company for Cause or by reason of the Employee’s Disability, or by the Employee for Good Reason, shall be communicated by a Notice of Termination to the other party given in accordance with Section 5.2 of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated and (iii) if the effective date of the termination is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice), provided that the effective date for any termination by reason of the Employee’s Disability shall be the 30th day after the giving of such notice, unless prior to such 30th day the Employee shall have resumed the full-time performance of his duties. The failure by the Employee or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause, Disability or Good Reason shall not waive any right of the Employee or the Company, respectively, hereunder or preclude the Employee or the Company, respectively, from asserting such fact or circumstance in enforcing the Employee’s or the Company’s rights hereunder.

(d) Six Month Delay for Specified Employees. Notwithstanding any other provision hereof, payments hereunder which constitute deferred compensation under Code Section 409A and the Treasury Regulations thereunder and which are not exempt from coverage by Code Section 409A and the Treasury Regulations thereunder shall commence, if Employee is then a Specified Employee and payment is triggered by his Separation from Service, on the first day of the seventh month following the date of the Specified Employee’s Separation from Service, or, if earlier, the date of death of the Specified Employee. On the first day of such seventh month or on the first day of the month following the earlier death of the Specified Employee, the Specified Employee or his estate or spouse, as the case may be, shall be paid in a lump sum the amount that the Specified Employee would have been paid hereunder over the preceding six months (or, if earlier, the months preceding the date of death) but for the fact that he was a Specified Employee. Nevertheless, for all other purposes of this Agreement, the payments shall be deemed to have commenced on the date they would have had the Employee not been a Specified Employee, and payment of any remaining benefits shall be made as otherwise scheduled hereunder.

Section 3.4 Accrued Obligations and Other Benefits. It is the intent of this Agreement that upon termination of employment for any reason following a Change of Control the Employee or his legal representatives be entitled to receive promptly, and in addition to any other benefits specifically provided, (a) the Employee’s Base Salary through the date of termination to the extent not theretofore paid, (b) any accrued vacation pay, to the extent not theretofore paid, and (c) any other amounts or benefits required to be paid or provided or which the Employee or his legal representatives are entitled to receive under any plan, program, policy, practice or agreement of the Company or its Affiliates, the terms and benefits of which are hereby affirmed in their entirety (as such terms and benefits may be supplemented or enhanced pursuant to the terms hereof).

Section 3.5 Stock Options and Other Incentives. The foregoing benefits provided for in this Article III are intended to be in addition to the value or benefit of any stock options, restricted stock, performance shares or similar awards, the exercisability, vesting or payment of which is accelerated or otherwise enhanced upon a Change of Control pursuant to the terms of any stock option, incentive or other similar plan or agreement heretofore or hereafter adopted by the Company or the Post-Transaction Corporation; provided, however, that, upon any termination of the Employee other than for Cause within three years following a Change of Control, all of the Employee’s then-outstanding vested stock options, whether granted before or during the Employment Term, shall remain exercisable until the later of the 90th day after the termination date or the end of the exercise period provided for in the applicable option agreement or plan as then in effect, but in no event shall such exercise period continue after the date on which such options would have expired if the Employee had remained an employee of the Company, the Post-Transaction Corporation or one of their respective Affiliates.

Section 3.6 Legal Fees.

(a) The Company shall pay the Employee’s reasonable fees for legal and other related expenses associated with any disputes arising hereunder or under any other agreements, arrangements or understandings regarding the Employee’s employment with the Company (including, without limitation, all agreements, arrangements and understandings regarding bonuses, equity-based incentives, employee benefits or other compensation matters) if either a court of competent jurisdiction or an arbitrator shall render a final judgment or an arbitrator’s final decision in favor of the Employee on the issues in such dispute, from which there is no further right of appeal. If it shall be determined in such judicial adjudication or arbitration that the Employee is successful on some of the issues in such dispute, but not all, then the Employee shall be entitled to receive a portion of such legal fees and other expenses as shall be appropriately prorated. All payments due under this Section 3.6 shall be made promptly, but in no event later than 30 days after the final judgment or decision is rendered.

(b) For purposes of this Section 3.6, the phrase “reasonable fees for legal and other related expenses” shall mean only the reasonable fees incurred by the Employee for legal and other related expenses, to the extent and only to the extent to which either (a) the reimbursement or payment of such fees and expenses by the Company does not constitute “compensation” within the meaning of that word where it appears in the phrase “a legally binding right during a taxable year to compensation” in the first sentence of Treasury Regulations Section 1.409A-1(b)(1); or (b) the reimbursement or payment of such fees and expenses by the Company is a settlement or award resolving bona fide legal claims based on wrongful termination, employment discrimination, the Fair Labor Standards Act, or worker’s compensation statutes, including claims under applicable Federal, state, local, or foreign laws, or for reimbursements or payments of reasonable attorneys fees or other reasonable expenses incurred by a service provider related to such bona fide legal claims described in Treasury Regulations Section 1.409A-1(b)(10).

Section 3.7 Set-Off; Mitigation. After a Change of Control, the obligations of the Company and its Affiliates to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company or its Affiliates may have against the Employee or others other than the Company’s right to reduce welfare benefits under the circumstances described in Section 3.3(a)(iv). It is the intent of this Agreement that in no event shall the Employee be obligated to seek other employment or take any other action to mitigate the amounts or benefits payable to the Employee under any of the provisions of this Agreement.

Section 3.8 Certain Pre-Change-of-Control Terminations. Notwithstanding any other provision of this Agreement, the Employee’s employment shall be deemed to have been terminated following a Change of Control by the Company without Cause (and the Employee shall be entitled to receive all payments and benefits associated therewith) if the Employee’s employment is terminated by the Company or any of its Affiliates without Cause prior to a Change of Control (whether or not a Change of Control actually occurs) and the Employee can reasonably demonstrate that such termination was at the request or direction of a third party who has taken steps designed to effect a Change of Control or otherwise arose in connection with or in anticipation of a Change of Control.

Section 3.9 Excise Taxes.

(a) Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Employee in connection with the Change of Control or the termination of the Employee’s employment under this Agreement or any other agreement between the Company and the Employee (all such payments and benefits, including the payments and benefits under Section 3.3 hereof, being hereinafter called “Total Payments”) would be subject (in whole or in part), to an excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the cash payments under Section 3.3 hereof shall first be reduced, and the noncash payments and benefits under the other sections hereof shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income and employment taxes on such reduced Total Payments), is greater than or equal to the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income and employment taxes on such Total Payments and the amount of Excise Tax to which the Employee would be subject in respect of such unreduced Total Payments); provided, however, that the Employee may elect to have the noncash payments and benefits hereof reduced (or eliminated) prior to any reduction of the cash payments under Section 3.3 hereof.

(b) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which the Employee shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to the Employee and selected by the accounting firm (the “Auditor”) which was, immediately prior to a Change of Control or other event giving rise to a potential Excise Tax, the Company’s independent auditor, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “Base Amount” (within the meaning set forth in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

(c) At the time that payments are made under this Agreement, the Post-Transaction Corporation shall provide the Employee with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Post-Transaction Corporation has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement).

(d) The Company shall be responsible for all charges of the Tax Counsel and the Auditor.

Section 3.10 Indemnification and Insurance.

(a) If, in connection with any agreement related to a transaction that results in a Change of Control of the Company, an undertaking is made to provide the Board with rights to indemnification from the Company (or from any other party to such agreement), the Employee shall, upon effectiveness of the Change of Control, by virtue of this Agreement be entitled to the same rights to indemnification as are provided to the Board pursuant to such agreement. Otherwise, the Employee shall be entitled to indemnification rights on terms no less favorable to the Employee than those available under any Company indemnification agreements or the articles of incorporation, bylaws or resolutions of the Company at any time after the Change of Control to his peer employees of the Company. Such indemnification rights shall be with respect to all claims, actions, suits or proceedings to which the Employee is or is threatened to be made a party that arise out of or are connected to his services at any time prior to the termination of his employment, without regard to whether such claims, actions, suits or proceedings are made, asserted or arise during or after the Employment Term.

(b) If, in connection with any agreement related to a transaction that results in a Change of Control of the Company, an undertaking is made to provide the Board with continued coverage following the Change of Control under one or more directors and officers liability insurance policies, then the Employee shall, upon effectiveness of the Change of Control, by virtue of this Agreement be entitled to the same rights to continued coverage under such directors and officers liability insurance policies as are provided to the Board, and the Company shall take any steps necessary to give effect to this provision. Otherwise, the Company shall agree to cover the Employee under any directors and officers liability insurance policies as are provided generally at any time after the Change of Control to his peer employees of the Company.

ARTICLE 4

NONDISCLOSURE AND PROPRIETARY RIGHTS

Section 4.1 Confidential Information. For purposes of this Agreement, the term “Confidential Information” means any information, knowledge or data of any nature and in any form (including information that is electronically transmitted or stored on any form of magnetic or electronic storage media) relating to the past, current or prospective business or operations of the Company and its Affiliates, that at the time or times concerned is not generally known to persons engaged in businesses similar to those conducted or contemplated by the Company and its Affiliates (other than information known by such persons through a violation of an obligation of confidentiality to the Company), including information relating to the Company’s or its Affiliates’ products and services, business plans, operating procedures, files, plans, proposals, trade secrets, supplier information, consultants’ reports, marketing, shipping or other technical studies, vessel or maintenance records, employment or personnel data, marketing data, strategies or techniques, financial reports, budgets, projections, cost analyses, price lists, employee lists, customer records, customer lists, proprietary computer software, and internal notes and memoranda relating to any of the foregoing.

Section 4.2 Nondisclosure of Confidential Information. During the period beginning upon receipt of the cash payments contemplated by Section 3.3 hereof and ending on the third anniversary of the date of the Employee’s termination specified in the Notice of Termination, the Employee agrees (a) not to communicate, divulge or make available to any person or entity (other than the Company or its Affiliates) any Confidential Information, except upon the prior written authorization of the Company or as may be required by law or legal process, and (b) to deliver, upon request, promptly to the Company any Confidential Information in his possession, including any duplicates thereof and any notes or other records the Employee has prepared with respect thereto. In the event that the provisions of any applicable law or the order of any court would require the Employee to disclose or otherwise make available any Confidential Information, the Employee will give the Company prompt prior written notice of such required disclosure and an opportunity to contest the requirement of such disclosure or apply for a protective order with respect to such Confidential Information by appropriate proceedings.

Section 4.3 Injunctive Relief; Other Remedies. The Employee acknowledges that a breach by the Employee of Section 4.2 could cause immediate and irreparable harm to the Company for which an adequate monetary remedy may not exist. Consequently, the Employee agrees that, in the event of a breach or threatened breach by the Employee of the provisions of Section 4.2, the Company will be entitled to injunctive relief restraining the Employee from such violation without the necessity of proof of actual damage or the posting of any bond, except as required by non-waivable, applicable law. Nothing herein, however, will be construed as prohibiting the Company from pursuing any other remedy at law or in equity to which the Company may be entitled under applicable law in the event of a breach or threatened breach of Section 4.2 by the Employee; provided, however, that in no event shall an asserted violation of the provisions of Section 4.2 constitute a basis for deferring, withholding or offsetting any amounts otherwise payable to the Employee hereunder.

Section 4.4 Employee’s Understanding of this Article. The Employee acknowledges that the duration of the covenants contained in Article IV are the result of arm’s length bargaining and are fair and reasonable. It is the desire and intent of the parties that the provisions of this Article IV be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect.

ARTICLE 5

MISCELLANEOUS

Section 5.1 Binding Effect; Successors.

(a) This Agreement shall be binding upon and inure to the benefit of the Company and any of its successors or assigns.

(b) This Agreement is personal to the Employee and shall not be assignable by the Employee without the written consent of the Company (there being no obligation to give such consent) other than such rights or benefits as are transferred by will or the laws of descent and distribution, which shall inure to the benefit of the Employee’s legal representatives.

(c) The Company shall require any successor to or assignee of (whether direct or indirect, by purchase, share exchange, merger, consolidation or otherwise) all or substantially all of the assets or businesses of the Company (i) to assume unconditionally and expressly this Agreement and (ii) to agree to perform or to cause to be performed all of the obligations under this Agreement in the same manner and to the same extent as would have been required of the Company had no assignment or succession occurred, such assumption to be set forth in a writing reasonably satisfactory to the Employee. The Company shall also require all entities that control or that after the transaction will control (directly or indirectly) the Company or any such successor or assignee to agree to cause to be performed all of the obligations under this Agreement, such agreement to be set forth in a writing reasonably satisfactory to the Employee.

(d) The obligations of the Company and the Employee which by their nature may require either partial or total performance after the expiration of the term of the Agreement shall survive such expiration.

Section 5.2 Notices. All notices hereunder must be in writing and shall be deemed to have been given upon receipt of delivery by: (a) hand, (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows:

If to the Company, to:

International Shipholding Corporation

11 North Water Street

Suite 18290

Mobile, Alabama 36602

Attn: Chief Executive Officer

If to the Employee, to:

Niels M. Johnsen

c/o 11 North Water Street

Suite 18290

Mobile, Alabama 36602

(or, if the Employee is no longer employed at such address,

to the Employee’s last known principal residence reflected in

the Company’s records)

or such other address as to which any party hereto may have notified the other in writing.

Section 5.3 Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Delaware without regard to principles of conflict of laws.

Section 5.4 Withholding. The Employee agrees that the Company has the right to withhold, from the amounts payable pursuant to this Agreement, all amounts required to be withheld under applicable income or employment tax laws, or as otherwise stated in documents granting rights that are affected by this Agreement.

Section 5.5 Amendment. No provision of this Agreement may be modified or amended except by an instrument in writing signed by both parties.

Section 5.6 Severability. If any term or provision of this Agreement, or the application thereof to any Person or circumstance, shall at any time or to any extent be invalid, illegal or unenforceable in any respect as written, the Employee and the Company intend for any court construing this Agreement to modify or limit such provision so as to render it valid and enforceable to the fullest extent allowed by law. Any such provision that is not susceptible of such reformation shall be ignored so as to not affect any other term or provision hereof, and the remainder of this Agreement, or the application of such term or provision to Persons or circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not be affected thereby and shall be valid and enforced to the fullest extent permitted by law.

Section 5.7 Waiver of Breach. Except as expressly provided herein to the contrary, the failure by any party to enforce any of its rights hereunder shall not be deemed to be a waiver of such rights, unless such waiver is an express written waiver. The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof.

Section 5.8 Remedies Not Exclusive. No remedy specified herein shall be deemed to be such party’s exclusive remedy, and accordingly, in addition to all of the rights and remedies provided for in this Agreement, the parties shall have all other rights and remedies provided to them by applicable law, rule or regulation, including without limitation the right to claim interest with respect to any payment not timely made hereunder.

Section 5.9 Company’s Reservation of Rights. The Employee acknowledges and understands that (i) the Employee is employed at will by either the Company or one of its Affiliates (the “Employer”), (ii) the Employee serves at the pleasure of the board of directors of the Employer, and (iii) the Employer has the right at any time to terminate the Employee’s status as an employee, or to change or diminish his status during the Employment Term, subject to the rights of the Employee to claim the benefits conferred by this Agreement. Notwithstanding any other provisions of this Agreement to the contrary, this Agreement shall not entitle the Employee or his legal representatives to any severance or other benefits of any kind prior to a Change of Control or to any such benefits if Employee is not employed by the Company or one of its Affiliates on the date of a Change of Control, except in each case for those rights afforded under Section 3.8.

Section 5.10 Non-exclusivity of Rights. Subject to Section 5.9, nothing in this Agreement shall prevent or limit the Employee’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its Affiliates and for which the Employee may qualify, nor shall anything herein limit or otherwise restrict such rights as the Employee may have under any contract or agreement with the Company or any of its Affiliates. The Employee shall not be obligated to furnish a release of any rights or claims against the Company or its Affiliates as a condition of receiving benefits hereunder.

Section 5.11 Section 409A. Notwithstanding any other provision of this Agreement, it is the intention of the parties to this Agreement that no payment or entitlement pursuant to this Agreement will give rise to any adverse tax consequences to the Employee under Code Section 409A and Treasury Regulations and other interpretive guidance issued thereunder, including that issued after the date hereof (collectively, “Section 409A”). This Agreement and any amendments hereto shall be interpreted to that end and (i) to the maximum extent permitted by law, no effect shall be given to any provision herein, any amendment hereto or any action taken hereunder in a manner that reasonably could be expected to give rise to adverse tax consequences under Section 409A and (ii) the parties shall take any corrective action reasonably within their control that is necessary to avoid such adverse tax consequences.

Section 5.12 Demand for Benefits. Unless otherwise provided herein, the payment or payments due hereunder shall be paid to the Employee without the need for demand, and to a beneficiary upon the receipt of the beneficiary’s address and social security number. Nevertheless, the Employee or a Person claiming to be a beneficiary who claims entitlement to a benefit can file a claim for benefits hereunder with the Company. Unless otherwise provided herein, the Company shall accept or reject the claim within 15 business days of its receipt. If the claim is denied, the Company shall give the reason for denial in a written notice that refers to the provision of this Agreement that forms the basis of the denial.

Section 5.13 Authority. The Company represents and warrants that this Agreement was duly authorized by the Compensation Committee of the Board and by the Board on July 30, 2008, and that no other corporate proceedings are necessary to authorize the Company’s execution, delivery and performance of this Agreement.

Section 5.14 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

Section 5.15 Interpretation. Any reference to any section of the Code or the Treasury Regulations shall be deemed to also refer to any successor provisions thereto. Any reference to the term “including” shall be deemed to be followed by the words “without limitation”.

Section 5.16 Employee Acknowledgment. The Employee acknowledges (a) that he has consulted with or has had the opportunity to consult with independent counsel of his own choice concerning this Agreement, and (b) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment.

[Signatures appear on following page]

IN WITNESS WHEREOF, the Company and the Employee have caused this Change of Control Agreement to be executed as of the Agreement Date.

INTERNATIONAL SHIPHOLDING

CORPORATION

By: /s/ Erik L. Johnsen

Erik L. Johnsen

President

EMPLOYEE:

/s/ Niels M. Johnsen

Niels M. Johnsen

EX-10.15 4 exhibit1015.htm CHANGE OF CONTROL AGREEMENT exhibit1015.htm

Exhibit 10.15

CHANGE OF CONTROL AGREEMENT

W I T N E S S E T H:

WHEREAS, the Board believes that this agreement accomplishes these and other related objectives;

NOW, THEREFORE, the parties agree as follows:

ARTICLE 1

CERTAIN DEFINITIONS

Section 1.3 Cause. (a) “Cause” shall mean:

(i) conviction of the Employee of a felony or the Employee’s entry of a guilty plea or a plea of no contest to a felony;

(ii) willful and continued engagement by the Employee in illegal conduct that is materially and demonstrably injurious to the Company;

(iii) habitual intoxication during working hours, or habitual abuse of or addiction to a controlled dangerous substance; or

(c) No action or inaction shall be deemed the basis for Cause unless the Employee is terminated therefor within one year after such action or omission is known to the Chief Executive Officer of the Company.

Section 1.4 Change of Control. “Change of Control” shall mean:

(i) any acquisition (other than a Business Combination which constitutes a Change of Control under Section 1.4(c) hereof) of Common Stock directly from the Company,

(ii) any acquisition of Common Stock by the Company or its subsidiaries,

(iii) any acquisition of Common Stock by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or

(iv) any acquisition of Common Stock by any entity pursuant to a Business Combination that does not constitute a Change of Control under Section 1.4(c) hereof; or

approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

Section 1.5 Code. “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

Section 1.8 Employment Term. “Employment Term” shall mean the period commencing on the date of a Change of Control and ending on the third anniversary of such date.

(iii) A material increase in the Employee’s responsibilities or duties without a commensurate increase in total compensation;

(iv) Any material failure by the Company to comply with and satisfy Section 5.1(c) of this Agreement;

(vii) Any purported termination of the Employee’s employment otherwise than as expressly permitted by this Agreement.

ARTICLE 2

STATUS OF CHANGE OF CONTROL AGREEMENTS

ARTICLE 3

CHANGE OF CONTROL BENEFITS

Section 3.1 Employment Term and Capacity after Change of Control.

Section 3.2 Compensation and Benefits. During the Employment Term, the Employee shall be entitled to the following compensation and benefits:

Section 3.3 Obligations upon Termination after a Change of Control.

(vii) The Company shall discharge its obligations under all other applicable sections of this Article III, including Sections 3.4, 3.5, 3.6 and 3.10.

Section 3.6 Legal Fees.

Section 3.9 Excise Taxes.

(d) The Company shall be responsible for all charges of the Tax Counsel and the Auditor.

Section 3.10 Indemnification and Insurance.

ARTICLE 4

NONDISCLOSURE AND PROPRIETARY RIGHTS

ARTICLE 5

MISCELLANEOUS

Section 5.1 Binding Effect; Successors.

(a) This Agreement shall be binding upon and inure to the benefit of the Company and any of its successors or assigns.

If to the Company, to:

International Shipholding Corporation

11 North Water Street

Suite 18290

Mobile, Alabama 36602

Attn: Chief Executive Officer

If to the Employee, to:

Erik L. Johnsen

c/o 11 North Water Street

Suite 18290

Mobile, Alabama 36602

(or, if the Employee is no longer employed at such address,

to the Employee’s last known principal residence reflected in

the Company’s records)

or such other address as to which any party hereto may have notified the other in writing.

Section 5.5 Amendment. No provision of this Agreement may be modified or amended except by an instrument in writing signed by both parties.

[Signatures appear on following page]

IN WITNESS WHEREOF, the Company and the Employee have caused this Change of Control Agreement to be executed as of the Agreement Date.

INTERNATIONAL SHIPHOLDING

CORPORATION

By: /s/ Niels M. Johnsen

Niels M. Johnsen

Chairman and Chief Executive Officer

EMPLOYEE:

/s/ Erik L. Johnsen

Erik L. Johnsen

EX-10.16 5 exhibit1016.htm CHANGE OF CONTROL AGREEMENT exhibit1016.htm

Exhibit 10.16