form10q6302010.htm

0000278041-10-000034.txt : 20100729 0000278041-10-000034.hdr.sgml : 20100729 20100728182901 ACCESSION NUMBER: 0000278041-10-000034 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20100630 FILED AS OF DATE: 20100729 DATE AS OF CHANGE: 20100728 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: 1028 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10852 FILM NUMBER: 10975367 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 form10q6302010.htm FORM 10-Q - SECOND QTR 2010-JUNE 30, 2010 form10q6302010.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, 2010

[ ]	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. 001-10852

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) 60; (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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ & #160; 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. . . . . . . . 7,208,159 shares outstanding as of June 30, 2010

INTERNATIONAL SHIPHOLDING CORPORATION

TABLE OF CONTENTS

PART I –	FINANCIAL INFORMATION	2

ITEM 1 –	FINANCIAL STATEMENTS	2

	CONDENSED CONSOLIDATED STATEMENTS OF INCOME	2

	CONDENSED CONSOLIDATED BALANCE SHEETS	3

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	4

	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	5

ITEM 2 –	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	8

ITEM 3 –	QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK	10

ITEM 4 –	CONTROLS AND PROCEDURES	11

PART II –	OTHER INFORMATION	11

ITEM 1 –	LEGAL PROCEEDINGS	11

ITEM 1A-	RISK FACTORS	11

ITEM 2 –	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	11

ITEM 6 –	EXHIBITS	12

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,
	2010			2009			2010			2009
Revenues	$	85,084		$	99,815		$	157,998		$	197,893

Operating Expenses:
Voyage Expenses		61,513			76,862			116,456			154,943
Vessel Depreciation		4,984			5,225			8,748			10,394
Impairment Loss		-			2,899			-			2,899

Gross Voyage Profit		18,587			14,829			32,794			29,657

Administrative and General Expenses		5,415			4,670			11,434			10,940
Loss/(Gain) on Sale of Other Assets		46			-			(75	)		-

Operating Income		13,126			10,159			21,435			18,717

Interest and Other:
Interest Expense		2,433			1,402			4,032			2,870
Gain on Sale of Investment		(16	)		-			(16	)		-
Other Income from Vessel Financing		(590	)		-			(1,194	)		-
Investment (Income) Loss		(987	)		141			(1,166	)		332
Foreign Exchange Loss		3,148			-			3,148			-
		3,988			1,543			4,804			3,202

Income Before (Benefit) Provision for Income Taxes
and Equity in Net Income of Unconsolidated Entities		9,138			8,616			16,631			15,515

(Benefit) Provision for Income Taxes:
Current		170			65			340			130
Deferred		(200	)		(286	)		(965	)		(2,015	)
State		-			(5	)		(17	)		44
		(30	)		(226	)		(642	)		(1,841	)
Equity in Net Income of Unconsolidated
Entities (Net of Applicable Taxes)		448			1,817			2,911			2,778

Net Income	$	9,616		$	10,659		$	20,184		$	20,134

Basic and Diluted Earnings Per Common Share:

Net Income Per Share - Basic	$	1.33		$	1.47		$	2.79		$	2.79
	$	1.33		$	1.47		$	2.79		$	2.79

Net Income Per Share - Diluted	$	1.32		$	1.46		$	2.76		$	2.78
	$	1.32		$	1.46		$	2.76		$	2.78

Weighted Average Shares of Common Stock Outstanding:
Basic		7,242,126			7,228,570			7,245,642			7,220,863
Diluted		7,295,638			7,278,782			7,308,398			7,253,360

Dividends Per Share	$	0.375		$	0.500		$	0.875		$	1.000

The accompanying notes are an integral part of these statements.

Table of Contents

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

	June 30,			December 31,
ASSETS	2010			2009

Current Assets:
Cash and Cash Equivalents	$	13,815		$	47,468
Marketable Securities		18,643			10,333
Accounts Receivable, Net of Allowance for Doubtful Accounts
of $274 and $299 in 2010 and 2009:
Traffic		9,732			5,221
Agents'		2,754			3,353
Other		20,515			12,637
Net Investment in Direct Financing Leases		5,294			52,649
Other Current Assets		2,645			1,640
Notes Receivable		4,248			5,348
Material and Supplies Inventory, at Lower of Cost or Market		3,417			3,100
Total Current Assets		81,063			141,749

Investment in Unconsolidated Entities		23,257			15,971

Net Investment in Direct Financing Leases		52,990			55,046

Vessels, Property, and Other Equipment, at Cost:
Vessels		443,771			314,534
Leasehold Improvements		26,128			26,128
Construction in Progress		34,718			49,496
Furniture and Equipment		7,947			6,966
		512,564			397,124
Less - Accumulated Depreciation		(194,791	)		(185,292	)
		317,773			211,832

Other Assets:
Deferred Charges, Net of Accumulated Amortization		12,430			15,914
of $15,049 and $20,826 in 2010 and 2009, Respectively
Acquired Contract Costs, Net of Accumulated Amortization		-			364
of $30,526 and $30,162 in 2010 and 2009, Respectively
Due from Related Parties		5,187			5,043
Notes Receivable		42,266			44,390
Other		6,358			6,341
		66,241			72,052

	$	541,324		$	496,650


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

	June 30,			December 31,
	2010			2009
LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current Liabilities:
Current Maturities of Long-Term Debt	$	17,805		$	68,789
Accounts Payable and Accrued Liabilities		31,667			31,039
Total Current Liabilities		49,472			99,828

Long-Term Debt, Less Current Maturities		182,167			97,635

Other Long-Term Liabilities:
Deferred Income Taxes		4,162			2,070
Lease Incentive Obligation		5,736			6,262
Other		53,363			51,924
		63,261			60,256


Stockholders' Investment:
Common Stock		8,525			8,484
Additional Paid-In Capital		83,942			83,189
Retained Earnings		193,730			180,121
Treasury Stock		(25,403	)		(20,172	)
Accumulated Other Comprehensive (Loss)		(14,370	)		(12,691	)
		246,424			238,931

	$	541,324		$	496,650

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,
	2010			2009

Cash Flows from Operating Activities:
Net Income	$	20,184		$	20,134
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation		9,040			10,619
Amortization of Deferred Charges and Other Assets		5,087			4,928
Deferred Benefit for Federal Income Taxes		(965	)		(1,885	)
Impairment Loss		-			2,899
Equity in Net Income of Unconsolidated Entities		(2,911	)		(2,778	)
Distributions from Unconsolidated Entities		1,500			2,000
Gain on Sale of Assets		(75	)		-
Gain on Sale of Investments		(16	)		-
Loss on Foreign Currency Exchange		3,148			-
Deferred Drydocking Charges		(244	)		(10,194	)
Changes in:
Accounts Receivable		(11,790	)		(4,377	)
Inventories and Other Current Assets		505			691
Other Assets		(2	)		(1,335	)
Accounts Payable and Accrued Liabilities		397			10,992
Pension Plan Funding		(150	)		(1,000	)
Other Long-Term Liabilities		602			(1,577	)
Net Cash Provided by Operating Activities		24,310			29,117

Cash Flows from Investing Activities:
Principal payments received under Direct Financing Leases		2,935			3,985
Capital Expenditures for Vessels, Leasehold Improvements, and Other Assets		(72,642	)		(11,869	)
Proceeds from Sale of Assets		3,853			-
Purchase of Marketable Securities		(8,708	)		(10,323	)
Proceeds from Sale of Marketable Securities		598			-
Investment in Unconsolidated Entities		(2,584	)		-
Principal payments received on Related Party Notes Receivable		2,012			9
Net Cash Used by Investing Activities		(74,536	)		(18,198	)

Cash Flows from Financing Activities:
Common Stock Repurchase		(5,231	)		-
Proceeds from Issuance of Debt		122,306			8,007
Repayment of Debt		(93,409	)		(6,522	)
Additions to Deferred Financing Charges		(518	)		(64	)
Common Stock Dividends Paid		(6,575	)		(7,252	)
Net Cash Provided (Used) by Financing Activities		16,573			(5,831	)

Net (Decrease) Increase in Cash and Cash Equivalents		(33,653	)		5,088
Cash and Cash Equivalents at Beginning of Period		47,468			51,835

Cash and Cash Equivalents at End of Period	$	13,815		$	56,923

The accompanying notes are an integral part of these statements.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2010

(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 as permitted thereunder we have omitted certain information and footnote disclosures required by U.S. Generally Accepted Accounting Principles (GAAP) for complete financial statements. 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, 2009. The condensed consolidated balance sheet as of December 31, 2009 included in this report has been derived from the audited financial statements at that date.

The foregoing 2010 interim results are not necessarily indicative of the results of operations for the full year 2010. 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 vo yage 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 and postretirement benefits plan for the three months ended June 30, 2010 and 2009:

(All Amounts in Thousands)	Pension Plan						Postretirement Benefits
	Three Months Ended June 30,						Three Months Ended June 30,
Components of net periodic benefit cost:	2010			2009			2010			2009
Service cost	$	140		$	138		$	5		$	4
Interest cost		372			371			99			110
Expected return on plan assets		(427	)		(356	)		-			-
Amortization of prior service cost		(1	)		(1	)		(3	)		(3	)
Amortization of Net Loss		86			113			-			-
Net periodic benefit cost	$	170		$	265		$	101		$	111

The following table provides the components of net periodic benefit cost for our pension plan and postretirement benefits plan for the six months ended June 30, 2010 and 2009:

(All Amounts in Thousands)	Pension Plan						Postretirement Benefits
	Six Months Ended June 30,						Six Months Ended June 30,
Components of net periodic benefit cost:	2010			2009			2010			2009
Service cost	$	280		$	276		$	10		$	8
Interest cost		744			742			198			220
Expected return on plan assets		(854	)		(712	)		-			-
Amortization of prior service cost		(2	)		(2	)		(6	)		(6	)
Amortization of Net (Gain)/Loss		172			226			-			-
Net periodic benefit cost	$	340		$	530		$	202		$	222

We contributed $150,000 to our Pension Plan through June 30, 2010 and contributed another $150,000 on July 15th, 2010. We are monitoring market conditions and based on the current market conditions, we anticipate additional contributions to be made by the end of the fourth quarter of 2010 of approximately $1.0 million.

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. Beginning with this second quarter Form 10-Q report, we have split Time Charter Contracts into two different operating segments, Time Charter Contracts – US Flag and Time Charter Contracts – International flag. Although we believe our previous segment reporting was appropriate, this change will further align our segment disclosures with the information reviewed by our chief operating decision maker. All prior period data for the previous Time Charter Contracts Segment has been restated based on the new operating segments. We report in the Other category results of several of our subsidiaries that provide ship and cargo 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.

We allocate interest expense to the segments in proportion to the book values of the vessels owned within each segment. We do not allocate to our segments administrative and general expenses, investment income, gain on sale of investment, foreign exchange gain or loss, equity in net income of unconsolidated entities, or income taxes. 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 six months ended June 30, 2010 and 2009:


(All Amounts in Thousands)	Time Charter Contracts- U.S. Flag		Time Charter Contracts-International Flag		COA		Rail-Ferry Service			Other			Total
2010
Revenues from External Customers	$	109,855	$	26,812	$	8,472	$	11,404		$	1,455		$	157,998
Intersegment Revenues (Eliminated)		-		-		-		-			(7,441	)		(7,441	)
Intersegment Expenses (Eliminated)		-		-		-		-			7,441			7,441
Voyage Expenses		78,167		16,880		8,368		11,756			1,285			116,456
Vessel Depreciation		4,909		994		-		2,839			6			8,748
Gross Voyage Profit (Loss)		26,779		8,938		104		(3,191	)		164			32,794
Interest Expense		1,633		1,370		-		751			278			4,032
Gain on Sale of Other Asset		-		-		-		-			75			75
Segment Profit (Loss)		25,146		7,568		104		(3,942	)		(39	)		28,837
2009 (restated)
Revenues from External Customers	$	147,176	$	25,706	$	8,962	$	14,672		$	1,377		$	197,893
Intersegment Revenues (Eliminated)		-		-		-		-			(6,316	)		(6,316	)
Intersegment Expenses (Eliminated)		-		-		-		-			6,316			6,316
Voyage Expenses		111,442		20,910		7,866		13,439			1,286			154,943
Vessel Depreciation		6,660		803		-		2,925			6			10,394
Impairment Loss		-		2,899		-		-			-			2,899
Gross Voyage Profit (Loss)		29,074		1,094		1,096		(1,692	)		85			29,657
Interest Expense		1,501		473		-		640			256			2,870
Segment Profit (Loss)		27,573		621		1,096		(2,332	)		(171	)		26,787

The following table presents information about segment profit and loss for the three months ended June 30, 2010 and 2009:


(All Amounts in Thousands)	Time Charter Contracts- U.S. Flag		Time Charter Contracts- International Flag			COA		Rail-Ferry Service			Other			Total
2010
Revenues from External Customers	$	58,399	$	15,008		$	4,513	$	6,268		$	896		$	85,084
Intersegment Revenues (Eliminated)		-		-			-		-			(3,708	)		(3,708	)
Intersegment Expenses (Eliminated)		-		-			-		-			3,708			3,708
Voyage Expenses		41,471		8,904			4,205		6,163			770			61,513
Vessel Depreciation		2,530		994			-		1,457			3			4,984
Gross Voyage Profit (Loss)		14,398		5,110			308		(1,352	)		123			18,587
Interest Expense		793		1,139			-		365			136			2,433
Loss on Sale of Other Assets		-		-			-		-			(46	)		(46	)
Segment Profit (Loss)		13,605		3,971			308		(1,717	)		(59	)		16,108
2009 (restated)
Revenues from External Customers	$	73,532	$	12,734		$	4,771	$	8,201		$	577		$	99,815
Intersegment Revenues (Eliminated)		-		-			-		-			(6,006	)		(6,006	)
Intersegment Expenses (Eliminated)		-		-			-		-			6,006			6,006
Voyage Expenses		54,954		10,796			4,071		6,494			547			76,862
Vessel Depreciation		3,331		426			-		1,465			3			5,225
Impairment Loss		-		2,899			-		-			-			2,899
Gross Voyage Profit (Loss)		15,247		(1,387	)		700		242			27			14,829
Interest Expense		730		232			-		315			125			1,402
Segment Profit (Loss)		14,517		(1,619	)		700		(73	)		(98	)		13,427

The following table 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)	Six Months Ended June 30,						Three Months Ended June 30,
Profit or Loss:	2010			2009			2010			2009
Total Profit for Reportable Segments	$	28,837		$	26,787		$	16,108		$	13,427
Unallocated Amounts:
Administrative and General Expenses		(11,434	)		(10,940	)		(5,415	)		(4,670	)
Gain on Sale of Investment		16			-			16			-
Other Income from Vessel Financing		1,194			-			590			-
Investment Income (Loss)		1,166			(332	)		987			(141	)
Foreign Exchange Loss		(3,148	)		-			(3,148	)		-
Income Before (Benefit) Provision for
Income Taxes and Equity in Net Income of Unconsolidated Entities	$	16,631		$	15,515		$	9,138		$	8,616

Table of Contents

Note 4. Unconsolidated Entities

In 2003, we acquired for $3,479,000 a 50% investment in Dry Bulk Cape Holding Inc. (“Dry Bulk”), which owns 100% of subsidiary companies currently owning two Capesize Bulk Carriers and two Handymax Bulk Carrier Newbuildings on order for delivery in 2012. This investment is accounted for 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 earnings of this investment was $3.6 million, net of taxes of $3.3 million, and $2.7 million, net of taxes of $0, for the six months ended June 30, 2010 and 2009, respectively. This increase was due to a $1.4 million gain on the sale of Dry Bulk’s Panamax Bulk Carrier in early 2010 and improved charter hire rates. Our earnings for the second quarter o f 2010 and 2009, respectively, net of taxes of $703,000 and $0, were $1.4 million and $1.6 million. In prior years, we did not provide for income taxes related to our earnings from Dry Bulk as a result of the U. S. tax law in effect in those years. This tax law expired effective January 1, 2010, resulting in income taxes now being provided on our earnings from Dry Bulk. A pending bill currently in Congress would eliminate the need for a tax provision on these amounts. If this bill becomes law with retroactive application, then our 2010 provision for taxes could be reversed in the quarter in which the bill is passed and signed into law (See Note 7 Income Taxes).

We received a cash distribution from Dry Bulk of $1.5 million and $2.0 million in the first six months of 2010 and 2009, respectively.

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)	2010		2009		2010		2009
Operating Revenues	$	6,337	$	7,016	$	15,913	$	12,956
Operating Income	$	4,617	$	4,402	$	11,581	$	7,757
Net Income	$	4,026	$	3,288	$	13,377	$	5,377

In December 2009, we acquired for $6,250,000 a 25% investment in Oslo Bulk Shipping (“Oslo Bulk”), which, in 2008, contracted to build eight new Mini Bulkers. During the first half of 2010, we invested an additional $2.6 million in Oslo Bulk for our 25% share of the installment payments for two more new Mini Bulkers. We expect to pay our remaining share of installment payments associated with the ninth and tenth new Mini Bulkers of approximately $3.2 million by the fourth quarter of 2010. These 8,000 dead weight ton (dwt) vessels are being constructed and are scheduled for deliveries commencing in the fourth quarter of 2010. This investment is accounted for under the equity method and our share of earnings or loss es is reported in our consolidated statements of income net of taxes. Our portion of the earnings of this investment was a $681,000 loss for the six months ended June 30, 2010, primarily related to the mark-to-market adjustment of an interest rate swap contract. Although the terms of Oslo Bulk’s interest rate hedge match the terms of the loan, the swap did not qualify for hedge accounting treatment due to the lack of documentation at the inception of the contract entered into in 2008, prior to our investment in Oslo Bulk. Although U.S. GAAP requires recording the mark-to-market revaluation of this derivative instrument through earnings, we expect the instrument to be an effective economic hedge of Oslo Bulk’s interest cost.

Note 5. Earnings Per Share

We compute basic earnings per share based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per share also reflects dilutive potential common shares, including shares issuable under restricted stock grants using the treasury stock 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,
	2010		2009		2010		2009
Numerator
Net Income – Basic:
	$	9,616	$	10,659	$	20,184	$	20,134
Net Income – Diluted:
	$	9,616	$	10,659	$	20,184	$	20,134
Denominator
Weighted Avg Shares of Common Stock Outstanding:
Basic		7,242,126		7,228,570		7,245,642		7,220,863
Plus:
Effect of dilutive restrictive stock		53,512		50,212		62,756		32,497
Diluted		7,295,638		7,278,782		7,308,398		7,253,360

Basic and Diluted Earnings Per Common Share:
Net Income per share - Basic
	$	1.33	$	1.47	$	2.79	$	2.79
Net Income per share – Diluted:
	$	1.32	$	1.46	$	2.76	$	2.78

Note 6. Comprehensive Income (Loss)

The following table summarizes components of comprehensive income for the three months ended June 30, 2010 and 2009:

	Three Months Ended June 30,
(Amounts in Thousands)	2010			2009
Net Income	$	9,616		$	10,659
Other Comprehensive Income (Loss):
Unrealized Foreign Currency Translation Gain (Loss)		(17	)		107
Unrealized Holding Gain on Marketable Securities, Net of Deferred Taxes of $47 and $206, Respectively		86			375
Change in Fair Value of Derivatives, Net of Deferred Taxes of ($82) and $514, respectively		(1,682	)		2,600
Total Comprehensive Income	$	8,003		$	13,741

The following table summarizes components of comprehensive income for the six months ended June 30, 2010 and 2009:

	Six Months Ended June 30,
(Amounts in Thousands)	2010			2009
Net Income	$	20,184		$	20,134
Other Comprehensive Income (Loss):
Unrealized Foreign Currency Translation Gain		24			62
Unrealized Holding Gain on Marketable Securities, Net of Deferred Taxes of $128 and $248, respectively		238			451
Net Change in Fair Value of Derivatives, Net of Deferred Taxes of ($127) and $573, respectively		(1,941	)		4,087
Total Comprehensive Income	$	18,505		$	24,734

Note 7. Income Taxes

We recorded a benefit for income taxes of $642,000 on our $16.6 million of income, before income from unconsolidated entities, in the first six months of 2010, reflecting tax losses on operations taxed at the U.S. corporate statutory rate. For the first six months of 2009 our benefit was $1.8 million on our $15.5 million of income from continuing operations, before income from unconsolidated entities, reflecting tax losses on operations taxed at the U.S. corporate statutory rate. For further information on certain tax laws and elections, see our annual report on Form 10-K for the year ended December 31, 2009, including Note F to the consolidated financial statements. Our qualifying U.S. flag operations continue to be taxed under a “tonnage tax” regime rather than under the normal U.S. corpo rate income tax regime.

Foreign income such as dividends, interest, rents and royalties are normally treated as foreign personal holding company income and subject to immediate taxation under the U.S. taxation regime. In 2005 the treatment of foreign personal holding company income between related controlled foreign corporations allowed deferral of that income. This rule was not permanent but was extended in years following through December 31, 2009. The rule has been proposed to be further extended and is under consideration by Congress for 2010, however, it has not passed and is therefore not yet law. In light of this change, the tax provision on equity in earnings from unconsolidated entities for the first six months of 2010 includes the tax impact of dividends between related party controlled foreign corporations that would be cla ssified as foreign personal holding company income, as well as undistributed earnings of those corporations. Accordingly, related party controlled foreign earnings of $6.2 million were reduced by $3.3 million in United States income taxes. If the pending bill currently in Congress passed, then our 2010 provision for these taxes could be reversed in the quarter in which the bill is passed and signed into law.

Note 8. Fair Value Measurements

Accounting Standards Codification (“ASC”) Topic 820 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 ASC Topic 820, 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 transact ions 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, and (iii) able and willing to complete a transaction.

Fair value measurements require the use of valuation techniques that are consistent with one or more of the market approach, the income approach 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. The fair value of our interest rate swap agreements is based upon the approximate amounts required to settle the contracts. Inputs to valuation techniques refer to the a ssumptions 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, ASC Topic 820 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) 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, 2010, segregated by the above-described levels of valuation inputs:

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

Marketable securities	$	18,643	$	-		$	-	$	18,643
Derivative assets		-		406			-		406
Derivative liabilities		-		(9,744	)		-		(9,744	)

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Note 9. Marketable Securities

We have categorized all marketable securities as available-for-sale securities. Management performs a quarterly evaluation of marketable securities for any other-than-temporary impairment. We determined that none of our securities were impaired as of June 30, 2010. For the six month period ended June 30, 2009, we recognized impairment charges of $735,000 related to certain equity securities, representing the difference between each investment’s cost and fair value on such date. The fair value was determined using market prices that represented Level 1 inputs in the fair value hierarchy described in Note 8.

The following tables include cost and valuation information on our investment securities at June 30, 2010:

(Amounts In Thousands)
			AOCI**		AOCI**
			Unrealized		Unrealized		Estimated
Securities Available for Sale	Cost Basis		Holding Gains		Holding Losses		Fair Value

Corporate Bonds*	$	18,405	$	238	$	-	$	18,643
Total	$	18,405	$	238	$	-	$	18,643

* Various maturity dates from August 2010 – February 2015.

** Accumulated Other Comprehensive Income

Note 10. New Accounting Pronouncements

Fair Value Measurements. In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance which expanded the required disclosures about fair value measurements. In particular, this guidance requires (i) separate disclosure of the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements along with the reasons for such transfers, (ii) information about purchases, sales, issuances and settlements to be presented separately in the reconciliation for Level 3 fair value measurements, (iii) fair value measurement disclosures for each class of assets and liabilities and (iv) disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value mea surements for fair value measurements that fall in either Level 2 or Level 3. The adoption of this guidance did not have a material effect on our financial condition or results of operations.

Subsequent Events. In February 2010, the FASB issued guidance related to events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This guidance amends existing standards to address potential conflicts with Securities and Exchange Commission (“SEC”) guidance and refines the scope of the reissuance disclosure requirements to include revised financial statements only. Under this guidance, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated. The adoption of this standard did not have a material effect on our financial condition or results of operations.

Note 11. Stock Based Compensation

A summary of the activity for restricted stock awards during the six months ended June 30, 2010 is as follows:


	Shares	Weighted Average Fair Value Per Share
Non-vested –December 31, 2009	177,500	$19.51
Shares Granted	47,500	$28.40
Shares Vested	(45,000)	$19.01
Shares Vested	(47,500)	$20.87
Non-vested – June 30, 2010	132,500	$22.38

The following table summarizes the future amortization of unrecognized compensation cost, which we will include in administrative and general expenses, relating to the Company’s restricted stock grants as of June 30, 2010:

Grant Date	2010		2011		2012		Total

April 30, 2008	$	365,000	$	435,000	$	34,000	$	834,000
January 27, 2010	$	578,000	$	289,000	$	-	$	867,000
Total	$	943,000	$	724,000	$	34,000	$	1,701,000

For the six months ended June 30, 2010, the Company’s income before taxes and net income included $1,399,000 and $909,000, respectively, of stock-based compensation expense charges, which reduced both basic and diluted earnings per share by $0.12 per share. For the six months ended June 30, 2009, the Company’s income before taxes and net income included $733,000 and $476,000, respectively, of stock-based compensation expense charges, which resulted in decreases in basic and diluted earnings per share of $0.07 per share, respectively.

For the three months ended June 30, 2010, the Company’s income before taxes and net income included $665,000 and $432,000, respectively, of stock-based compensation expense charges, which reduced both basic and diluted earnings per share by $0.05 per share. For the three months ended June 30, 2009, the Company’s income before taxes and net income included $458,000 and $298,000, respectively, of stock-based compensation expense charges, which resulted in decreases in basic and diluted earnings per share of $0.04 per share, respectively.

On January 27, 2010, our Compensation Committee granted 47,500 shares of restricted stock to certain executive officers. The shares vest over a period of one year assuming the company attains certain stipulated performance metrics. 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.

Note 12. Derivative Instruments

The Company uses derivative instruments to manage certain foreign currency exposures and interest rate exposures. The Company does not use derivative instruments for speculative trading purposes. All derivative instruments must be recorded on the balance sheet at fair value. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded to other comprehensive income, and is reclassified to earnings when the derivative instrument is settled. Any ineffective portion of changes in the fair value of the derivative is reported in earnings. None of the Company’s derivative contracts contain credit-risk related contingent features that would require us to settle the contract upon the occurrence of such contingency. H owever, all of our contracts contain clauses specifying events of default under certain circumstances, including failure to pay or deliver, breach of agreement, default under the specific agreement to which the hedge relates, bankruptcy, misrepresentation and mergers. The remedy for default is settlement in entirety or payment of fair market value of the contracts, which is $9.6 million in the aggregate for all of our contracts less a posted collateral of $1.9 million as of June 30, 2010. The unrealized loss related to the Company’s derivative instruments included in accumulated other comprehensive loss was $8.8 million as of June 30, 2010 and $6.8 million as of December 31, 2009.

The notional and fair value amounts of our derivative instruments as of June 30, 2010 were as follows:

(Amounts in thousands)		Asset Derivatives		Liability Derivatives
		2010		2010
	Current Notional	Balance Sheet	Fair Value	Balance Sheet	Fair Value
As of June 30, 2010	Amount	Location		Location
Interest Rate Swaps*	$143,010	-	-	Other Liabilities	$9,468
Interest Rate Swaps*	$27,061	-	-	Accrued Liabilities	$262
Foreign Exchange Contracts**	$1,125	Other Current Assets	$392	-
Foreign Exchange Contracts**	$1,800	Other Assets	$14
Foreign Exchange Contracts**	$1,725			Other Liabilities	$ 14
Total Derivatives designated as hedging instruments	$174,721	-	$406	-	$9,744

* With regard to the interest rates of our long-term debt (including current maturities) that have been swapped to a fixed rate under contract, they include an interest rate swap on a Yen based Facility for the financing of a new PCTC. The notional amount under this contract is approximately $70.9 million. Of this amount, approximately $17.8 million is outstanding as of June 2010 and the remaining $53.1 million will become outstanding with the commencement of the term loan on September 2010. With the bank exercising its option to reduce the underlying Yen Loan from 80% to 65% funding, the 15% reduction represents the ineffective portion, which consists of the portion of the derivative instrument that is no longer supported by an underlying credit facility. The change in fair value related to th e ineffective portion of this swap was a $228,000 loss for the six months ended June 30, 2010.
** Represents approximately 33% of our operational foreign currency exposure through December 2010.

The effect of derivative instruments designated as cash flow hedges on our condensed consolidated statement of income for the six months ended June 30, 2010 was as follows:

(Amounts in thousands)	Loss Recognized in Other Comprehensive Income	Location of Gain(Loss) Reclassified from AOCI to Income	Amount of Gain(Loss) Reclassified from AOCI to Income	Gain (Loss) Recognized in Income from Ineffective portion
Six Months Ended June 30,	2010		2010	2010
Interest Rate Swaps	($1,812)	Interest Expense	($2,084)	($228)
Foreign Exchange contracts	($129)	Other Revenues	$507	-
Total	($1,941)	-	($1,577)	($228)

Note 13. Changes in Accounting Estimate

In the first quarter of 2010 we extended the economic life on our U.S. flag Coal Carrier, basing this decision on the extension on the vessel’s time charter contract. By reducing our depreciation expense, this adjustment increased our pre-tax income by $2.8 million, and our net income by $1.8 million, or $0.24 per share, for the six months ended June 30, 2010. The vessel will be fully depreciated by the second quarter of 2015.

Also in the first quarter of 2010, we extended the economic life of both the Mobile, Alabama and Coatzacoalcos, Mexico rail terminal’s leasehold improvements due to anticipated contractual extensions to the rail terminal operating agreement. The amortization periods were extended two and a half years and six years, respectively. Extending these amortization periods has the effect of increasing our pre-tax income by approximately $450,000, and our net income by approximately $293,000, or $0.04 per share, per quarter.

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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) estimat ed 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 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, (14) changes i n laws, regulations or tax rates, or the outcome of pending legislative or regulatory initiatives, and (15) 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 repay existing debt or support operations, including to acquire, modify, or construct vess els 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; (v) manage our growth in terms of implementing internal controls and information systems and hiring or retaining key personnel, among other things, and (vi) effectively handle our substantial 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.

Other factors include (vii) changes in cargo, charter hire, fuel, and vessel utilization rates; (viii) 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; (ix) 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; (x) 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; (xi) changes in accounting policies and practices adopted voluntarily or as required by accounting principles generally accepted in t he United States; (xii) changes in laws and regulations such as those related to government assistance programs and tax rates; (xiii) the frequency and severity of claims against us, and unanticipated outcomes of current or possible future legal proceedings; (xiv) unexpected out-of-service days on our vessels whether due to unplanned maintenance, piracy or other causes; (xv) the ability of customers to fulfill obligations with us; (xvi) the performance of unconsolidated subsidiaries; (xvii) political events in the United States and abroad, including terrorism and piracy, and the U.S. military's response to those events; (xviii) election results, regulatory activities and the appropriation of funds by the U.S. Congress; (xix) unanticipated trends in operating expenses such as fuel and labor costs and our ability to recover these fuel costs through fuel surcharges; (xx) changes in foreign exchange rates and (xxi) other economic, competitive, governmental, and technological factors which may affect our operatio ns.

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

Overview of Second Quarter 2010

Overall Strategy

We operate a diversified fleet of U.S. and International flag vessels that provide international and domestic maritime transportation services to commercial and governmental customers primarily under medium to long-term contracts. Our business strategy consists of identifying growth opportunities as market needs change, utilizing our extensive experience to meet those needs, and continuing to maintain a diverse portfolio of medium to long-term contracts, as well as protecting our long-standing customer base by providing quality transportation services.

Financial Discipline & Strong Balance Sheet

§	Total cash and marketable securities of $32.4 million.

§	Cash generated from operations of $11.8 million for the quarter.

§	Payment of cash dividends of $0.375 per share during the quarter.

§	Working capital (consisting of total current assets less total current liabilities) of $31.6 million, which includes a $6.0 million draw on our Line of Credit.

§	Increase in total debt of approximately $33.5 million primarily associated with the financing of the International Flag Pure Car Truck Carrier Newbuilding that commenced service at the end of the first quarter of 2010.

Consolidated Financial Performance – Second Quarter 2010 vs. Second Quarter 2009

Net income for the second quarter of 2010 was $9.6 million as compared to $10.7 million for the same period in 2009, including an impairment loss of $2.9 million in 2009 for the write down of one of our International flag Container vessels. Total gross voyage profit improved by $3.8 million year on year, with prior year gross voyage profit being reduced by a $2.9 million impairment charge. The improvement in gross voyage profit resulted in part from the addition of one International flag Pure Car Truck Carrier Newbuilding, which began service at the end of March 2010, extension of the depreciable life on our Coal Carrier and increased operating days on our Military Sealift Command Vessels and vessels servicing our Indonesian customer. This improvement was partially offset by lower supplemental cargo volum es and the redelivery of one of our chartered in International flag Pure Car Truck Carriers. The improvement to gross voyage profit was offset by higher administrative and general expenses, interest expense and a foreign exchange loss on the revaluation of a Yen denominated loan facility related to the aforementioned International flag Pure Car Truck Carrier Newbuilding. Other items impacting the second quarter 2010 include:

Administrative expenses increased from $4.7 million in 2009 to $5.4 million in 2010 primarily due to the reversal of previously accrued expenses of $500,000 in the second quarter of 2009 associated with an unaffiliated shipping company’s unsolicited conditional offer to purchase the Company’s outstanding shares and an increase in the amortization of 2010 performance based stock grants provided to senior management.

§	Other interest income of $590,000 associated with the 2009 sale and subsequent financing of two vessels to an Indonesian company .

Segment Performance – Second Quarter 2010 vs. Second Quarter 2009

Beginning with this second quarter Form 10-Q report, we have split Time Charter Contracts into two different operating segments, Time Charter Contracts – US Flag and Time Charter Contracts – International flag. Although we believe our previous segment reporting was appropriate, this will provide investors with more substantive information that they might find useful and will further align our segment disclosures with the information reviewed by our Chief Operating decision maker. All prior period data for the previous Time Charter Contracts Segment has been restated based on the new operating segments.

Time Charter Contracts - US Flag

§	Decrease year on year in revenues and gross profits of $15.1 million and $849,000, respectively.

§	Lower supplemental cargo volumes compared to prior year partially offset by improved net profit margins and lower operating cost.

§	Increased operating days on the vessels servicing our Military Sealift Command (MSC) vessels and the U.S. flag Coal Carrier.

§	Reduced depreciation on the U.S. Flag Coal Carrier.

Time Charter Contracts - International Flag

§	Increase in revenues year on year of $2.3 million.

§	Increase in gross profits of $6.5 million, with prior year gross profit being reduced by a $2.9 million impairment charge.

§ New Pure Car Truck Carrier began service at the end of March 2010.

§ Redelivery of one of our chartered-in Pure Car Truck Carriers.

§	Improved operating results due to more operating days on our fleet servicing our Indonesian customer.

Contract of Affreightment (“COA”)

§	Decrease of $392,000 in gross profits primarily due to a scheduled reduction in the contracted freight rates partially offset by higher volumes.

Rail-Ferry

§	Loss of $1.4 million in the second quarter of 2010 as compared to a profit of $ 242,000 primarily due to a reduction in Northbound volumes.

Other

§	Slight improvement in brokerage commission revenues.

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RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2010

COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2009


(All Amounts in Thousands)	Time Charter Contracts- U.S. Flag		Time Charter Contracts-International Flag			COA		Rail-Ferry Service			Other		Total
2010
Revenues from External Customers	$	58,399	$	15,008		$	4,513	$	6,268		$	896	$	85,084
Voyage Expenses		41,471		8,904			4,205		6,163			770		61,513
Vessel Depreciation		2,530		994			-		1,457			3		4,984
Gross Voyage Profit (Loss)		14,398		5,110			308		(1,352	)		123		18,587
2009
Revenues from External Customers	$	73,532	$	12,734		$	4,771	$	8,201		$	577	$	99,815
Voyage Expenses		54,954		10,796			4,071		6,494			547		76,862
Vessel Depreciation		3,331		426			-		1,465			3		5,225
Impairment Loss		-		2,899			-		-			-		2,899
Gross Voyage Profit (Loss)		15,247		(1,387	)		700		242			27		14,829

The changes of revenue and expenses associated with each of our segments are discussed within the following analysis below.

Time Charter Contracts-U.S. Flag: Overall revenues decreased by 21% or $15.1 million when comparing the second quarter of 2010 to the second quarter of 2009. The decrease was driven primarily by a drop in supplemental cargoes.

The decrease in the segment’s gross voyage profit from $15.2 million in the second quarter of 2009 to $14.4 million in the second quarter of 2010 was primarily due to the aforementioned drop in supplemental cargoes, partially offset by additional operating days on our vessels servicing our MSC contract and a reduction in depreciation costs of $1.4 million associated with extending the life of our Coal Carrier to match the length of a new contract.

Time Charter Contracts-InternationalFlag: Revenues increases from $12.7 million in the second quarter of 2009 to $15.0 million in the second quarter of 2010. Gross voyage profit increased $6.5 million in the second quarter of 2010. The improvement in revenue and gross voyage profit was primarily due to more operating days on vessels servicing our Indonesian customer and the initial employment of the PCTC Newbuilding commencing in late March, 2010, with gross voyage profit also improving due to a $2.9 million impairment charge in the prior year period.

Contracts of Affreightment: Gross voyage profit decreased from $700,000 in the second quarter of 2009 to $308,000 in the second quarter of 2010 primarily due to scheduled reductions in the contracted freight rates that took effect in the fourth quarter of 2009, partially offset by higher volumes.

Rail-Ferry Service: Gross voyage profit decreased from $242,000 in the second quarter of 2009 to a loss of $1.4 million in the second quarter of 2010 while revenues for this segment decreased from $8.2 million in the second quarter of 2009 to $6.3 million in the second quarter of 2010, both due primarily to a drop in northbound cargo volumes caused primarily by the loss of a major customer in December 2009. The Company continues to work on its marketing strategy and its plan to increase northbound volumes (See Risk Factors, starting on page 33).

Other: Gross profit increased from $27,000 in the second quarter of 2009 to $123,000 in the second quarter of 2010. This increase was due to an increase in brokerage revenue.

Other Income and Expense

Administrative and general expenses increased from $4.7 million in the second quarter of 2009 to $5.4 million in the second quarter of 2010 primarily due to higher share prices associated with awards under our executive stock compensation program, and the reversal of previously accrued expenses of $500,000 in the second quarter of 2009 associated with an unaffiliated shipping company’s unsolicited conditional offer to acquire the Company’s outstanding shares in 2009.

The following table shows the significant A&G components for the second quarter of 2010 and 2009 respectively.

(Amounts in Thousands)	Three Months Ended June 30,
A&G Account	2010		2009			Variance

Wages & Benefits	$	2,511	$	2,362		$	149
Executive Stock Compensation		665		468			197
Professional Services		578		455			123
Office Building Expenses		415		327			88
Other		1,246		1,521			(275	)
Consulting Fees *		-		(463	)		463
TOTAL:	$	5,415	$	4,670		$	745

* Fees associated with unaffiliated company’s offer to purchase the company.

Interest Expense increased from $1.4 million in the second quarter of 2009 to $2.4 million in the second quarter of 2010 due to entering into a new loan agreement in the third quarter of 2009 to finance the purchase of two Multi-Purpose vessels that were subsequently sold to an Indonesian company, higher interest expense due to the final installment owed on the credit facility associated with our International flag PCTC Newbuilding and the ineffectiveness of a portion of a mark-to-market adjustment of a derivative contract on this loan.

Investment income (loss) increased from a loss of $141,000 in the second quarter of 2009 to income of $987,000 in the second quarter of 2010 due to other than temporary impairment losses taken on certain investments in 2009, higher average cash balances in the first quarter 2010 and higher average balances of debt securities.

Other income from vessel financing in 2010 is due to interest earned on a note receivable on vessels sold to an Indonesian company in the third quarter of 2009.

Foreign Exchange Loss in 2010 is due to the revaluation of our Yen denominated loan due to a decrease in the exchange rate associated with the financing of our International flag PCTC Newbuilding. (See Risk on page 33)

Income Taxes

We recorded a benefit for income taxes of $30,000 on our $9.1 million of income before income from unconsolidated entities and a benefit of $226,000 on our $8.6 million of income before income from unconsolidated entities for the three months ended June 30, 2010 and 2009 respectively. The income tax benefit for both periods reflects tax losses on operations taxed at the U.S. Corporate statutory rate. The decrease in our tax benefit is primarily the result of an increase in gross profit related to the US flag Coal Carrier partially offset by a decrease in gross profit in our Rail Ferry service. For further information on certain tax laws and elections, see our annual report on Form 10-K for the year ended December 31, 2009, including Note G to the financial statements. Our qualify ing U.S. flag operations continue to be taxed under the “tonnage tax” laws.

Foreign income such as dividends, interest, rents and royalties are normally treated as foreign personal holding company income and subject to immediate taxation under the US taxation regime. In 2005 the treatment of foreign personal holding company income between related controlled foreign corporations allowed deferral of that income. This rule was not permanent but was extended in years following through December 31, 2009. The rule has been proposed to be further extended and is under consideration by Congress for 2010, however, it has not passed and is therefore not yet law. In light of this change, the tax provision on equity in earnings from unconsolidated entities for the first six months of 2010 includes the tax impact of dividends between related party controlled foreign corporations that would be class ified as foreign personal holding company income. Related party controlled foreign earnings of $1.1 million were reduced by $675,000 in United States income taxes on current and undistributed earnings for a net income of approximately $900,000. If the pending bill currently in Congress passed, then our 2010 provisions for these taxes could be reversed in the quarter in which the bill is passed and signed into law.

Equity in Net Income of Unconsolidated Entities

Equity in net income of unconsolidated entities, net of taxes, decreased from $1.8 million in the second quarter of 2009 to $448,000 in the second quarter of 2010. This decrease is due to income taxes on our related party controlled foreign entities (see Income Taxes above). Equity in net income of unconsolidated entities net of taxes, for the first six months of 2010 was further impacted by our 25% investment in Oslo Bulk during December 2009. Our portion of the earnings of this investment was a $681,000 loss for the six months ended June 30, 2010, primarily related to the mark-to-market adjustment of an interest rate swap contract. Although the terms of Oslo Bulk’s interest rate swap contract match the terms of the loan, the swap did not qualify for hedge accounting treatment due to the lack of documentation at the inception of the contract entered into in 2008, prior to our investment in Oslo Bulk. Although U.S. GAAP requires recording the mark-to-market revaluation of this derivative instrument through earnings, we expect the instrument to be an effective economic hedge of Oslo Bulk’s interest cost.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2010

COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2009


(All Amounts in Thousands)	Time Charter Contracts- US Flag		Time Charter Contracts-International Flag		COA		Rail-Ferry Service			Other		Total
2010
Revenues from External Customers	$	109,855	$	26,812	$	8,472	$	11,404		$	1,455	$	157,998
Voyage Expenses		78,167		16,880		8,368		11,756			1,285		116,456
Vessel Depreciation		4,909		994		-		2,839			6		8,748
Gross Voyage Profit (Loss)		26,779		8,938		104		(3,191	)		164		32,794
2009
Revenues from External Customers	$	147,176	$	25,706	$	8,962	$	14,672		$	1,377	$	197,893
Voyage Expenses		111,442		20,910		7,866		13,439			1,286		154,943
Vessel Depreciation		6,660		803		-		2,925			6		10,394
Impairment Loss		-		2,899		-		-			-		2,899
Gross Voyage Profit (Loss)		29,074		1,094		1,096		(1,692	)		85		29,657

The changes of revenue and expenses associated with each of our segments are discussed within the gross voyage analysis below.

Time Charter Contracts-U.S. Flag: Overall revenues decreased by 25% or $37.3 million when comparing the first six months of 2010 to the first six months of 2009. The decrease was driven primarily by a drop in supplemental cargoes.

The decrease in the segment’s gross voyage profit from $29.1 million in the first six months of 2009 to $26.8 million in the first six months of 2010 was primarily due to the aforementioned drop in supplemental cargoes, partially offset by (i) more operating days on the vessels servicing our MSC contract and the U.S. flag Coal Carrier and (ii) a reduction in depreciation costs of $2.8 million associated with extending the life of our Coal Carrier to match the length of a new contract.

Our Time Charter Contracts include operating three RO/RO vessels for the United States Navy’s Military Sealift Command (“MSC”) for varying time periods. Two of the current agreements are set to expire by the end of September 2010 and the remaining agreement is set to expire in November 2010. These contracts represented 18.5% of our total consolidated gross profit in the first six months of 2010. We have been notified that these contracts have been awarded to another operator, and we, along with other operators, have protested this decision. Even if we are successful in overturning this decision and are eventually awarded the contracts, we anticipate materially reduced revenues and gross profit.

Time Charter Contracts-InternationalFlag: Gross voyage profit increased $7.8 million in the first six months of 2010, primarily due to an impairment charge of $2.9 million in the prior year period and more operating days on vessels servicing our Indonesian customer and the initial employment of the PCTC Newbuilding commencing in late March 2010.

Contracts of Affreightment: Gross voyage profit decreased from $1.1 million in the first six months of 2009 to $104,000 for the same period in 2010 due to scheduled reductions in the contracted freight rates that took effect in the fourth quarter of 2009, partially offset by greater cargo volumes being carried in the first six months of 2010 as compared to the same period last year. Although the current results for the segment have decreased, the benefit from a 2007 sale leaseback is reflected in a lower consolidated effective tax rate, resulting in improved after-tax consolidated net income.

Rail-Ferry Service: A decrease in gross voyage results from a $1.7 million loss in the first six months of 2009 to a $3.2 million loss in the first six months of 2010 while revenues for this segment decreased from $14.7 million in the first six months of 2009 to $11.4 million in the first six months of 2010, both due primarily to a drop in northbound cargo volumes caused principally by the loss of a major customer in December, 2009. The Company continues to work on its marketing strategy and its plan to increase northbound volumes (See Risk Factors, starting on page 34). Due to anticipated contractual extensions to the rail terminal operating agreement, we extended the amortization period of both the Mobile, Alabama and Coatzacoalcos, Mexico rail terminal’s leasehold improvements two and a half years and six years, respectively, during the first quarter 2010. Extending these amortization periods had the effect of increasing our gross profit approximately $450,000 per quarter.

Other: Gross profit increased from $85,000 in the first six months of 2009 to $164,000 in the first six months of 2010. This increase was primarily due to an increase in brokerage income.

Other Income and Expense

Administrative and general expenses increased from $10.9 million in the first six months of 2009 to $11.4 million in the first six months of 2010. The increase was primarily due to increases in amortization on awards under our executive stock compensation program and an initial charge for establishing a self-insured life insurance policy for a former Chairman of the Company, who is presently a Director.

The following table shows the significant A&G components for the first six months of 2010 and 2009 respectively.

(Amounts in Thousands)	Six Months Ended June 30,
A&G Account	2010		2009		Variance

Wages & Benefits	$	5,444	$	5,261	$	183
Executive Stock Compensation		1,398		752		646
Professional Services		1,121		1,116		5
Insurance and Worker’s Comp		673		305		368
Office Building Expenses		738		659		79
Other		2,060		2,426		(366	)
Consulting Fees *		-		421		(421	)
TOTAL:	$	11,434	$	10,940	$	494

* Fees associated with unaffiliated company’s offer to purchase the company.

Interest Expense increased from $2.9 million in the first six months of 2009 to $4.0 million in the first six months of 2010 due to (i) entering into a new loan agreement in the third quarter of 2009 to finance the purchase of two Multi-Purpose vessels that were subsequently sold to an Indonesian company, (ii) higher interest expense due to the incurrence of bank indebtedness in 2010 to fund the final installment owed on our International flag PCTC Newbuilding and the ineffectiveness of a portion of a mark-to-market adjustment of a derivative contract on this loan. This was partially offset by increased capitalized interest of $374,000 in the first six months of 2010 compared to the same period in 2009.

Investment income (loss) increased from a loss of $332,000 in the first six months of 2009 to income of $1.2 million in the first six month of 2010 due to other than temporary impairment losses taken on certain investments in 2009, higher average cash balances in the first quarter 2010 and higher average balances of debt securities.

Other income from vessel financing in 2010 is due to interest earned on a note receivable on vessels sold to an Indonesian company in the third quarter of 2009.

Income Taxes

We recorded a benefit for income taxes of $642,000 on $16.6 million of income before income from unconsolidated entities and a benefit of $1.8 million on $15.5 million of income before income from unconsolidated entities for the six months ended June 30, 2010 and 2009 respectively. The income tax benefit for both periods reflects tax losses on operations taxed at the U.S. Corporate statutory rate. The decrease in our tax benefit is primarily the result of an increase in gross profit related to the US flag Coal Carrier partially offset by a decrease in gross profit in our Rail Ferry service. For further information on certain tax laws and elections, see our annual report on Form 10-K for the year ended December 31, 2009, including Note F to the financial statements. Our qualifying U.S. flag o perations continue to be taxed under a “tonnage tax” regime rather than under the normal U.S. corporate income tax regime.

Foreign income such as dividends, interest, rents and royalties are normally treated as foreign personal holding company income and subject to immediate taxation under the U.S. taxation regime. In 2005 the treatment of foreign personal holding company income between related controlled foreign corporations allowed deferral of that income. This rule was not permanent but was extended in years following through December 31, 2009. The rule has been proposed to be further extended and is under consideration by Congress for 2010; however, it has not passed and is therefore not yet law. In light of this change, the tax provision on equity in earnings from unconsolidated entities for the first six months of 2010 includes the tax impact of dividends between related party controlled foreign corporations that would be cla ssified as foreign personal holding company income. Related party controlled foreign earnings of $6.2 million were reduced by $3.3 million in United States income taxes on current and undistributed earnings for a net income of $2.9 million. If the pending bill currently in Congress passed, then our 2010 provision for these taxes could be reversed in the quarter in which the bill is passed and signed into law.

Equity in Net Income of Unconsolidated Entities

Equity in net income of unconsolidated entities, net of taxes, increased from $2.8 million in the first six months of 2009 to $2.9 million in the same period of 2010. The results were driven by our 50% investment in Dry Bulk, which owns 100% of subsidiary companies that currently own two Capesize Bulk Carriers and have two Handymax Bulk Carrier Newbuildings on order for delivery in 2012. For the six months of 2010 and 2009, our portion of the earnings of this investment was $3.6 million, net of taxes of $3.3 million, and $2.7 million, net of taxes of $0, respectively, with the increase being principally due to Dry Bulk having sold its one remaining Panamax vessels in the first quarter 2010. Equity in net income of unconsolidated entities net of taxes, for the first six months of 2010 was further impacted by our 2 5% investment in Oslo Bulk made during December 2009. Our portion of the earnings of this investment was a $681,000 loss for the six months ended June 30, 2010, primarily related to the mark-to-market adjustment of an interest rate swap contract. Although the terms of Oslo Bulk’s interest rate swap contract match the terms of the loan, the swap did not qualify for hedge accounting treatment due to the lack of documentation at the inception of the contract entered into in 2008, prior to our investment in Oslo Bulk. Although U.S. GAAP requires recording the mark-to-market revaluation of this derivative instrument through earnings, we expect the instrument to be an effective economic hedge to Oslo Bulk’s interest cost.

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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 $41.9 million at December 31, 2009, to $31.6 million at June 30, 2010. Cash and cash equivalents decreased during the first six months of 2010 by $33.7 million to a total of $13.8 million at June 30, 2010, with a portion of the decrease due to cash used to purchase $8.7 million of short-term corporate bonds. The decrease in cash and cash equivalents was a result of cash provided by operating activities of $24.3 million and cash provided by financing activities of $16.6 million, partially offset by cash used for investing activities of $74.5 million. Total current liabilities of $49.5 million as of June 30, 2010 included cur rent maturities of long-term debt of $17.8 million.

Net cash provided by operating activities for the first six months of 2010 was $24.3 million after adjusting net income of $20.2 million for the first six months of 2010 for non-cash provisions such as depreciation, amortization, and foreign exchage and cash dividends of $1.5 million from our investment in unconsolidated entities, offset by among other things, the deduction of the non-cash $2.9 million of net income from our equity in net income of these unconsolidated entities, and the aforementioned changes in working capital.

Net cash used for investing activities of $74.5 million included capital expenditures of $72.6 million, and the purchase, net of sales, of marketable securities of $8.1 million which were partially offset by principal payments received under Direct Financing Leases of $2.9 million and proceeds from the sale of one of our International Flag Container vessels. Included in the $72.6 million of capital expenditures are $51.4 million for the final installment payment on an International flag Pure Car Truck Carrier delivered in late March 2010 and the second installment payment of $17 million on three Handy-size Bulk Carrier Newbuildings scheduled for delivery in the first quarter of 2011.

Net cash provided by financing activities of $16.6 million included outflows of regularly scheduled debt payments of $6.9 million, an additional $6.0 million paid toward principal payment on debt affiliated with the purchase of two Multi-Purpose vessels in 2009, the buyback of shares of our common stock of $5.2 million and cash dividends paid of $6.6 million. These cash outflows were offset by the net effect of (i) line of credit draw of $26.0 million offset by line of credit payment of $20.0 million, (ii) debt payment of $47.9 million and loan proceeds of $46.0 million from the refinancing of the 2007 U.S. flag PCTC, (iii) pay off of a bridge loan for $12.6 million and (iv) proceeds of $50.3 million from the final bank draw associated with financing of the International flag PCTC Newbuilding.

In 2007, we acquired a 2007-built PCTC, which we reflagged as a U.S. flag vessel. The vessel was financed with a three year Yen denominated note with a balloon payment of 4.25 billion Yen due on September 10, 2010. Immediately after being delivered to us in September of 2007, we chartered this vessel through August of 2010 to a Far East based shipping company, which held an option to purchase the vessel at the end of the contract. A portion of the charter was based on Yen capital hire payments which corresponded with our Yen debt payments. On February 5, 2010, the charterer notified us of their intention not to exercise their option to purchase the vessel and did not exercise their option on the due date of February 6, 2010. On February 14, 2010, we negotiated a mutually acceptable early redelivery of the vessel under the time charter. On March 8, 2010, we entered into a U.S. denominated bridge loan which converted our total outstanding debt of 4.32 billion Yen to approximately $47.9 million USD. On June 29, 2010 we entered into a refinancing loan agreement to establish long term financing on this vessel for $46.0 million. As a result of the time charterer redelivery of the vessel in February 2010, we reclassified $48.1 million of net investment in direct financing leases from current assets to capital assets in the first quarter of 2010. This vessel is currently employed on a long-term time charter.

On March 31, 2010 we adjusted and extended our $30 million unsecured revolving line of credit upward to $35 million and extended the maturity date to April 6, 2012. As of June 30, 2010, we had $6.0 million outstanding and had pledged $6.4 million as collateral for a letter of credit. The remaining $22.6 million was available as of June 30, 2010. Associated with this credit facility is a commitment fee of .125% per year on the undrawn portion of this facility. Subsequently, in early July 2010, the $6.0 million drawn on the line of credit was paid off.

Debt and Lease Obligations – As of June 30, 2010, we held five vessels under operating contracts, five vessels under bareboat charter or lease agreements and four vessels under time charter agreements. The types of vessels held under these agreements include three Pure Car/Truck Carriers, two Breakbulk/Multi Purpose vessels, three Roll-On/Roll-Off vessels, four Container vessels and a Tanker vessel, all of which operate in our Time Charter Contracts – U.S. Flag and International Flag segments, and a Molten Sulphur Carrier operating in our Contracts of Affreightment segment. We also conduct certain of our operations from leased office facilities. Refer to our 2009 form 10-K for a schedule of our contractual obligations. 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, borrow money, or restructure our debt. We believe we have sufficient liquidity despite the recent disruption of the capital and credit markets and believe we can continue to fund working capital and capital investment liquidity needs through cash flow from operations and available credit facilities. We have debt of $14.3 million due in 2010, $19.3 million due in 2011, $31.7 million due in 2012, $33.3 million due in 2013 and $20.1 million due in 2014.

Bulk Carriers - In November 2009, we contracted with a Korean shipyard to construct three Handy-Size Bulk Carrier Newbuildings with scheduled deliveries in early 2011. We have made total payments of $34.0 million including $17.0 million in the first six months of 2010 on these vessels. We have received an acceptable Indicative Term Sheet with a major International bank for the construction and long-term financing of these vessels. Upon execution of permanent financing, we expect to receive net proceeds of $4.3 million, which represents payments previously made to the Builder that exceed our required equity percentage under the financing.

We have a 50% interest in Dry Bulk, which owns 100% of subsidiary companies which own two Cape-Size Bulk Carriers. 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’s subsidiary companies have entered into ship purchase agreements 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 $37.0 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 1 5% with the 85% balance of the cost being financed with a bank construction loan. Due to the financial market conditions, it is likely that the permanent financing will require additional equity contributions. While it is anticipated that any required equity contributions will be covered by Dry Bulk’s subsidiary companies’ earnings, if they are not, our anticipated share of these interim equity contributions could be approximately $2.7 million, of which we have already funded $354,000.

Cash Dividend Payments – On January 28, 2010, our Board approved a 2010 first quarter payment of a $.50 cash dividend for each share of common stock held on the record date of February 17, 2010, which was paid on March 1, 2010. During its January 2010 Board of Directors meeting, the board established a quarterly dividend target of $.375 per share, per quarter for the remainder of 2010.

On April 28, 2010, our Board approved a 2010 second quarter payment of a $.375 cash dividend for each share of common stock held on the record date of May 17, 2010, which was paid on June 1, 2010.

On July 28, 2010, our Board approved a 2010 third quarter payment of a $.375 cash dividend for each share of common stock held on the record date of August 17, 2010, to be paid on September 1, 2010.

Environmental Issues – 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.

On June 23, 2009, a complaint was filed in U.S. District Court of Oregon by ten plaintiffs against approximately forty defendants, including Waterman Steamship Corporation, which is one of our wholly owned subsidiaries. See Part II, Item 1, of this report for further information.

New Accounting Pronouncements - Fair Value Measurements. In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance which expanded the required disclosures about fair value measurements. In particular, this guidance requires (i) separate disclosure of the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements along with the reasons for such transfers, (ii) information about purchases, sales, issuances and settlements to be presented separately in the reconciliation for Level 3 fair value measurements, (iii) fair value measurement disclosures for each class of asset s and liabilities and (iv) disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for fair value measurements that fall in either Level 2 or Level 3. The adoption of this guidance did not have a material effect on our financial condition or results of operations.

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 and forward exchange contracts, and in the past we have also utilized commodity swap agreements to manage certain of these exposures. While our Corporate policy is to only enter into hedges for firm commitments or anticipated transactions and do not use derivatives for speculation, due to current market conditions, we are currently charging to expense the mark-to-market adjustment of the 15% reduction in the previously contracted Yen Swap Facility for the newly delivered PCTC by the bank. 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, 2010, 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 quarter-end for our investment portfolio is not material.

The fair value of long-term debt at June 30, 2010, including current maturities, was estimated to equal the carrying value of $200 million.

We enter into interest rate swap agreements to manage well-defined interest rate risks. The Company records the fair value of the interest rate swaps as an asset or liability on its balance sheet. Currently, each of the Company’s interest rate swaps is accounted for as an effective cash flow hedge. Accordingly, the effective portion of the change in fair value of the swap is recorded in Other Comprehensive Income (Loss). As of June 30, 2010, the Company has the following interest rate swap contracts outstanding:

Effective Date	Termination Date	Current Notional Amount		Swap Rate			Type
9/28/07	9/30/10	$	13,530,333		4.68	%	Fixed
12/31/07	9/30/10	$	13,530,333		3.96	%	Fixed
11/30/05	11/30/12	$	13,370,000		5.17	%	Fixed
3/31/08	9/30/13	$	13,530,333		3.46	%	Fixed
9/30/10	9/30/13	$	12,908,000		2.69	%	Fixed
9/30/10	9/30/13	$	12,908,000		2.45	%	Fixed
9/26/05	9/28/15	$	9,666,667		4.41	%	Fixed
9/26/05	9/28/15	$	9,666,667		4.41	%	Fixed
3/15/09	9/15/20	¥	6,280,000,000		2.065	%	Fixed

The fair value of these agreements at June 30, 2010, 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 $9.6 million. A hypothetical 10% decrease in interest rates as of June 30, 2010, would have resulted in a $10.4 million liability.

Commodity Price Risk. As of June 30, 2010, we do not have commodity swap agreements in place to manage our exposure to price risk related to the purchase of the estimated 2010 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 2010. If we had commodity swap agreements, they could be structured to reduce our exposure to increases in fuel prices. However, they would also limit the benefit we might otherwise receive from any price decreases associated with this commodity. A 20% increase in the price of fuel for the period January 1, 2010 through June 30, 2010 would have resulted in an increase of approximately $474,000 in our fuel costs for the same period, and in a corresponding decrease of approximately $0.06 in our basic earnings per share based on the shares of our common stock outstanding as of June 30, 2010. The additional fuel costs assumes no additional revenue would be generated from fuel surcharges, even though we believe that we could pass along some or all of the price increase might be able to be passed on to our customers through fuel surcharges. Our charterers in the Time Charter Contracts – U.S. Flag and the Time Charter Contracts – International Flag segments are responsible for purchasing vessel fuel requirements; thus, we have no fuel price risk in these segments.

Foreign Exchange Rate Risk. We have entered into foreign exchange contracts to hedge certain firm purchase commitments. In 2009, we entered into two forward purchase contracts. The first was for Mexican Pesos for $225,000 U.S. Dollar equivalents at an exchange rate of 14.1787 and the second was for Indonesian Rupiah for $900,000 U.S. Dollar equivalents at an exchange rate of 12975. In 2010, we entered into two forward purchase contracts. The first was for Mexican Pesos for $1,725,000 U.S. Dollar equivalents at an exchange rate of 13.1524 and the second was for Indonesian Rupiah for $1.8 million U.S. Dollar equivalents at an exchange rate of 9670. The following table summarizes these contracts:

(Amounts in Thousands)
Transaction Date	Type of Currency	Transaction Amount in Dollars	Effective Date	Expiration Date
February 2009	Rupiah	900	January 2010	December 2010
September 2009	Peso	225	April 2010	October 2010
June 2010	Rupiah	1,800	January 2011	December 2011
June 2010	Peso	1,725	September 2010	August 2011

The fair value of these contracts at June 30, 2010, is an asset of $392,000. The potential fair value of these contracts that would have resulted from a hypothetical 10% adverse change in the exchange rates would be an asset of $353,000.

On January 23, 2008, a wholly-owned subsidiary of the Company entered into a Senior Secured Term Loan Facility denominated in Japanese Yen for the purchase of a 6400 CEU Newbuilding PCTC, which was completed and delivered in March 2010. The decision to enter into this Yen loan was driven by the lower Yen interest rates versus the USD interest rates at that time. Subsequently, we entered into a Yen interest rate swap designed to cap the interest at 2.065%. In June 2009, we received notification that the banking institution would be exercising their option to reduce the Yen financing on this vessel from 80% to 65% of delivered cost. The loan was fully drawn in March 2010 for a total of Yen 5,103,000,000. Under current accounting guidelines, since this Facility is not denominated in our functional curren cy, the outstanding balance of the Facility as of the end of each reporting period is to be revalued, with any adjustments recorded to earnings. Due to the amount of the Facility, we may sustain fluctuations that may cause material swings in our reported results. As an example, a hypothetical 1Yen to 5 Yen increase or decrease on the exchange rate between the Yen and U.S. Dollar, which was $88.39 at June 30, 2010, would impact earnings by approximately $600,000 to $3.0 million for the reporting period (See Item 1A-Risk Factors). While we believe that these fluctuations will likely smooth out over time, any particular reporting period could be materially impacted by these adjustments. The Company intends to continue to monitor its risk profile for this Facility. There was a 6% fluctuation in the Yen to USD exchange rate at June 30, 2010 compared to the prior reporting period end, resulting in a $3.1 million foreign exchange loss, reported under Interest and Other on our Statement of income included in Item 1 of this report above.

Pension Plan Risk. During the capital market crisis, we experienced a significant decline in the market value of plan assets. With the rise in the equity markets due to the recovery over the past year, we have recouped most of the value lost during the credit crisis and currently the plan is appropriately funded under the new regulatory requirements for plan year 2010. In addition to the 300,000 contributed to our pension plan during 2010 through July 15, 2010, based on the current market conditions, we anticipate additional contributions to be made by the end of the fourth quarter of 2010 of approximately $1.0 million.

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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 Rule 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 first six months of 2010, 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 1 – LEGAL PROCEEDINGS

On June 23, 2009, ten plaintiffs filed a complaint in U.S. District Court of Oregon against approximately forty defendants, including Waterman Steamship Corporation, which is one of our wholly owned subsidiaries. The suit was filed for contribution and recovery of both past and future cost associated with the investigation and remediation of the Portland Harbor Superfund Site. Based on our review to date, we believe our exposure, if any, could be limited to an insurance deductible, which we believe would be immaterial.

ITEM 1A. RISK FACTORS

Our Rail-Ferry Service has a history of losses, and we can give no assurances as to its future profitability. The service began operating in February of 2001 and has been unprofitable every year except 2008, when the two vessels used to provide this service averaged approximately 75% capacity utilization. Beginning in 2009, the service began to suffer the impact from the overall economic downturn, especially on its northbound service to the US, and both volumes and net margins decreased. During December 2009, we were notified that one of the segment’s largest customers would no longer use our services, stating sourcing decisions as the reason for the change.

Due to the uncertainty of this segment and the history of losses, the Company has routinely performed an impairment test to determine if the undiscounted cash flows were sufficient enough to recover the asset value of the segment. As of June 30, 2010, we performed the latest impairment test which factored in the lower recent and anticipated improved projected results, and concluded that there was no asset impairment. We will continue to monitor the results and cash flow estimates. If actual cash flows fall below current estimates, we may have to take an impairment charge in the near future. The Company estimates that a decrease of 10-15% in expected results could result in an impairment charge up to $30 million. The total investment at risk as of June 30, 2010 was $63.4 million.

Yen denominated loan. The Company has a Yen denominated loan of Yen 5,103,000,000 which at the Balance Sheet date of June 30, 2010 converted to a USD $57.7 million liability at a USD/Yen exchange rate of $88.39. A 1 Yen to 5 Yen hypothetical change in the Yen would impact earnings by approximately $600,000 to $3.0 million for the reporting period. USD/Yen rate exchanges could be volatile during a short valuation period such as quarter over quarter, thus quarterly results going forward could be materially impacted. The Company intends to continue to monitor its risk profile for this Facility.

Our vessels which travel in the Gulf of Mexico are being disrupted and could be disrupted further due to the oil slick presently moving towards shore. On April 20, 2010, the Deepwater Horizon Oil rig, located in the Gulf of Mexico, exploded causing an oil spill into the Gulf of Mexico waters. Given the nature and scope of our operations, specifically the Rail-Ferry Service and Sulphur vessel, we are vulnerable to disruption this oil slick may cause to our operations or to any damage it may cause to our vessels that operate in the Gulf of Mexico. We continue to operate all of these vessels and have experienced disruption, for which we have submitted a $180,000 claim to BP, covering the time period up to June 30, 2010.

For a listing of other factors that could materially and adversely affect our business, financial condition, results of operations, liquidity or prospects, please see Item 1A to our Annual Report on Form 10-K for the year ended December 31, 2009.

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. In 2008, we repurchased 491,572 shares of our common stock for $11.5 million. During the second quarter quarter of 2010, considering the market valuation of our stock, we repurchased 223,051 shares of our Common Stock for $5.2 million. Unless and until the Board otherwise provides, this authorization will remain open indefinitely, or until we reach the 1, 000,000 share limit.

This table provides certain information with respect to the Company’s purchase of shares of its common stock during the second quarter of 2010:

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
April 1, 2010 – April 30, 2010	-	-	-	508,428
May 1, 2010 – May 30, 2010	27,700	$23.7285	27,700	480,728
June 1, 2010 – June 30, 2010	195,351	$23.2429	195,351	285,377

Table of Contents

ITEM 6 – EXHIBITS

(a) EXHIBIT INDEX

Part II Exhibits:

(3.1)

Restated Certificate of Incorporation of the Registrant, as amended through May 19, 2010*

(3.2)

By-Laws of the Registrant as amended through October 28, 2009 (filed with the Securities and Exchange Commission as Exhibit 3.2 to the Registrant's Form Current Report on Form 8-K dated November 2, 2009 and incorporated herein by reference)

(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 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)

(10.3)

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)

(10.4)

Consulting Agreement, dated December 29, 2009, 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, 2009 and incorporated herein by reference)

(10.5)

Consulting Agreement, dated December 23, 2009, 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, 2009 and incorporated herein by reference)

(10.6)

Form of Restricted Stock Agreement under the International Shipholding Corporation Stock Incentive Plan referenced to in Item 10.7 (filed with the Securities and Exchange Commission as Exhibit 10.1 to the Registrant’s Form 8-K dated May 6, 2008 and incorporated herein by reference)

(10.7)

International Shipholding Corporation 2009 Stock Incentive Plan (filed with the Securities and Exchange Commission as Exhibit 99.2 to the Registrant's Current Report on Form 8-K dated April 30, 2009 and incorporated herein by reference)

(10.8)

Form of Restricted Stock Agreement dated May 6, 2009 under the International Shipholding Corporation 2009 Stock Incentive Plan (filed with the Securities and Exchange Commission as Exhibit 99.2 to the Registrant's Current Report on Form 8-K dated May 7, 2009 and incorporated herein by reference)

(10.9)

Form of Restricted Stock Agreement dated January 27, 2010 under the International Shipholding Corporation 2009 Stock Incentive Plan *

(10.10)

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)

(10.11)

Credit Agreement, dated as of June 29, 2010, by and among Waterman Steamship Corporation, as borrower, the Registrant, as guarantor, Regions as lender.*

(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. (filed with the Securities and Exchange Commission as Exhibit 10.14 to the Registrant’s Form 10-Q for quarterly period ended June 30, 2008 and incorporated herein by reference)

(10.15)

Change of Control Agreement, by and between the registrant and Erik L. Johnsen, effective as of August 6, 2008. (filed with the Securities and Exchange Commission as Exhibit 10.15 to the Registrant’s Form 10-Q for quarterly period ended June 30, 2008 and incorporated herein by reference)

(10.16)

Change of Control Agreement, by and between the registrant and Manuel G. Estrada, effective as of August 6, 2008. (filed with the Securities and Exchange Commission as Exhibit 10.16 to the Registrant’s Form 10-Q for quarterly period ended June 30, 2008 and incorporated herein by reference)

(10.17)

Form of Indemnification Agreement, by and between the registrant and members of the Board of Directors, effective as of November 11, 2009 (filed with the Securities and Exchange Commission as Exhibit 10.20 to the Registrant’s Form 10-K for the annual period ended December 31, 2009 and incorporated herein by reference)

(10.18)

Shipbuilding Contract, dated as of November 6, 2009, by and between East Gulf Shipholding, Inc., as buyer, and Hyundai Mipo Dockyard Co., Ltd. as seller, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof. (filed with the Securities and Exchange Commission as Exhibit 10.21 to the Registrant’s Form 10-K for the annual period ended December 31, 2009 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.)

(10.19)

Shipbuilding Contract, dated as of November 6, 2009, by and between East Gulf Shipholding, Inc., as buyer, and Hyundai Mipo Dockyard Co., Ltd. as seller, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof. (filed with the Securities and Exchange Commission as Exhibit 10.22 to the Registrant’s Form 10-K for the annual period ended December 31, 2009 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.)

(10.20)

Shipbuilding Contract, dated as of November 6, 2009, by and between East Gulf Shipholding, Inc., as buyer, and Hyundai Mipo Dockyard Co., Ltd. as seller, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof. (filed with the Securities and Exchange Commission as Exhibit 10.23 to the Registrant’s Form 10-K for the annual period ended December 31, 2009 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.)

(10.21)

Performance Guarantee, dated as of November 11, 2009, by International Shipholding Corporation, as guarantor, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof. (filed with the Securities and Exchange Commission as Exhibit 10.24 to the Registrant’s Form 10-K for the annual period ended December 31, 2009 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.)

(10.22)

Performance Guarantee, dated as of November 11, 2009, by International Shipholding Corporation, as guarantor, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof. (filed with the Securities and Exchange Commission as Exhibit 10.25 to the Registrant’s Form 10-K for the annual period ended December 31, 2009 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.)

(10.23)

Performance Guarantee, dated as of November 11, 2009, by International Shipholding Corporation, as guarantor, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof. (filed with the Securities and Exchange Commission as Exhibit 10.26 to the Registrant’s Form 10-K for the annual period ended December 31, 2009 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.)

(10.24)

Letter of Guarantee, dated as of November 12, 2009, by Korea Eximbank, as guarantor, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof. (filed with the Securities and Exchange Commission as Exhibit 10.27 to the Registrant’s Form 10-K for the annual period ended December 31, 2009 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.)

(10.25)

Letter of Guarantee, dated as of November 12, 2009, by Korea Eximbank, as guarantor, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof. (filed with the Securities and Exchange Commission as Exhibit 10.28 to the Registrant’s Form 10-K for the annual period ended December 31, 2009 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.)

(10.26)

Letter of Guarantee, dated as of November 12, 2009, by Korea Eximbank, as guarantor, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof. (filed with the Securities and Exchange Commission as Exhibit 10.29 to the Registrant’s Form 10-K for the annual period ended December 31, 2009 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.)

(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

(Principal Financial and Accounting Officer)

Date: July 28, 2010

EX-3.1 2 exhibit31certinc.htm RESTATED CERTIFICATE OF INCORPORATION exhibit31certinc.htm

Exhibit 3.1

COMPOSITE CERTIFICATE OF INCORPORATION

INTERNATIONAL SHIPHOLDING CORPORATION

(as amended through May 19, 2010)

ARTICLE I

The name of the Company is INTERNATIONAL SHIPHOLDING CORPORATION.

ARTICLE II

The registered office of the Company is to be located at 1209 Orange Street in the City of Wilmington, County of New Castle, State of Delaware. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

The nature of the business or purposes to be conducted or promoted is:

To carry on and conduct any and every kind of manufacturing, distribution and service business; to manufacture, process, fabricate, rebuild, service, purchase or otherwise acquire, to design, invent or develop, to import or export, and to distribute, lease, sell, assign or otherwise dispose of and generally deal in and with raw materials, products, goods, wares, merchandise and real and personal property of every kind and character; and to provide services of every kind and character.

To conduct any lawful business, to exercise any lawful purpose and power, and to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

In general, to possess and exercise all the powers and privileges granted by the General Corporation Law of Delaware or by any other law of Delaware or by this Certificate of Incorporation, together with any powers incidental thereto, so far as such powers and privileges are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Company.

ARTICLE IV

A. General.

1. The total number of shares of stock that the Company shall have authority to issue is 21 million shares, of which 20 million shall be common stock with a par value of $1.00 per share (the “Common Stock”) and one million shall be preferred stock with a par value of $1.00 per share (the “Preferred Stock”).

2. Shares of stock of any class now or hereafter authorized may be issued by the Company from time to time for such consideration (not less than the par value thereof if there be a par value) as shall be fixed from time to time by the Board of Directors of the Company. Any and all shares of stock so issued for which the consideration so fixed has been paid or delivered to the Company shall be declared and taken to be fully paid stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments in respect of such shares.

Subscriptions to, or the purchase price of, shares of stock of the Company may be paid for, wholly or partly, by cash, by labor done, by personal property, or by real property or leases thereof. In the absence of actual fraud in the transaction, the judgment of the directors as to the value of such labor, personal property, real estate or leases thereof shall be conclusive.

3. Any and all right, title, interest and claim in or to any dividends declared by the Company, whether in cash, stock or otherwise, which are unclaimed by the stockholder entitled thereto for a period of six years after the close of business on the payment date, shall be and be deemed to be extinguished and abandoned; and such unclaimed dividends in the possession of the Company, its transfer agents or other agents or depositaries, shall at such time become the absolute property of the Company, free and clear of any and all claims of any person or entity whatsoever.

4. The designation and the powers, preferences, rights, qualifications, limitations and restrictions applicable to the Common Stock and the Preferred Stock shall be, or shall be determined, as hereinafter set forth.

B. Common Stock.

1. Dividend Rights. Subject to the provisions of law and the preferences of the Preferred Stock and of any other stock ranking prior to Common Stock as to dividends, the holders of Common Stock will be entitled to receive dividends when, as and if declared by the Board of Directors.

2. Voting Rights. Except as otherwise provided by law or pursuant to this Article IV, the holders of Common Stock shall be entitled to one vote, in person or by proxy, for each share held on each matter submitted to a vote of the shareholders of the Company. Except as otherwise provided by law, by the Certificate of Incorporation or by resolution or resolutions of the Board of Directors providing for the issue of any series of Preferred Stock, the holders of Common Stock will have sole voting power.

3. Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Company and the preferential amounts to which the holders of any stock ranking prior to the Common Stock in the distribution of assets are entitled upon liquidation, the holders of the Common Stock and the holders of any other stock ranking on a parity with the Common Stock in the distribution of assets upon liquidation will be entitled to share in the remaining assets of the Company according to their respective interests.

C. Preferred Stock.

1. Authority of the Board of Directors to Issue in Series. Preferred Stock may be issued from time to time in one or more series. All shares of any one series of Preferred Stock shall be identical except as to the dates of issue and the dates from which dividends on shares of the series issued on different dates will cumulate, if cumulative. Authority is hereby expressly granted to the Board of Directors to authorize the issue of one or more series of Preferred Stock, and to fix by resolution or resolutions providing for the issue of each such series the voting powers, designations, preferences and relative, participating, optional or other special rights, and qualifications, limitatio ns or restrictions thereof, of such series, to the full extent now or hereafter permitted by law, including, but not limited to, the following:

(a) The number of shares of such series, which may subsequently be increased, except as otherwise provided by the resolution or resolutions of the Board of Directors providing for the issue of such series, or decreased, to a number not less than the number of shares then outstanding, by resolution or resolutions of the Board of Directors, and the distinctive designation thereof;

(b) The dividend rights of such series, the preferences, if any, over any other class or series of stock, or of any other class or series of stock over such series, as to dividends, the extent, if any, to which shares of such series will be entitled to participate in dividends with shares of any other series or class of stock, whether dividends on shares of such series will be fully, partially or conditionally cumulative, or a combination thereof, and any limitations, restrictions or conditions on the payment of such dividends;

(c) The rights of such series, and the preferences, if any, over any other class or series of stock, or of any other class or series of stock over such series, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and the extent, if any, to which shares of any such series will be entitled to participate in such event with any other series or class of stock;

(d) The time or times during which, the price or prices at which, and the terms and conditions on which the shares of such series may be redeemed;

(e) The terms of any purchase, retirement or sinking funds which may be provided for the shares of such series;

(f) The terms and conditions, if any, upon which the shares of such series will be convertible into or exchangeable for shares of any other series, class or classes, or any other securities;

(g) The voting powers, if any, of such series.

2. Limitation on Dividends. No holders of any series of Preferred Stock will be entitled to receive any dividends thereon other than those specifically provided for by the Certificate of Incorporation or the resolution or resolutions of the Board of Directors providing for the issue of such series of Preferred Stock, nor will any accumulated dividends on Preferred Stock bear any interest.

3. Limitation on Liquidating Distributions. In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Preferred Stock of each series will be entitled to receive only such amount or amounts as will have been fixed by the Certificate of Incorporation or by the resolution or resolutions of the Board of Directors providing for the issue of such series. A consolidation or merger of the Company with or into one or more other corporations or a sale, lease or exchange of all or substantially all of the assets of the Company will not be deemed to be a voluntary or involuntary liquidation, dissolution or winding up, within the mea ning of this Article IV.

ARTICLE V

A. Purpose. The provisions of this Article V are intended to assure that the Company remains in continuous compliance with the citizenship requirements of the Merchant Marine Act, 1920, as amended, the Merchant Marine Act, 1936, as amended, the Shipping Act, 1916, as amended, and the regulations promulgated thereunder, as such laws and regulations are amended from time to time (collectively, the “Maritime Laws”). It is the policy of the Company that Non-Citizens should not Beneficially Own, individually or in the aggregate, any shares of the Company’s Capital Stock in excess of the Permitted Amount. If the Boar d of Directors of the Company should conclude in its sole discretion at any time that Non-Citizens have become, or are about to become, the Beneficial Owners, individually or in the aggregate, of shares of Capital Stock in excess of the Permitted Amount, the Board of Directors may by resolution duly adopted declare that any or all of the provisions of subparagraphs C, D and E of this Article V shall apply.

B. Definitions. For purposes of this Article V, the following terms shall have the meanings specified below:

1. A Person shall be deemed to be the “Beneficial Owner” of, or to “Beneficially Own,” shares of Capital Stock to the extent such Person would be deemed to be the beneficial owner thereof pursuant to Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as such rule may be amended from time to time.

2. “Capital Stock” shall mean any class or series of capital stock of the Company other than any class or series of capital stock of the Company that is permitted by the Maritime Administration of the United States Department of Transportation (“MARAD”) to be excluded from the determination of whether the Company is in compliance with the citizenship requirements of the Maritime Laws.

3. “Citizen” shall mean:

(a) any individual who is a citizen of the United States, by birth, naturalization or as otherwise authorized by law;

(b) any corporation (i) that is organized under the laws of the United States or of a state, territory, district or possession thereof, (ii) not less than 75% of the capital stock of which is Beneficially Owned by Persons who are Citizens, (iii) whose president or chief executive officer, chairman of the board of directors and all officers authorized to act in the absence or disability of such Persons are Citizens and (iv) of which more than 50% of the number of its directors necessary to constitute a quorum are Citizens;

(c) any partnership (i) that is organized under the laws of the United States or of a state, territory, district or possession thereof, (ii) all general partners of which are Citizens and (iii) not less than a 75% interest in which is Beneficially Owned by Persons who are Citizens;

(d) any association or limited liability company (i) that is organized under the laws of the United States or of a state, territory, district or possession thereof, (ii) whose president or chief executive officer (or the Person serving in an equivalent position), chairman of the board of directors (or equivalent position) and all Persons authorized to act in the absence or disability of such Persons are Citizens, (iii) not less than a 75% interest in which or 75% of the voting power of which is Beneficially Owned by Citizens and (iv) of which more than 50% of the number of its directors (or the Persons serving in equivalent positions) necessary to constitute a quorum are Citizens;

(e) any joint venture (if not an association, corporation or partnership) (i) that is organized under the laws of the United States or of a state, territory, district or possession thereof and (ii) all co-venturers of which are Citizens; and

(f) any trust (i) that is domiciled in and existing under the laws of the United States or of a state, territory, district or possession thereof, (ii) the trustee of which is a Citizen and (iii) of which not less than a 75%of the beneficial interests in both income and principal are held for the benefit of Citizens.

4. “Non-Citizen” shall mean any Person other than a Citizen.

5. “Permitted Amount” shall mean shares of Capital Stock that, individually or in the aggregate (a) have Voting Power not in excess of 23%of Total Voting Power or (b) constitute not more than 23% of the total number of the issued and outstanding shares of Capital Stock; provided that, if the Maritime Laws are amended to change the amount of Capital Stock that a Non-Citizen may own or have the power to vote, then the Permitted Amount shall be changed to a percentage that is two percentage points less than the percentage that would cause the Company to be no longer qualified under the Maritime Laws, after giving effect to such amendment, as a Citizen qualified to (i) engage in coastwise trade, (ii) participate in MARAD’s Title XI or comparable financing p rograms, or (iii) participate in operating differential subsidies or similar programs.

6. “Person” shall mean an individual, partnership, corporation, limited liability company, trust, joint venture or other entity.

7. “Total Voting Power” shall mean the total number of votes that may be cast by all outstanding shares of Capital Stock having Voting Power.

8. “Voting Power” shall mean the power to vote with respect to the election of the Company’s directors.

C. Restrictions on Transfer.

1. Any transfer, or attempted or purported transfer, of any shares of the Capital Stock of the Company or any interest therein or right thereof, that would result in the Beneficial Ownership by Non-Citizens, individually or in the aggregate, of shares of Capital Stock in excess of the Permitted Amount will, until such excess no longer exists, be void and ineffective as against the Company and the Company will not recognize, with respect to those shares that caused the Permitted Amount to be exceeded, the purported transferee as a stockholder of the Company for any purpose other than the transfer by the purported transferee of such excess to a person who is not a Non-Citizen or to the extent necessary to effect any other remedy available to the Company under this Article V.

2. The Board of Directors is hereby authorized to effect any and all measures necessary or desirable (consistent with applicable law and the provisions of this Certificate of Incorporation) to fulfill the purpose and implement the provisions of this Article V, including without limitation, obtaining, as a condition to recording the transfer of shares on the stock records of the Company, affidavits or other proof as to the citizenship of existing or prospective stockholders on whose behalf shares of the Capital Stock of the Company or any interest therein or right thereof are or are to be held, or establishing and maintaining a dual stock certificate system under which different forms of stock certificates representing outstanding shares of the Capital Stock of the Compan y are issued to Citizens or Non-Citizens.

D. Suspension of Voting, Dividend and Distribution Rights with Respect to Excess Shares. If any shares of Capital Stock in excess of the Permitted Amount are Beneficially Owned by Non-Citizens, individually or in the aggregate, any such excess shares determined in accordance with this subparagraph D (the “Excess Shares”), shall, until such excess no longer exists, not be entitled to (1) receive any dividends or distributions of assets declared payable or paid to the holders of the Capital Stock of the Company during such period or (2) vote with respect to any matter submitted to a vote of the stockholders of the Company, and such Excess Shares shall not be deemed to be outstanding for purposes of determining the vote required on any matter properly submitted to a vote of the stockholders of the Company. At such time as the Permitted Amount is no longer exceeded, full voting rights shall be restored to any shares previously deemed to be Excess Shares, and any dividends or distributions with respect thereto that have been withheld shall be due and paid to the holders of such shares. If the number of shares of Capital Stock Beneficially Owned by Non-Citizens is in excess of the Permitted Amount, the shares deemed to be Excess Shares for purposes of this Article V will be those shares Beneficially Owned by Non-Citizens that the Board of Directors determines became so Beneficially Owned most recently, and such determination shall be conclusive.

E. Redemption of Excess Shares. The Company shall have the power, but not the obligation, to redeem Excess Shares subject to the following terms and conditions:

1. The per share redemption price (the “Redemption Price”) to be paid for the Excess Shares to be redeemed shall be the sum of (a) the average closing sales price of the Capital Stock and (b) any dividend or distribution declared with respect to such shares prior to the date such shares are called for redemption hereunder but which has been withheld by the Company pursuant to subparagraph D. As used herein, the term “average closing sales price” shall mean the average of the closing sales prices of the Capital Stock on the New York Stock Exchange during the 10 trading days immediately prior to the date the notice of redemption is given; except that, if the Capital Stock is not traded on the New York Stock Exchange then the closing sales prices of the Capital Stock on any other national securities exchange selected by the Company on which such Capital Stock is listed, and if not listed on any national securities exchange, the closing sales prices as quoted on the Nasdaq National Market, and if not so quoted, the mean between the representative bid and ask prices as quoted by Nasdaq or another generally recognized reporting system, on each of such 10 trading days, and if not so quoted, as may be determined in good faith by the Board of Directors.

2. The Redemption Price may be paid in cash or by delivery of a promissory note of the Company, at the election of the Company. Any such promissory note shall have a maturity of not more than 10 years from the date of issuance and shall bear interest at the rate equal to the then current coupon rate of a 10-year Treasury note as such rate is published in The Wall Street Journal or comparable publication.

3. A notice of redemption shall be given by first class mail, postage prepaid, mailed not less than 10 days prior to the redemption date to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock records of the Company. Each such notice shall state (a) the redemption date, (b) the number of shares of Capital Stock to be redeemed from such holder, (c) the Redemption Price, and the manner of payment thereof, (d) the place where certificates for such shares are to be surrendered for payment of the Redemption Price, and (e) that dividends on the shares to be redeemed will cease to accrue on such redemption date.

4. From and after the redemption date, dividends on the shares of Capital Stock called for redemption shall cease to accrue and such shares shall no longer be deemed to be outstanding and all rights of the holders thereof as stockholders of the Company (except the right to receive from the Company the Redemption Price) shall cease. Upon surrender of the certificates for any shares so redeemed in accordance with the requirements of the notice of redemption (properly endorsed or assigned for transfer if the notice shall so state), such shares shall be redeemed by the Company at the Redemption Price. In case fewer than all shares represented by any such certificate are redeemed, a new certificate shall be issued representing the shares not redeemed wit hout cost to the holder thereof.

5. Such other terms and conditions as the Board of Directors may reasonably determine.

ARTICLE VI

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized at any regular or special meeting thereof, without stockholder approval:

1. To make By-laws for the Company, and to amend, alter or repeal any By-laws.

2. To authorize and cause to be executed mortgages and liens upon the real and personal property of the Company.

3. To authorize the borrowing of money; the issuance of bonds, notes, debentures and other obligations or evidences of indebtedness of the Company, secured or unsecured, and the inclusion of provisions as to redeemability and convertibility into shares of stock of the Company or otherwise.

4. To authorize the purchase or other acquisition of shares of stock of the Company or any of its bonds, debentures, notes or other securities or evidences of indebtedness.

5. To determine from time to time whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Company, or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any account book or document of the Company, except as conferred by statute or authorized by the Board of Directors, or by resolution of the stockholders.

6. To set apart out of the funds of the Company available for dividends a reserve or reserves for any proper purposes and to abolish any such reserve in the manner in which it was created.

7. To designate one or more committees, each committee to consist of two or more directors of the Company. Any such committee, to the extent provided in the resolution or in the By-laws of the Company, shall have and may exercise the power 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 of Directors may designate one or more of the directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee; provided, however, the By-laws may provide that in the absence or 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 or disqualified member.

8. To provide indemnification to the full extent permitted by Delaware law.

ARTICLE VII

The number of directors of the Company shall be fixed from time to time by, or in the manner provided in, its By-laws and may be increased or decreased as therein provided. Election of directors need not be by ballot unless the By-laws so provide. The directors of the Company shall be elected annually by the stockholders and shall hold office until their respective successors are duly elected and qualified. The By-laws may prescribe the number of directors necessary to constitute a quorum.

ARTICLE VIII

Meetings of stockholders may be held within or without the State of Delaware, as the By-laws may provide. The books of the Company may be kept (subject to any provisions contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-laws of the Company. Any corporate action upon which a vote of stockholders is required or permitted may be taken without a meeting and vote of stockholders with the written consent of stockholders having not less than a majority of the total number of votes entitled to be cast upon the action, or such larger percentage required by statute, if a meeting were held. Prompt notice shall be given to all stockholders of the taking of corporate action without a meeting by less than una nimous written consent.

ARTICLE IX

The Company reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

ARTICLE X

No director shall be personally liable to the Company or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director, except (i) for breach of the director’s duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article X shall apply to or have any effect on the liability or alleged liability of any director of the Company for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

* * * * *

EX-10.9 3 reststockagreement.htm FORM OF RESTRICTED STOCK AGREEMENT reststockagreement.htm

Exhibit 10.9

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

RESTRICTED STOCK AGREEMENT

UNDER THE INTERNATIONAL SHIPHOLDING CORPORATION

2009 STOCK INCENTIVE PLAN

This RESTRICTED STOCK AGREEMENT (this “Agreement”) is entered into as of January 28, 2010, by and between International Shipholding Corporation (“ISC”) and (“Award Recipient”).

WHEREAS, ISC maintains the 2009 Stock Incentive Plan (the “Plan”), under which the Compensation Committee of the Board of Directors of ISC (the “Committee”) may, among other things, grant shares of ISC’s common stock, $1.00 par value per share (the “Common Stock”), to key employees, officers, and directors of ISC or its subsidiaries (collectively, the “Company”), and persons providing services as consultants or advisors to the Company as the Committee may determine, subject to the Plan and such other terms, conditions, or rest rictions as it may deem appropriate; and

WHEREAS, pursuant to the Plan, the Committee has awarded to the Award Recipient restricted shares of Common Stock on the terms and conditions specified below;

NOW, THEREFORE, in consideration of the premises, the parties agree as follows:

AWARD OF SHARES AND VESTING SCHEDULE

1.1. Under the terms of the Plan and this Agreement, the Committee hereby awards to the Award Recipient, in consideration of future services, restricted shares of Common Stock (the “Restricted Stock”).

1.2. The Restricted Stock is subject to the terms, conditions, and restrictions set forth in the Plan and in this Agreement. The definition of all capitalized terms used but not otherwise defined in this Agreement shall be as provided in the Plan.

1.3. Subject to (a) the provisions of the Plan, (b) the other provisions of this Agreement, and (c) the Award Recipient remaining employed by the Company on the vesting date, the shares of Restricted Stock shall vest on the date the Company files its Annual Report on Form 10-K for 2010 with the Securities and Exchange Commission, if the Company’s 2010 net income before taxes (excluding any impairment charges) is equal to at least $26.36 million (the “Performance Target”). If the Performance Target is not met, the shares of Restricted Stock will be forfeited on the date of the Company’s filing of its Annual Report on Form 10-K for 2010 with the Securities and Exchange Commission.

RESTRICTIONS ON RESTRICTED STOCK

2.1. Subject to the restrictions provided in this Section 2, the Award Recipient shall be entitled to all rights of a stockholder of ISC with respect to the Restricted Stock, including the right to vote the shares.

2.2. All dividends paid and distributions made on unvested shares of Restricted Stock shall be held by the Company until the vesting of the related shares of Restricted Stock on which such dividends were paid or distributions were made. No interest shall accrue on such amounts prior to payout by the Company. All dividends and distributions on the Restricted Stock shall be paid to the Award Recipient promptly upon the vesting of the related Restricted Stock, but in no event later than 2 ½ months following such vesting date.

2.3. In addition to the conditions and restrictions provided in the Plan, the shares of Restricted Stock, the right to vote the Restricted Stock, and the right to receive dividends may not be sold, assigned, donated, transferred, exchanged, pledged, hypothecated, or otherwise encumbered prior to vesting.

EFFECT OF CHANGE OF CONTROL OR TERMINATION OF EMPLOYMENT

3.1. Any shares of Restricted Stock which have not vested in accordance with the terms of Section 1.3 shall vest and all restrictions set forth in Section 2 shall lapse on the earlier of:

(a) the date on which the employment of the Award Recipient terminates as a result of (i) death; (ii) disability within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”); or (iii) retirement on or after reaching age 65; or

(b) the occurrence of a Change of Control of ISC, as described in Section 12.10 of the Plan.

3.2. All unvested Restricted Stock and related rights to dividends and distributions shall automatically terminate and be forfeited if the employment of the Award Recipient terminates for any reason, unless and to the extent otherwise provided in Section 3.1.

EVIDENCE OF STOCK OWNERSHIP

4.1. Ownership of the Restricted Stock by the Award Recipient shall be reflected by the issuance of stock certificates or by book entry evidence of ownership. Any stock certificates evidencing the Restricted Stock shall be retained by ISC until the lapse of restrictions under the terms of this Agreement. ISC shall place a legend, in the form specified in Section 7.3 of the Plan, on any stock certificates and a similar notation of restrictions on any book entry evidence of ownership restricting the transferability of the shares of Restricted Stock.

4.2. Upon the lapse of restrictions on shares of Restricted Stock, ISC shall cause a stock certificate or book entry evidence of ownership without a restrictive legend to be issued with respect to the vested Restricted Stock in the name of the Award Recipient or his or her nominee within 30 days, subject to the other terms and conditions hereof, including any withholding of shares under Section 5 below. Upon receipt of such stock certificate, the Award Recipient is free to hold or dispose of the shares represented by such certificate, subject to (a) applicable securities laws, (b) ISC’s insider trading policy, and (c) any applicable s tock retention policies that ISC may adopt in the future.

TAXES

5.1. Unless an Award Recipient timely makes the election described in Section 5.2, at the time that all or any portion of the Restricted Stock vests, the Award Recipient must deliver to ISC the amount of income tax withholding required by law. The Award Recipient shall have the right to fully satisfy this tax withholding obligation by requesting ISC to withhold (from the shares the Award Recipient otherwise would receive upon vesting) that number of shares of Common Stock having an aggregate value (as determined under the Plan) equal to the minimum amount required to be withheld; provided, however, that to prevent the issuance of fractional shares and the under-withholding of taxes, the Award Recipient agrees that the number of shares withheld shall be rounded up to the next whole number of shares. The Committee does not have the right to disapprove of an election by the Award Recipient to have shares withheld in satisfaction of the withholding tax obligation.

5.2. The Award Recipient understands that the Award Recipient (and not the Company) shall be responsible for the Award Recipient’s own tax liability that may arise as a result of the transactions contemplated by this Agreement. The Award Recipient understands that Section 83 of the Code taxes as ordinary income the Fair Market Value of the Restricted Stock as of the date any restrictions on the shares lapse. The Award Recipient understands that the Award Recipient may elect to be taxed at the time the Restricted Stock is granted rather than upon vesting by filing an election under Section 83(b) of the Code with the I.R.S. within 30 days from the date of grant. The form for mak ing this election is available from the Company’s Secretary upon the Award Recipient’s request.

NO CONTRACT OF EMPLOYMENT INTENDED

Nothing in this Agreement shall confer upon the Award Recipient any right to continue in the employment of the Company, or to interfere in any way with the right of the Company to terminate the Award Recipient’s employment relationship with the Company at any time.

BINDING EFFECT

This Agreement shall inure to the benefit of and be binding upon the parties to this agreement and their respective heirs, executors, administrators, legal representatives, and successors.

INCONSISTENT PROVISIONS

The Restricted Stock is subject to the provisions of the Plan as in effect on the date of this Agreement and as it may be amended. If any provision of this Agreement conflicts with a provision of the Plan, the Plan provision shall control.

ATTORNEYS’ FEES AND EXPENSES

Should any party to this Agreement retain counsel for the purpose of enforcing, or preventing the breach of, any provision of this Agreement, including but not limited to the institution of any action or proceeding in court (a) to enforce any provision of this Agreement, (b) to obtain monetary or liquidated damages for failure to perform under this Agreement, (c) for a declaration of such parties’ rights or obligations with respect to this Agreement, or (d) for any other judicial remedy, then the prevailing party shall be entitled to be reimbursed by the losing party for all costs and expenses incurred thereby, including, but not limited to, attorneys’ fees (including costs of appeal).

10.

GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

11.

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 Award Recipient and ISC 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 of this Agreement, 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 each term and provision of this Agreement shall be valid and enforced to the f ullest extent permitted by law.

12.

ENTIRE AGREEMENT; MODIFICATION

The Plan and this Agreement contain the entire agreement between the parties with respect to the subject matter contained herein and may not be modified, except as provided in the Plan, as it may be amended from time to time in the manner provided by the Plan, or in this Agreement, as it may be amended from time to time by a written document signed by each of the parties to this Agreement. Any oral or written agreements, representations, warranties, written inducements, or other communications made prior to the execution of the Agreement shall be void and ineffective for all purposes.

By signature below, the Award Recipient represents that he or she is familiar with the terms and provisions of the Plan, and hereby accepts this Agreement subject to all of those terms and provisions. The Award Recipient has reviewed the Plan and this Agreement in their entirety and fully understands all provisions of each. The Award Recipient agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee upon any questions arising under the Plan or this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the day and year first above written.

INTERNATIONAL SHIPHOLDING CORPORATION

By:

By: Award Recipient

EX-10.11 4 creditagreement62910.htm CREDIT AGREEMENT - JUNE 29, 2010 creditagreement62910.htm

Exhibit 10.11

CREDIT AGREEMENT

Dated as of June 29, 2010

Between

WATERMAN STEAMSHIP CORPORATION,

as Borrower

INTERNATIONAL SHIPHOLDING CORPORATION,

as Guarantor

and

REGIONS BANK, as Lender

Relating to a

$46,000,000 Term Loan

TABLE OF CONTENTS

ARTICLE 1 Rules of Construction and Definitions

SECTION 1.1 General Rules of Construction

SECTION 1.2 Definitions

ARTICLE 2 Credit to be Extended Under this Agreement

SECTION 2.1 Loan

SECTION 2.2 Note.

SECTION 2.3 Interest

SECTION 2.4 Prepayments

SECTION 2.5 Place and Time of Payments

SECTION 2.6 Auto Debit Provision

SECTION 2.7 Security

SECTION 2.8 Guaranty Agreement

SECTION 2.9 Origination Fee

ARTICLE 3 Representations and Warranties

SECTION 3.1 Organization, Powers, etc.

SECTION 3.2 Authorization of Borrowing, etc.

SECTION 3.3 Litigation

SECTION 3.4 Agreements.

SECTION 3.5 Federal Reserve Board Regulations

SECTION 3.6 Investment Company Act.

SECTION 3.7 ERNA

SECTION 3.8 Enforceability

SECTION 3.9 Consents, Registrations, Approvals, etc.

SECTION 3.10 Financial Condition

SECTION 3.11 No Misleading Information

SECTION 3.12 Taxes

SECTION 3.13 Patents, Trademarks

SECTION 3.14 Hazardous Substances

SECTION 3.15 Solvency

SECTION 3.16 Foreign Trade Control Regulations

ARTICLE 4 Conditions of Lending

SECTION 4.1 Representations and Warranties

SECTION 4.2 No Default

SECTION 4.3 Intentionally Deleted

SECTION 4.4 Required Items

SECTION 4.5 Authorized Representative Certificates

SECTION 4.6 Other Supporting Documents

ARTICLE 5 Covenants

SECTION 5.1 Existence

SECTION 5.2 Continuation of Current Business, Offices, Name, etc

SECTION 5.3 Sale of Assets, Consolidation, Merger

SECTION 5.4 Accounting Records

SECTION 5.5 Reports to the Lender

SECTION 5.6 Maintenance

SECTION 5.7 Insurance

SECTION 5.8 Payment of Indebtedness, Taxes, etc.

. SECTION 5.9 Litigation Notice.

SECTION 5.10 Visitation

SECTION 5.11 Notice of Default

SECTION 5.12 Further Assurances

SECTION 5.13 Transactions with Related Persons

SECTION 5.14 Use of Credit Proceeds

SECTION 5.15 Financial Covenants

SECTION 5.16 Change in Management

SECTION 5.17 PATRIOT Act

ARTICLE 6 Events of Default

SECTION 6.1 Events of Default

SECTION 6.2 Lender's Remedies on Default

ARTICLE 7 Miscellaneous

SECTION 7.1 Notices

SECTION 7.2 Expenses

SECTION 7.3 Independent Obligations

SECTION 7.4 Heirs, Successors and Assigns

SECTION 7.5 Governing Law

SECTION 7.6 Date of Agreement

SECTION 7.7 Separability Clause

SECTION 7.8 Counterparts

SECTION 7.9 No Oral Agreements

SECTION 7.10 Waiver and Election

SECTION 7.11 No Obligations of Lender; Indemnification

SECTION 7.12 Set-off

SECTION 7.13 Participation

SECTION 7.14 Submission to Jurisdiction

SECTION 7.15 Usury Laws

SECTION 7.16 WAIVER OF TRIAL BY JURY

CREDIT AGREEMENT

THIS CREDIT AGREEMENT ("this Agreement") dated as of June 29, 2010 is between WATERMAN STEAMSIHP CORPORATION, a New York. corporation (the "Borrower"), INTERNATIONAL SHIPHOLDING CORPORATION, a Delaware corporation (the "Guarantor") and REGIONS BANK, an Alabama banking corporation (the "Lender").

Recitals

Capitalized terms used in these Recitals have the meanings defined for them above or in Section 1.2. The Borrower has requested that the Lender extend Credit to the Borrower under this Agreement and the other Credit Documents as described herein. To induce the Lender to extend Credit to the Borrower, the Borrower has agreed to execute and deliver this Agreement to the Lender.

Agreement

NOW, THEREFORE, in consideration of the foregoing Recitals, and to induce the Lender to extend Credit to the Borrower under this Agreement and the other Credit Documents, the Borrower and the Lender hereby agree as follows:

ARTICLE 1

Rules of Construction and Definitions

SECTION 1.1 General Rules of Construction. For the purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(a) Words of masculine, feminine or neuter gender include the correlative words of other genders. Singular terms include the plural as well as the singular, and vice versa.

(b) All references herein to designated "Articles," "Sections" and other subdivisions or to lettered Exhibits are to the designated Articles, Sections and subdivisions hereof and the Exhibits annexed hereto unless expressly otherwise designated in context. All Article, Section, other subdivision and Exhibit captions herein are used for reference only and do not limit or describe the scope or intent of, or in any way affect, this Agreement.

(c) The terms "include," "including," and similar terms shall be construed as if followed by the phrase "without being limited to."

(d) The terms "herein," "hereof' and "hereunder" and other words of similar import

refer to this Agreement as a whole and not to any particular Article, Section, other subdivision or Exhibit.

(e) All Recitals set forth in, and all Exhibits to, this Agreement are hereby

incorporated in this Agreement by reference.

(f) No inference in favor of or against any party shall be drawn from the fact that

such party or such party's counsel has drafted any portion hereof.

(g) All references in this Agreement to a separate instrument are to such separate

instrument as the same may be amended or supplemented from time to time pursuant to the applicable provisions thereof.

SECTION 1.2 Definitions. As used in this Agreement, the following terms are defined as follows:

(a) Actual/360 Day Basis means a method of computing interest and other charges on the basis of an assumed year of 360 days for the actual number of days elapsed, meaning that the interest accrued for each day will be computed by multiplying the interest rate applicable on that day by the unpaid principal balance on that day and dividing the result by 360.

(b) Affiliate of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For purposes of this definition, "control" when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "c ontrolling" and "controlled" have meanings correlative to the foregoing.

(d) Appraisal means a report that (i) determines the Appraised Value of the Vessel, (ii) is issued by a nationally recognized maritime appraiser experienced in appraising vessels of the same type as the Vessel and selected by the Lender, (iii) is prepared annually at the cost and expense of the Borrower, and (iv) is obtained by the Lender within thirty (30) days before each annual anniversary of the Closing Date.

(e) Appraised Value means the desktop value of the Vessel as determined by the Appraisal.

(f) Authorized Representative means the director or directors, officer or officers or authorized representatives of the Borrower or Guarantor, as applicable, that are duly authorized to act for such entity in the specified capacity under the Governing Documents or duly adopted resolutions of such entity or applicable law.

(g) Borrower shall have the meaning attributed to that term in the preamble to this Agreement.

(h) Business Day means any day, excluding Saturday and Sunday, on which the Lender's main office in Mobile, Alabama, is open to the public for carrying on substantially all of its banking business.

(i) Capital Expenditures means with respect to Guarantor and the Subsidiaries, on a consolidated basis, for any period (without duplication), any expenditure for fixed assets or that is properly chargeable to a capital account in accordance with GAAP.

(i)Change of Control means (a) any "person" (as such term is used in Sections

13(d) and 14(d) of the Exchange Act), other than the existing owners, that becomes the beneficial owner (as defmed in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 30% of the total voting power of Guarantor or (b) Guarantor ceases to own, directly or indirectly, 100% of the Borrower or (c) the Board of Directors of the Borrower ceases to consist of a majority of the directors existing on the date hereof or directors nominated by at least two-thirds (2/3) of the then existing directors.

(k) • Closing Date means June 29, 2010.

Consolidated EBITDA means, for any period, with respect to Guarantor and the Subsidiaries, the sum of (without duplication) (a) Consolidated Net Income; (b) all Interest Expense of Guarantor and the Subsidiaries; (c) income taxes of Guarantor and the Subsidiaries; and (d) depreciation and amortization of Guarantor and the Subsidiaries determined on a consolidated basis in accordance with GAAP for such period; provided that if any Subsidiary is not wholly-owned by Guarantor, Consolidated EBrIDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (i) the amount of Consolidated Net Income attributable to such Subsidiary multiplied by (ii) the percentage owner ship interest in the income of such Subsidiary not owned by Guarantor on the last day of such period.

(m) Consolidated Indebtedness means all Indebtedness of Guarantor and the Subsidiaries determined on a consolidated basis in accordance with GAAP.

(n) Consolidated Net Income means, for any period, the consolidated net income of Guarantor and the Subsidiaries for such period, as shown on the consolidated financial statements of Guarantor and the Subsidiaries delivered in accordance with Section 5.5.

(o) Consolidated Tangible Net Worth means, with respect to Guarantor and the Subsidiaries, at any date for which a determination is to be made (determined on a consolidated basis without duplication in accordance with GAAP) (a) the amount of capital stock; plus (b) the amount of surplus and retained earnings (or, in the case of a surplus or retained earnings deficit, minus the amount of such deficit); plus (c) deferred charges to the extent amortized and acq uired contract costs net of accumulated amortization as stated on the then most recent audited balance

sheet of Guarantor; minus (d) the sum of (i) the cost of treasury shares and (ii) the book value of all assets that should be classified as intangibles (without duplication of deductions in respect of items already deducted in arriving at surplus and retained earnings) but in any event including goodwill, minority interests, research and development costs, trademarks, trade names, copyrights, patents and franchises, unamortized debt discount and expense, all reserves and any write up in the book value of assets resulting from a revaluation thereof subsequent to December 31, 1996.

(p) Credit means, individually and collectively, all loans, forbearances, renewals, extensions, advances, disbursements and other extensions of credit now or hereafter made by the Lender to or for the account of the Borrower under this Agreement and the other Credit Documents, including the Loan.

(q) Credit Documents means this Agreement and the documents described in Exhibit A and all other documents now or hereafter executed or delivered in connection with the transactions contemplated thereby.

(r) Default Rate means a rate of interest equal to two percentage points (200 basis points) in excess of the interest rate otherwise payable on the Loan as set forth in Section 2.3(a), or the maximum rate permitted by law, whichever is less.

(s) EBITDAR means, with respect to Guarantor and the Subsidiaries, on a consolidated basis, for any period (without duplication) the sum of (i) Consolidated EBITDA; and (ii) Lease Expense; less maintenance Capital Expenditures (calculated at 30% of their depreciation expense).

(t) ERISA means the Employee Retirement Income Security Act of 1974, as amended.

(u) Events of Default is defined in Section 6.1. An Event of Default "exists" if an Event of Default has occurred and is continuing.

(v) Fixed Charges means with respect to Guarantor and the Subsidiaries, on a consolidated basis, for any period (without duplication), the sum of (i) Interest Expense; (ii) Lease Expense; and (iii) required principal payments for any outstanding debt during the applicable reporting period.

(w) GA_AP means generally accepted accounting principles for the United States.

(x) Governing Documents means, with respect to any person that is not a natural person, all organizational and governing documents applicable thereto.

(y) Governmental Authority means any national, state, county, municipal or other government, domestic or foreign, and any agency, authority, department, commission, bureau, board, court or other instrumentality thereof.

(z)Governmental Requirements means all laws, rules, regulations, ordinances,

judgments, decrees, codes, orders, injunctions, notices and demand letters of any Governmental Authority.

(aa) Guarantor shall have the meaning attributed to that term in the preamble to this Agreement.

(bb) Guaranty Agreement means that certain Guaranty Agreement dated of even date herewith executed by the Guarantor in favor of the Lender.

(cc) Hazardous Substances means all pollutants, effluents, contaminants, emissions, toxic or hazardous wastes and other substances, the removal of which is required or the manufacture, use, maintenance, handling, discharge or release of which is regulated, restricted, prohibited or penalized by any Governmental Requirement, or even if not so regulated, restricted, prohibited or penalized, might pose a hazard to the health and safety of the public or the occupants of the property on which it is located or the occupants of the property adjacent thereto, including (1) asbestos or asbestos-containing materials, (2) urea formaldehyde foa m insulation, (3) polychlorinated biphenyls (PCBs), (4) flammable explosives, (5) radon gas, (6) laboratory wastes, (7) experimental products, including genetically engineered microbes and other recombinant DNA products, (8) petroleum, crude oil, natural gas, natural gas liquid, liquefied natural gas, other petroleum products and synthetic gas usable as fuel, (9) radioactive materials, and (10) any substance or mixture listed, defined or otherwise determined by any Governmental Authority to be hazardous, toxic or dangerous, or otherwise regulated, affected, controlled or giving rise to liability under any Governmental Requirement.

(dd) Indebtedness means, with respect to any Person at any date of determination (without duplication), (i) all indebtedness of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto), (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taldng delivery thereof or the completion of such services, except trade payables , (v) all obligations on account of principal of such Person as lessee under capitalized leases, (vi) all indebtedness of other Persons secured by a lien on any asset of such Person, whether or not such indebtedness is assumed by such Person; provided that the amount of such indebtedness shall be the lesser of (a) the fair market value of such asset at such date of determination and (b) the amount of such indebtedness, and (vii) all indebtedness of other Persons guaranteed by such Person to the extent guaranteed; the amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided that the amount outstanding at any time of any indebtedness issued with original issue discount is the face amount of such indebtedness less the remaining unamortized portion of the original issue discount o f such indebtedness at such time as determined in conformity with GAAP; and

provided further that Indebtedness shall not include any liability for current or deferred federal, state, local or other taxes, or any trade payables.

(ee) Interest Determination Date means the first day of each month in each year.

(if)Interest Expense means, with respect to Guarantor and the Subsidiaries, on a

consolidated basis, for any period (without duplication), interest expense, whether paid or accrued (including the interest component of capitalized leases), on all Indebtedness of Guarantor and the Subsidiaries for such period, net of interest income, all determined in accordance with GAAP.

(gg) Lease Expense means with respect to Guarantor and the Subsidiaries, on a consolidated basis, for any period (without duplication), all amounts payable under any operating leases and time charter agreements which may be classified as operating lease expenses, charter hire expenses or rent as determined in accordance with GAAP during the period in question.

(hh) LIBOR-Based Rate means the per annum rate of interest most recently published in the Bloomberg reporting service or such other financial information reporting service used by the Lender as of the close of business on the Closing Date and on each Interest Determination Date (being the rate quoted for the immediately preceding Business Day) as the London Interbank Offered Rate for U.S. dollar deposits having a term of one month, plus the Applicable Margin. The Lender shall determine the LIBOR-Based Rate on the Closing Date and on each Interest Determination Date.

(ii) Lien means any mortgage, pledge, assignment, charge, encumbrance, lien,

security title, security interest or other preferential arrangement.

(jj)Loan is defined in Section 2.1.

(ldc) Loan to Collateral Value means at any time of determination, the outstanding principal balance of the Loan divided by the Appraised Value.

(II) Margin Stock is defined in Regulation U of the Federal Reserve Board, as

amended.

(mm) Maturity Date is defined in Section 2.2. (nn) Note is defined in Section 2.2.

(oo) Obligations means (1) the Loan and all other obligations and debts owing to the Lender and arising under the terms of this Agreement, the Note and the other Credit Documents, whether now or hereafter incurred, existing or arising, including the Loan; (2) any sums expended by the Lender in exercising the rights and remedies described in Section 6.2; (3) all accrued interest on the Loan, and all costs, fees, charges and expenses incurred and payable in connection therewith, including fees payable under the terms of, or in connection with, this

Agreement; (4) all other obligations and debts owing to the Lender arising in connection with, ancillary to, or in support of the Loan; (5) the payment and performance of all other indebtedness, obligations and liabilities of the Borrower to the Lender (including obligations of performance) of every ldnd whatsoever, arising directly between the Borrower and the Lender or acquired outright, as a participation or as collateral security from another person by the Lender, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, contracted or arising, joint or several, liquidated or unliquidated, regardless of how they arise or by what agreement or instrument they may be evidenced or whether they are evidenced by agreement or instrument, and whether incurred as maker, endorser, surety, guaranto r, general partner, drawer, tort-feasor, account party with respect to a letter of credit, indemnitor or otherwise; and (6) all renewals, extensions, modifications and amendments of any of the foregoing, whether or not any renewal, extension, modification or amendment agreement is executed in connection therewith.

(pp) Obligors means the Borrower, Guarantor and any other maker, endorser, surety, guarantor or other person now or hereafter liable for the payment or performance, in whole or in part, of any of the Obligations.

(qq) PATRIOT Act shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act of 2001), as amended from time to time, and any successor statute, and all rules and regulations from time to time promulgated thereunder.

(rr)Permitted Contest means any appropriate proceeding conducted in good faith by

the Borrower to contest any tax, assessment, charge, Lien or similar claim, during the pendency of which proceeding the enforcement of such tax, assessment, charge, Lien or claim is stayed; provided that the Borrower has set aside on its books or, if required by the Lender, deposited as cash collateral with the Lender, adequate cash reserves to assure the payment of any such tax, assessment, charge, Lien or claim.

(ss) Permitted Encumbrances means any Liens and other matters that are described on Schedule I attached hereto.

(ft)Person (whether or not capitalized) includes natural persons, sole proprietorships,

corporations, trusts, unincorporated organizations, associations, companies, institutions, entities, joint ventures, partnerships, limited liability companies and Governmental Authorities.

(uu) Prime Rate means that rate of interest designated by the Lender from time to time as its "prime rate," it being expressly understood and agreed that the "prime rate" is merely an index rate used by the Lender to establish lending rates and is not necessarily the Lender's most favorable lending rate, and that changes in the "prime rate" are discretionary with the Lender.

(vv) Property means all property, real and personal, including the Vessel, that is now or hereafter conveyed or assigned to the Lender, or in which the Lender is now or hereafter

granted a Lien, as security for any of the Obligations pursuant to the Credit Documents referenced in Exhibit A.

(ww) Resizing Amount is defined in Section 6.1(d).

(xx) Security Documents means all the Credit Documents that now or hereafter grant or purport to grant to Lender any guaranty, collateral or other security for any of the Obligations.

(yy) Solvent means, with respect to any person on a particular date, that as of such date (1) the fair value of the property of such person is greater than the total amount of liabilities (including contingent liabilities) of such person, (2) the present fair salable value of the assets of such person is not less than the amount that will be required to pay the probable liability of such person on its debts as they become absolute and matured, (3) such person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such person's property would constitute an unreasonably small capital, and (4) such person does not intend to, or believe or reasonably s hould have believed that it will, incur debts beyond its ability to repay as they become due.

(zz) subsidiary means, with respect to any Person, any business entity of which more than 50% of the outstanding voting stock or other equity interest is owned directly or indirectly by such Person and/or one or more other subsidiaries of such Person.

(aaa) Subsidiary(les) means all of the subsidiaries of Guarantor, including the Borrower hereunder.

(bbb) Vessel shall have the meaning attributed to the term "vessel" set forth in the First Preferred Ship Mortgage referenced in Exhibit A attached hereto.

ARTICLE 2

Credit to be Extended

Under this Agreement

SECTION 2.1 Loan. The Lender agrees, upon the terms and subject to the conditions of this Agreement, to make a term loan on the date hereof to the Borrower in the principal amount of $46,000,000 (the "Loan"). The Lender shall make the Loan by crediting the general deposit account of the Borrower with the Lender with the proceeds thereof against delivery to the Lender of the Note referred to in Section 2.2.

SECTION 2.2 Note. The Loan shall be evidenced by a certain promissory note (the "Note"), payable to the order of the Lender, duly executed on behalf of the Borrower, dated the date of this Agreement, in the principal amount of the Loan and satisfactory in form

and substance to the Lender. The Note shall be payable as to principal in eighty four (84) consecutive monthly installments, the first eighty three (83) of which shall be in the amount of $255,555.56 each and shall be payable on the first day of each month in each year, beginning August 1, 2010 and continuing to and including June 1, 2017. The final principal installment shall be in the amount of the entire outstanding principal balance and shall be due and payable on July 1, 201.7 (the "Maturity Date"). THE MONTHLY PRINCIPAL INSTALLMENTS WILL NOT FULLY AMORTIZE THE NOTE BY THE MATURITY DATE THEREOF, AND A SUBSTANTIAL "BALLOON PAYMENT" WILL BE DUE ON SAID MATURITY DATE.

SECTION 2.3 Interest

(a) The Note shall bear interest from the Closing Date until payment in full on the unpaid principal balance at the rate per annum equal to the LIBOR-Based Rate. Such interest shall be payable monthly on the first day of each month in each year, commencing on August 1, 2010, and upon payment in full. Interest will be computed on an Actual/360 Day Basis. Any change in the interest rate on the Note because of a change in the LIBOR-Based Rate shall take effect on the Interest Determination Date without notice to the Borrower and without any further action by the Lender. If it is impossible or impractical to obtain the LIBOR-Based Rate for a certain time period, the Loan shall bear interest at the Prime Rate.

(b) If an Event of Default exists, the Note shall bear interest at the Default Rate, until the earlier of (1) such time as all amounts due hereunder are paid in full or (2) no such Event of Default exists.

(c) The Borrower agrees to pay to the Lender, on demand, a late charge equal to five percent (5.0%) of any payment that is not paid within twelve (12) days after it is due. The late charge shall never be less than $10.00 on each payment. This provision shall not be deemed to excuse a late payment or be deemed a waiver of any other right the Lender may have, including the right to declare the entire unpaid principal and interest immediately due and payable and the right to collect interest on any late payment at the Default Rate.

SECTION 2.4 Prepayments. The Borrower may at any time prepay all or any part of the Loan, without premium or penalty, except that partial prepayments shall be in amounts not less than $50,000. Any prepayment shall be accompanied by the payment of accrued interest to the date of prepayment on the principal amount prepaid and shall be paid on any full prepayment of the Note in connection with the termination of this Agreement on the date of such prepayment.

SECTION 2.5 Place and Time of Payments.

(a)All payments by the Borrower to the Lender under this Agreement and the other Credit Documents shall be made in lawful currency of the United States and in immediately

available funds to the Lender at its main office in Mobile, Alabama at the hand delivery address set forth in Section 7.1 or at such other address within the continental United States as shall be specified by the Lender by notice to the Borrower. Any payment received by the Lender after 2:00 p.m. (Mobile, Alabama time) on a Business Day (or at any time on a day that is not a Business Day) shall be deemed made by the Borrower and received by the Lender on the following Business Day.

(b) All amounts payable by the Borrower to the Lender under this Agreement or any of the other Credit Documents for which a payment date is expressly set forth herein or therein shall be payable on the specified due date without notice or demand by the Lender. All amounts payable by the Borrower to the Lender under this Agreement or the other Credit Documents for which no payment date is expressly set forth herein or therein shall be payable ten days after written demand by the Lender to the Borrower. The Lender may, at its option, send written notice or demand to the Borrower of amounts payable on a specified due date pursuant to this Agreement or the other Credit Documents, but the failure to send such notice shall not affect or ex cuse the Borrower's obligation to make payment of the amounts due on the specified due date.

next succeeding Business Day, and any interest payable thereon shall be payable for such extended time at the specified rate.

(d) Except as otherwise required by law, payments received by the Lender shall be

applied first to expenses, fees and charges, then to interest and finally to principal.

SECTION 2.6 Auto Debit Provision. The Borrower hereby authorizes the Lender to initiate entries to the checking or savings account of Borrower held with the Lender for the purpose of making the payments due hereunder. The Borrower further authorizes the Lender to withdraw these payments from said account. The Borrower acknowledges that this authorization may be revoked at any time by providing written notice thereof to the Lender in such time and manner as to afford the Lender a reasonable opportunity to act thereupon.

SECTION 2.7 Security. The security for the Obligations shall include the Property and other security granted to the Lender under the Security Documents described in Exhibit A. The Security Documents shall be valid and binding as security for the aggregate amount of the Obligations outstanding from time to time, whether or not the full amount of the Credit is actually advanced by the Lender to the Borrower.

SECTION 2.8 Guaranty Agreement. Concurrently with the execution of this Agreement, the Guarantor is executing and delivering to the Lender a Guaranty Agreement pursuant to which the Guarantor is unconditionally guaranteeing the payment to the Lender, when and as due and payable, of the Obligations.

SECTION 2.9 Origination Fee. The Borrower will pay the Lender an origination fee equal to $230,000 which fee shall be payable on the Closing Date and will be fully earned and non-refundable as of such date.

ARTICLE 3

Representations and Warranties

The Borrower represents and warrants to the Lender as follows: SECTION 3.1 Organization, Powers, etc.

(a) It is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization or formation.

(b) It has the requisite power and authority to own its properties and to carry on its business as now being conducted and is duly qualified or registered to do business in every jurisdiction where the character of its properties or the nature of its activities makes such qualification or registration necessary.

SECTION 3.2 Authorization of Borrowing, etc. The execution, delivery and performance of any Credit Documents to which it is a party (a) have been duly authorized by all requisite action (including any necessary shareholder action), and (b) will not violate any Governmental Requirement, its Governing Documents or any indenture, agreement or other instrument to which it is a party, or by which it or any of its properties are bound, or be in conflict with, result in a breach of or constitute a default under, any such indenture, agreement or other instrument, or result in the creation or imposition o f any Lien, upon any of its properties except as contemplated by the Credit Documents.

SECTION 3.3 Litigation. There are no actions, suits or proceedings (whether or not purportedly on its behalf) pending or, to the best of its knowledge, threatened against or affecting it, by or before any Governmental Authority, that involve any of the transactions contemplated by the Credit Documents or the possibility of any judgment or liability that might reasonably be expected to result in any material adverse change in its business, operations, properties or condition, financial or otherwise; and it is not, to the best of its knowledge, in default with respect to any Governmental Requiremen t.

SECTION 3.4 Agreements. It is not a party to any agreement or instrument, or subject to any restriction in its Governing Documents that materially and adversely affects its business, operations, properties or condition, financial or otherwise, and it is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party, which default might reasonably be expected to have a material adverse effect upon its business, operations, properties or condition, financial or otherwise.

SECTION 3.5 Federal Reserve Board Regulations. It does not intend to use any part of the proceeds of the Credit, and has not incurred any indebtedness to be reduced, retired or purchased by it out of such proceeds, for the purpose of purchasing or carrying any Margin Stock, and it does not own and has no intention of acquiring any such Margin Stock.

SECTION 3.6 Investment Company Act. It is not an "investment company," or a company "controlled" by an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended.

SECTION 3.7 ERISA.

(a) The execution and delivery of this Agreement and the issuance and delivery of the Note as contemplated hereby will not involve any prohibited transaction within the meaning of ERISA or Section 4975 of the Internal Revenue Code, as amended.

(b) Based on ERISA and the regulations and published interpretations thereunder, it

is in compliance in all material respects with the applicable provisions of ERISA.

occurred with respect to any plan maintained by it.

SECTION 3.8 Enforceability. Any Credit Documents to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors' rights and remedies generally and by general principles of equity, whether considered in a proceeding at law or in equity.

SECTION 3.9 Consents, Registrations, Approvals, etc. No registration with or consent or approval of, or other action by, any Governmental Authority is required for the execution, delivery and performance of any Credit Documents to which it-is a party.

SECTION 3.10 Financial Condition.

(a) Guarantor's consolidated financial statements that have been furnished to the Lender were prepared in conformity with GAAP consistently applied throughout the periods involved, are in accordance with its books and records, are correct and complete and present fairly its financial condition as of the date or dates indicated and for the periods involved in accordance with GAAP applied on a consistent basis.

(b) Since the date of such financial statements no material adverse change in Guarantor's consolidated financial condition, business or operations has occurred.

(c) Guarantor has no liability, direct or contingent, that is material in amount and that is not reflected in its consolidated financial statements.

(d) It has good and marketable title to all its properties and assets reflected on the financial statements except for properties and assets disposed of since the date thereof as no longer used or useful in the conduct of its business or disposed of in the ordinary course of its business.

(e) All such properties and assets are free and clear of all Liens, except as otherwise permitted or required by the provisions of this Agreement and the other Credit Documents.

SECTION 3.11 No Misleading Information. To the best knowledge of the Borrower, neither this Agreement nor any of the other Credit Documents, nor any certificate, written statement or other document furnished to the Lender by or on behalf of the Borrower in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading; and there is no fact known to the Borrower that the Borrower has not disclosed to the Lender that materially adversely affects or, so far as the Borrower can now reasonably foresee, will materially adversely affect the properties, or financial or other condition of the Borrower or the ability of the Borrower to perform its obligations hereunder and under the other Credit Documents.

SECTION 3.12 Taxes.

(a) It has filed or caused to be filed all tax returns that, to the knowledge of its officers, are required to be filed with any Governmental Authority, and it has paid or has caused to be paid all taxes as shown as due on said returns or on any assessment received by it.

(b) It has reserves that are believed by its officers to be adequate for the payment of additional taxes for years that have not been audited by the respective tax authorities.

(c) All payments made or to be made by it under or pursuant to this Agreement and the Note shall be made free and clear of, and without deduction or withholding for an account of, any taxes.

SECTION 3.13 Patents, Trademarks. It owns, or possesses the right to use, all the patents, trademarks, service marks, trade names, copyrights, franchises, consents, authorizations and licenses and rights with respect to the foregoing, necessary for the conduct of its business as now conducted and proposed to be conducted, without any known conflict with the rights of others.

SECTION 3.14 Hazardous Substances.

(a)Except as otherwise disclosed in writing to the Lender, it has never caused or permitted any Hazardous Substance to be placed, held, located, released or disposed of in violation of any Governmental Requirement on, under or at any real property legally or beneficially owned, leased or operated by it, and such property has never been used by it or, to

the best of its knowledge, by any other person as a dump site or permanent or temporary storage site for any Hazardous Substance, in violation of any Governmental Requirement.

(b)To the best of its knowledge and except as otherwise disclosed in writing to the

Lender, it has no liabilities with respect to Hazardous Substances, and no facts or circumstances exist that could give rise to liabilities with respect to Hazardous Substances.

SECTION 3.15 Solvency. It is and will remain Solvent, taking into account the transactions contemplated by the Credit Documents.

SECTION 3.16 Foreign Trade Control Regulations. To the best of its knowledge, none of the transactions contemplated herein will violate the provisions of any statute or regulation enacted to prohibit or limit economic transactions with certain foreign Persons including any of the provisions of the Foreign Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Page 500, as amended).

ARTICLE 4

Conditions of Lending

The obligation of the Lender to lend hereunder is subject to the following conditions precedent:

SECTION 4.1 Representations and Warranties. On and as of the Closing Date, the representations and warranties set forth in Article 3 must be true and correct with the same effect as though they had been made on and as of such date, except to the extent that they expressly relate to an earlier date.

SECTION 4.2 No Default. On and as of the Closing Date, the Borrower must be in compliance with all the terms and provisions set forth in this Agreement on its part to be observed or performed, and no Event of Default, nor any event that upon notice or lapse of time or both would constitute an Event of Default, may exist.

SECTION 4.3 Intentionally Deleted.

SECTION 4.4 Required Items. On and as of the Closing Date, the Lender must have received all financial statements, reports and other items required as of that date under Article 2 and Article 5 of this Agreement.

.SECTION 4.5 Authorized Representative Certificates. On and as of the Closing Date the Borrower must have delivered to the Lender the following certificates executed by the appropriate Authorized Representatives of the Borrower, each of which certificates must be of a current date and must be satisfactory in form and substance to the Lender: (a) a certificate confirming compliance by the Borrower with the conditions precedent set forth in Sections 4.1 and 4.2; (b) a certificate certifying as in full force and effect reso lutions of the directors, shareholders or other appropriate persons under the Governing Documents and applicable law authorizing the transactions contemplated by the Credit Documents and authorizing certain Authorized Representatives of the Borrower to execute the Credit Documents on behalf of the Borrower and to act on behalf of the Borrower with respect to the Credit Documents, including the authority to request disbursements of the proceeds of the Credit and to direct the disposition of such proceeds; and (c) a certificate certifying as true and correct attached copies of the Governing Documents of the Borrower and the incumbency and signature of each Authorized Representative of the Borrower specified in said resolutions. The Lender may conclusively rely on the certified resolutions described in Section 4.5(b) as to all actions on behalf of the Borrower by the Authorized Representatives specified therein until the Lender receives further duly adopted resolutions cancelling or amending the prior resolutio ns.

SECTION 4.6 Other Supporting Documents. The Lender must receive on or before the Closing Date the following, each of which must be satisfactory to the Lender in form and content, (a) such legal opinions, certificates, proceedings, instruments and other documents as the Lender or its counsel may reasonably request to evidence (1) compliance by the Borrower and all other parties to the Credit Documents with legal requirements, (2) the truth and accuracy as of the Closing Date of the respective representations thereof contained in the Credit Documents, and (3) the due performance or satisfaction by such pa rties at or prior to the Closing Date of all agreements then required to be performed and all conditions then required to be satisfied by them pursuant to the Credit Documents, and (b) such additional supporting documents as the Lender or its counsel may reasonably request.

ARTICLE 5

Covenants

Each of the Borrower and the Guarantor covenants and agrees that the Borrower and/or Guarantor, as applicable, shall:

SECTION 5.1 Existence. Do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights and franchises and comply with all applicable Governmental Requirements.

SECTION 5.2 Continuation of Current Business, Offices, Name, etc. Not, without the prior written consent of the Lender, such consent not to be nnreasonably withheld, (a) engage in any business other than the business now being conducted by it and other businesses directly related thereto; (b) change its name or conduct its business in any name other than its current name; or (c) enter into (1) any agreement whereby the management, supervision or control of its business is delegated to or placed in any person other than its governing body and officers or (2) any contract or agreement whereby a ny of its principal functions are delegated to or placed in any agent or independent contractor.

SECTION 5.3 Sale of Assets, Consolidation, Merger. Not (a) other than as reasonably acceptable to the Lender, sell or otherwise dispose of all or a substantial part of its properties or assets to any person; or (b) consolidate with, merge into or participate in a statutory share exchange with any other person, or permit another person to merge into it, other than consolidations, mergers or statutory share exchanges with any other Subsidiary.

SECTION 5.4 Accounting Records. Keep proper books of record and account in which full, true and correct entries are made in accordance with GAAP applied on a consistent basis.

SECTION 5.5 Reports to the Lender. Furnish to the Lender:

(a) within 90 days after the end of each fiscal year, consolidated financial statements

(including a consolidated balance sheet and the related statements of income, cash flows and retained earnings) of Guarantor for such fiscal year, together with statements in comparative form for the preceding fiscal year, all in reasonable detail, prepared in accordance with GAAP consistently applied throughout the periods involved, and audited and certified by independent certified public accountants of recognized standing selected by Guarantor and satisfactory to the Lender (the form of such certification also to be satisfactory to the Lender);

(b) within 45 days after the end of each of the first three quarters of each fiscal year,

consolidated financial statements of Guarantor similar to those referred to in Section 5.5(a) for such quarter and for the period beginning on the first day of the fiscal year and ending on the last day of such quarter, unaudited but certified by an Authorized Representative of Guarantor;

year (commencing with the quarter ending September 30, 2010) and 90 days after the end of each fiscal year, a compliance certificate duly executed by an Authorized Representative of Guarantor substantially in the form of Exhibit B attached hereto;

(d) with the financial statements submitted under Section 5.5(a) and 5.5(b), a

• certificate signed by the party certifying said statement to the effect that no Event of Default, nor any event that, upon notice or lapse of time or both, would constitute an Event of Default, exists or, if any such Event of Default or event exists, specifying the nature and extent thereof;

(e) promptly upon receipt thereof, copies of all other reports, management letters and

other documents submitted to it by independent accountants in connection with any annual or interim audit of its books made by such accountants; and

(f) as soon as practical, from time to time, such other information regarding its

operations, business affairs and financial condition as the Lender may reasonably request.

SECTION 5.6 Maintenance. Maintain, preserve and protect all franchises and trade names and preserve all the remainder of its property used or useful in the

conduct of its business and keep the same in good repair, working order and condition, and from time to time make, or cause to be made, all needful and proper repairs, renewals, replacements,. betterments and improvements thereto, so that the business carried on in connection therewith may be properly and advantageously conducted at all times.

SECTION 5.7 Insurance. Maintain (a) adequate insurance on its properties and the Vessel to such extent and against such risks, including fire, as is customary with companies in the same or a similar business, (b) necessary worker's compensation insurance, and (c) such other insurance as may be required by law or as may reasonably be required in writing by the Lender.

SECTION 5.8 Payment of Indebtedness, Taxes, etc. (a) Pay its indebtedness and obligations in accordance with normal terms; (b) pay all taxes, assessments and governmental charges or levies imposed upon it or upon its income and profits or upon any of its properties before they become in default, except any such tax, assessment or governmental charge that is subject to a Permitted Contest; and (c) pay all lawful claims for labor, materials and supplies or otherwise, which, if unpaid, might become a Lien upon any of its properties, except any such claim that is subject to a Permitted Contest.

SECTION 5.9 Litigation Notice. Promptly notify the Lender of any action, suit or proceeding at law or in equity or by or before any Governmental Authority that, if adversely determined, might reasonably be expected to impair its ability to perform its obligations under any of the Credit Documents to which it is a party, might reasonably be expected to impair its right to carry on its business substantially as now conducted, or might reasonably be expected to materially and adversely affect its business, operations, properties or condition, financial or otherwise.

SECTION 5.10 Visitation. Permit representatives of the Lender from time to time to visit and inspect any of its offices and properties and to examine its assets and books of account and to discuss its affairs, finances and accounts with and be advised as to the same by its officers, all at such reasonable times and intervals as the Lender may desire.

SECTION 5.11 Notice of Default. Promptly notify the Lender of the existence of any Event of Default, or any event that upon notice or lapse of time or both would constitute an Event of Default.

SECTION 5.12 Further Assurances. At its cost and expense, upon request of the Lender, duly execute and deliver, or cause to be duly executed and delivered, to the Lender such further instruments and do and cause to be done such further acts as may be reasonably necessary or proper in the opinion of the Lender or its counsel to carry out more effectively the provisions and purposes of the Credit Documents.

SECTION 5.13 Transactions with Related Persons. Not enter into any transaction with any Obligor or any officer, director, partner, member or Affiliate unless the terms of that transaction are no less favorable to it than those that would be obtained on an arms-length basis.

01977418.2

SECTION 5.14 Use of Credit Proceeds. Not, directly or indirectly use any part of the proceeds of the Credit (a) for any purpose other than the refinance of existing indebtedness, or (b) without limiting the generality of the foregoing, for the purpose of purchasing or carrying any Margin Stock, or of reducing, retiring or purchasing any indebtedness incurred for such purpose; or take any other action that would involve a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulation issued thereunder, including Regulation U or Regulation X of the Federal Reserve Board, in connection with the transactions contemplated hereby; provided, however, that nothing set forth in this Section 5.14 or elsewhere in this Agreement shall be construed as imposing any duty on the Lender to supervise the use or application of the Credit proceeds or any liability on the Lender to any person if the Credit proceeds are not used for the purposes set forth in this Agreement.

SECTION 5.15 Financial Covenants.

(a) Dividends or Distributions. Not create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary to pay dividends or make any other distributions on its capital stock or limited liability company interests, as the case may be.

(b) Indebtedness. Not incur any new Indebtedness (excluding any Indebtedness pursuant to this Agreement) other than Indebtedness incurred to finance the acquisition and/or construction of any vessels, provided that the principal amount of such Indebtedness shall not exceed eighty percent (80%) of such acquisition and/or construction price, unless such Indebtedness is fully subordinated to all existing Indebtedness and the Obligations.

(c) Liens. Not incur, create, assume or permit to exist any Lien on any of its properties, now or hereafter owned, other than:

(1)	Liens securing the payment of obligations permitted under Section 5.8(b);

(2)	Liens securing the payment of Indebtedness incurred pursuant to Section 5.15(b);

(3)	other Permitted Encumbrances;

(4)

deposits under workmen's compensation, unemployment insurance and Social Security laws, or to secure the performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases or to secure statutory obligations or surety or appeal bonds, or to secure indemnity, performance or other similar bonds in the ordinary course of business;

(5)	Liens imposed by law, such as carriers', warehousemen's or mechanics' liens, or liens for crew's wages or salvage, incurred in good faith in the ordinary course of business and that are not delinquent or that are subject

to Permitted Contests, and any Lien arising out of a judgment or award not exceeding $500,000 with respect to which an appeal is being prosecuted, a stay of execution pending such appeal having been secured;

(6)	Liens in favor of the Lender;

(7)	Liens for taxes, assessments or other governmental charges or levies that are not delinquent or that are subject to Permitted Contests;

(8)

purchase money Liens on equipment (arising substantially contemporaneously with the purchase of such equipment) acquired in the ordinary course of business to secure the purchase price of such equipment or to secure indebtedness incurred solely for the purpose of financing the acquisition of such equipment, or any Lien existing on the equipment at the time of its acquisition, provided that (A) the indebtedness secured by such Lien does not exceed the purchase price or fair market value, whichever is less, of the equipment so acquired at the time of its acquisition, (B) the equipment is used or useful in the ordinary course of business of the acquiring person, and (C) the Lien does not cover any property other than the equipment so acquired; and

(9)	Liens against the Property that are permitted to exist pursuant to the terms of the Credit Documents.

(d) Guaranties. Not guarantee, endorse, become surety for or otherwise in any way become or be responsible for the indebtedness, liabilities or obligations of any third party.

(e) Subordination of Inter-Company Indebtedness. With respect to the Borrower, ensure that, upon the occurrence and continuation of an Event of Default, no payments are made on any inter-company Indebtedness until such time as the Obligations have been paid in full.

(f) Solvency. Continue to be Solvent.

(g) Consolidated Indebtedness to Consolidated EBITDA Ratio. Maintain, on a consolidated basis, a ratio of Consolidated Indebtedness to Consolidated EBITDA of not more than 4.25 to 1.00 for Guarantor and the Subsidiaries through the Maturity Date, as measured at the end of each fiscal quarter based on the four most recent fiscal quarters for which financial infoimation is available.

(h) Working Capital. Maintain on a consolidated basis for Guarantor and the Subsidiaries a ratio of current assets to current liabilities of not less than 1.00 to 1.00, as measured at the end of each fiscal quarter.

(i) Consolidated Tangible Net Worth. Maintain a Consolidated Tangible Net Worth, as measured at the end of each fiscal quarter, in an amount of not less than the sum of

One Hundred Sixty Million Dollars ($160,000,000) and fifty percent (50%) of all net income of Guarantor and the Subsidiaries (on a consolidated basis) earned after July 1, 2005.

(j) Consolidated EBITDA to Interest Expense. Maintain a ratio of Consolidated EBITDA to Interest Expense of not less than 2.50 to 1.00, measured at the end of each fiscal quarter based on the four most recent fiscal quarters for which financial information is available.

(k) EBITDAR to Fixed Charges. Maintain a ratio of EBITDAR to Fixed Charges of not less than 1.40 to 1.00, for Guarantor and the Subsidiaries on a consolidated basis as measured at the end of each fiscal quarter based on the four most recent fiscal quarters for which financial information is available.

(I)Loan to Collateral Value. Maintain a Loan to Collateral Value ratio that is less

than or equal to seventy five percent (75%) as measured on each annual anniversary of the Closing Date.

(m) Fiscal Year. Not change its fiscal year.

(n) Change of Control. In the case of Guarantor, cause or permit a Change of Control.

SECTION 5.16 Change in Management. Promptly notify the Lender of any change in directors or the senior executive officers of the Borrower.

SECTION 5.17 PATRIOT Act.

(1) Neither the Borrower nor the Guarantor (i) is or will become a Person whose property or interests in property are blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages or will engage in any dealings or transactions prohibited by Section 2 of such Executive Order, or be otherwise associated with any such Person in any manner violative of Section 2, or (iii) will otherwise become a Person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other OFAC regulation or e xecutive order.

(2) The Borrower and the Guarantor are in compliance in all material respects with the PATRIOT Act. No part of the proceeds of the Loan hereunder will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

ARTICLE 6

Events of Default

SECTION 6.1 Events of Default. The occurrence of any of the following events shall constitute an event of default (an "Event of Default") under this Agreement (whatever the reason for such event and whether or not it shall be voluntary or involuntary or be effected by operation of law or pursuant to any Governmental Requirement):

(a) any representation or warranty made in this Agreement or in any of the other Credit Documents shall prove to be false or misleading in any material respect as of the time made; or

(b) any report, certificate, financial statement or other instrument furnished in

connection with the Credit, this Agreement or any of the other Credit Documents, shall prove to be false or misleading in any material respect as of the time furnished; or

(d) default shall be made in the due observance or performance of any covenant,

condition or agreement on the part of the Borrower or the Guarantor to be observed or performed pursuant to the terms of Sections 5.2, 5.3 and 5.15 hereof; except that in the event that the Borrower fails to satisfy the covenant set forth in Section 5.15(1), an Event of Default shall be deemed to have occurred only if within ten (10) days of receipt of written notice of such default from the Lender, the Borrower has not either (a) made a prepayment of the outstanding principal balance of the Loan in an amount sufficient to result in compliance with such covenant (the "Resizing Amount"), in which event the amount of the Loan shall automatically be reduced by the amount of the Resizing Amount, or (b) deposited cash in an amount equal to the Resizing Amount into an account (the "Deposit") to be pledged to and maintained with the Lender (w hich the Borrower hereby agrees shall serve as additional collateral for the Loan) until the Borrower complies with the covenant set forth in Section 5.15(1), at which time the Deposit shall be returned to the Borrower; or

(e) default shall be made in the due observance or performance of any covenant,

condition or agreement on the part of the Borrower or the Guarantor to be observed or performed pursuant to the terms of this Agreement (other than any covenant, condition or agreement, default in the observance or performance of which is elsewhere in this Section 6.1 specifically dealt with) and such default shall continue unremedied until the first to occur of (1) the date that is 30 days after written notice by the Lender to the Borrower or the Guarantor or (2) the date that is 30 days after the Borrower or Guarantor first obtains knowledge thereof; or

(f) failure of Borrower or Guarantor to timely perform any covenant in the Credit

Documents requiring the furnishing of notices, financial reports or other information to the Lender within ten (10) Business Days of when due; or

(g) any default or event of default, as therein defined, shall occur under any of the

other Credit Documents (after giving effect to any applicable notice, grace or cure period specified therein); or

(h) (1) default shall be made with respect to any Indebtedness (other than the

Obligations) of any Obligor, if the effect of such default is to accelerate the maturity of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior to its stated maturity, or (2) any such Indebtedness shall not be paid when due (after giving effect to any applicable notice, grace or cure periods); or

(i) any Obligor shall (1) apply for or consent to the appointment of a receiver,

trustee, liquidator or other custodian of such Obligor or any of such Obligor's properties or assets, (2) fail or admit in writing such Obligor's inability to pay such Obligor's debts generally as they become due, (3) make a general assignment for the benefit of creditors, (4) suffer or permit an order for relief to be entered against such Obligor in any proceeding under the federal Bankruptcy Code, or (5) file a voluntary petition in bankruptcy, or a petition or an answer seeking an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against such Obligor in any proceeding under any such law or statute, or if action shall be taken by any Obligor for the purpose o f effecting any of the foregoing; or

a petition shall be filed, without the application, approval or consent of any Obligor in any court of competent jurisdiction, seeking bankruptcy, reorganization, rearrangement, dissolution or liquidation of such Obligor or of all or a substantial part of the properties or assets of such Obligor, or seeking any other relief under any law or statute of the type referred to in Section 6.1(i)(5) against such Obligor, or the appointment of a receiver, trustee, liquidator or other custodian of such Obligor or of all or a substantial part of the properties or assets of such Obligor, and such petition shall not have been stayed or dismissed within 30 days after the filing thereof; or

(k)any Obligor shall be dissolved or liquidated or cease to be Solvent or suspend

business; or

(1)any writ of execution, attachment or garnishment shall be issued against the assets

of any Obligor and such writ of execution, attachment or garnishment shall not be dismissed, discharged or quashed within 30 days of issuance; or

(m) any final judgment for the payment of money (not paid or fully covered by insurance, subject to applicable deductibles) in excess of an aggregate of $2,500,000 shall be rendered against any Obligor and the same shall remain undischarged for a period of 30 days during which execution shall not be effectively stayed.

01977418.2

SECTION 6.2 Lender's Remedies on Default.

If an Event of Default exists, or any event exists that upon notice or lapse of time or both would constitute an Event of Default, the Lender shall have no obligation to extend any further Credit hereunder. If an Event of Default exists under Section 6.1(i) or 6.1(j), all of the Obligations shall automatically become immediately due and payable. If any other Event of Default exists, the Lender may, by written notice to the Borrower, declare any or all of the Obligations to be immediately due and payable, whereupon they shall become immediately due and payable. Any such acceleration (whether automatic or upon notice) shall be effective without presentment, demand, protest or other action of any kind, all of which are hereby expressly waived, anything contained herein or in any of the other Credit Documents to the contrary notwithstanding. If an Event of Default exists, the Lender may exercise any of its rights and remedies on default under the Credit Documents or applicable law.

ARTICLE 7 Miscellaneous SECTION 7.1 Notices.

(a) Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Agreement or the other Credit Documents to be made upon, given or furnished to, or filed with, the Borrower or the Lender must (except as otherwise provided in this Agreement or the other Credit Documents) be in writing and be delivered by one of the following means: (1) by personal delivery at the hand delivery address specified below, (2) by first-class, registered or certified mail, postage prepaid and addressed as specified below, or (3) if facsimile transmission facilities for such party are identified below or pursuant to a separate notice from such party, sent by facsimile transmission to the number specif ied below or in such notice.

(b) The hand delivery address, mailing address and (if applicable) facsimile transmission number for receipt of notice or other documents by such parties are as follows:

Borrower

By hand and mail:

11 North Water Street

Suite 18290

Mobile, Alabama 36602

Attention: Chief Financial Officer

By facsimile: 251-706-0756

Lender

By hand and mail:

11 North Water Street

RSA Tower 26th Floor

Mobile, Alabama 36602 Attention:James Currie

By facsimile: (251) 690-1588 With a copy to:

J. Kris Lowry

Maynard, Cooper & Gale, P.C. 1901 Sixth Avenue North

2400 Regions/Harbert Plaza

Birmingham, Alabama 35203-2618

By facsimile: (205) 254-1999

Any of such parties may change the address or facsimile transmission notice for receiving any such notice or other document by giving notice of the change to the other parties named in this Section 7.1.

(c) Any such notice or other document shall be deemed delivered when actually received by the party to whom directed (or, if such party is not a natural person, to an officer, director, partner, member or other legal representative of the party) at the address or number specified pursuant to this Section 7.1, or, if sent by mail, three Business Days after such notice or document is deposited in the United States mail, addressed as provided above.

(d) Five Business Days' written notice to the Borrower as provided above shall constitute reasonable notification to the Borrower when notification is required by law; provided, however, that nothing contained in the foregoing shall be construed as requiring five Business Days' notice if, under applicable law and the circumstances then existing, a shorter period of time would constitute reasonable notice.

SECTION 7.2 Expenses.. The Borrower shall promptly on demand pay all costs and expenses, including the fees and disbursements of counsel to the Lender, incurred by the Lender in connection with (a) the extension of the Credit and the administration or collection of the Obligations, (b) the negotiation, preparation and review of the Credit Documents (whether or not the transactions contemplated by this Agreement shall be consummated), (c) the enforcement of any of the Credit Documents, (d) the custody and preservation of the Vessel, (e) the protection or perfection of the Lender's rights and interests under the Security Documents in < /font>the Property, (f) the filing or recording of the Security Documents or any related financing, continuation or termination statements, or similar documents (including any stamp, documentary, mortgage, recording and similar taxes and fees), (g) the exercise by or on behalf of the Lender of any of its rights, powers or remedies under the Credit Documents, (h) the compliance by the Lender with any Governmental Requirements with respect to any of the Credit Documents, and (i) the prosecution or defense of any action or proceeding by or against the Lender, the Borrower, any Obligor, or any one or more of them, concerning any matter related to this Agreement or any of the other Credit Documents, or any of the Obligations. All such amounts shall bear interest from the date demand is made at the Default Rate and shall be included in the Obligations. The Borrower's obligations under this Section 7.2 shall survive the payment in full of the Obligations and the termination of this Agreement.

SECTION 7.3 Independent Obligations. The Borrower agrees that each of the obligations of the Borrower to the Lender under this Agreement may be enforced against the Borrower without the necessity of joining any other Obligor or any other person, as a party.

SECTION 7.4 Heirs, Successors and Assigns. Whenever in this Agreement any party hereto is referred to, such reference shall be deemed to include the heirs, successors and assigns of such party, except that the Borrower may not assign or transfer this Agreement without the prior written consent of the Lender; and all covenants and agreements of the Borrower contained in this Agreement shall bind the Borrower's heirs, successors and assigns and shall inure to the benefit of the successors and assigns of the Lender.

SECTION 7.5 Governing Law. This Agreement and the other Credit Documents shall be construed in accordance with and governed by the internal laws of the State of Alabama (without regard to conflict of law principles) except as required by mandatory provisions of law, foreign or otherwise.

SECTION 7.6 Date of Agreement. The date of this Agreement is intended as a date for the convenient identification of this Agreement and is not intended to indicate that this Agreement was executed and delivered on that date.

SECTION 7.7 Separability Clause. If any provision of the Credit Documents shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 7.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed an original, but all such counterparts shall together constitute but one and the same agreement.

SECTION 7.9 No Oral Agreements. This Agreement is the final expression of the agreement between the parties hereto, and this Agreement may not be contradicted by evidence of any prior oral agreement between such parties. All previous oral agreements between the parties hereto have been incorporated into this Agreement and the other Credit Documents, and there is no unwritten oral agreement between the parties hereto in existence.

SECTION 7.10 Waiver and Election. The exercise by the Lender of any option given under this Agreement shall not constitute a waiver of the right to exercise any other option. No failure or delay on the part of the Lender in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any further exercise thereof or the exercise of any other right, power or remedy. No modification, termination or waiver of any provisions of the Credit Documents, nor consent to any departure by the Borrowe r therefrom, shall be effective unless in writing and signed by an authorized representative of the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances.

SECTION 7.11 No Obligations of Lender; Indemnification. The Lender does not by virtue of this Agreement or any of the transactions contemplated by the Credit Documents assume any duties, liabilities or obligations with respect to any property now or hereafter granted to it as collateral for any of the Obligations imless expressly assumed by the Lender under a separate agreement in writing, and the Credit Documents shall not be deemed to confer on the Lender any duties or obligations that would make th e Lender directly or derivatively liable for any person's negligent, reckless or willful conduct. The Borrower agrees to indemnify and hold the Lender harmless against and with respect to any damage, claim, action, loss, cost, expense, liability, penalty or interest (including attorney's fees) and all costs and expenses of all actions, suits, proceedings, demands, assessments, claims and judgments directly or indirectly resulting from, occurring in connection with, or arising out of: (a) any inaccurate representation made by the Borrower or any Obligor in this Agreement or any other Credit Document; and (b) any breach of any of the warranties or obligations of the Borrower or any Obligor* under this Agreement or any other Credit Document. The provisions of this Section 7.11 shall survive the payment of the Obligations in full and the termination of this Agreement and the other Credit Documents.

SECTION 7.12 Set-off. While any Event of Default exists, the Lender is authorized at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Lender to or for the credit or the account of the Borrower against any and all of the Obligations, irrespective of whether or not the Lender shall have made any demand under this Agreement and although such Obligations may be unrnatured. The rights of the Lender under

this Section 7.12 are in addition to all other rights and remedies (including other rights of set-off or pursuant to any banker's lien) that the Lender may have.

SECTION 7.13 Participation. The Borrower understands that the Lender may from time to time enter into a participation agreement or agreements with one or more participants pursuant to which each such participant shall be given a participation in the Credit and that any such participant may from time to time similarly grant to one or more subparticipants subparticipations in the Credit. The Borrower agrees that any participant or subparticipant may exercise any and all rights of banker's lien or set-off with respect to the Borrower, as fully as if such participant or subparticipant had made a loan directly to the Borrower in the amount of the participation or subparticipation given to such participant or subparticipa nt in the Credit. For the purposes of this Section 7.13 only, the Borrower shall be deemed to be directly obligated to each participant or subparticipant in the amount of their participating interest in the amount of the Credit and any other Obligations. Nothing contained in this Section 7.13 shall affect the Lender's right of set-off (under Section 7.12 or applicable law) with respect to the entire amount of the Obligations, notwithstanding any such participation or subparticipation. The Lender may divulge to any participant or subparticipant all information, reports, financial statements, certificates and documents obtained by it from the Borrower or any other person under any provision of this Agreement or otherwise.

SECTION 7.14 Submission to Jurisdiction. The Borrower irrevocably (a) acknowledges that this Agreement will be accepted by the Lender and performed by the Borrower in the State of Alabama; (b) submits to the jurisdiction of each state or federal court sitting in Mobile County, Alabama (collectively, the "Courts") over any suit, action or proceeding arising out of or relating to this Agreement or any of the other Credit Documents (individually, an "Agreement Action"); (c) waives, to the fullest extent permitted by law, any objection or defense that the Borrower may now or hereafter have based on improper venue, lack of personal jurisdiction, inconvenience of forum or any similar matter in any Agreement Action brought in any of the Courts; (d) agrees that final judgment in any Agreement Action brought in any of the Courts shall be conclusive and binding upon the Borrower and may be enforced in any other court to the jurisdiction of which the Borrower is subject, by a suit upon such judgment; (e) consents to the service of process on the Borrower in any Agreement Action by the mailing of a copy thereof by registered or certified mail, postage prepaid, to the Borrower at the < font style="DISPLAY: inline; FONT-SIZE: 12pt">Borrower's address designated in or pursuant to Section 7.1; (f) agrees that service in accordance with Section 7.14(e) shall in every respect be effective and binding on the Borrower to the same extent as though served on the Borrower in person by a person duly authorized to serve such process; and (g) AGREES THAT THE PROVISIONS OF THIS SECTION, EVEN IF FOUND NOT TO BE STRICTLY ENFORCEABLE BY ANY COURT, SHALL CONSTITUTE "FAIR WARNING" TO THE BORROWER THAT THE EXECUTION OF THIS AGREEMENT MAY SUBJECT THE BORROWER TO THE JURISDICTION OF EACH STATE OR FEDERAL COURT SITTING IN MOBILE COUNTY, ALABAMA WITH RESPECT TO ANY AGREEMENT ACTIONS, AND THAT IT IS FORESEEABLE BY THE BORROWER THAT THE BORROWER MAY BE SUBJECTED TO THE JURISDICTION OF SUCH COURTS AND MAY BE SUED IN

THE STATE OF ALABAMA IN ANY AGREEMENT ACTIONS. Nothing in this Section 7.14 shall limit or restrict the Lender's right to serve process or bring Agreement Actions in manners and in courts otherwise than as herein provided.

SECTION 7.15 Usury Laws. Any provision of this Agreement or any of the other Credit Documents to the contrary notwithstanding, the Borrower and the Lender agree that they do not intend for the interest or other consideration provided for in this Agreement and the other Credit Documents to be greater than the maximum amount permitted by applicable law. Regardless of any provision in this Agreement or any of the other Credit Documents, the Lender shall not be entitled to receive, collect or apply, as interest on the Obligations, any amount in excess of the maximum rate of interest permitted to be charged under applicable law until such time, if any, as that interest, together with all other interest then payable, falls within the then applicable maximum lawful rate of interest. If the Lender shall receive, collect or apply any amount in excess of the then maximum rate of interest, the amount that would be excessive interest shall be applied first to the reduction of the principal amount of the Obligations then outstanding in the inverse order of maturity, and second, if such principal amount is paid in full, any excess shall forthwith be returned to the Borrower. In determining whether the interest paid or payable under any specific contingency exceeds the highest lawful rate, the Borrower and the Lender shall, to the maximum extent permitted under applicable law, (a) characterize any nonprincipal payment as an expense, fee or premium rather than as interest, (b) exclude voluntary prepayments and the effects thereof, (c) consider all the Obligations as one general obligation of the Borrower, and (d) "spread" the total amount of the interest throughout the entire term of the Note so that the interest rate is uniform throughout the entire term of the Note.

SECTION 7.16 WAIVER OF TRIAL BY JURY. THE BORROWER AND THE LENDER HEREBY (1) IRREVOCABLY AND UNCONDITIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT, ANY OF THE OTHER FINANCING DOCUMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH AND (2) AGUE THAT EITHER PARTY MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND BARGAINED FOR AGREEMENT BETWEEN THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY, AND T HAT ANY DISPUTE OR CONTROVERSY OF ANY KIND WHATSOEVER BETWEEN THEM SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the Borrower, the Guarantor and the Lender have caused this Agreement to be dated as of June 29, 2010 and to be duly executed and delivered.

BORROWER:

WATERMAN STEAMSHIP CORPORATION, a New York corporation

GUARANTOR:

INTERNATIONAL SHIPHOLDING CORPORATION, a Delaware corporation

LIST OF EXHIBITS AND SCHEDULES

Exhibit

A Credit Documents

Compliance Certificate

Schedules

Pemiitted Encumbrances

EXHIBIT A

Credit Documents

The "Credit Documents" referred to in this Agreement include this Agreement and the following:

(a) The Note.

(b) First Preferred Ship Mortgage dated of even date herewith and executed by Borrower in favor of the Lender.

EXHIBIT B

COMPLIANCE CERTIFICATE

Reference is made to that certain Credit Agreement between WATERMAN STEAMSHIP CORPORATION, a New York corporation (the "Borrower"), INTERNATIONAL SHIPHOLDING CORPORATION, a Delaware corporation ("Guarantor") and REGIONS BANK, an Alabama banking corporation (the "Lender") dated June 29, 2010 (the "Agreement"). Capitalized terms used in this certificate and the Schedule attached hereto, unless otherwise defined herein, have the meanings assigned to them in the Agreement.

The undersigned does hereby certify to the Lender on behalf of the Guarantor as follows:

1. He is the duly elected and serving [chief financial officer] [president] [chief

executive officer] of the Guarantor.

2. He has reviewed the terms of the Agreement and the other Credit Documents and

has made, or has caused to be made, a review of the transactions and conditions of the Guarantor and the Borrower through the date on which this certificate is delivered to the Lender. No Event of Default or event that upon notice or lapse of time or both would constitute an Event of Default under the Agreement has occurred and is continuing as of the date this certificate is delivered to the Lender except as follows: [Give detailed description or insert "none" if appropriate].

3. The computations relating to the Guarantor's financial condition set forth on

Schedule B-1 attached hereto were true and correct as of , 200(such date being the last day of the most recently ended quarter) and there has been no material adverse change in such amounts upon which such computations are based through the date on which this certificate is delivered to the Lender.

INTERNATIONAL SHIPHOLDING CORPORATION,

a Delaware corporation

SCHEDULE B-I

FINANCIAL 'COVENANTS COMPLIANCE

SCHEDULE I

PERMITTED ENCUMBRANCES

None

EX-31.1 5 ceocertex311.htm CEO CERTIFICATION - 302 ceocertex311.htm

EXHIBIT 31.1

CERTIFICATION

I, Niels M. Johnsen, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of International Shipholding Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

All significant deficiencies and material weaknesses, if any, in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

Fraud, if any, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 28, 2010

/s/ Niels M. Johnsen

______________________________

Niels M. Johnsen

Chairman of the Board of Directors and Chief Executive Officer

International Shipholding Corporation

EX-31.2 6 cfocertex312.htm CFO CERTIFICATION - 302 cfocertex312.htm

EXHIBIT 31.2

CERTIFICATION

I, Manuel G. Estrada, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of International Shipholding Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

Fraud, if any, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 28, 2010

/s/ Manuel G. Estrada

______________________________

Manuel G. Estrada

Vice President and Chief Financial Officer

International Shipholding Corporation

EX-32.1 7 ceocer321.htm CEO CERTIFICATION - 906 ceocer321.htm

Exhibit 32.1

Certification of CEO Pursuant to 18 U.S.C. Section 1350

(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Quarterly Report on Form 10-Q of International Shipholding Corporation (the “Company”) for the period ending June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Niels M. Johnsen, as Chairman and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 28, 2010

/s/ Niels M. Johnsen

_______________________________

Niels M. Johnsen

Chairman of the Board and

Chief Executive Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2 8 cfocertex322.htm CFO CERTIFICATION - 906 cfocertex322.htm

Exhibit 32.2

Certification of CFO Pursuant to 18 U.S.C. Section 1350

(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Quarterly Report on Form 10-Q of International Shipholding Corporation (the “Company”) for the period ending June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Manuel G. Estrada, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 28, 2010

/s/ Manuel G. Estrada

____________________________________

Manuel G. Estrada

Vice President and Chief Financial Officer