10-Q

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, 2012

OR

 [  ]       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)	(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  þ                                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¨                                                                                                                         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. . . . . . . . 7,203,860 shares outstanding as of June 30, 2012

INTERNATIONAL SHIPHOLDING CORPORATION
TABLE OF CONTENTS
PART I -	FINANCIAL INFORMATION
ITEM 1 -	FINANCIAL STATEMENTS	3
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME	3
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	4
	CONDENSED CONSOLIDATED BALANCE SHEETS	5
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	6
	NOTES TO CONDENSED CONSOLIDATED FINANACIAL STATEMENTS	7
ITEM 2 -	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13
ITEM 3 -	QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK	20
ITEM 4 -	CONTROLS AND PROCEDURES	20
PART II -	OTHER INFORMATION
ITEM 1A -	RISK FACTORS	20
ITEM 2 -	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	20
ITEM 6 -	EXHIBITS	21

In this report, the terms “we,” “us,” “our,” and the “Company” refer to International Shipholding Corporation and its subsidiaries. In addition, the term “GAAP” means U.S. generally accepted accounting principles, the term “Newbuilding” means a vessel that is under construction, the term “Notes” means the Notes to our Consolidated Financial Statements contained elsewhere in this report, the term “PCTC” means a Pure Car/Truck Carrier vessel, the term “SEC” means the U.S. Securities and Exchange Commission, and the term “USD” means U.S. Dollars.

2

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

INTERNATIONAL SHIPHOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(All Amounts in Thousands Except Share Data)
(Unaudited)
	Three Months Ended June 30,						Six Months ended June 30,
	2012			2011			2012			2011
Revenues	$	60,320		$	69,961		$	125,524		$	134,295
Operating Expenses:
Voyage Expenses		47,026			51,814			97,852			100,804
Vessel Depreciation		5,723			6,095			12,080			11,469
Administrative and General Expenses		4,720			5,455			10,228			11,284
Gain on Dry Bulk Transaction		-			(130	)		-			(18,844	)
Gain on Sale/Purchase of Other Assets		(667	)		-			(4,466	)		-
Total Operating Expenses		56,802			63,234			115,694			104,713
Operating Income		3,518			6,727			9,830			29,582
Interest and Other:
Interest Expense		2,281			2,330			5,008			4,620
Derivative Loss (Income)		117			106			(32	)		(15	)
Gain on Sale of Investment		(24	)		(114	)		(66	)		(114	)
Other Income from Vessel Financing		(605	)		(672	)		(1,227	)		(1,360	)
Investment Income		(146	)		(185	)		(274	)		(385	)
Foreign Exchange Loss (Gain)		1,734			1,900			(1,914	)		411
		3,357			3,365			1,495			3,157
Income Before Provision for Income Taxes and
Equity in Net Income of Unconsolidated Entities		161			3,362			8,335			26,425
Provision for Income Taxes:
Current		108			173			276			381
		108			173			276			381
Equity in Net Income (Loss)of Unconsolidated
Entities (Net of Applicable Taxes)		651			(351	)		581			874
Net  Income	$	704		$	2,838		$	8,640		$	26,918
Basic and Diluted Earnings Per Common Share:
Basic Earnings Per Common Share:	$	0.10		$	0.39		$	1.20		$	3.72
Diluted Earnings Per Common Share:	$	0.10		$	0.39		$	1.20		$	3.70
Weighted Average Shares of Common Stock Outstanding:
Basic		7,203,860			7,228,252			7,187,236			7,230,530
Diluted		7,234,505			7,265,092			7,202,559			7,260,598
Dividends Per Share	$	0.250		$	0.375		$	0.500		$	0.750

 The accompanying notes are an integral part of these statements.

3

INTERNATIONAL SHIPHOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(All Amounts in Thousands Except Share Data)
(Unaudited)
	Three Months ended June 30,						Six Months ended June 30,
	2012			2011			2012			2011
Net Income	$	704		$	2,838		$	8,640		$	26,918
Other Comprehensive Income:
Unrealized Foreign Currency Translation (Loss)Gain		(170	)		56			(79	)		74
Unrealized Holding Gain(Loss) on Marketable Securities		37			(4	)		188			83
Change in Fair Value of Derivatives		(1,127	)		(590	)		70			403
Comprehensive (Loss) Income	$	(556	)	$	2,300		$	8,819		$	27,478

The accompanying notes are an integral part of these statements.

4

INTERNATIONAL SHIPHOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(All Amounts in Thousands)
(Unaudited)
	June 30,			December 31,
ASSETS	2012			2011
Cash and Cash Equivalents	$	21,203		$	21,437
Restricted Cash		-			8,907
Marketable Securities		13,111			12,827
Accounts Receivable, Net of Allowance for Doubtful Accounts
of $100 and $100 in 2012 and 2011:		20,276			20,553
Federal Income Taxes Receivable		-			242
Net Investment in Direct Financing Leases		3,310			6,278
Other Current Assets		3,596			4,441
Notes Receivable		4,430			4,450
Material and Supplies Inventory		4,603			5,034
Total Current Assets		70,529			84,139
Investment in Unconsolidated Entities		13,180			12,800
Net Investment in Direct Financing Leases		15,291			43,837
Vessels, Property, and Other Equipment, at Cost:
Vessels		561,632			581,705
Leasehold Improvements		26,348			26,128
Construction in Progress		252			20,729
Furniture and Equipment		9,529			9,372
		597,761			637,934
Less -  Accumulated Depreciation		(179,235	)		(171,820	)
		418,526			466,114
Other Assets:
Deferred Charges, Net of Accumulated Amortization		19,066			15,983
of $15,821 and $17,307 in 2012 and 2011, Respectively
Intangible Assets, Net		1,932			3,219
Due from Related Parties		1,633			1,571
Notes Receivable		35,561			37,714
Other		5,180			202
		63,372			58,689
TOTAL ASSETS	$	580,898		$	665,579

The accompanying notes are an integral part of these statements.

INTERNATIONAL SHIPHOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(All Amounts in Thousands)
(Unaudited)
	June 30,			December 31,
	2012			2011
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Long-Term Debt	$	27,849		$	36,079
Accounts Payable and Accrued Liabilities		32,152			28,343
Total Current Liabilities		60,001			64,422
Long-Term Debt, Less Current Maturities		191,945			286,014
Other Long-Term Liabilities:
Lease Incentive Obligation		6,571			6,640
Other		69,137			59,148
TOTAL LIABILITIES		327,654			416,224
Stockholders' Equity:
Common Stock		8,600			8,606
Additional Paid-In Capital		85,711			85,830
Retained Earnings		207,944			204,109
Treasury Stock		(25,403	)		(25,403	)
Accumulated Other Comprehensive (Loss)		(23,608	)		(23,787	)
TOTAL STOCKHOLDERS' EQUITY		253,244			249,355
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	580,898		$	665,579

The accompanying notes are an integral part of these statements.

5

INTERNATIONAL SHIPHOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All Amounts in Thousands)
(Unaudited)
	Six Months Ended June 30,
	2012			2011
Cash Flows from Operating Activities:
Net Income	$	8,640		$	26,918
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation		12,357			11,961
Amortization of Deferred Charges and Other Assets		5,214			4,004
Gain on Dry Bulk Transaction		-			(18,844	)
Non-Cash Stock Based Compensation		544			1,006
Equity in Net Income of Unconsolidated Entities		(581	)		(874	)
Distributions from Unconsolidated Entities		-			750
Gain on Purchase / Sale of Assets		(4,466	)		-
Gain on Sale of Investments		(66	)		(114	)
Gain (Loss) on Foreign Currency Exchange		(1,914	)		411
Changes in:
Deferred Drydocking Charges		(7,623	)		(4,359	)
Accounts Receivable		277			(4,817	)
Inventories and Other Current Assets		(624	)		1,816
Other Assets		1,950			114
Accounts Payable and Accrued Liabilities		(594	)		(121	)
Other Long-Term Liabilities		(3,204	)		1,249
Net Cash Provided by Operating Activities		9,910			19,100
Cash Flows from Investing Activities:
Principal payments received under Direct Financing Leases		2,279			2,711
Capital Improvements to Vessels and Other Assets		(46,103	)		(17,216	)
Proceeds from Sale of Assets		130,315			-
Purchase of Marketable Securities		(5	)		(85	)
Proceeds from Sale of Marketable Securities		159			2,755
Investment in Unconsolidated Entities		(750	)		(1,796	)
Acquisition of Unconsolidated Entity		-			7,092
Net Decrease/(Increase) in Restricted Cash Account		6,907			(6,549	)
Proceeds from Note Receivables		2,507			2,069
Net Cash Provided by (Used In) Investing Activities		95,309			(11,019	)
Cash Flows from Financing Activities:
Proceeds from Issuance of Debt		41,175			58,079
Repayment of Debt		(141,559	)		(49,378	)
Additions to Deferred Financing Charges		(264	)		(1,479	)
Common Stock Dividends Paid		(4,805	)		(5,625	)
Net Cash (Used In) Provided by Financing Activities		(105,453	)		1,597
Net (Decrease) / Increase in Cash and Cash Equivalents		(234	)		9,678
Cash and Cash Equivalents at Beginning of Period		21,437			24,158
Cash and Cash Equivalents at End of Period	$	21,203		$	33,836

The accompanying notes are an integral part of these statements.

6

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

Note 1.  Basis of Preparation

 We operate a diversified fleet of U.S. and Foreign flag vessels that provide international and domestic maritime transportation services. For additional information on our business see Item 2 of Part I of this report.

 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, 2011.  The condensed consolidated balance sheet as of December 31, 2011 included in this report has been derived from the audited financial statements at that date.

 The foregoing 2012 interim results are not necessarily indicative of the results of operations for the full year 2012.  Management believes that it has made all adjustments necessary, consisting only of normal recurring adjustments, for a fair statement of the information presented.

 Our policy is to consolidate each subsidiary 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 or economic interest and have the ability to exercise significant influence over their operating and financial activities, and the cost method to account for investments in entities in which we hold a 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 and Contracts of Affreightment segments’ 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.  Based on our prior experience, we believe there is no material difference between recording estimated expenses ratably over the voyage versus recording expenses as incurred.  Revenues and expenses relating to our other segments' voyages, which require limited estimates or assumptions, are recorded when earned or incurred during the reporting period.

 The attached financial statements include out of period adjustments which the Company concluded were immaterial to the prior periods affected and projected full year 2012.  These out of period adjustments were corrected during the three month period ended June 30, 2012. See Note 17 for further details.

 We have eliminated all significant intercompany balances, accounts and transactions in consolidation.

Note 2.  Operating Segments

 Our five operating segments, Time Charter Contracts – U.S. Flag, Time Charter Contracts – International Flag, Contracts of Affreightment (“COA”), Rail-Ferry Service and Other, are identified primarily by the characteristics of the contracts and terms under which our vessels are operated.  We report in the Other category the results of several of our subsidiaries that provide ship charter brokerage, ship management services and agency services.  Also included in the Other category are corporate related items, results of insignificant operations, and income and expense items not allocated to the other reportable segments. We manage each reportable segment separately, as each requires different resources depending on the nature of the contract or terms under which the vessels within the segment operate.

 We allocate interest expense to the segments in proportion to the fixed assets (defined as the carrying value of vessels, property, and other equipment) within each segment.  We do not allocate to our segments administrative and general expenses, gain on Dry Bulk transaction, gain on sale/purchase of other assets, derivative (income) loss,  income taxes, gain on sale of investment, other income from vessel financing, investment income, foreign exchange loss (gain) and equity in net (loss) income of unconsolidated entities.  Intersegment revenues are based on market prices and include revenues earned by our subsidiaries that provide specialized services to our operating companies.

 The following table presents information about segment profit and loss for the three months ended June 30, 2012 and 2011:

(Amounts in Thousands)	Time Charter Contracts- U.S. Flag			Time Charter Contracts- International Flag			COA			Rail-Ferry Service			Other			Total
Three months ended June 30, 2012
Revenues from External Customers	$	34,488		$	11,931		$	4,207		$	9,396		$	298		$	60,320
Intersegment Revenues (Eliminated)		-			-			-			-			(5,250	)		(5,250	)
Intersegment Expenses (Eliminated)		-			-			-			-			5,250			5,250
Voyage Expenses (Income)		27,858			7,252			4,081			7,948			(113	)		47,026
Add back:
Operating Lease Expense		900			-			910			-			-			1,810
Direct Finance Lease Amortization		760			-			-			-			-			760
Gross Voyage Profit *		8,290			4,679			1,036			1,448			411			15,864
Gross Voyage Profit Percentage		24	%		39	%		25	%		15	%		138	%		26	%
Less:
Operating Lease Expense		900			-			910			-			-			1,810
Direct Finance Lease Amortization		760			-			-			-			-			760
Vessel Depreciation		2,310			2,702			-			701			10			5,723
Gross Profit *		4,320			1,977			126			747			401			7,571
Interest Expense		550			1,213			259			161			98			2,281
Segment Profit (Loss)		3,770			764			(133	)		586			303			5,290
Three months ended June 30, 2011
Revenues from External Customers	$	39,290		$	15,813		$	4,500		$	9,867		$	491		$	69,961
Intersegment Revenues (Eliminated)		-			-			-			-			(5,554	)		(5,554	)
Intersegment Expenses (Eliminated)		-			-			-			-			5,554			5,554
Voyage Expenses		29,952			8,294			4,601			8,807			160			51,814
Add Back:
Operating Lease Expense		1,060			2,195			898			-			-			4,153
Direct Finance Lease Amortization		662			718			-			-			-			1,380
Gross Voyage Profit *		11,060			10,432			797			1,060			331			23,680
Gross Voyage Profit Percentage		28	%		66	%		18	%		11	%		67	%		34	%
Less:
Operating Lease Expense		1,060			2,195			898			-			-			4,153
Direct Finance Lease Amortization		662			718			-			-			-			1,380
Vessel Depreciation		2,495			2,699			-			899			2			6,095
Gross  Profit (Loss)*		6,843			4,820			(101	)		161			329			12,052
Interest Expense		678			1,337			-			193			122			2,330
Segment Profit (Loss)		6,165			3,483			(101	)		(32	)		207			9,722

*Information used by Chief Decision Makers.

 The following table presents information about segment profit and loss for the six months ended June 30, 2012 and 2011:

(Amounts in Thousands)	Time Charter Contracts- U.S. Flag			Time Charter Contracts- International Flag			COA			Rail-Ferry Service			Other			Total
Six months ended June 30, 2012
Revenues from External Customers	$	73,506		$	25,234		$	7,600		$	18,597		$	587		$	125,524
Intersegment Revenues (Eliminated)		-			-			-			-			(10,311	)		(10,311	)
Intersegment Expenses (Eliminated)		-			-			-			-			10,311			10,311
Voyage Expenses (Income)		58,952			14,394			8,367			16,316			(177	)		97,852
Add back:
Operating Lease Expense		1,364			-			1,808			-			-			3,172
Direct Finance Lease Amortization		1,499			780			-			-			-			2,279
Gross Voyage Profit *		17,417			11,620			1,041			2,281			764			33,123
Gross Voyage Profit Percentage		24	%		46	%		14	%		12	%		130	%		26	%
Less:
Operating Lease Expense		1,364			-			1,808			-			-			3,172
Direct Finance Lease Amortization		1,499			780			-			-			-			2,279
Vessel Depreciation		4,876			5,792			-			1,399			13			12,080
Gross Profit (Loss) *		9,678			5,048			(767	)		882			751			15,592
Interest Expense		1,308			2,828			259			383			230			5,008
Segment Profit (Loss)		8,370			2,220			(1,026	)		499			521			10,584
Six Months ended June 30, 2011
Revenues from External Customers	$	78,307		$	27,023		$	8,731		$	18,921		$	1,313		$	134,295
Intersegment Revenues (Eliminated)		-			-			-			-			(9,331	)		(9,331	)
Intersegment Expenses (Eliminated)		-			-			-			-			9,331			9,331
Voyage Expenses		59,951			15,179			8,912			16,438			324			100,804
Add Back:
Operating Lease Expense		2,119			3,746			1,797			-			-			7,662
Direct Finance Lease Amortization		1,305			1,406			-			-			-			2,711
Gross Voyage Profit *		21,780			16,996			1,616			2,483			989			43,864
Gross Voyage Profit Percentage		28	%		63	%		19	%		13	%		75	%		33	%
Less:
Operating Lease Expense		2,119			3,746			1,797			-			-			7,662
Direct Finance Lease Amortization		1,305			1,406			-			-			-			2,711
Vessel Depreciation		5,004			4,689			-			1,771			5			11,469
Gross  Profit (Loss)*		13,352			7,155			(181	)		712			984			22,022
Interest Expense		1,353			2,638			-			386			243			4,620
Segment Profit (Loss)		11,999			4,517			(181	)		326			741			17,402

*Information used by Chief Decision Makers.

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:		2012	2011	2012	2011
Total Profit for Reportable Segments		$    10,584	$  17,402	$    5,290	$  9,722
Unallocated Amounts:
	Administrative and General Expenses	(10,228)	(11,284)	(4,720)	(5,455)
	Gain on Sale/Purchase of Other Assets	4,466	-	667	-
	Derivative Income (Loss)	32	15	(117)	(106)
	Gain on Sale of Investment	66	114	24	114
	Other Income from Vessel Financing	1,227	1,360	605	672
	Investment Income	274	385	146	185
	Foreign Exchange Gain (Loss)	1,914	(411)	(1,734)	(1,900)
	Gain on Dry Bulk Transaction	-	18,844	-	130
Income Before Provision for
Income Taxes and Equity in Net Income of Unconsolidated Entities		$       8,335	$          26,425	$     161	$        3,362

7

Note 3.  Unconsolidated Entities

 In December 2009, we acquired for $6.25 million a 25% investment in Oslo Bulk AS (“Oslo Bulk”) which in 2008 contracted to build eight new Mini Bulkers.  During 2010, we invested an additional $3.9 million in Oslo Bulk Holding Pte. Ltd. (formerly “Tony Bulkers”), an affiliate of Oslo Bulk, for our 25% share of the installment payments for two additional new Mini-Bulkers. These investments are accounted for under the equity method and our share of earnings or losses is reported in our consolidated statements of operations, net of taxes.  All ten of these Mini-Bulkers are managed by an affiliate of Oslo Bulk.  We contributed $750,000 to Oslo Bulk in the first quarter of 2012 and $250,000 in July, 2012 for working capital purposes. Our portion of the aggregate earnings of Oslo Bulk and Tony Bulkers, was $660,000 for the six months ended June 30, 2012. Included in the second quarter 2012 results of unconsolidated entities was an out of period adjustment of $716,000. See Note 17 for further disclosure of this adjustment. Our portion of the aggregate earnings of Oslo Bulk and Tony bulkers, which included final 2010 income adjustments of $143,000 for Oslo Bulk, were losses of $399,000 and $108,000, respectively, for the six months ended June 30, 2011, largely due to initial positioning of the newly delivered vessels.

 Our 2011 second quarter results also included our portion of earnings of Dry Bulk Cape Holding Inc. (“Dry Bulk”). In 2003, we acquired for $3,479,000 a 50% investment in Dry Bulk. Historically, we have accounted for this investment under the equity method and our share of earnings or losses has been reported in our consolidated statements of income, net of taxes.  On March 25, 2011, we acquired 100% ownership of Dry Bulk.  Following the acquisition, Dry Bulk’s results are no longer accounted for under the equity method.  For further information on this acquisition, see Note 4 below.

 Our portion of earnings of Dry Bulk for the first six months of 2011, recorded under the equity method, was a profit of $1.3 million.  During the first quarter of 2011 we received a $750,000 cash dividend distribution from Dry Bulk prior to acquiring full ownership of it on March 25, 2011.

 Our portion of the earnings of our remaining investments in unconsolidated entities for the six months ended June 30, 2012 and 2011 were losses of $79,000 and $62,000, respectively.

Note 4.  Dry Bulk Cape Holding, Inc. Step Acquisition

 On March 25, 2011, Cape Holding, Ltd. (one of our indirect wholly-owned subsidiaries) and DryLog Ltd. completed a transaction that restructured their respective 50% interests in Dry Bulk.    

 Prior to this transaction, Dry Bulk controlled through various subsidiaries two Capesize vessels and two Handymax Newbuildings.  In connection with this transaction, (i) Cape Holding, Ltd. increased its ownership in Dry Bulk from 50% to 100% and (ii) in consideration, DryLog Ltd. received ownership of two former Dry Bulk subsidiaries holding one Capesize vessel and one shipbuilding contract relating to a Handymax vessel scheduled to be delivered in the second quarter of 2012.  Following the transfer of these subsidiaries, Dry Bulk continued to control, through two subsidiaries, one Cape Size vessel and one shipbuilding contract relating to a Handymax vessel delivered in January of 2012.  As a result of completing this transaction, we now own 100% of Dry Bulk and have complete control of the two remaining vessels.

 During the first quarter of 2011, we retained an independent, third party firm with shipping industry experience to assist us in determining the fair value of Dry Bulk and the fair value of our previous 50% interest in Dry Bulk.

 At the time of the acquisition, the assets of Dry Bulk consisted of cash, trade receivables, prepayments, inventory, two Capesize vessels, two Handymax vessels under construction and time charter agreements on the two Capesize vessels which expire in early 2013 and are currently fixed at attractive time charter rates. Current liabilities consisted primarily of accrued interest on debt and the non-current liabilities consisting primarily of floating rate bank borrowings. With the exception of the Capesize vessels and the intangible value assigned to the above-market time charter contracts, the fair value of all assets and liabilities were equal to the carrying values.

 As of March 31, 2011, the combined appraised value for both Capesize vessels was $84.0 million as compared to the book value of approximately $53.6 million. In determining the appraised fair value of the Capesize vessels, the cost and comparable sales approaches were used with equal weight applied to each approach. In addition to the fair value adjustment on the Capesize vessels, an intangible asset was established reflecting the difference between the existing value of the time charter contracts in place as compared to current market rates for similar vessels under short-term contracts, discounted back to present value. Based on the income approach, the fair value of the intangible asset was calculated to be $5.2 million and will be amortized over the remaining life of the contract, which is set to expire on January 7, 2013. As a result of the combined fair value adjustments noted above, we concluded that the total fair value of the net assets of Dry Bulk acquired was $69.0 million.

 In order to arrive at the fair value of our existing interest in Dry Bulk, 50% of the total fair value of $69.0 million was discounted by 5.1%, reflecting our lack of control of Dry Bulk as a 50% owner. The discount rate of 5.1% was derived from a sample of recent industry data. As a result, we concluded that the fair value of our existing 50% interest was $32.7 million.

 Under Accounting Standards Codification (“ASC”) 805, a step up to fair value is required when an equity interest changes from a non-controlling interest to a controlling interest (step acquisition). Based on the step up from a 50% interest to a 100% interest in Dry Bulk, a gain of approximately $18.3 million was generated determined by taking the difference between the fair value of our previously held 50% interest less the book value of the previously held interest.

 This calculation is shown below:

 (Amounts in thousands)

Fair Value of Previously Held 50% Interest	$	32,700
Less: Book Value of Previously Held Interest		(14,400	)
Gain on Previously Held 50% Interest	$	18,300

 We also recognized a bargain purchase gain of $0.5 million with respect to the step up to fair value of the 50% interest we acquired, calculated as follows:

 (Amounts in thousands)

Fair Value of Net Assets Acquired	$	69,000
Less: Fair Value of Purchase Consideration		(35,800	)
Less: Fair Value of Previously Held 50% Interest		(32,700	)
Bargain Purchase Gain	$	500

 We recorded substantially all of these above-described gains in the first quarter of 2011.  Previously, we accounted for our non-controlling interest in Dry Bulk under the equity method. We now include the financial results of Dry Bulk in our consolidated financial results.

Note 5.  Gain on Sale/Purchase of Other Assets

 In March 2012, we sold two of our International Flag Pure Car Truck Carriers (“PCTC”) to Norwegian Car Carriers ASA.  As a result of this transaction, we received total gross proceeds of $73.9 million and realized a gain of $3.8 million. These proceeds were used to pay down approximately $36.1 million of debt.  Refer to our Current Report on Form 8-K dated March 26, 2012 for further information.

 Also included under this line item in our condensed consolidated statements of operation is the recognition of deferred gains of approximately $239,000 and $430,000 related to the purchase of one US Flag PCTC vessel and one molten-sulphur carrier respectively.  See Note 17 (Out of Period Adjustments) for details related to the gain on the purchase of the PCTC vessel.  Details of the gain on the purchase of the molten-sulphur carrier are disclosed in Note 11 (Sale and Leaseback Transactions).  Both vessels were purchased as a result of early buy-outs of lease agreements.

Note 6. Income Taxes

 We recorded a provision for income taxes of $276,000 on our $8.3 million of income before taxes and equity in net income (loss) of unconsolidated entities for the six months of 2012.  For the first six months of 2011 our income tax provision was $381,000 on our $26.4 million of income before equity in net income (loss) of unconsolidated entities.  These provision amounts represent our qualifying U.S. flag operations, which continue to be taxed under a “tonnage tax” regime rather than under the normal U.S. corporate income tax regime and foreign tax withholdings.  We established a valuation allowance against deferred tax assets in 2010 because, based on available information, we could not conclude that it was more likely than not that the full amount of deferred tax assets generated primarily by NOL carryforwards and AMT credits would be realized through the generation of taxable income in the near future. We have and will continue to evaluate the need for a valuation allowance on an annual basis. For further information on certain tax laws and elections, see our Annual Report on Form 10-K filed for the year ended December 31, 2011, including “Note G - Income Taxes” to the consolidated financial statements included therein.

Note 7. Changes in Accounting Estimate

 Based on company policy, we review the reasonableness of our salvage values for our fleet every three years based on the most recent three year average price of scrap steel per metric ton. In the first quarter of 2012 we reviewed and adjusted the salvage values on eight of our vessels, based on material change in the market value of scrap steel.  The adjustments resulted in increasing the salvage values and reducing our depreciation expense on these eight vessels by approximately $3.8 million annually.  This adjustment increased both our pre-tax and net income by $1,890,000, or $0.26 per share, for the six months ended June 30, 2012.  Due to the company being in a valuation allowance position there was no impact on income taxes.

Note 8.  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 (Amounts in thousands except share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Numerator
Net Income – Basic:
	$	704	$	2,838	$	8,640	$	26,918
Net Income  – Diluted:
	$	704	$	2,838	$	8,640	$	26,918
Denominator
Weighted Avg Shares of Common Stock Outstanding:
Basic		7,203,860		7,228,252		7,187,236		7,230,530
Plus:
Effect of dilutive restrictive stock		30,645		36,840		15,323		30,068
Diluted		7,234,505		7,265,092		7,202,559		7,260,598
Basic and Diluted Earnings Per Common Share:
Net Income per share - Basic
	$	.10	$	0.39	$	1.20	$	3.72
Net Income per share – Diluted:
	$	.10	$	0.39	$	1.20	$	3.70

8

Note 9. Stockholders’ Equity

 A summary of the changes in Stockholders’ equity for the six months ended June 30, 2012 is as follows:

	Stockholders'
(Amounts in thousands)	Equity
Balance December 31, 2011	$	249,355
Net Income		8,640
Dividend Payments		(4,805	)
Unrealized Foreign Currency Translation Loss		(79	)
Unrealized Holding Gain on Marketable Securities		188
Net Change in Fair Value of Derivatives		70
Stock-based compensation expense      (net of forfeited shares)		(125	)
Balance  June 30, 2012	$	253,244

Stock Repurchase Program

 On January 25, 2008, the Company’s Board of Directors approved a share repurchase program for up to a total of 1,000,000 shares of the Company’s common stock. We expect that any share repurchases under this program will be made from time to time for cash in open market transactions at prevailing market prices. The timing and amount of any purchases under the program will be determined by management based upon market conditions and other factors.  In 2008, we repurchased 491,572 shares of our common stock for $11.5 million. Thereafter, we suspended repurchases until the second quarter of 2010, when 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 first six months of 2012:

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, 2012– April 30, 2012	-	-	-	285,377
May 1, 2012 – May 31, 2012	-	-	-	285,377
June  1, 2012 – June 30, 2012	-	-	-	285,377

 On February 1, 2012 and March 9, 2012, 13,665 and 16,439 shares of common stock, respectively, were retired in order to meet tax liabilities associated with the vesting of Restricted Stock grants by our executive officers.

Dividend Payments

 During the six months ended June 30, 2012, we paid cash dividends as follows:

(Amounts in Thousands Except per Share Data )			Total
		Per Share	Dividend
Record Date	Payment Date	Amount	Paid
February 15, 2012	March 1, 2012	$                      0.375	$                      2,690
May 16, 2012	June 1, 2012	$                      0.250	$                      1,801
			$                      4,491

 During this period, we paid an additional $314,000 in cash dividends related to unvested stock awards that accrued quarterly dividend payments, paid upon the shares vesting in the first six months of 2012.

Note 10.  Stock Based Compensation

 On January 18, 2012, our independent Directors received unrestricted stock awards of 5,712 shares from the 2011 Stock Incentive Plan (the plan”).  Recently, the Compensation Committee of the Board of Directors approved an expansion of our stock-based compensation programs to include the grant of restricted stock units (“RSUs”) to certain key individuals.  On May 7, 2012, the Company granted 65,500 restricted stock units payable in shares of our common stock, $1.00 par value per share, to 10 key individuals.  The grants consisted of three tranches of RSUs – Time-Based RSUs, Absolute Performance-Based RSUs, and Relative Performance-Based RSUs.  If we attain certain performance targets, the 65,500 RSUs could result in us issuing up to 81,875 shares of our stock.  Our operating results, net income and net income before taxes for the periods set forth below include (i) the following amounts of compensation expenses associated with the above-described stock grants and RSUs and (ii) the related reductions in earnings per share:

	Six Months Ended June 30,						Three Months ended June 30,
	2012			2011			2012			2011
Stock-Based Compensation
Expense	$	544,000		$	1,006,000		$	214,000		$	428,000
Related Reduction in
Earnings Per Share 1	$	(0.08	)	$	(0.15	)	$	(0.03	)	$	(0.06	)
1 Same for basic and diluted earnings per share

Stock Awards

 For the six months ended June 30, 2012, our net income included $360,000 of stock-based compensation expense charges, exclusive of expense related to the RSUs discussed below, which reduced both basic and diluted earnings per share by $0.05 per share.

 For the three months ended June 30, 2012, the Company’s net income included $30,000 of stock-based compensation expense charges, exclusive of expense related to the RSUs discussed below, which did not have a material effect on both basic and diluted earnings per share.

 A summary of the activity for stock awards during the six months ended June 30, 2012 is as follows:

	Shares	Weighted Average Fair Value Per Share
Non-vested –December 31, 2011	87,500	$22.91
Unrestricted Shares Granted	5,712	$21.01
Shares Vested	(93,212)	$22.79
Non-vested – June 30, 2012	-	-

Restricted Stock Units

 For the six months ended June 30, 2012, our net income included $184,000 of stock-based compensation expense charges, exclusive of the stock awards discussed above, which reduced both basic and diluted earnings per share by $0.03 per share. For the three months ended June 30, 2012, the Company’s net income included $184,000 of stock-based compensation expense charges, exclusive of the stock awards discussed above, which reduced both basic and diluted earnings per share by $0.03 per share. As these RSUs were first granted in the second quarter of 2012, net income for the three and the six months ended June 30, 2011 did not include any RSU-related compensation expense charges.

 Our Time-Based RSUs represent the right to receive one share of our common stock and will vest evenly over a three year period, except that the Time-Based RSUs for our two top executives will vest on the first anniversary of the grant date.  Each of our Absolute Performance-Based RSUs represent the right to receive a maximum of one-and-a-half shares of our common stock. These RSUs will pay out based on our basic earnings per share for fiscal year 2012, with the actual number of shares of common stock received dependent on our level of achievement as measured against the target. The shares due under these RSUs will vest evenly over three years beginning in fiscal 2013, except that each of our two top executives will receive any shares due under these RSUs in fiscal year 2013.

 Each of our Relative Performance-Based RSUs represent the right to receive a maximum of one-and-a-half shares of our common stock. These RSUs will pay out in shares of our common stock based on how our total stockholder return for the three-year period (or the one-year period, for our top two executives) beginning January 1, 2012 compares relative to the total stockholder return of the companies comprising the Russell 2000 index for the same period or periods. Any shares due under these RSUs will be paid out in the fiscal year following the end of the applicable performance period.  In all cases, vesting is contingent upon continued employment with the company.

 A summary of our  RSU activity and related information for the six months ended June 30, 2012 is as follows:

	Number of RSUs	Weighted- Average Grant Date Fair  Value
Non-vested –December 31, 2011	-	-
Restricted Stock Units Granted	65,500	$21.48
Shares Vested	-	-
Non-vested – June 30, 2012	65,500	$21.48

9

Note 11. Sale and Leaseback Transactions

 On February 22, 2012, we completed a sale and leaseback transaction with Wells Fargo Bank Northwest, National Association, of our 2007-built PCTC.  The transaction generated gross proceeds of $59.0 million, which we used to pay down debt of $54.5 million. We are leasing the vessel back under a ten year lease agreement with early buyout options that can be exercised in 2017 and 2019.  The sale resulted in a gain of $14.9 million, which has been recorded as a deferred liability on the balance sheet and will be recognized over the term of the lease. Refer to our Current Report Form 8-K dated February 22, 2012 for further information.

 On June 15, 2012, we negotiated the early buy-out of the operating lease related to our molten-sulphur carrier which constitutes the sole vessel in our Contract of Affreightment segment. In 2007, we sold the vessel in a sale-leaseback transaction to ISC-Sulphur Holding, Inc. (a wholly-owned subsidiary of Capital One).  The 2007 sale-leaseback transaction generated a gain of approximately $1.4 million which we deferred and have been recognizing ratably over the 10-year  life of the lease.  Our negotiation of the early buy-out resulted in us recording in the second quarter of 2012 a net gain of $430,000.  This was caused by accelerating the remaining $710,000 of unrecognized gain from the 2007 sale-leaseback, partially offset by the remaining $280,000 of unamortized deferred charges incurred in connection with the establishment of the operating lease.  This gain has been recognized in our condensed consolidated statement of operations under the caption “Gain on Sale/Purchase of Other Assets”.

Note 12. Fair Value Measurements

 ASC 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 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 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 transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, 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 following: 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 assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. In that regard, ASC 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:

wLevel 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.

wLevel 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.

wLevel 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 certain of our financial assets and financial liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2012, 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	$	13,111	$	-		$	-	$	13,111
Derivative assets	$	-	$	42		$	-	$	42
Derivative liabilities	$	-	$	(8,189	)	$	-	$	(8,189	)
Vessels (1)	$	-	$	37,070		$	-	$	37,070

 (1) Represents the appraised fair value of our Rail-Ferry vessels after the impairment charge taken in the third quarter of 2010. The valuation technique used was a weighted average of the cost, comparable sales and income approaches. The carrying value of the Rail-Ferry vessels ($33.2 million as of June 30, 2012) no longer equals the fair value.

 The carrying amounts of our accounts receivable, accounts payable and accrued liabilities approximated their fair value at June 30, 2012 and December 31, 2011. We estimated the fair value of our variable rate long-term debt at June 30, 2012, including current maturities, to equal the carrying value due to the variable rate nature of the debt as well as to the underlying value of the collateral. Credit risk has also been considered and has been determined to be a non-issue.

Note 13.  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, 2012.

 The following table includes cost and valuation information on our markeatble securities at June 30, 2012:

(Amounts In Thousands)		AOCI**
		Unrealized
Securities Available for Sale	Cost Basis	Holding Gain	Fair Value
Bonds*	$      8,679	$       187	$      8,866
Mutual Funds	4,116	129	4,245
Total	$    12,795	$      316	$    13,111
* Various maturity dates from February 2014 – January 2017.

** Accumulated Other Comprehensive Income

Note 14.  Derivative Instruments

 We use derivative instruments to manage certain foreign currency and interest rate risk exposures. We do not use derivative instruments for speculative trading purposes.  All derivative instruments are 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 our derivative contracts contain credit-risk related contingent features that would require us to settle the contract upon the occurrence of such contingency.  However, all of our contracts contain clauses specifying events of default under specified circumstances, including failure to pay or deliver, breach of agreement, default under the specific agreement to which the hedge relates, bankruptcy, misrepresentation and the occurrence of certain transactions.  The remedy for default is settlement in entirety or payment of the fair value of the contracts, which is $8.1 million in the aggregate for all of our contracts, with $390,000 of posted collateral as of June 30, 2012.  The unrealized loss related to our derivative instruments included in accumulated other comprehensive loss, net of taxes was $7.7 million as of June 30, 2012 and $8.6 million as of December 31, 2011.

 The notional and fair value amounts of our derivative instruments as of June 30, 2012 were as follows:

(Amounts in thousands)		Asset Derivatives		Liability Derivatives
	Current Notional	Balance Sheet	Fair Value	Balance Sheet	Fair Value
	Amount	Location		Location
Interest Rate Swaps - S/T	$12,145	N/A	-	Current Liabilities	(247)
Interest Rate Swaps - L/T*	$109,162	N/A	N/A	Other Liabilities	($7,826)
Foreign Exchange Contracts	$900	Other Current Assets	$42	N/A	N/A
Foreign Exchange Contracts	$3,800	N/A		Current Liabilities	($116)
Total Derivatives Designated as Hedging Instruments	$126,007	-	$42	-	($8,190)
*We have outstanding a variable-to-fixed interest rate swap with respect to a Yen-based facility for the financing of a PCTC delivered in March 2010.   The notional amount under this contract is $69,506,745 (based on a Yen to USD exchange rate of 79.81 as of June 30, 2012).  With the bank exercising its option to reduce the underlying Yen loan from 80% to 65% funding of the vessel’s delivery cost, the 15% reduction represents the ineffective portion of this swap, which consists of the portion of the derivative instrument that is no longer supported by underlying borrowings.  The change in fair value related to the ineffective portion of this swap was a $117,000 loss for the quarter ended June 30, 2012 and this amount was included in earnings.

 In July of 2011, Oslo Bulk, an entity in which we hold a 25% ownership interest and account for under the equity method, entered into an interest rate swap agreement to mitigate is exposure to fluctuating interest rates.  We were unsuccessful in obtaining adequate documentation and reaching a conclusion on the effectiveness of the swap prior to filing both our 2011 Annual Report on Form 10-K and Form 10-Q for the first quarter of 2012.  Therefore, we accounted for the swap as if it were ineffective, recognizing the losses incurred in earnings under the caption “Equity in Net (Loss) Income of Unconsolidated Entities.”

 Oslo Bulk’s 2011 financial statement audit was completed in the second quarter of 2012 and their auditors concluded that the swap did, in fact, meet all of the criteria for hedge accounting at its inception.  As a result of this information, we corrected the prior year ineffectiveness of approximately $674,000 during the three months ended June 30, 2012.  Ineffectiveness for the first quarter of 2012 was approximately $42,000.  See Note 17 (Out of Period Adjustments) for further details.

 The effect of derivative instruments designated as cash flow hedges on our condensed consolidated statement of operations for the six months ended June 30, 2012 was as follows:

(Amounts in thousands)	Net Gain / (Loss) Recognized in Other Comprehensive Income	Location of Gain (Loss) Reclassified from AOCI to Income	(Loss) Reclassified from AOCI to Income	Gain Recognized in Income from Ineffective portion
	2012		2012	2012
Interest Rate Swaps	$1,236	Interest Expense	($1,723)	$32
Foreign Exchange contracts	($180)	Voyage Expenses	($111)	-
Total	$1,056	-	($1,834)	$32

10

Interest Rate Swap Agreements

 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 our 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.

 As of June 30, 2012, we had the following swap contracts outstanding:

Effective Date	Termination Date	Current Notional Amount	Swap Rate	Type
11/30/05	11/30/12	12,145,000	5.17%	Fixed
3/31/08	9/30/13	$8,551,667	3.46%	Fixed
9/30/10	9/30/13	$8,551,667	2.69%	Fixed
9/30/10	9/30/13	$8,551,667	2.45%	Fixed
9/26/05	9/28/15	$7,000,000	4.41%	Fixed
9/26/05	9/28/15	$7,000,000	4.41%	Fixed
3/15/09	9/15/20	*$69,506,745	2.065%	Fixed
Total:		$121,306,746

*Notional amount converted from Yen at June 30, 2012 at a Yen to USD exchange rate of 79.81

Foreign Exchange Rate Risk.

 We have entered into foreign exchange contracts to hedge certain firm foreign currency purchase commitments.  In 2011, we entered into three forward purchase contracts which expire in 2012. The first was for Mexican Pesos for $1,200,000 U.S. Dollar equivalents at an exchange rate of 12.4717, the second was for Mexican Pesos for $450,000 U.S. Dollar equivalents at an exchange rate of 13.036 and the third was for Mexican Pesos for $750,000 U.S. Dollar equivalents at an exchange rate of 14.0292. In 2012, we entered into three forward purchase contracts which expire in 2013. The first was for Mexican Pesos for $750,000 U.S. Dollar equivalents at an exchange rate of 13.7787, the second was for Mexican Pesos for $250,000 U.S. Dollar equivalents at an exchange rate of 14.2939 and the third was for Mexican Pesos for $700,000 U.S. Dollar equivalents at an exchange rate of 14.5700.  Our Mexican Peso foreign exchange contracts represent approximately 100% of our projected Peso exposure.

 In May 2012, we entered into a forward purchase contract which expires in 2012. The contract was for Indonesian Rupiah for $2,100,000 U.S. Dollar equivalents at an exchange rate of 9315.  Our Indonesian Rupiah foreign exchange contracts represent approximately 66% of our projected Rupiah exposure.

 The following table summarizes the notional value of these contracts:

Transaction Date	Type of Currency	Transaction Amount in Dollars	Fair Value of Contracts - Asset (Liability)	Effective Date	Expiration Date
August 2011	Peso	$   450,000	$  27,245	September 2011	December 2012
September 2011	Peso	$   450,000	14,442	July 2012	December 2012
September 2011	Peso	$   300,000	(16,006)	October 2011	December 2012
May 2012	Peso	$   750,000	(6,512)	January 2013	May 2013
May 2012	Peso	$   250,000	(11,600)	January 2013	May 2013
May 2012	Peso	$   700,000	(35,979)	June 2013	December 2013
May 2012	Rupiah	$1,800,000	(46,312)	July 2012	December 2012
		$4,700,000	$ (74,722)

Note 15.  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, 2012 and 2011:

	Pension Plan						Postretirement Benefits
( Amounts in Thousands)	Three Months Ended June 30,						Three Months Ended June 30,
Components of net periodic benefit cost:	2012			2011			2012			2011
Service cost	$	164		$	136		$	13		$	22
Interest cost		357			368			130			143
Expected return on plan assets		(497	)		(475	)		-			-
Amortization of prior service cost		(1	)		(1	)		(3	)		(3	)
Amortization of Net Loss		192			83			71			55
Net periodic benefit cost	$	215		$	111		$	211		$	217

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, 2012 and 2011:

(All Amounts in Thousands)	Pension Plan						Postretirement Benefits
	Six Months Ended June 30,						Six Months Ended June 30,
Components of net periodic benefit cost:	2012			2011			2012			2011
Service cost	$	328		$	272		$	26		$	44
Interest cost		715			736			260			286
Expected return on plan assets		(994	)		(950	)		-			-
Amortization of prior service cost		(2	)		(2	)		(6	)		(6	)
Amortization of Net (Gain)/Loss		385			166			142			110
Net periodic benefit cost	$	432		$	222		$	422		$	434

 We contributed $800,000 to our pension plan for the six months ended June 30, 2012 and anticipate making approximately $800,000 in additional contributions for the remainder of 2012.

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Note 16. Long-Term Debt

 Long-term debt consisted of the following on the dates set forth below:

( in thousands)		Interest Rate			Total Principal Due
		June 30,	December 31,	Maturity	June 30,	December 31,
Description		2012	2011	Date	2012	2011
Secured:
Notes Payable – Variable Rate	(4)	1.4616%	1.5738%	2015	$       14,000	$        15,333
Notes Payable – Variable Rate	(4)	4.6700%	0.0000%	2012	12,145	12,845
Notes Payable – Variable Rate	(3)(4)	1.7106%	1.8293%	2013	14,242	29,389
Notes Payable – Variable Rate	(1)	2.9616%	3.0632%	2018	20,614	22,332
Notes Payable – Variable Rate	(3)	N/A	3.2702%	2014	-	13,318
Notes Payable – Variable Rate	(3)(4)	1.1000%	1.0957%	2020	47,875	60,808
Notes Payable – Variable Rate	(3)	N/A	3.0600%	2017	-	41,656
Notes Payable – Variable Rate		2.9700%	2.88-2.92%	2018	50,600	52,440
Notes Payable– Variable Rate	(3)	N/A	3.2458%	2018	-	24,162
Notes Payable – Variable Rate		2.5898%	2.6440%	2017	14,742	15,675
Notes Payable – Variable Rate		3.1306%	3.2458%	2018	17,040	18,460
Notes Payable – Variable Rate	(1)	2.9657%	3.0000%	2018	18,536	6,175
Unsecured Line of Credit	(2)	4.0214%	4.0349%	2013	10,000	9,500
					219,794	322,093
		Less Current Maturities			(27,849)	(36,079)
					$     191,945	$      286,014

(1) We entered into a variable rate financing agreement with ING Bank N.V., London branch on June 20, 2011 for a seven year facility to finance the acquisition of a Cape Size vessel and a Handymax Bulk Carrier Newbuilding, both of which were assumed in the acquisition of Dry Bulk.  Pursuant to the terms of the facility, the lender agreed to provide a secured term loan facility divided into two tranches:  Tranche A, fully drawn on June 20, 2011 in the amount of $24.2 million, and Tranche B, providing up to $23.3 million of additional credit.  Under Tranche B, $6.1 million was drawn in November 2011 and the final draw of $12.7 million was drawn on January 24, 2012.

(2) In March, 2012, we amended our unsecured line of credit to extend the expiration date until April, 2014.  At December 31, 2011, we had $9.5 million drawn and during the first quarter of 2012, an additional $18.5 million was drawn.  The entire $28 million was repaid by March 31, 2012.  During the second quarter of 2012, $10 million was drawn.  This $10 million was repaid in July, 2012.  Associated with this credit facility is a commitment fee of .125% per year on the undrawn portion of this facility.

(3)  In the first quarter of 2012, we used proceeds from the sale of capital assets to pay off three loans in full and two loans in part, including approximately $10 million of the Japanese Yen facility.

(4) We have interest rate swap agreements in place to fix the interest rates on these variable rate notes payable.

As of June 30, 2012, we were in compliance with all financial covenants related to our debt obligations, and we believe that we will continue to meet such covenants in the near future.

Note 17.  Out of Period Adjustments

 In July of 2011, Oslo Bulk AS (“Oslo”), an entity in which we hold a 25% equity interest and account for under the equity method, entered into an interest rate swap to reduce its exposure to variable interest rates on its outstanding debt.  We incorrectly accounted for the derivative by reporting our 25% share of the change in fair value of the derivative in the statement of operations under the caption “Equity in Net (Loss) Income of Unconsolidated Entities” from inception of the swap to December 31, 2011, rather than accounting for the change in fair value as a component of comprehensive income.  The change in fair value recorded in the third and fourth quarters of 2011 resulted in an aggregate loss of approximately $674,000.  As a result of this error, we recorded an out of period (“OOP”) adjustment during the three months ended June 30, 2012 to correct the $674,000 aggregate loss that was previously recorded in 2011, and $42,000 that was previously recorded in the first quarter of 2012.  The correction of these amounts was recorded in "Other Comprehensive Income".  We also recorded a $324,000 negative OOP adjustment related to net charter revenues that were not previously recorded on a straight-line basis in prior periods from 1999 to 2011, and a $239,000 positive OOP adjustment related to the termination of a lease on one of our PCTC vessels in the third quarter of 2011.  The net impact of these OOP adjustments was a $85,000 decrease to pre-tax income and a $631,000 increase to net income.  We evaluated the impact of the OOP adjustments on the results of our previously issued financial statements for each of the periods affected and concluded that the impact was not material.    We also evaluated the impact of correcting the cumulative effect of the OOP adjustments in the current year and concluded that the impact is not material to our projected results for 2012.  Accordingly, a net adjustment of $631,000 was recorded to correct the OOP errors in the three month period ended June 30, 2012.

Note 18.  New Accounting Pronouncements

 In May 2011, the Financial Accounting Standard Board (“FASB”) issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 clarifies some existing concepts, eliminates wording differences between U.S. GAAP and International Financial Reporting Standards (“IFRS”), and in some limited cases, changes some principles to achieve convergence between U.S. GAAP and IFRS. ASU 2011-04 results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. ASU 2011-04 became effective for International Shipholding Corporation beginning on December 15, 2011. The adoption of ASU 2011-04 did not have a material effect on our operating results or financial position.

 In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income , which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of equity. ASU 2011-05 became effective for International Shipholding Corporation for the quarters beginning on December 15, 2011. The adoption of ASU 2011-05 did not have a material effect on our operating results or financial position, and have applied these new requirements in the first quarter of 2012.

Note 19.  Subsequent Events

 On August 6, 2012, the Company acquired the common stock and membership interest of Frascati Shops, Inc. and Tower LLC, respectively for a total of $4.3 million (consisting of a $600,000 cash payment and assumption of all debt for both companies).  These two Companies own and operate a certified rail-car repair yard facility near the port of Mobile, Alabama and will be used to service and repair rail-cars from third party customers and  service and repair rail-cars that are transported via the Company’s Rail-Ferry vessels.  While the transaction is deemed immaterial, it will be accounted for as a business combination.

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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.

 Such forward-looking statements include, without limitation, statements regarding (1) 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; (2) 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; (3) estimated scrap values of assets; (4) estimated proceeds from selling assets and the anticipated cost of constructing or purchasing new or existing vessels; (5) estimated fair values of financial instruments, such as interest rate and currency swap agreements; (6) estimated losses under self-insurance arrangements, as well as estimated gains or losses on certain contracts, trade routes, lines of business or asset dispositions; (7) estimated losses attributable to asbestos claims or other litigation; (8) estimated obligations, and the timing thereof, relating to vessel repair or maintenance work; (9) the adequacy of our capital resources and the availability of additional capital resources on commercially acceptable terms; (10) our ability to remain in compliance with applicable regulations and our debt covenants; (11) anticipated trends in government sponsored cargoes; (12) our ability to effectively service our debt; (13) financing opportunities and sources (including the impact of financings on our financial position, financial performance or credit ratings); (14) changes in laws, regulations or tax rates, or the outcome of pending legislative or regulatory initiatives; and (15) assumptions underlying any of the foregoing.

 Important factors that could cause our actual results to differ materially from our expectations include our ability to:

·   identify customers who require marine transportation services or vessels offered by us,

·   secure financing on satisfactory terms to repay existing debt or support operations, including to acquire, modify, or construct vessels if such financing is necessary to service the potential needs of current or future customers,

·   maximize the usage of our vessels and other assets on favorable economic terms,

·   manage the amount and rate of growth of our administrative and general expenses and costs associated with operating our vessels,

·   manage our growth in terms of implementing internal controls and information systems and hiring or retaining key personnel, among other things, and

·   effectively handle our substantial leverage by meeting the payment and covenant requirements in each of our debt instruments, thereby avoiding any defaults under those instruments and avoiding cross defaults under others.

 Other factors that could cause our actual results to differ materially from our expectations include, without limitation:

·   unanticipated changes in domestic or international transportation markets that reduce the demand for shipping generally or our vessels in particular,

·   unanticipated changes in cargo freight rates,market time charter rates, charter hire, cost of fuel we are not able to pass on to customers, or other operating expenses,

·   the rate at which competitors add or scrap vessels, as well as demolition scrap prices and the availability of scrap facilities in the areas in which we operate,

·   changes in interest rates, which could increase or decrease the amount of interest we incur on our variable rate debt and the availability and cost of capital to us,

·   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,

·   changes in accounting policies and practices adopted voluntarily or as required by GAAP,

·   changes in laws and regulations such as those related to government assistance programs and tax rates,

·   the frequency and severity of claims against us, including the possibility of unanticipated adverse outcomes of current or future legal proceedings,

·   unexpected out-of-service days on our vessels whether due to unplanned maintenance or other causes,

·   the ability of customers to fulfill their obligations with us,

·   the performance of unconsolidated subsidiaries or revenue sharing agreements,

·   political events in the United States and abroad, including terrorism and piracy, and the U.S. military's response to those events,

·   election results, regulatory activities and the appropriation of funds by the U.S. Congress,

·   changes in foreign currency exchange rates, and

·   other economic, competitive, governmental, and technological factors which may affect our operations.

 Due to these uncertainties, we cannot assure that we will attain our anticipated results, that our judgments or assumptions will prove correct, or that unforeseen developments will not occur.  Accordingly, you are cautioned not to place undue reliance upon any of our forward-looking statements, which speak only as of the date made.  Additional risks that we currently deem immaterial or that are not presently known to us could also cause our actual results to differ materially from those expected in our forward-looking statements.  Except for meeting our ongoing obligations under the federal securities laws, we undertake no obligation to update or revise for any reason any forward-looking statements made by us or on our behalf, whether as a result of new information, future events or developments, changed circumstances or otherwise.

 For additional information on our forward-looking statements and risks, see Items 1, 1A and 7 of our Annual Report on Form 10-K for the year ended December 31, 2011, and Part II, Item 1A, of this report.

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Executive Summary

Overview of Second Quarter 2012

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 providing stable revenue streams, as well as protect our long-standing customer base by providing quality transportation services.

Overview

 Even though the Company’s results were negatively affected by the currently depressed dry cargo freight market, the termination of three of its Military Sealift Command (MSC) operating contracts, a reduction in the size of its International Flag PCTC fleet and a non-cash foreign exchange loss on its Yen denominated loan, the Company reported net income of $704,000  While the international dry cargo freight market was negatively affected by vessel oversupply, the Company’s revenue sharing agreements continued to outperform the dry bulk indices and we believe that the dry cargo freight market should gradually improve as older and less efficient vessels are scrapped. The rail-ferry service’s gross profit results for the second quarter of 2012 were comparable to the prior year with notable reductions in operating crew costs.  Revenues from supplemental cargoes improved by 21% from the second quarter of 2011 to the second quarter of 2012 due to an increase in cargo volumes. For the six months ended June 30, 2012, the Company’s revenues from its variable contracts were $52 million while revenues from its fixed or firm contracts were $73.5 million for the same period. For the three months ended June 30, 2012, the revenue mix was $26.9 million and $33.4 million for variable and fixed, respectively.

Consolidated Financial Performance – Second Quarter 2012 vs. Second Quarter 2011

 The Company reported a profit of $704,000 for the three months ended June 30, 2012 as compared to a $2.8 million profit for the same period in 2011. Excluding the foreign exchange loss of $1.7 million and net non-cash non-recurring gains of $662,000, net income for the second quarter of 2012 would have been $1.8 million. Similarly, net income for the same period in 2011 excluding the foreign exchange loss and a non-recurring gain on our Dry Bulk transaction would have resulted in net income of $4.6 million. Gross profit (defined as revenues less voyage and lease expenses and depreciation) decreased from $12.1 million in the second quarter of 2011 to $7.6 million for the same period in 2012. The decrease of $4.5 million in gross profit is primarily attributable to the termination of the MSC contracts associated with three Roll-on/Roll-off vessels that the company did not own but operated, the sale of two International Flag PCTC’s in March, 2012 and the currently depressed dry cargo freight market, partially offset by increased volumes of supplemental cargo carried, operation of our ice strengthened multi-purpose vessel that commenced operations in late 2011 and operational improvements in our rail ferry vessels and molten sulphur carrier vessel. Administrative and general expenses decreased by $700,000 as a result of lower compensation cost and reductions in consultant expenses.

Segment Performance – Second Quarter 2012 vs. Second Quarter 2011

Time Charter Contracts – U.S. Flag

§   Decrease in gross profits of $2.5 million.

§   Decrease in MSC revenues primarily due to the recent termination of three MSC operating agreements.

§   Improvement in supplemental cargoes revenues.

§   Contributions from our ice strengthened vessel since December, 2011.

Time Charter Contracts – International Flag

§   Decrease in gross profits of $2.9 million.

§   Lower revenues due to the sale of two international flagged pure PCTCs in March, 2012.

§   Currently depressed dry cargo freight market.

Contract of Affreightment

§   Improvement in gross profits of approximately $200,000.

§   Lower operating cost due to reduction in variable expenses.

§   Lower tonnage carried.

Rail-Ferry

§   Improvement in gross profits of $600,000.

§   Improved cost structure due to a reduction in variable expenses.

Financial Discipline

§   Early buy-out of the molten sulphur carrier operating lease which carried an implicit interest cost of approximately 7.5%.

§   Cash generated from operations of $7.0 million for the three months ended June 30, 2012.

§   Cash and cash equivalents of $21.2 million at June 30, 2012.

§   Debt payments of $7.3 million during second quarter 2012.

§   Compliance with all debt covenants.

Overview of Fleet

 As of June 30, 2012, our fleet consisted of vessels of which 17 we owned 100% directly through our wholly owned subsidiaries.  Of the 17 vessels, 15 are employed on fixed time charters, a long-term cargo contract and revenue sharing agreements.   Of the 15 vessels, 14 are operated within our Time Charter Contracts - International Flag and Time Charter Contracts – U.S. Flag segments. On June 15, 2012, we purchased the Sulphur Enterprise, the sole vessel operating in our Contract of Affreightment segment. Two vessels operate on a voyage to voyage basis providing service to a number of regular shippers in our Rail-Ferry segment.   In February 2012, the operating contracts for three vessels that we previously operated for the MSC expired. For additional information on our vessels, please see our fleet on the following page.

 Our Time Charter segments, which are primarily serviced by our PCTC’s generally operating under medium to long-term contracts, provide us with fixed income streams and predictable cash flows, with revenues only impacted by the amount of our off-hire time. The average remaining firm contract charterhire period for our International Flag PCTC fleet and U.S. Flag PCTC fleet is approximately one year and 2.4 years as of the end of the quarter, respectively.  In addition to contractually fixed income, we also earn from time to time supplemental income as a result of chartering our U.S. Flag PCTC’s back for the carriage of supplemental cargo when available.

 Because of recent downturns in our revenues and the overall condition of the global economy, we test our long-lived assets quarterly to determine whether or not our projected cash flows exceed the vessel’s carrying amount. Based on this assessment, we believe that no impairment existed at June 30, 2012.

14

The following table lists the vessels in our fleet as of June 30, 2012. At such date, we believe the market value of each of the vessels equals or exceeds it's carrying value.
INTERNATIONAL SHIPHOLDING CORPORATION
FLEET STATISTICS
June 30, 2012
	Vessels		Year Built	Business Segment (1)	Owned	Bareboat Charter/  Leased	Operating Contracts	Partially Owned	Time Chartered	Weight Carrying Capacity (MT)
	GREEN BAY	PURE CAR/TRUCK CARRIER	2007	TC-US		X				18,090
	GREEN COVE	PURE CAR/TRUCK CARRIER	1994	TC-US	X					16,178
	GREEN LAKE	PURE CAR/TRUCK CARRIER	1998	TC-US	X					22,799
	GREEN POINT	PURE CAR/TRUCK CARRIER	1994	TC-US	X					14,930
	GREEN RIDGE	PURE CAR/TRUCK CARRIER	1998	TC-US	X					21,523
	GREEN DALE	PURE CAR/TRUCK CARRIER	1999	TC-US	X					16,157
	CSAV RIO GEIKE	PURE CAR/TRUCK CARRIER	2010	TC-I	X					18,701
	ENERGY ENTERPRISE	BELT SELF-UNLOADING BULK CARRIER	1983	TC-US	X					38,848
	MAERSK ALABAMA	CONTAINER VESSEL	1998	TC-US		X				17,524
	MAERSK CALIFORNIA	CONTAINER VESSEL	1992	TC-US		X				25,375
	FLORES SEA	MULTI-PURPOSE VESSEL	2008	TC-I			X			11,151
	SAWU SEA	MULTI-PURPOSE VESSEL	2008	TC-I			X			11,184
	OCEAN PORPOISE	TANKER	1996	TC-I	X					13,543
	MARINA STAR 2	CONTAINER VESSEL	1982	TC-I					X	13,193
	MARINA STAR 3	CONTAINER VESSEL	1983	TC-I					X	13,193
	TERRITORY TRADER	CONTAINER VESSEL	1991	TC-I					X	3,138
	SULPHUR ENTERPRISE	MOLTEN SULPHUR CARRIER	1994	COA	X					27,678
	BALI SEA (2)	ROLL-ON/ROLL-OFF SPV	1995	RF	X					20,737
	BANDA SEA (2)	ROLL-ON/ROLL-OFF SPV	1995	RF	X					20,664
	BULK AUSTRALIA	CAPESIZE BULK CARRIER	2003	TC-1	X					170,578
	BULK AMERICAS	HANDYMAX BULK CARRIER	2012	TC-1	X					57,959
	EGS CREST	HANDYSIZE BULK CARRIER	2011	TC-I	X					35,914
	EGS TIDE	HANDYSIZE BULK CARRIER	2011	TC-I	X					35,916
	EGS WAVE	HANDYSIZE BULK CARRIER	2011	TC-I	X					35,921
	HANZE GRONINGEN	HANDYSIZE BULK CARRIER	2011	TC-I					X	34,734
	INTERLINK VERITY	HANDYSIZE BULK CARRIER	2012	TC-1					X	37,300
	GREEN WAVE	ICE STRENGTHENED MULTI-PURPOSE VESSEL	2000	TC-US	X					17,381
	OSLO BULK 1	MINI BULK CARRIER	2010	UE				X		8,000
	OSLO BULK 2	MINI BULK CARRIER	2010	UE				X		8,000
	OSLO BULK 3	MINI BULK CARRIER	2010	UE				X		8,000
	OSLO BULK 4	MINI BULK CARRIER	2010	UE				X		8,000
	OSLO BULK 5	MINI BULK CARRIER	2010	UE				X		8,000
	OSLO BULK 6	MINI BULK CARRIER	2011	UE				X		8,000
	OSLO BULK 7	MINI BULK CARRIER	2011	UE				X		8,000
	OSLO BULK 8	MINI BULK CARRIER	2011	UE				X		8,000
	OSLO BULK 9	MINI BULK CARRIER	2011	UE				X		8,000
	OSLO BULK 10	MINI BULK CARRIER	2011	UE				X		8,000
					17	3	2	10	5	850,309
(1)	Business Segments:
	TC-I	Time Charter Contracts-International Flag
	TC-US	Time Charter Contracts-U.S. Flag
	COA	Contracts of Affreightment
	RF	Rail-Ferry
	UE	Unconsolidated Entity
(2)	Originally built in 1982 - Converted 1995

15

Management Gross Profit Financial Measures

 In connection with discussing the results of our various operating segments in this report, we refer to “gross profit,” a metric that management reviews to assist in monitoring and managing our business.  The following table provides a reconciliation of consolidated gross profit to operating income:

	Three Months Ended June 30,						Six Months ended June 30,
	2012			2011			2012			2011
Revenues	$	60,320		$	69,961		$	125,524		$	134,295
Voyage Expenses	$	47,026		$	51,814		$	97,852		$	100,804
Vessel Depreciation	$	5,723		$	6,095		$	12,080		$	11,469
Gross Profit	$	7,571		$	12,052		$	15,592		$	22,022
Other Operating Expenses:
Administrative and General Expenses	$	4,720		$	5,455		$	10,228		$	11,284
Gain on Dry Bulk Transactions	$	-		$	(130	)	$	-		$	(18,844	)
Gain on Sale/Purchase  of Other Assets	$	(667	)	$	-		$	(4,466	)	$	-
Total Other Operating Expenses	$	4,053		$	5,325		$	5,762		$	(7,560	)
Operating Income	$	3,518		$	6,727		$	9,830		$	29,582

Non-GAAP Financial Measures

 In Management’s Discussion and Analysis of Financial Condition and Results of Operations, we refer to adjusted net income. We believe this performance metric is useful information to investors because it provides comparable information with respect to the financial condition and results of operations of the Company excluding the results of certain transactions.  The following table provides a reconciliation of net income to adjusted net income.

(All Amounts in Thousands)		Three Months Ended June 30,			Six Months ended June 30,
			2012	2011	2012	2011
Net Income			$            704	$           2,838	$         8,640	$         26,918
	Foreign Exchange Loss (Gain)		1,734	$           1,900	(1,914)	$              411
	Gain on Dry Bulk Transaction		-	(130)		(18,844)
	Gain on Sale/Purchase of Other Assets		(667)	$                -	(4,466)	$                 -
Adjusted Net Income			$         1,771	$           4,608	$         2,260	$           8,485

16

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2012

COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2011

		Time Charter  Contracts-International Flag
(Amounts in Thousands)	Time Charter Contracts- U.S. Flag		COA	Rail-Ferry Service	Other	Total
Three months ended June 30, 2012
Revenues from External Customers	$       34,488	$      11,931	$4,207	$9,396	$     298	$    60,320
Voyage Expenses (Income)	27,858	7,252	4,081	7,948	(113)	47,026
Add back:
Operating Lease Expense	900	-	910	-	-	1,810
Direct Finance Lease Amortization	760	-	-	-	-	760
Gross Voyage Profit  *	8,290	4,679	1,036	1,448	411	15,864
Gross Voyage Profit Percentage	24%	39%	25%	15%	452%	26%
Less:
Operating Lease Expense	900	-	910	-	-	1,810
Direct Finance Lease Amortization	760	-	-	-	-	760
Vessel Depreciation	2,310	2,702	-	701	10	5,723
Gross  Profit *	$        4,320	1,977	126	747	401	$  7,571
Three months ended June 30, 2011
Revenues from External Customers	$         39,290	$      15,813	$  4,500	$    9,867	$    491	$    69,961
Voyage Expenses	29,952	8,294	4,601	8,807	160	51,814
Add back:
Operating Lease Expense	1,060	2,195	898	-	-	4,153
Direct Finance Lease Amortization	662	718	-	-	-	1,380
Gross Voyage Profit *	11,060	10,432	797	1,060	331	23,680
Gross Voyage Profit Percentage	28%	66%	18%	11%	67%	34%
Less:
Operating Lease Expense	1,060	2,195	898	-	-	4,153
Direct Finance Lease Amortization	662	718	-	-	-	1,380
Vessel Depreciation	2,495	2,669	-	899	2	6,095
Gross Profit (Loss) *	$           6,843	4,820	(101)	161	329	$   12,052

*Information used by Chief Decision Makers.

 The following table shows the breakout of revenues by segment between fixed and variable for the three months ended June 30, 2012 and 2011, respectively:

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

Time Charter Contracts-U.S. Flag:

 Revenues decreased from $39.3 million in the second quarter of 2011 to $34.5 million in the second quarter of 2012, and the segment’s gross profit decreased from $6.8 million in the second quarter of 2011 to $4.3 million in the second quarter of 2012. This decrease in gross profit is largely due to the termination of three MSC operating contracts in early 2012,  partially offset by improvements in supplemental cargo volumes.  Our U.S. Flag Time Charter Contracts segment historically reflected the results of the three MSC operating contracts.  In January of 2012, we were notified that we would not be awarded operating contract renewals. All three vessels’ operating contracts were terminated in February 2012. Our fixed contract revenues of $21.5 million and $26.8 million in the second quarter of 2012 and 2011, respectively, represent revenues derived from our fixed time charter contracts, and our variable revenues of $13.0 million and $12.4 million for the same periods in 2012 and 2011, respectively, represent revenues derived from our supplemental cargoes.

Time Charter Contracts-International Flag:

 Revenues decreased from $15.8 million in the second quarter of 2011 to $11.9 million in the second quarter of 2012 and gross profit for this segment decreased from $4.8 million in the second quarter of 2011 to $2.0 million in the second quarter of 2012. The decrease in revenues and gross profit is attributable to the sale of two of our PCTC’s in March, 2012, as well as lower cargo freight rates and time charter rates for our dry bulk vessels.  Our fixed revenues of $7.8 million in the second quarter of 2012 represent our revenues from fixed Time Charter contracts.  Our variable revenues of $4.2 million in the second quarter of 2012 represent revenues earned by our three Handy-Size Bulk Carriers, two chartered-in Handy-Size Bulk Carriers, and one Handymax Bulk Carrier, all of which operate under revenue sharing agreements. Our fixed revenues of $12.1 million in the second quarter of 2011 represents revenues derived from our fixed time charter contracts, while our variable revenues of $3.7 million in the second quarter of 2011 represents voyages on our three Handy-Size Bulk Carriers which operate under a revenue sharing agreement which commenced in January 2011.

Contracts of Affreightment:  

 Revenues for this segment decreased from $4.5 million in the second quarter of 2011 to $4.2 million in the second quarter of 2012.  Our gross profit increased from a loss of $101,000 in the second quarter of 2011 to a profit $126,000 in the second quarter of 2012 due to reduced vessel operating cost.

Rail-Ferry Service:

 Revenues for this segment decreased from $9.9 million in the second quarter of 2011 to $9.4 million in the second quarter of 2012; however gross profit increased from $161,000 in the second quarter of 2011 to $747,000 in the second quarter of 2012 due to lower vessel operating costs.

Other:  

 Revenue decreased from $491,000 in the second quarter of 2011 to $298,000 in the second quarter of 2012 due to lower chartering brokerage income.

Administrative and General Expense

 Administrative and general expenses decreased from $5.5 million in the second quarter of 2011 to $4.7 million in the second quarter of 2012.  The following table shows the significant components of administrative and general expenses for the second quarter of 2012 and 2011, respectively. Wages and benefits reflect lower expenses due to reduced bonus payments partially offset by severance payments to former employees terminated in connection with the loss of the MSC contracts.

 The following table shows the significant components of administrative and general expenses for the second quarter of 2012 and 2011, respectively:

A&G Account	2012		2011		Variance
(Amounts in Thousands)
Wages and Benefits	$	2,551	$	2,841	$	290
Executive Stock Compensation		213		428		215
Office Building Expenses		331		390		59
Professional Services		587		722		135
System Hardware and Software		197		301		104
Other		841		773		(68	)
TOTAL:	$	4,720	$	5,455	$	735

Other Income and Expense

 Interest Expense remained flat at $2.3 million in the second quarters of both 2011 and 2012. Increases in indebtedness due to new financings in late 2011 and the first quarter of 2012, and a decrease in capitalized interest in 2012 after the delivery of our Handymax Bulk Carrier newbuilding in January 2012, were offset by debt retired using the proceeds from the sale of our two international flag PCTC’s.

 Derivative Loss of $117,000 and $106,000 in the second quarters of 2012 and 2011, respectively,represents the ineffectiveness of a portion of a derivative contract and the related mark-to-market adjustment associated with this portion of the derivative (See Note 14).

 Other income from vessel financing of $605,000 and $672,000 in the second quarters of 2012 and 2011, respectively, 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 of $1.7 million in the second quarter of 2012, as compared to a loss of $1.9 million in the second quarter of 2011, is associated with the financing of one of our International Flag PCTC’s. The loss is related to the revaluation of our Yen-denominated loan due to a strengthening of the value of the Yen since the end the first quarter of 2012.  The exchange loss was based on a change in the exchange rate of 82.82 Yen to 1 USD at March 31, 2012 compared to 79.81 Yen to 1 USD at June 30, 2012.

Income Taxes

 We recorded a provision for income taxes of $108,000 on our $161,000 income before taxes and equity in net income from unconsolidated entities for the three months ended June 30, 2012.  For the three months ended June 30, 2011 we recorded a provision of $173,000 on our $3.4 million income before taxes and equity in net income of unconsolidated entities.  These provision amounts include the impact of our qualifying U.S. flag operations, which continue to be taxed under a “tonnage tax” regime rather than under the normal U.S. corporate income tax regime.  We established a valuation allowance against our deferred tax assets in 2010 because, based on available information, we could not conclude that it was more likely than not that the full amount of our deferred tax assets generated primarily by NOL carryforwards and AMT credits would be realized through the generation of taxable income in the near future. We have and will continue to evaluate the need for a valuation allowance on an annual basis. For further information on certain tax laws and elections, see our Annual Report on Form 10-K filed for the year ended December 31, 2011, including “Note G - Income Taxes” to the consolidated financial statements included therein.

Equity in Net (Loss) Income of Unconsolidated Entities

 Equity in net (loss) income from unconsolidated entities, net of taxes, increased from a loss of $351,000 in the second quarter of 2011 to a gain of $651,000 in the second quarter of 2012.  As described in Note 17, we recorded during the second quarter of 2012 a net gain of $716,000 associated with an out of period adjustment relating to an interest swap. Excluding the out of period adjustment, we would have reported a loss of $55,000 from our 25% investment in Oslo Bulk and Tony Bulkers for the second quarter of 2012. The 2011 second quarter results reflected a loss of $307,000 for Oslo Bulk and Tony Bulkers.  Prior to us acquiring 100% of Dry Bulk on March 25, 2011, we reported our proportionate interest in Dry Bulk using the equity method.  As a result of the acquisition, Dry Bulk results are now consolidated in our Time Charter Contracts-International Flag segment.

Our portion of the earnings of our remaining investments in unconsolidated entities for the three months ended June 30, 2012 and 2011 was a gain of $33,000 and a loss of $45,000, respectively.  See Note 3 for additional information.

Out of Period Adjustments

 Three out of period adjustments (“OOP”) have been recorded in earnings for the second quarter of 2012.  Of the three, the only adjustment impacting any segment is a $324,000 OOP adjustment to our Time Charter Contracts – U.S. Flag segment related to net charter revenues that were not previously recorded on a straight-line basis in prior periods from 1999 to 2011.  The other two adjustments are related to an interest rate swap ($716,000) and recognition of the gain deferred in a sale-leaseback transaction ($239,000).  In accordance with our policy stated in Note 2 above, we do not allocate to our segments administrative and general expenses, gain on Dry Bulk transaction, gain on sale/purchase of other assets, derivative (income) loss, income taxes, gain on sale of investment, other income from vessel financing, investment income, foreign exchange loss (gain), and equity in net (loss) income of unconsolidated entities.  Refer to Note 17 for further details.

17

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2012

COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2011

		Time Charter  Contracts-International Flag
(Amounts in Thousands)	Time Charter Contracts- U.S. Flag		COA	Rail-Ferry Service	Other	Total
Six Months Ended June 30, 2012
Revenues from External Customers	$       73,506	$      25,234	$    7,600	$    18,597	$     587	$    125,524
Voyage Expenses (Income)	58,952	14,394	8,367	16,316	(177)	97,852
Add back:
Operating Lease Expense	1,364	-	1,808	-	-	3,172
Direct Finance Lease Amortization	1,499	780	-	-	-	2,279
Gross Voyage Profit  *	17,417	11,620	1,041	2,281	764	33,123
Gross Voyage Profit Percentage	24%	46%	14%	12%	130%	26%
Less:
Operating Lease Expense	1,364	-	1,808	-	-	3,172
Direct Finance Lease Amortization	1,499	780	-	-	-	2,279
Vessel Depreciation	4,876	5,792	-	1,399	13	12,080
Gross  Profit (Loss) *	$         9,678	5,048	(767)	882	751	$     15,592
Six Months Ended June 30, 2011
Revenues from External Customers	$         78,307	$      27,023	$  8,731	$  18,921	$ 1,313	$    134,295
Voyage Expenses	59,951	15,179	8,912	16,438	324	100,804
Add back:
Operating Lease Expense	2,119	3,746	1,797	-	-	7,662
Direct Finance Lease Amortization	1,305	1,406	-	-	-	2,711
Gross Voyage Profit *	21,780	16,996	1,616	2,483	989	43,864
Gross Voyage Profit Percentage	28%	63%	19%	13%	75%	33%
Less:
Operating Lease Expense	2,119	3,746	1,797	-	-	7,662
Direct Finance Lease Amortization	1,305	1,406	-	-	-	2,711
Vessel Depreciation	5,004	4,689	-	1,771	5	11,469
Gross Profit (Loss) *	$        13,352	7,155	(181)	712	984	$    22,022

 The following table shows the breakout of revenues by segment between fixed and variable for the first six months of 2012 and 2011, respectively:

 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:

 Revenues decreased from $78.3 million in the first six months of 2011 to $73.5 million in the first six months of 2012, and the segment’s gross profit decreased from $13.4 million in the first six months of 2011 to $9.7 million in the first six months of 2012. This decrease in gross profit is due to higher operating cost and the above-described termination of three MSC contracts in early 2012. Our fixed contract revenues of $47.9 million and $53.9 million in the first six months of 2012 and 2011, respectively, represent revenues derived from our fixed time charter contracts, and our variable revenues of $25.6 million and $24.4 million for the same periods in 2012 and 2011, respectively, represent revenues derived from our supplemental cargoes.

Time Charter Contracts-International Flag:

 Revenues decreased from $27.0 million in the first six months of 2011 to $25.2 million in the first six months of 2012 and gross profit for this segment decreased from $7.2 million in the first six months of 2011 to $5.0 million in the first six months of 2012. The decrease in revenues and gross profit is attributable to the above-mentioned sale of two of our PCTC’s.  Our fixed revenues of $18.0 million in the second quarter of 2012 represent our revenues from fixed time charter contracts.  Our variable revenues of $7.2 million in the first six months of 2012 represent revenues earned by our three Handy-Size Bulk Carriers, two chartered-in Handy-Size Bulk Carriers, and one Handymax Bulk Carrier, all of which operate under revenue sharing agreements. Our fixed revenues of $20.6 million in the first six months of 2011 represents revenues derived from our fixed time charter contracts, while our variable revenues of $6.4 million in the first six months of 2011 represents voyages on our three Handy-Size Bulk Carriers which operate under a revenue sharing agreement which commenced in January 2011.

Contracts of Affreightment:  

 Revenues decreased from $8.7 million in the first six months of 2011 to $7.6 million in the first six months of 2012.  Our gross loss increased from $181,000 in the first six months of 2011 to $767,000 in the first six months of 2012 due to a reduction in cargo volume. However, we expect improvements in our results for the remainder of 2012 due to minimum tonnage requirements under our contract.

Rail-Ferry Service:

 Revenues for this segment decreased from $18.9 million in the first six months of 2011 to $18.6 million in the first six months of 2012; however gross profit increased from $712,000 in the first six months of 2011 to $882,000 in the first six months of 2012. This increase in gross profit is a result of vessel operating cost savings.

Other:  

 Revenue decreased from $1.3 million in the first six months of 2011 to $587,000 in the first six months of 2012 due to lower chartering brokerage income.

Administrative and General Expense

 Administrative and general expenses decreased from $11.3 million in the first six months of 2011 to $10.2 million in the first six months of 2012. The reduction in overhead expense can be attributed to lower executive compensation and lower professional fees.

 The following table shows the significant A&G components for the first six months of 2012 and 2011 respectively.

(Amounts in Thousands)	Six Months Ended June 30,
A&G Account	2012		2011		Variance
Wages and Benefits	$	5,812	$	5,697	$	(115	)
Amortization of Executive Stock Compensation		543		1,005		462
Office Building Expenses		667		737		70
System Hardware and Software		465		609		144
Professional Services		1,047		1,454		407
Other		1,694		1,782		88
TOTAL:	$	10,228	$	11,284	$	1,056

Other Income and Expense

 Interest Expense increased from $4.6 million in the first six months of 2011 to $5.0 million in the first six months of 2012 due to higher debt balances associated with the financing of our three new Handy-Size Bulk Carriers.  The increase in interest expense from new debt was partially offset by the impact of lower effective interest rates from new swap contracts and prepayments under several loan facilities.

 Other income from vessel financing of $1.2 million in 2012 includes interest earned on a note receivable on vessels sold to an Indonesian company in the third quarter of 2009.

 Foreign Exchange Gain of $1.9 million for the first six months of 2012is due totherevaluation of our Yen-denominated loan associated with the financing of one of our International flag PCTC's due to a weakening of the value of the Yen.  The exchange gain was based on a change in the exchange rate of 76.92 Yen to 1 USD at December 31, 2011 to 79.81 Yen to 1 USD at June 30, 2012.

Income Taxes

 We recorded a provision of $276,000 on $8.3 million of income before income from unconsolidated entities and a provision of $381,000 on $26.4 million of income before income from unconsolidated entities for the six months ended June 30, 2012 and 2011 respectively.  The decrease in our provision for income taxes was based on our establishment of a valuation allowance on certain deffered tax assets, which was partially offset by a reduction in taxable income of our 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 filed for the year ended December 31, 2011, including Note G to the consolidated financial statements included therein.  Our qualifying U.S. flag operations continue to be taxed under a “tonnage tax” regime rather than under the normal U.S. corporate income tax regime.

Equity in Net Income of Unconsolidated Entities

 Equity in net income of unconsolidated entities, net of taxes, decreased from $874,000 in the first six months of 2011 to $581,000 in the same period of 2012.  For the six months ended June 30, 2012 and 2011, our portion of the earnings of Dry Bulk was $0, net of taxes of $0, and $1.3 million, net of taxes of $0, respectively. In addition, we recorded a favorable $674,000 out of period adjustment associated with an interest rate swap that Oslo Bulk entered into in the third quarter of 2011. Refer to Note 17 (Out of Period Adjustments) for more information.  Dry Bulk was acquired in the first quarter of 2011 and is now included in consolidated results. Equity in net income of unconsolidated entities net of taxes, for the first six months of 2012 was further impacted by our results in our 25% investment in Oslo Bulk and Tony Bulkers.  Our portion of the earnings of these investments was income of $660,000 for the six months ended June 30, 2012 and $650,000 for the six months ended June 30, 2011.  Excluding the out of period adjustment our portion of earnings of Oslo Bulk and Tony Bulkers would have been a loss of $14,000 for the six months ended June 30, 2012.  The decrease in the results were primarily due to financial performance from Dry Bulk being included in our consolidated results following our March 25, 2011 acquisition of full control of Dry Bulk and reduced contributions from our 25% investment in Oslo Bulk.

Out of Period Adjustments

 Three out of period adjustments (“OOP”) have been recorded in earnings for the first six months of 2012.  Of the three, the only adjustment impacting any segment is a $324,000 OOP adjustment to our Time Charter Contracts – U.S, Flag segment related to net charter revenues that were not previously recorded on a straight-line basis in prior periods from 1999 to 2011.  The other two adjustments are related to an interest rate swap ($674,000) and recognition of the gain deferred in a sale-leaseback transaction ($239,000).  In accordance with our policy stated in Note 2 above, we do not allocate to our segments administrative and general expenses, gain on Dry Bulk transaction, gain on sale/purchase of other assets, derivative (income) loss, income taxes, gain on sale of investment, other income from vessel financing, investment income, foreign exchange loss (gain), and equity in net (loss) income of unconsolidated entities.  Refer to Note 17 for further details.

18

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 in Item 1 of Part I of this report.

 Our working capital (which we define as the difference between our total current assets and total current liabilities) decreased from $19.7 million at December 31, 2011, to $10.5 million at June 30, 2012. This $9.2 million decrease in working capital is a result of utilizing cash to purchase the Molten Sulphur carrier vessel, partially offset by a $10 million draw on our line of credit. Cash and cash equivalents decreased during the first six months of 2012 by $234,000 to a total of $21.2 million at June 30, 2012. The decrease in cash and cash equivalents was a result of cash provided by operating activities of $9.9 million and cash provided by investing activities of $95.3 million, offset by cash used in financing activities of $105.5 million.  Total current liabilities of $60 million as of June 30, 2012 included current maturities of long-term debt of $27.8 million.

 Net cash provided by operating activities for the first six months of 2012 was $9.9 million after adjusting net income of $8.6 million upward for non-cash items such as depreciation and amortization and non-cash stock based compensation, which were offset by a foreign exchange gain of $1.9 million on a Yen-denominated loan, a $4.5 million gain on sale of two International Flag PCTC’s, one US Flag PCTC and our Molten Sulphur Carrier, and various other items specified in our consolidated statements of cash flows.

 Net cash provided by investing activities of $95.3 million included $130.3 million in proceeds from the sale of assets, removing $6.9 million from restricted cash, $2.3 million of principal payments received under direct financing leases and $2.5 million from cash received on note receivables, partially offset by capital expenditures of $46.1 million and investments in unconsolidated entities of $750,000.

 Further detail of the $46.1 million of capital improvements to vessels and other assets, including the breakdown of payments from working capital versus debt financing are in the table below:

Capital Improvements to Vessels, Property and Other Equipment	Improvements through:
(Amounts in thousands)
	Working	Debt
Vessel	Capital	Financing	Total
Vessel Acquisitions/Improvements	$               24,152	$                   -	24,152
Tsuneishi Newbuilding Handymax Bulk Carrier	9,103	12,675	21,778
Vessel Equipment	32	-	32
Other	141	-	141
			$             46,103

 Net cash used in financing activities of $105.5 million included $100.6 million of debt payments using proceeds from vessel sales, $13.0 million of regularly scheduled debt payments and $28.0 million of payments to reduce our line of credit indebtedness. These debt payments and our $4.8 million of dividend payments were partially offset by proceeds of $12.7 million from the final bank draw on a term loan for a Handymax Bulk Carrier Newbuilding delivered in January 2012 and draws on our line of credit of $28.5 million.

 As of June 30, 2012, $20 million of our $30 million unsecured revolving line of credit, which expires in April 2014, is available for future draws as needed.  Associated with this credit facility is a commitment fee of .125% per year on the undrawn portion of the facility.

 We have filed with the Securities and Exchange Commission a $200 million universal shelf registration statement, which expires in October, 2013,  which we believe provides us with flexibility to access the public equity and debt markets.

 Debt and Lease Obligations – As of June 30, 2012, we held three vessels under bareboat charter or lease agreements, and five vessels under time charter agreements.  The types of vessels held under these agreements include one PCTC, five container vessels, and two Handysize Bulk Carriers, all of which operate in our Time Charter Contracts – U.S. Flag and International Flag segments.  

 Our operating lease agreement has early buy-out options and fair value purchase options.  The lease agreement imposes defined minimum working capital and net worth requirements, impose restrictions on the payment of dividends, and prohibit us from incurring, without prior written consent, additional debt or lease obligations, subject to certain specified exceptions.

 On February 22, 2012, we completed a sale and leaseback transaction with Wells Fargo Bank Northwest, National Association, of our 2007-built PCTC, the Green Bay.  The sale generated proceeds of $59.0 million, which we used to pay down debt of $54.5 million. We are leasing the vessel back under a 10 year lease agreement with early buyout options that can be exercised in 2017 and 2019.  The sale resulted in a gain of $14.9 million, which has been recorded as a deferred gain on the balance sheet and will be recognized over the length of the lease. If we were to exercise our option to purchase this vessel back at the early buy-out dates, any remaining deferred gain would be recognized through current period earnings.

 In March of 2012 we sold two of our International Flag Pure Car Truck Carriers to Norwegian Car Carriers ASA.  This transaction generated total proceeds of $73.9 million, and resulted in a gain of $3.8 million. These proceeds were used to pay down approximately $36.1 million of debt.  Refer to our Current Report on Form 8-K dated March 26, 2012 for further information.

 In June of 2012, we purchased our Jones Act Molten Sulphur-Carrier that constitutes the sole vessel in our Contract of Affreightment segment, This was an early buy-out of an operating lease pursuant to favorable negotiations with the lessor.  Our operations under this segment were unaffected by the acquisition. As a result of this purchase, we removed approximately $19.3 million in future lease obligations as the terms of the operating lease extended to 2017.

 We also conduct certain of our operations from leased office facilities.  Refer to our 2011 annual report on Form 10-K for a schedule of our contractual obligations under operating leases.

 Substantially all of our credit agreements require us to comply with various loan covenants, including financial covenants that require minimum levels of net worth, working capital and interest expense coverage and a maximum amount of debt leverage.

 As of June 30, 2012, the Company was in compliance with all financial covenants related to its debt obligations, and we believe that we will continue to meet such covenants in the near future. The following table represents the actual and required covenant amounts for the six months ending June 30, 2012:

				Actual		Required
(1		)	Net Worth (thousands of dollars)	$	253,245	$	249,545
(2		)	Working Capital (thousands of dollars)	$	10,528	$	1
	(3	)	Interest Expense Coverage Ratio (minimum)		6.52		2.50
	(4	)	Leverage Ratio (maximum)		3.36		4.25
	(5	)	Indebtedness to EBITDAR Ratio (maximum)		3.57		4.75
	(6	)	EBITDAR to Fixed Charge (minimum)		1.36		1.10

1.   Total assets minus total liabilities.

2.   Total current assets minus total current liabilities.

3.   Defined as the ratio between consolidated earnings before interest, taxes, depreciation, and amortization (“EBITDA”) to interest expense.

4.   Defined as the ratio between consolidated indebtedness to consolidated EBITDA.

5.   Defined as the ratio between consolidated indebtedness to consolidated EBITDA and rent/lease expense (“EBITDAR”)

6.   Defined as the ratio between consolidated EBITDAR to consolidated fixed charges

 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 capital, enter into financings of our unencumbered vessels or restructure debt. Based on current circumstances we believe we can continue to fund our working capital and routine capital investment liquidity needs through cash flow from operations and/or accessing available lines of credit.  To the extent we are required to seek additional capital, our efforts could be hampered by continuing uncertainties in the credit markets. We presently have interest rate swaps on 40% of our long-term debt.  We have debt of $36.1 million due during the second half of 2012, $31.0 million due in 2013, $20.5 million due in 2014, and $25.2 million due in 2015. The 2012 amount includes a balloon payment of $12.1 million scheduled to be refinanced.

 As a result of increasing our ownership in Dry Bulk from 50% to 100% on March 25, 2011, we assumed a 100% interest in a Handymax Bulk Carrier Newbuilding, completed and delivered in the first quarter of 2012. Total investment in this newbuilding was approximately $42.1 million.  On June 20, 2011, we entered into a secured loan facility agreement in the amount of $47.5 million, divided into two tranches:  Tranche A, which provided $24.2 million used to refinance and repay existing indebtedness of $22.0 million related to a Cape Size vessel assumed in connection with the Dry Bulk acquisition, and Tranche B, which provided up to $23.3 million to finance the remaining installment payments on the Handymax Bulk Carrier Newbuilding.  Under Tranche B, we made draws for $6.1 million in November 2011 and $12.7 million in January 2012 and contributed another $2.0 million in November 2011 and approximately $8.7 million upon final delivery in January 2012, respectively.  For further information on this agreement, see our Current Report on Form 8-K, dated June 20, 2011.

19

 Cash Dividend Payments – The payment of dividends to common stockholders is at the discretion of our board of directors.  On October 29, 2008, our Board of Directors authorized the reinstitution of a quarterly cash dividend program beginning in the fourth quarter of 2008. Since then, the Board has declared a cash dividend each quarter. On July 25, 2012, the board of directors authorized payment of a $0.25 dividend for each share of common stock and as of the record date August 16, 2012, which is payable on September 4, 2012. While all future payments remain subject to the discretion of our board of directors, we expect to meet our stated $1.00 per share annual dividend target for 2012.

 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 $250,000 for each incident.

 New Accounting Pronouncements-In May 2011, the Financial Accounting Standard Board (“FASB”) issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 clarifies some existing concepts, eliminates wording differences between U.S. GAAP and International Financial Reporting Standards (“IFRS”) and, in some limited cases, changes some principles to achieve convergence between U.S. GAAP and IFRS. ASU 2011-04 results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. ASU 2011-04 first applied to us beginning on December 15, 2011. The adoption of ASU 2011-04 did not have a material effect on our operating results or financial position.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income , which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of equity. ASU 2011-05 became effective for International us for quarters beginning on December 15, 2011. The adoption of ASU 2011-05 did not have a material effect on our operating results or financial position, and have applied these new requirements starting in the first quarter of 2012.

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.  We hedge firm commitments or anticipated transactions and do not enter into derivatives for speculative purposes.  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, 2012 approximated its carrying value due to the short-term duration of the underlying securities.  The potential decrease in fair value resulting from a hypothetical 10% change in interest rates at quarter-end for our investment portfolio is not material.

 We estimate the fair value of our variable rate long-term debt at June 30, 2012, including current maturities, to equal the carrying value of $219.8 million due to the variable rate nature of the debt as well as to the underlying value of the collateral.

 We enter into interest rate swap agreements to manage well-defined interest rate risks. We record the fair value of the interest rate swaps as an asset or liability on our balance sheet.  Currently, each of our USD-denominated 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).  We have entered into seven interest rate swap agreements with commercial banks, two in September of 2005, one in November of 2005, one in March of 2008, one in March of 2009 and two in September of 2010, in order to reduce the possible impact of higher interest rates by our swapping our obligations to pay variable interest rates for fixed rates.  For each of these agreements, the fixed rate payor is the Company, and the floating rate payor is the commercial bank.  While these arrangements are structured to reduce our exposure to increases in interest rates, it also limits the benefit we might otherwise receive from any decreases in interest rates, and our weighted average cost of capital.

 The fair value of these agreements at June 30, 2012, 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 $8.2 million.  A hypothetical 10% decrease in interest rates as of June 30, 2012, would have resulted in a liability of $8.3 million.

 Commodity Price Risk.  As of June 30, 2012, we did not have commodity swap agreements in place to manage our exposure to the risk of increases in the price of fuel necessary to operate both our Rail-Ferry Service and Contract of Affreightment segments.  We have fuel surcharges and escalation adjustments in place for both of these segments, which we believe manages the price risk for those services during 2012. We estimate that a 20% increase in the average price of fuel for the period January 1, 2012 through June 30, 2012 would have resulted in an increase of approximately $577,000 in our fuel costs for the same period, and in a corresponding decrease of approximately $0.08 in our basic earnings per share based on the shares of our common stock outstanding as of June 30, 2012.  The additional fuel costs assume no additional revenue would be generated from fuel surcharges, even though we believe that we could have passed on to our customers some or all of the fuel price increases through the aforementioned fuel surcharges during the same period, subject to the need to maintain competitive freight rates.  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 direct fuel price risk in these segments.

 Foreign Exchange Rate Risk.  We entered into foreign exchange contracts to hedge certain firm purchase commitments during 2011.  These contracts mature on various dates during 2012. The fair value of these contracts at June 30, 2012 is a liability of $75,000.  The potential fair value of these contracts that would have resulted from a hypothetical 10% adverse change in the exchange rates would be a liability of $83,000.

 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 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 (the “Facility”) 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 the delivered vessel cost. The loan was fully drawn in March 2010 to the full amount available of Yen 5,102,500,000.  Under current accounting guidelines, since this Facility is not denominated in our functional currency, 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 1 to 5 Yen increase or decrease on the exchange rate between the U.S. Dollar and Yen, which was $1 to Yen 79.81 at June 30, 2012, would impact our earnings by approximately $600,000 to $3.0 million for the reporting period.  While we believe that these fluctuations may smooth out over time, any particular reporting period could be materially impacted by these adjustments.  There was a 3.8% appreciation in the Yen to USD exchange rate at June 30, 2012 compared to March 31, 2012, resulting in a $1.7 million foreign exchange loss for the quarter ended June 30, 2012.  This amount is reported under Interest and Other on our Consolidated Statement of Operations.  We continue to monitor the movements in the foreign currency markets in order to take advantage of potential opportunities.

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 were effective as of June 30, 2012 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 2012, 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 1A.  RISK FACTORS

See Item 1A of our annual report on Form 10-K for the year ended December 31, 2011 for a list of known material risks applicable to our business.

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. Thereafter, we suspended repurchases until the second quarter of 2010, when 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 first six months of 2012:

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, 2012– April 30, 2012	-	-	-	285,377
May 1, 2012 – May 31, 2012	-	-	-	285,377
June  1, 2012 – June 30, 2012	-	-	-	285,377

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ITEM 6 – EXHIBITS

(a)           EXHIBIT INDEX

Part II Exhibits:

(3.1)         Exhibits

(3.1) Restated Certificate of Incorporation of the Registrant, as amended through May 19, 2010 (filed with the Securities and Exchange Commission as Exhibit 3.1 to the Registrant's Form 10-Q dated July 28, 2010 and incorporated herein by reference)

(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, Commerzbank AG, as successors to 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 Commerzbank AG, as successors toDeutsche 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)   Credit Agreement, dated as of August 2, 2010, by and among East Gulf Shipholding, Inc., as borrower, the Registrant, as guarantor, the banks and financial institutions listed therein, as lenders, and ING Bank N.V., London Branch, as facility agent and security trustee. (filed with the Securities and Exchange Commission as Exhibit 10.12 to the Registrant’s Form 10-Q/A dated December 23, 2010 and incorporated herein by reference) (On December 28, 2010, the Securities and Exchange Commission granted confidential treatment with respect to certain portions of this exhibit.)

(10.5)   $30,000,000 Revolving Loan to the Registrant and seven of its subsidiaries by Regions Bank dated March 7, 2008, as amended by instruments dated March 3, 2009, August 13, 2009, March 31, 2010, March 31, 2011, July 18, 2011 and March 31, 2012. (filed with the Securities and Exchange Commission as Exhibit 10.6 to the Registrant’s Form 10-Q dated May 5, 2011 and incorporated herein by reference)

(10.6)   Credit 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 Commerzbank AG, as successors to 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)

(10.7)   Credit Agreement, dated as of June 20, 2011, by and among Dry Bulk Australia Ltd. and Dry Bulk Americas Ltd., as joint and several borrowers, the Registrant, as guarantor, and ING Bank N.V. London branch, as lender, facility agent and security trustee (filed with the Securities and Exchange Commission as Exhibit 10.8 to the Registrant’s Form 10-Q for the quarterly period ended June 30, 2011 and incorporated herein by reference)

(10.8)   Credit Agreement, dated as of June 29, 2011, by and among LCI Shipholdings, Inc. and Waterman Steamship Corporation, as joint and several borrowers, the Registrant, as guarantor, DnB NOR Bank ASA and HSH Nordbank AG, New York Branch, as lenders, DnB NOR Bank ASA, as bookrunner, facility agent and security trustee and DnB NOR Bank ASA and HSH Nordbank AG, New York Branch, as mandated lead arrangers (filed with the Securities and Exchange Commission as Exhibit 10.9 to the Registrant’s Form 10-Q for the quarterly period ended June 30, 2011 and incorporated herein by reference)

(10.9)   International Shipholding Corporation 2011 Stock Incentive Plan (filed with the Securities and Exchange Commission as Exhibit 99.2 to the Registrant's Current Report dated April 27, 2011 on Form 8-K filed on April 29, 2011 and incorporated herein by reference)

(10.10)   Form of Incentive Agreement for Restricted Stock Units granted May 7, 2012 (filed with the Securities and Exchange Commission as Exhibit 10.1 to the Registrant’s Form Current Report on Form 8-K dated May 7, 2012 and incorporated herein by reference)

(10.11)   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)

(10.12)   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)

(10.13)   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)

(10.14)   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)

(10.15)   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)

(10.16)   Agreement to Acquire and Charter, dated as of February 22, 2012, by and between Waterman Steamship Corporation, Wells Fargo Bank Northwest, National Association, Regions Equipment Finance, Ltd, International Shipholding Corporation and Gulf South Shipping Pte. Ltd, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof. (An unredacted version of this exhibit has been filed separately with the Securities and Exchange Commission.)*

(10.17)   Charter Assignment and Security Agreement, dated as of February 22, 2012, by Waterman Steamship Corporation in favor of Wells Fargo Bank Northwest, National Association, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof.  (An unredacted version of this exhibit has been filed separately with the Securities and Exchange Commission.)*

(10.18)   Bareboat Charter Agreement, dated as of February 22, 2012, by and between Waterman Steamship Corporation and Wells Fargo Bank Northwest, National Association, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof.  (An unredacted version of this exhibit has been filed separately with the Securities and Exchange Commission.)*

(10.19)   Notice and Acknowledgment of Collateral Assignment of Time Charter and Subordination Agreement, dated as of February 22, 2012, from Waterman Steamship Corporation and Wells Fargo Bank Northwest, National Association to Nippon Yusen Kaisha, filed herewith in redacted form as confidential treatment has been requested pursuant to Rule 24b-2 for certain portions thereof.  (An unredacted version of this exhibit has been filed separately with the Securities and Exchange Commission.)*

(10.20)   Guaranty Agreement, dated as of February 22, 2012, executed by International Shipholding Corporation in favor of Wells Fargo Bank Northwest, National Association*

(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:   August 7, 2012

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EX-10.16

The portion of this Exhibit 10.16 marked “******” has been omitted and confidentially filed with the Securities and Exchange Commission pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.

AGREEMENT TO ACQUIRE AND CHARTER

THIS AGREEMENT TO ACQUIRE AND CHARTER (this “Agreement”) is made as of the 22nd day of February, 2012 by and among WATERMAN STEAMSHIP CORPORATION, a corporation organized under the laws of the State of New York, with offices at 11 North Water St., Suite 18290, Mobile, Alabama 36602 (hereinafter, “Waterman”), WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION (the “Trust Company”), a national banking association organized under the laws of the United States of America, with offices at 299 South Main Street, 12th Floor, Salt Lake City, Utah 84111, not in its individual capacity, but solely as the Trustee of The Green Bay Vessel Trust (hereinafter, together with its successors and assigns, the “Purchaser”), REGIONS EQUIPMENT FINANCE, LTD., a limited partnership organized under the laws of the State of Alabama, with offices at 1900 5th Avenue North, Suite 2400, Birmingham, Alabama, 35203 (“REFL”), INTERNATIONAL SHIPHOLDING CORPORATION, a corporation organized under the laws of Delaware, with offices at 11 North Water St., Suite 18290, Mobile, Alabama 36602 (hereinafter, the “Guarantor”), and GULF SOUTH SHIPPING PTE. LTD., a corporation organized under the laws of Singapore, with offices at 11 Keppel Road, #11-01 RCL Centre, Singapore, Singapore 089057 (hereinafter, the “Gulf South”).

RECITALS

EX-10.17

The portion of this Exhibit 10.17 marked “******” has been omitted and confidentially filed with the Securities and Exchange Commission pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.

CHARTER ASSIGNMENT AND SECURITY AGREEMENT

THIS CHARTER ASSIGNMENT AND SECURITY AGREEMENT (this “Agreement”) is executed as of February 22, 2012 by WATERMAN STEAMSHIP CORPORATION, a New York corporation, with offices at 11 North Water St., Suite 18290, Mobile, Alabama 36602 (“Debtor”), in favor of WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION (the “Trustee”) a national banking association organized under the laws of the United States of America, with offices at 299 South Main Street, 12th Floor, Salt Lake City, Utah 84111, not in its individual capacity, but solely as the Trustee of The Green Bay Vessel Trust (together with its affiliates, successors and assigns, “Secured Party”).

RECITALS

A.           Debtor and Secured Party have entered into a sale-leaseback transaction with respect to the M/V GREEN BAY, a 199.99 m, U.S.-flag, RO-RO, pure car/truck carrier, U.S. Official Number 1204654 (the “Vessel”), pursuant to the terms of that certain Bareboat Charter Agreement dated of even date herewith between Debtor, as “Charterer”, and Secured Party, as “Owner” (the “Bareboat Charter”).

B.           The Vessel is currently under time charter by Debtor to ******, a stock company organized under the laws of Japan (the “Time Charterer”) pursuant to that certain Time Charter dated June 24, 2010, a true and correct copy of which is attached hereto as Exhibit “A” (as such agreement may be amended, modified, renewed, extended, or supplemented from time to time, the “Time Charter”).

C.           Under the terms of the Bareboat Charter, Debtor has collaterally assigned to Secured Party and granted a security interest in favor of Secured Party in, among other Collateral, all existing and future charter, operating or management agreements entered into by Debtor covering the charter, lease, management, use or operation of the Vessel, and all charter hire, freights, subfreights, demurrage, salvage or requisition awards and recoveries, recoveries in general average, and other accounts and general intangibles related to such agreements or otherwise arising out of the management, use or operation of the Vessel, whether now owned or hereafter acquired by Debtor, in order to secure the prompt payment and performance of all obligations, liabilities and indebtedness of Debtor to Secured Party arising under or in connection with the Bareboat Charter and the Charter Documents related thereto.

D.           As a condition precedent to consummation of the sale-leaseback transaction, Debtor has agreed to enter into this Agreement for the purpose of further confirming the security interest in the Time Charter and related Collateral granted by Debtor in favor of Secured Party under the Bareboat Charter.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and obligations contained herein, and intending to be legally bound, the parties do hereby agree as follows:

1.           Assignment and Grant of Security Interest.

As security for the prompt payment and performance of all obligations, liabilities and indebtedness of Debtor to Secured Party arising under or in connection with the Bareboat Charter and the Charter Documents related thereto (as such agreements may be extended, renewed, restated, amended or supplemented), of every nature and description, whether now existing or hereafter arising, due or to become due, including without limitation, and individually, collectively and interchangeably, (a) the payment of all charter hire, stipulated loss value payments, termination payments, liquidated damages, purchase option payments payable by Debtor under the Bareboat Charter, and (b) all additional fees, Attorneys’ Fees, late charges, premiums of insurance, taxes, assessments, expenses, costs, reimbursements, indemnities and other sums payable by Debtor under the Charter Documents, whether such obligations, liabilities and indebtedness are absolute or contingent, liquidated or unliquidated, owed individually or jointly, severally or jointly and severally with others, as a principal obligor or as a surety (all of the foregoing, hereinafter, collectively, the “Secured Obligations”), Debtor hereby sells, assigns, pledges, transfers and sets over unto Secured Party and hereby grants to Secured Party a security interest in and lien upon the following described personal property (whether now existing and owned by Debtor or hereafter arising or acquired by Debtor) and in the proceeds (including cash proceeds, insurance proceeds and proceeds of proceeds) of such property in any form (hereinafter collectively referred to as the “Assigned Property”):

(a)           All of Debtor’s right, title and interest in and to the Time Charter, and all supporting obligations related thereto;

(b)           All of Debtor’s right, title and interest in and to all accounts and payment intangibles now or hereafter due under the Time Charter, including, without limitation, all charter hire, earnings, freights, subfreights, demurrage, salvage or requisition awards and recoveries, recoveries in general average, and other claims for money, distributions, indemnities, losses or damages (including liquidated damages), arising out of or related to the Time Charter, to the present or future use, operation or management of the Vessel pursuant to the Time Charter, or to any breach thereof;

(c)           All of Debtor’s right, title and interest in and to all other general intangibles now or hereafter arising under the Time Charter, or out of the present or future use, operation or management of the Vessel pursuant to the Time Charter; and

(d)           Debtor’s interest in all insurance policies relating to the Vessel provided under or in connection with the Time Charter, and Debtor’s interest in all proceeds thereof and payments thereunder.

2.           Representation and Warranties of Debtor.

Debtor represents warrants that: (a) the Time Charter is genuine and enforceable in accordance with its terms against the Time Charterer and any other obligors thereunder (subject to any applicable bankruptcy, insolvency or similar laws); (b) the Time Charter and all charter hire and other accounts and general intangibles arising thereunder are free and clear of all security interests, liens or other encumbrances except those in favor of Secured Party; (c) as of the date hereof, neither the Time Charterer nor any other obligor with respect to any Assigned Property (each such obligor under the Assigned Property, including the Time Charterer, hereinafter, sometimes, the “Account Debtor”) has any defense, set-off, claim or counterclaim which can be asserted against Debtor or the Vessel, whether in any proceeding to enforce the Assigned Property or otherwise; (d) Debtor is authorized to enter into this Agreement and was authorized to enter into the Time Charter; (e) Debtor is engaged in business operations which are carried on at the address specified above, and Debtor’s records concerning the Assigned Property are kept at the address specified above; (f)  the Time Charter, in the form submitted to Secured Party and attached hereto as Exhibit “A”, represents the entire agreement of Debtor and the Time Charterer with respect to its subject matter, has not been amended, modified, or supplemented, and remains in full force and effect; (g) no event has occurred which is a default or an event of default, or with the passing of time or the giving of notice or both would be a default or an event of default, under the Time Charter; (h) the Time Charterer has not notified Debtor of its intent to terminate the Time Charter; and (i) as of the date hereof, Debtor does not anticipate the termination of the Time Charter prior to the stated expiration date of that agreement in the foreseeable future for any reason.

3.           Covenants of Debtor.

Debtor agrees that it: (a) will defend the Assigned Property against the claims and demands of all other parties, including, without limitation, defenses, set-offs, claims and counterclaims asserted by the Time Charterer or any other Account Debtor against Debtor, the Vessel or Secured Party; (b) will keep the Assigned Property free of all security interests or other liens, mortgages or encumbrances, except those in favor of Secured Party, and will not sell, transfer, assign, pledge, grant a security interest in or otherwise dispose of any Assigned Property or any interest therein, without the prior written consent of Secured Party (and Debtor will, at Secured Party’s request, mark all or any Assigned Property and/or records related thereto to indicate the interests of Secured Party); (c) will notify Secured Party promptly in writing of any change in the address specified above at which records concerning the Assigned Property are kept; (d) will notify Secured Party immediately of any default by Time Charterer or any other Account Debtor in payment or other performance of its obligations with respect to any Assigned Property; (e) without Secured Party’s prior written consent, will not make or agree to make any alteration, modification, termination, cancellation of, or substitution for, or credits, discounts, adjustments, offsets or allowances on, the Time Charter or any other Assigned Property; and (f) in connection herewith, will execute and deliver to Secured Party such assignments, notices and other documents, pay all costs of title searches and filing financing statements, assignments and other documents in all public offices requested by Secured Party, and do such other things as Secured Party may reasonably request.

4.           Notification and Payments.

Debtor agrees to provide notice to the Time Charterer of the collateral assignment of the Time Charter and of Debtor’s rights thereunder by Debtor to Secured Party in the form attached hereto as Exhibit “B” and to obtain: (a) the agreement of the Time Charterer that, after receiving notice from Secured Party that an Event of Default has occurred and is continuing, it will pay over to Secured Party, when and as directed by Secured Party, all sums due and subsequently to become due from the Time Charterer under the terms of the Time Charter in good and indefeasible funds without defense or offset; (b) the acknowledgment of the Time Charterer that all of its right, title and interest in and to the Vessel arising under or in connection with the Time Charter is subject and subordinate to the rights of Secured Party under the Bareboat Charter; and (c) the agreement of the Time Charterer to forebear from the enforcement of any lien against the Vessel arising in favor of the Time Charterer pursuant to the Time Charter or by operation of law so long as the Bareboat Charter remains in effect and any Secured Obligations remain outstanding; provided that the foregoing is without prejudice to any rights which the Time Charterer may have under the Time Charter including but not limited to the right to make deductions from the payment of charter hire to the extent of claims which the Time Charterer may have against Debtor or the Vessel to the extent permitted pursuant to the terms of the Time Charter.  Debtor acknowledges and agrees that, following the occurrence and during the continuance of an Event of Default, Secured Party may direct the Time Charterer or any other Account Debtors to make all payments on or in respect to the Assigned Property to Secured Party.  All payments on, and other proceeds from Assigned Property (including cash proceeds, insurance proceeds and proceeds of proceeds) received by Secured Party directly or from Debtor shall be applied against the Secured Obligations in such order as may be provided in the Charter Documents.

5.           Default.

(a)           Any of the following events shall constitute an event of default hereunder (herein referred to as an “Event of Default”): (i) the occurrence of an “Event of Default” as that term is defined in the Bareboat Charter or any of the other Charter Documents related thereto; (ii) should any representation or warranty made or deemed made by Debtor in this Agreement or in any certificate, report, notice, or financial statement furnished at any time in connection with this Agreement be false, misleading, or erroneous in any material respect when made or deemed to have been made; and (iii) should Debtor default in the performance of any obligation, covenant, term or condition of this Agreement.

(b)           Upon the occurrence and during the continuance of any Event of Default, Secured Party shall have and may exercise all rights and remedies which may be available to it hereunder, under any of the Charter Documents or otherwise under applicable law, including all rights and remedies of a “secured party” under the Uniform Commercial Code as in force in any applicable jurisdiction (the “Uniform Commercial Code”).

(c)           Without in any way requiring notice to be given in the following manner, Debtor agrees that any notice by Secured Party of sale, disposition or other intended action hereunder or in connection herewith, whether required by the Uniform Commercial Code or otherwise, shall constitute reasonable notice to Debtor if such notice is mailed by regular or certified mail, postage prepaid, at least fifteen (15) days prior to such action, to Debtor at Debtor’s address specified above or to any other address to which notices hereunder shall be given to Debtor under the Charter Documents, and to Time Charterer at the notice address provided in the Time Charter.

(d)           Debtor agrees to pay, on demand, all costs and expenses incurred by Secured Party in enforcing this Agreement, in realizing upon any Assigned Property and in enforcing and collecting any indebtedness, including, without limitation, if Secured Party retains counsel for any such purpose, reasonable Attorneys’ Fees.  Any amounts not paid when due shall bear interest at the Default Rate.

(e)           Upon the occurrence and during the continuance of an Event of Default, Secured Party may demand, collect and sue on the Assigned Property (in either Debtor’s or Secured Party’s name at the latter’s option) with the right to enforce, compromise, settle or discharge the Assigned Property, and may indorse Debtor’s name on any and all checks, commercial paper and any other instruments pertaining to the Assigned Property.

6.           Miscellaneous.

(a)           In order to perfect, reperfect or to prevent a lapsing of perfecting of any security interest, Debtor hereby authorizes Secured Party, at Debtor’s expense, to file this Agreement and/or such financing statement or statements or other instruments, documents or affidavits, or copies thereof, relating to the Assigned Property, without Debtor’s signature thereon as Secured Party at its option may deem appropriate, and appoints Secured Party as Debtor’s attorney-in-fact to execute any such copy of this Agreement and/or any such financing statement or statements or other instruments, documents or affidavits in Debtor’s name and to perform all other acts which Secured Party deems appropriate.

(b)           Debtor does hereby irrevocably constitute and appoint Secured Party its true and lawful attorney with full power of substitution, for it and in its name, place and stead, to ask, demand, collect, receive, receipt for, sue for, compound and give acquittance for any and all money, claims, distributions, proceeds, accounts, general intangibles (including payment intangibles) and other sums which are assigned under this Agreement with full power to settle, adjust or compromise any claim thereunder as fully as the Debtor could itself do, and to endorse the name of the Debtor on all commercial paper given inpayment or in part payment thereof, and in its discretion to file any claim or take any other action or proceedings, either in its own name or in the name of the Debtor, or otherwise, which Secured Party may deem necessary or appropriate to collect any and all sums which may be or become due or payable under the Time Charter or any other Assigned Property, or which may be necessary or appropriate to protect and preserve the right, title and interest of Secured Party in and to the Assigned Property.

(c)           Upon Debtor’s failure to perform any of its duties under the Time Charter or with respect to any Assigned Property, and if an Event of Default shall have occurred and be continuing, Secured Party may, but shall not be obligated to, perform any or all such duties either directly or through any agents or other representatives appointed by Secured Party.  The amount of Secured Party’s expense in connection with any such performance shall be an additional obligation of Debtor under the Charter Documents, and Debtor shall pay such amount to Secured Party, together with interest at the Default Rate, forthwith upon written demand by Secured Party.

(d)           No delay or omission by Secured Party in exercising any right or remedy hereunder or under the Bareboat Charter or any other Charter Documents, or with respect to the Time Charter or other Assigned Property, shall operate as a waiver thereof or of any other right or remedy, and no single or partial exercise thereof shall preclude any other or further exercise of any other right or remedy.  Secured Party may remedy any default by Debtor hereunder or with respect to the Secured Obligations in any reasonable manner without waiving the default by Debtor.  All rights and remedies of Secured Party hereunder are cumulative.

(e)           Secured Party shall have no obligation to take, and Debtor shall have the sole responsibility for taking, any and all steps to preserve rights against any and all prior parties to any instrument constituting Assigned Property whether or not in Secured Party’s possession.  Secured Party shall not be responsible to Debtor for any loss or damage which may result from Secured Party’s failure to enforce any Assigned Property or to collect any monies due or to become due thereunder, or other proceeds (including cash proceeds, insurance proceeds and proceeds of proceeds) constituting Assigned Property hereunder except in the case of Secured Party’s gross negligence or willful misconduct.  Debtor waives protest of any instrument constituting Assigned Property at any time held by Secured Party on which Debtor is in any way liable.  It is expressly agreed that anything herein contained to the contrary notwithstanding, the Debtor shall remain liable to perform the Time Charter and all other contracts with respect to the Vessel, and the Secured Party shall have no obligation or liabilities under such contracts to the Time Charterer or to any other Person whatsoever, nor shall the Secured Party be required or obligated in any manner to perform any obligations of the Debtor under or pursuant to such contracts, or to take any action with respect thereto, whether such action be authorized by the terms of this Agreement or otherwise.

(f)           The rights and benefits of Secured Party hereunder shall inure to any successor or assignee of Secured Party.  This Agreement may not be assigned by Debtor without the prior written consent of Secured Party.

(g)           The terms “Secured Party” and “Debtor” as used herein shall include the successors and permitted assigns of those parties.

(h)           Notices hereunder shall be given in the same manner, and when given shall have the same effect, as provided in the Bareboat Charter.

(i)           No modification, rescission, waiver, release or amendment of any provision of this Agreement shall be made except by a written agreement signed by the party to be bound.

(j)           All capitalized terms used herein without definition, but defined in the Bareboat Charter, shall have meanings given to such terms in that agreement.

{N2493079.1}                                                                     

(k)           THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA, TO THE EXTENT APPLICABLE, AND OTHERWISE IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAW PRINCIPLES.

[Signature Page Follows]

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

Debtor:

WATERMAN STEAMSHIP CORPORATION

By:           /s/ D. B. Drake

Name:                      D. B. Drake

Title:            Vice President and Treasurer

Accepted by and agreed to:

Secured Party:

WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,

as Trustee of the The Green Bay Vessel Trust

By:           /s/ Jon Croasmun                                                      

Name:                      Jon Croasmun

Title:           Vice President

Date:  February 22, 2012

EX-10.18

The portion of this Exhibit 10.18 marked “******” has been omitted and confidentially filed with the Securities and Exchange Commission pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.

Bareboat Charter Agreement

THIS BAREBOAT CHARTER AGREEMENT (hereinafter “Charter”) is made and entered into to be effective as of the 22nd day of February, 2012, between WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association organized under the laws of the United States of America, with offices at 299 South Main Street, 12th Floor, Salt Lake City, Utah 84111, not in its individual capacity, but solely as the Trustee of The Green Bay Vessel Trust (hereinafter, together with its successors and assigns, “Owner”), and WATERMAN STEAMSHIP CORPORATION, a corporation organized under the laws of New York, with offices at 11 North Water St., Suite 18290, Mobile, Alabama 36602 (hereinafter “Charterer”).

WITNESSETH

For the consideration set forth herein, and upon the terms and conditions hereinafter described, Owner hereby lets and demises to Charterer, and Charterer hereby hires and charters from Owner, the following vessel on a bareboat basis:

VESSEL NAME	OFFICIAL NO.	IMO NO.	HAILING PORT
GREEN BAY	1204654	9339818	Mobile, Alabama

together with all engines, boilers, machinery, masts, boats, anchors, cables, chains, rigging, tackle, apparel, furniture, winches, capstans, outfit, tools, pumps, gears, furnishings, appliances, fittings, navigation and communications equipment, computers, stores, spare and replacement parts, and all other appurtenances thereto appertaining or belonging, and all inventory and equipment related thereto, whether now owned or hereafter acquired, whether on board or not on board, and also any and all additions, improvements and replacements thereto, or any part thereof (hereinafter, collectively, the “Vessel”).  For the purposes of this Charter, the cost of the Vessel to Owner (“Capitalized Owner’s Cost”) is FIFTY-NINE MILLION AND NO/100 U.S. Dollars ($59,000,000.00).

Terms and Conditions

1.Term.  This Charter shall become effective upon execution by Owner and Charterer. The term of this Charter shall be deemed to commence upon execution by Charterer of a Delivery and Acceptance Certificate (the date of such Delivery and Acceptance Certificate, the “Commencement Date”), and if the Commencement Date is prior to March 1, 2012, to continue for an interim period (the “Interim Period”) beginning on the Commencement Date and continuing through February 29, 2012, followed by a base term (the “Base Term”) of one hundred twenty (120) consecutive months commencing on March 1, 2012 and continuing through February 28, 2022.

2.Charter Hire; Non-Abatement; Payment.

(a)In consideration of the lease or charter of the Vessel, during the Base Term, Charterer agrees to pay one hundred twenty (120) successive installments of charter hire, monthly, in advance, commencing on March 1, 2012 and continuing on the first day of each month thereafter through February 1, 2022 (each scheduled payment date, hereinafter, a “Charter Hire Installment Date”).  Subject any adjustment required under Section 23(b), each installment of charter hire shall be in the amount of $464,296.63 (0.786943% of Capitalized Owner’s Cost).

(b)This Charter constitutes a non-cancelable contract of bareboat charter, subject only to the termination provisions of Section 11(b), and the Early Buy-Out Options granted in Section 27 (provided, however, that nothing contained in this sentence or any other provisions hereof shall be interpreted or construed to limit the rights of the Owner to terminate this Charter under Section 20).  Charterer’s obligation to pay charter hire hereunder shall be absolute, unconditional and not subject to any abatement, reduction, set-off, defense, counterclaim or recoupment for any reason whatsoever other than as provided in Sections 11(b) or 27(a) of this Charter.  Charterer hereby waives, to the extent permitted by applicable law, any and all rights that it may now have or that at any time hereafter may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Charter except in accordance with the express terms hereof.  Each payment of charter hire made by Charterer shall be final, and Charterer will not seek or have any right to recover all or any part of such payment from Owner for any reason whatsoever, other than manifest error.

(c)All installments of charter hire payable hereunder: (i) shall be paid to Owner by automatic funds withdrawal (ACH) from Charterer’s Account No. 0114791129 maintained at Regions Bank, Mobile Alabama (the “Debit Account”) on each Charter Hire Installment Date (or if the applicable Charter Hire Installment Date is not a Business Day, on the Business Day immediately preceding the applicable Charter Hire Installment Date), or by such other method and at such location as Owner may specify by written notice to Charterer, (ii) shall be paid without notice or demand, and (iii) shall be deemed earned on the Commencement Date, and on the initial date of each successive period (if any) that the Term of the Charter may be extended.  Contemporaneously with the payment of each installment of charter hire, Charterer shall pay the amount of any applicable sales/use or rental taxes with respect to such installment. Charterer agrees to execute and deliver to Owner such forms and other documents and agreements as may be customarily required by the Bank to implement the ACH payment arrangement required in clause (i) above.

(d)For any installment of charter hire that is not paid within ten (10) days after the date that such installment is due, Charterer agrees to pay to Owner a late charge equal to five percent (5%) of such overdue amount.  Payments received thereafter shall be applied first to delinquent amounts due, including late charges, then to current installments of charter hire.  Charterer agrees that: (i) the amount of such late charge represents a reasonable estimate of the cost that Owner and Participants would incur in processing each delinquent payment by Owner and Participants and that such late charge shall be paid as liquidated damages for each delinquent payment; and (ii) the payment of late charges and the payment of interest at the Default Rate are distinct and separate from one another.  Acceptance of any late charge or interest shall not constitute a waiver of default with respect to the overdue amount or prevent Owner or any Participant from exercising any other available rights and remedies.

3.Title; Instruments and Assurances; Quiet Enjoyment.

(a)Charterer and Owner intend that the charter of the Vessel pursuant to this Charter shall be a true lease and not a conditional sale of the Vessel.  Title to the Vessel shall remain in Owner exclusively throughout the Term of this Charter.  Charterer shall keep the Vessel free from all Liens (other than Permitted Maritime Liens), and shall, at its expense, defend and indemnify Owner against such Liens or other adverse claims of title (other than those imposed or otherwise created by, through or under Owner).  Charterer authorizes Owner to file UCC-1, Financing Statements, describing the Vessel and the additional property described in Section 23, as well as any amendments thereto, or continuations thereof, in any appropriate jurisdiction as determined by Owner, all without the signature of Charterer.  Charterer shall execute and/or furnish to Owner any further instruments and assurances reasonably requested from time to time by Owner to protect Owner’s interest in the Vessel, including, without limitation, a Memorandum of Charter, to be filed in any appropriate jurisdiction and with any appropriate filing officer at Charterer’s expense.

(b)Owner covenants and agrees that, so long as no Event of Default shall have occurred hereunder and be continuing, Charterer shall have exclusive possession, control, use and quiet enjoyment of the Vessel during the Term, subject to the terms and conditions of this Charter, without hindrance or molestation by Owner, or any other Person claiming the Vessel by, through or under Owner, or as a result of acts or omissions of Owner.

4.Licenses; Operational Certificates.  Throughout the Term, the Vessel shall be documented, with a registry trade endorsement, at the sole expense of Charterer, under a Certificate of Documentation issued in the name of Owner by the United States Coast Guard, National Vessel Documentation Center (“NVDC”).  Charterer agrees to execute all documents, and to provide all reasonable assistance to Owner, that may be required to maintain documentation of the Vessel as a U.S.-flagged vessel throughout the Term.  In addition, Charterer shall at all times during the Term obtain and maintain all additional U.S. Coast Guard registrations, certificates, licenses and permits applicable to the Vessel and its operations that may be required under Applicable Law, including, without limitation, all Certificates of Inspection, Load Line Certificates and other required safety, load line and classification society surveys and inspections, and any Certificate of Financial Responsibility as required by 33 C.F.R. Part 138.  Charterer warrants that as of the date of this Charter both Charterer and the Vessel are in compliance with the ISM and ISPS Codes in all material respects, and Charterer agrees to procure and maintain throughout the Term all ISM Code Documentation and all ISPS Code Documentation and otherwise to maintain compliance with the ISM and ISPS Codes. Charterer further warrants that the Vessel currently holds the classifications of A-1 Vehicle Carrier, AMS and ACCU issued by the American Bureau of Shipping and Charterer agrees to maintain those classifications (or comparable classifications issued by any replacement classification society selected by Charterer and approved by Owner, which approval shall not be unreasonably withheld or delayed, to which the Vessel becomes subject during the Term) in force, without exception, throughout the Term.  Charterer shall furnish to Owner copies of all Certificates of Inspection issued by the United States Coast Guard, all Load Line Certificates and all Classification Certificates issued by any classification society promptly upon issuance.

5.Location of Vessel and Related Records, etc.  The Vessel has been delivered to, and accepted by Charterer, AS IS, where she is located on the Commencement Date.  Unless the Charterer otherwise notifies the Owner pursuant to the penultimate sentence of this Section, (a) the hailing port of the Vessel shall remain as Mobile, Alabama during the Term of this Charter, and (b) all records with respect to the Vessel (other than those required under Applicable Law to be maintained aboard the Vessel) will be maintained at the address of Charterer stated in the preamble above.  Charterer shall give prior written notice to Owner of any change in the home port or the location of the office of Charterer where the records pertaining to the Vessel are maintained.  From time to time, upon Owner’s reasonable request, Charterer will advise Owner of the current location of the Vessel and scheduled ports of call.

6.Limitation of Liability; Exclusion of Warranties.

(a)Neither Owner nor any Participant shall be liable to Charterer, whether under contract, tort (including negligence or strict liability), or otherwise, for any indirect, special or consequential damages of any nature whatsoever arising out of the demise of the Vessel pursuant to this Charter, the breach of this Charter, or out of the condition, use, operation or maintenance of the Vessel, including, but not limited to, any liability for personal injury, death, property damage, pollution or any other indirect, special or consequential damages or loss arising out of any defects in, failures, or malfunctions of the Vessel or any of the appurtenances thereof.

(b)CHARTERER ACKNOWLEDGES THAT NEITHER OWNER NOR ANY PARTICIPANT DEAL IN PROPERTY OF THE KIND SUBJECT TO THIS CHARTER, NOR DOES OWNER OR ANY PARTICIPANT POSSESS OR OTHERWISE BY ITS OCCUPATION HOLD ITSELF OR ITS AGENTS OUT AS HAVING KNOWLEDGE OR SKILL PECULIAR TO THE VESSEL INVOLVED IN THIS TRANSACTION.  CHARTERER ACKNOWLEDGES THAT IT HAS INSPECTED AND IS THOROUGHLY FAMILIAR WITH THE VESSEL AND HER APPURTENANCES AND THAT IT HAS REQUESTED OWNER AND PARTICIPANTS TO CHARTER THE VESSEL TO CHARTERER.  NEITHER OWNER NOR ANY PARTICIPANT MAKES, NOR SHALL OWNER OR ANY PARTICIPANT, BY VIRTUE OF HAVING CHARTERED OR LEASED THE VESSEL TO CHARTERER PURSUANT TO THIS CHARTER, BE DEEMED TO HAVE MADE, ANY REPRESENTATION OR WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO (I) THE CONDITION, MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, CLASSIFICATION, SEAWORTHINESS, CONDITION OR QUALITY OF SUCH VESSEL, HER EQUIPMENT OR APPURTENANCES, OR AS TO THE MATERIAL OR WORKMANSHIP INCORPORATED THEREIN, (II) THE ELIGIBILITY OF THE VESSEL TO ENGAGE IN ANY PARTICULAR TRADE, OR (III) THE ABSENCE OF ANY VICES OR DEFECTS IN THE VESSEL, WHETHER HIDDEN OR OTHERWISE.

(c)By execution of this Charter and Owner’s form of Delivery and Acceptance Certificate, Charterer acknowledges (a) that it has inspected the Vessel at its expense prior to the Commencement Date, or that it has irrevocably waived that right, (b) that the Vessel is satisfactory and suitable for the purposes required by Charterer, is in full compliance with the terms of this Charter, and is, in all respects, seaworthy and in good condition and repair, and (c) the Charterer has irrevocably accepted the Vessel, “AS IS, WHERE IS” on the Commencement Date, and that this Charter and the Delivery and Acceptance Certificate shall constitute conclusive evidence as between Owner and Charterer of the seaworthy condition of the Vessel at the Commencement Date.  Nothing contained in this Section 6(c) or any other Charter Document shall, or shall be interpreted to, release or otherwise limit or impair any claim or right or remedy of Owner or Charterer against the prior owner or the builder of the Vessel or against the manufacturer of any appurtenance incorporated into and forming a component part of the Vessel (to the extent that any such claim, or right or remedy presently exists).

7.Use and Operation.

(a)The Vessel is a RO-RO, pure car/truck carrier and will be used solely in the conduct of Charterer’s business and exclusively for the purpose of performing the lawful carriage of cargoes and related activities within the navigation limits set forth below.  The Vessel shall not be used or operated in any manner contrary, in any material respect, to any applicable law, treaty or convention, or any rule or regulation duly issued thereunder, or in violation, in any material respect, of the terms of any policies of insurance procured by Charterer pursuant to Section 14.  Except for permitted subcharter arrangements or permitted assignments, Charterer shall have exclusive possession and control of the Vessel, and shall crew, supply, navigate and operate the Vessel at Charterer’s sole expense or by Charterer’s own procurement throughout the term of this Charter.  Charterer is an independent contractor and nothing contained in this Charter shall authorize Charterer or any Person to operate the Vessel so as to incur or impose any liability or obligation for or on behalf of Owner.  Charterer warrants that the Vessel will not be navigated or used (i) in the territorial waters claimed by any country included in Country Group E on Supplement No. 1 to Part 740, Title 15, Code of Federal Regulations, as such supplement is modified from time to time, or (ii) outside the navigational limits provided in any policy of insurance issued for the Vessel procured under Section 14.

(b)Charterer shall have the use of all machinery and equipment (including navigational aids, technical equipment, furnishings, furniture, fittings, spare and replacement parts), as well as all technical and operating manuals, drawings, specifications, logs and records, which are on board the Vessel at the time of delivery; and such equipment and other property, or its substantial equivalent, shall be returned to Owner upon redelivery in good order and condition, ordinary wear and tear alone excepted.  Charterer shall, at its sole expense, as needed from time to time during the term of this Charter, replace such items of machinery or equipment as shall be so damaged or worn as to be unfit for use.

(c)Neither Charterer nor any permitted sub-charterer will make any material structural changes to the Vessel (a “Modification”) without the prior written consent of Owner, which consent shall not be unreasonably withheld or delayed.  A structural change to the Vessel is material if such change would:  (1) convert the intended use of the Vessel from a use authorized in this Section; (2) impair the seaworthiness of the Vessel or invalidate any Certificate of Inspection, Load Line Certificate, or class certification issued with respect to the Vessel; or (3) diminish, in any material manner, the value, utility and remaining useful life of the Vessel below the value, utility or remaining useful life thereof immediately prior to such change.  Charterer shall make all Modifications required by any Applicable Law or required by any Governmental Authority or classification society having jurisdiction over the Vessel,provided, however, that Charterer shall not be required to make any Modification if (i) Charterer is contesting such requirement diligently and in good faith by appropriate proceedings, (ii) compliance with such requirement shall have been excused or exempted by a valid nonconforming use permit, waiver, extension or forbearance exempting Charterer from such requirement or governmental action, or (iii) the cost of implementation of such Modification relative to the Stipulated Loss Value of the Vessel has caused Charterer and Owner to deem the Vessel to be a constructive Total Loss under Section 11 of this Charter (and Charterer has made the Total Loss Payment pursuant to the terms of that Section).  All Modifications shall be made at the sole cost and expense of Charterer.  Each Modification shall be deemed to be a part of the Vessel subject to this Charter, and title to each such Modification shall vest in Owner upon completion thereof.

(d)Charterer may, at any time, at its sole cost and expense, alter or remove any items of machinery or equipment, or may fit any additional items of machinery or equipment incidental to, or required to render the Vessel suitable for, any purpose authorized under the provisions of this Section, subject to the obligations of Charterer under subsection (e) of this Section (“Additional Equipment”).  Any Additional Equipment fitted by Charterer shall become the property of Owner if left on the Vessel at re-delivery (but otherwise shall remain the property of Charterer).  Charterer, at its sole cost and expense, shall procure and install any items of machinery or equipment required by any Applicable Law or required by any Governmental Authority or classification society having jurisdiction over the Vessel (“Mandatory Equipment”).  Title to all Mandatory Equipment shall vest in Owner upon installation, and shall be left in place aboard the Vessel, in good condition (ordinary wear and tear excepted), at the time of re-delivery.

(e)At the termination of the lease or charter of the Vessel under this Charter, in connection with the re-delivery of the Vessel pursuant to Section 21, Owner may demand that Charterer (i) replace any equipment originally on board but subsequently removed by Charterer (pursuant to Section 7(d)), (ii) remove any Additional Equipment added by Charterer during the Term (other than Mandatory Equipment), and (iii) restore the Vessel to its condition prior to the removal of said equipment or the fitting of Additional Equipment as applicable (less ordinary wear and tear).  The cost of removal and restoration of the Vessel shall be for the sole account of Charterer.  Should Charterer fail or refuse to replace any equipment removed or to remove any Additional Equipment (other than Mandatory Equipment) at the termination of the lease or charter of the Vessel upon the demand of Owner, Owner shall be permitted to undertake the removal and restoration of the Vessel, and the cost thereof, together with interest at the Default Rate, shall be payable by Charterer upon demand as additional charter hire hereunder.

(f)Charterer shall have the right, at its expense, to change the name of the Vessel, to paint the Vessel in its own colors, and to install and display its stack insignia and to fly its own house flag.

(g)In the event that Charterer determines that the Vessel shall be withdrawn from navigation and laid-up for any period in excess of thirty (30) days during the Term, Charterer agrees that the Vessel shall be moored at a safe berth, free of ice and other obstructions, at such location as may be determined by Charterer, subject to the consent of Ownerwhich shall not be unreasonably withheld, delayed or conditioned.  During any such lay-up period, Charterer shall insure that the Vessel is adequately secured and supervised at all times.  The cost and expense of any lay-up of the Vessel, or of re-activation of the Vessel following the lay-up period, shall be for the sole account of Charterer.

8.Prohibition against Alienation, Liens and Encumbrances.

(a)Except as expressly provided in Section 25 or elsewhere herein, Charterer shall have no right, power or authority to sell, convey, sub-charter, mortgage, grant a security interest in or otherwise transfer the Vessel without the prior written consent of Owner, such consent not to be unreasonably withheld or delayed.

(b)Neither the Charterer, any sub-charterer, nor any other Person has or shall have any right, power or authority to create, incur, assume, suffer to exist or permit to be placed or imposed upon the Vessel any Lien other than the following permitted liens (hereinafter, “Permitted Maritime Liens”):  (i) Liens imposed or otherwise created by, through or under Owner; (ii) Liens for the wages of the crew and for maintenance and cure, (iii) Liens for wages of stevedores when employed directly by Charterer or the master of the Vessel, (iv) Liens for general average or for salvage (including contract salvage), (v) Liens fully covered (less permitted deductibles) by valid policies of insurance held by or otherwise in favor of Charterer and Owner and meeting or exceeding the minimum limits specified in Section 14 below so long as in each case there is no risk of Owner or any Participant incurring any civil or criminal liabilities, (vi) maritime liens which attach to the Vessel by operation of law without further action by the claimant, but only to the extent that such Liens are incurred and paid in the ordinary course of business without undue delay or default, and (vii) such other Liens as may be incurred with the prior written consent of Owner; provided however that no Lien described in this Section shall be a Permitted Maritime Lien which is no longer inchoate or which entails any material risk of the seizure, sale or forfeiture of the Vessel.

(c)If requested by Owner, Charterer will cause a notice reading as follows (or in such other form as Owner may reasonably require from time to time) to be framed and posted on the bridge or in the master’s quarters of the Vessel in a conspicuous place:

NOTICE

This Vessel is the property of and is registered in the name of Wells Fargo Bank Northwest, National Association, not in its individual capacity but as Trustee of the The Green Bay Vessel Trust pursuant to that certain Trust Agreement dated as of February 22, 2012; she is under charter by demise to and operated by WATERMAN STEAMSHIP CORPORATION (“Charterer”).  Under the terms of the Charter, neither the Charterer nor any other person has the right, power or authority to create, incur or permit to exist on this Vessel any lien or encumbrance whatsoever except liens for crew’s wages, salvage and other liens expressly permitted thereunder.  A copy of the Charter is on file at the office of the Charterer, where it may be examined, upon demand, by any person having business with the Vessel.

(d)With respect to any claims and demands of any Person whomsoever arising during the term of this Agreement made against the Owner or the Vessel, the Charterer agrees as follows:

(i)The Charterer shall warrant and defend title to and possession of the Vessel and every part thereof (other than with respect to Liens imposed or otherwise created by, through or under Owner) unless (A) title to the Vessel has been requisitioned or otherwise taken by any government or governmental body, and (B) such requisition or taking constitutes a Total Loss (as defined in Section 11);

(ii)The Charterer shall pay and discharge, and forthwith remove or cause to be removed, any Lien (other than a Permitted Maritime Lien) which shall be filed against or otherwise attach to the Vessel; provided, however, that, subject to subsection (e) of this Section, Charterer need not pay and discharge or remove any Lien that is being contested by the Charterer in good faith by appropriate and diligent legal proceedings, and with respect to which Charterer has posted an appropriate bond with a good and sufficient surety, or has deposited in escrow with Owner cash in the amount claimed by the holder of such Lien, or has established reserves on its books in an amount satisfactory to the Owner in its good faith discretion to secure the payment thereof.

(e)Notwithstanding the foregoing provisions of this Section 8, if a libel shall be filed against the Vessel, or if the Vessel shall be seized, arrested, levied upon and taken into custody or detained in any proceeding in any court or tribunal or by any government or under color of authority, the Charterer shall forthwith give notice of such arrest and taking or detention to the Owner and (except in connection with any taking or requisition of the title or use of the Vessel by any government or governmental body or the enforcement of a Lien claimed by any Person claiming the same by, through or under Owner) file a claim or other applicable pleadings to defend the Vessel within ten (10) days from the date of Charterer’s receipt of notice of any such seizure, arrest or detention, and secure the release of the Vessel from such seizure, arrest or detention within thirty (30) days from the date thereof, or within such lesser time as may be necessary to avoid any material prejudice to the interests of Owner and the Participants with respect to the Vessel.  Without limiting Charterer’s obligations under Section 10 of this Charter, Charterer shall hold harmless, defend and indemnify the Owner, the Participants and the Vessel from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, judgments, costs and expenses, including reasonable Attorneys’ Fees, of whatsoever kind and nature, imposed on, incurred by or claimed against Owner, any Participant or the Vessel, in any way relating to or arising out of the assertion of a Lien against the Vessel, including, without limitation, a Permitted Maritime Lien (but excluding any Lien claimed by any Person claiming the same by, through or under Owner).

9.Incorporation; U.S. Citizenship; Continuity.

(a)Charterer represents, warrants and covenants as follows:

(i)Charterer is validly constituted and existing as a corporation organized under the laws of the State of New York, and all requisites and authority necessary for Charterer to execute and deliver this Charter and the other Charter Documents, and for Charterer to perform its obligations thereunder, have been obtained.  The execution and performance of this Charter (A) does not conflict with or result in the breach of any provisions of, as applicable, the Articles or Certificate of Incorporation, By-Laws, or other organizational documents of Charterer, or of any material agreement or other material instrument to which the Charterer is a party or by which it is bound (including, without limitation, the Approved Charter or the MSP Contract), or, to its knowledge, any Applicable Law, judgment, order, writ, injunction, decree, rule or regulation of any court, administrative agency or other Governmental Authority or constitute a default under any thereof, and (B) does not require the consent, approval or other authorization of or by any court, administrative agency or other authority or person which has not been obtained.

(ii)Charterer is and shall remain throughout the Term a citizen of the United States within the meaning of Section 2 of the Shipping Act of 1916, as amended (46 U.S.C. §50501).  Charterer shall not permit the sale of any shares of its capital stock to Persons who fail to qualify as citizens of the United States if such “non-citizen” ownership would adversely affect Charterer’s status as a citizen of the United States under such statute, nor shall Charterer permit the Vessel to be put, placed or operated under a foreign flag or documentation without the prior written consent of Owner, or do, or permit any other act to be done, or omission to occur, which might injuriously affect the ability of the Vessel to remain documented and eligible to engage in the registry trade under the laws and regulations of the United States of America or to continue its enrollment in the Maritime Security Fleet pursuant to Chapter 531 of Title 46, United States Code and the MSP Contract.

(iii)Charterer will not and will not permit Guarantor to: (A) except for a Permitted Merger, enter into any merger or consolidation with, or sell or transfer all or substantially all of its assets to, any other Person without the prior written consent of Owner (which consent shall not be unreasonably withheld or delayed), (B) dissolve, liquidate or cease or suspend the conduct of business, or cease to maintain its existence, or (C) enter into or suffer any transaction or series of transactions as a result of which there occurs a Change of Control, without the prior written consent of Owner (which consent shall not unreasonably be withheld or delayed). Throughout the Term, Charterer will conduct its business as presently being conducted, and in compliance with all covenants set forth in this Charter and the other Charter Documents.

(b)Owner represents, warrants and covenants as follows:

(i)The Trust Company is validly constituted and existing as a national association organized under the laws of the United States of America, and all requisites and authority necessary for the Trust Company to execute and deliver this Charter and the other Charter Documents, and for the Trust Company to perform its obligations thereunder, in its capacity as Trustee of the Trust, have been obtained.

(ii)Except as permitted in Section 25(b), Owner shall retain such title to the Vessel as the Charterer transferred to the Owner.

(iii)The Trust Company is and shall remain throughout the Term a citizen of the United States within the meaning of Section 2 of the Shipping Act of 1916, as amended (46 U.S.C. §50501).  The Trust, as Owner hereunder, is a “documentation citizen” within the meaning of 46 U.S.C. §12103, eligible to document the Vessel in its name with a registry endorsement under 46 U.S.C. §12103(b)(2) and 46 U.S.C. §12111(a), and shall remain throughout the Term either a “documentation citizen” under such statutes or a “United States Citizen Trust” within the meaning of 46 U.S.C. §53101, so that the Vessel (A) shall be eligible (at all times during the Term) to be documented with, and operated under, a registry endorsement under the laws of the United States, and (B) satisfy the requirements of 46 U.S.C. §53102(b)(1) with respect to the citizenship of the Trust, as Owner.  Owner shall not permit the Vessel to be put, placed or operated under a foreign flag or documentation without the prior written consent of Charterer, or do, or permit any other act to be done, or omission to occur, which might injuriously affect the ability of the Vessel to engage in the registry trade under the laws of the United States or to be a vessel eligible to be enrolled in the Maritime Security Fleet pursuant to Chapter 531 of Title 46, United States Code.  Owner shall promptly notify Charterer of any breach of the foregoing obligations when it becomes aware of same, and agrees (without limiting any other liability for the failure to comply with this Section 9(b)(iii)) to indemnify Charterer for any reasonable expenses, fines and costs incurred by Charterer as a result of such breach, subject, however, to the limitations of Section 6(a).

10.General Indemnity.  Charterer hereby assumes all liabilities arising out of the design, use, operation, navigation, condition, maintenance and possession of the Vessel during the Term, including, but not limited to, any and all liability for personal injury, death or property damage (including pollution).  Charterer shall hold harmless, defend and indemnify Owner, each Participant, and each of their respective officers, directors, agents, servants, successors and assigns (each, an “Indemnified Person”), from any and all losses, damages, claims, penalties, liabilities and expenses whatsoever (including reasonable Attorneys’ Fees and litigation expenses), arising, either directly or indirectly: (a) out of any default or other breach by Charterer with respect to its obligations hereunder or under any Charter Document related hereto, (b) out of the design of the Vessel, or out of any defects in (including defects of design, material or workmanship) or the unseaworthiness of the Vessel (whether latent or patent), or (c) out of the use, operation, navigation, maintenance or possession of the Vessel by Charterer or any subcharterer during the Term of this Charter, including, but not limited to, any and all losses, damages, claims, penalties, liabilities and expenses (including reasonable Attorneys’ Fees) arising out of, or incurred in connection with, any property damage, pollution (including all remedial and clean-up costs), or the personal injury or death of any Person, whether or not caused by the sole or concurrent negligence or strict liability of an Indemnified Person; provided, however, that Charterer shall not be required to indemnify any Indemnified Person for loss or liability resulting solely from such Indemnified Person’s own gross negligence or willful misconduct, or for any loss or liability relating to the Vessel arising out of acts or events that occur after redelivery of the Vessel in accordance with this Charter; and provided further that any indemnity owed by Charterer to an Indemnified Person under this Section arising out of the design of the Vessel, or out of any defects in or unseaworthiness of the Vessel, shall not include any loss of value or utility of the Vessel due to such defects, unless such defects were caused in whole or in part by a breach by Charterer of its obligations hereunder, including, without limitation, the obligations of Charterer under Sections 7 and 13 of this Charter.

11.Loss or Damage.

(a)During the Term, Charterer shall bear the entire risk of any hijacking, capture, arrest, detention, condemnation, confiscation, requisition, expropriation, seizure, forfeiture or other taking of title to or use of the Vessel or the imposition of any Lien thereon (other than a Lien imposed or otherwise created by, through or under Owner), or any prohibition of use thereof, by any Person or Governmental Authority or by any Person(s) purporting to act on behalf of any Governmental Authority, or any constructive, compromised, agreed or arranged total loss, or any damage, disappearance or loss of the Vessel, including without limitation, any destruction of the Vessel in whole or in part from any reason whatsoever.  Except as provided in subsection (b) of this Section, no loss of or damage to the Vessel, including a Total Loss, shall relieve Charterer from the obligation to pay charter hire or from any other obligation under this Charter or under any Charter Document related hereto.  In the event of the Total Loss of the Vessel, or damage to the Vessel in excess of $500,000.00, Charterer shall notify Owner of such loss or damage within three (3) Business Days following the date that Charterer becomes aware of the Total Loss or the fact that such damage exceeds $500,000.00, and Charterer shall, if the Vessel is not a Total Loss, promptly repair the Vessel in order that the Vessel may be restored to the condition required hereunder.

(b)If the Vessel becomes a Total Loss, then Charterer shall, on the next scheduled Charter Hire Installment Date following the date that the Vessel is determined to be a Total Loss (the “Loss Payment Date”), pay to Owner, in good and indefeasible funds:  (i) the Stipulated Loss Value of the Vessel, plus (ii) all accrued but unpaid charter hire (pro-rated on a daily basis for any partial month) through the Loss Payment Date, and (iii) any additional sums that Charterer may owe to Owner pursuant to this Charter through the Loss Payment Date (together, the “Total Loss Payment”).  The obligation of Charterer to make the Total Loss Payment under the terms of this Section shall apply regardless of (A) the cause of the Total Loss, (B) whether or not the Total Loss is a covered peril under the terms of any insurance effected pursuant to Section 14, (C) the amount of proceeds, if any, payable under any insurance on the Vessel or under any requisition or condemnation award (or the like) on account of the Total Loss, (D) any denial of coverage or reservation of rights of any underwriter with respect to such insurance, or (E) whether or not Owner or any Participant has insurance for its own benefit separate and apart from the insurance to be procured and maintained under the terms of Section 14; provided, however, that in the event that proceeds of insurance procured and maintained under Section 14 or of any requisition or condemnation award (or the like) are payable with respect to the Total Loss, and Charterer is diligently pursuing the collection of such proceeds with reasonable prospect of success, Owner shall, upon Charterer’s written request, extend the Loss Payment Date to afford Charterer a reasonable opportunity to collect the proceeds of such insurance or requisition or condemnation award (or the like), but in no event shall the Loss Payment Date be extended beyond the fourth scheduled Charter Hire Installment Date following the date of the Total Loss.  Upon payment by Charterer of the Total Loss Payment in good and indefeasible funds, this Charter will terminate (other than the indemnity provisions set forth herein which shall survive), and Owner shall transfer to Charterer all of Owner’s right, title and interest in the Vessel on an “AS-IS, WHERE-IS” basis, with all faults, without recourse and without representation or warranty of any kind, express or implied (other than the warranties set forth in Section 27(c)).  The proceeds of any insurance procured and maintained by Charterer under the provisions of Section 14 or of any requisition or condemnation award (or the like) that are received by Owner following the full payment by Charterer of the Total Loss Payment required under this Section shall be promptly paid over to Charterer.

12.Hazardous Substances.  Charterer will not, nor will it permit any sub-charterer of Charterer to, use, generate, transport, store or dispose of, on, in, or about the Vessel, or utilize the Vessel in connection with, or so as to cause, either directly or indirectly, the release or discharge of any Hazardous Substance or Oil, in violation (in any material respect) of any applicable Environmental Laws.  Charterer hereby agrees to indemnify and hold Owner and each Participant harmless from any and all liability arising from the breach of this covenant, and in the event of any release of any Hazardous Substance or Oil in, on, under or about the Vessel during the Term hereof that may result in the imposition of Class II civil penalties or higher, or upon the initiation of any proceeding or inquiry with respect to such a release by any governmental agency or other authority, to notify Owner in writing within five (5) days after the date that Charterer obtains knowledge thereof.

13.Repairs, Maintenance and Inspection.

(a)Charterer (i) shall have full responsibility for maintenance and repair of the Vessel throughout the Term of this Charter, and at its expense and for its account (whether or not any applicable insurance proceeds are adequate for the purpose) will maintain and preserve the Vessel and her equipment in good condition, running order and repair, in accordance with good commercial marine maintenance practice and in accordance with the same standards of maintenance and repair observed by Charterer with respect to vessels of the same kind which it owns, so that the Vessel shall be, insofar as due diligence can make her so, in every respect seaworthy and in good and efficient operating condition, and (ii) shall keep the Vessel in such condition that she complies with all United States laws, treaties, conventions, rules, regulations and class certifications to which she is currently or during the Term becomes subject, or that are otherwise applicable to vessels of the same type, and used in the same trade, as the Vessel (and keep on board the Vessel, when required thereby, valid certificates showing compliance therewith).

(b)Without limiting the requirements of subsection (a) of this Section 13, Charterer shall, at its sole expense, throughout the Term, (i) keep the Vessel in such condition that she continues in class, without exception, under her current classifications as an A-1 Vehicle Carrier, AMS and ACCU issued by the American Bureau of Shipping (or under comparable classifications issued by any replacement classification society selected by Charterer and approved by Owner, which approval shall not be unreasonably withheld or delayed, to which the Vessel becomes subject during the Term), and (ii) maintain the Vessel in such condition as required to permit the continuation of any Coast Guard Certificates of Inspection and Load Line Certificates for the Vessel in force, without exception, should she be required to be inspected or to be assigned a load line under Applicable Law at any time during the Term.

(c)Charterer will not make, or permit to be made, any material change in the structure, or any change in the type or speed, of the Vessel without receiving Owner’s prior written approval as provided in clause (c) of Section 7.

(d)Charterer shall dry-dock the Vessel at its expense in accordance with good commercial practice, but at intervals not less than as may be required by the rules, standards, applicable regulations and/or any relevant laws of any applicable classification societies, the United States Coast Guard or any other Governmental Authorities having jurisdiction over the Vessel.  Notwithstanding any provision to the contrary, Charterer shall ensure that the Vessel shall have been dry-docked within six (6) months prior to redelivery.  Charterer shall give Owner not less than seven (7) days prior notice of any scheduled maintenance dry-docking of the Vessel, as well as any dry-docking to be made in connection with repairs in excess of $500,000.00, such notice to specify the intended time and place of dry-docking.  The costs and expenses of dry-dockings shall be paid for by Charterer.

(e)Charterer shall promptly repair any damage to the Vessel following a casualty or other occurrence (unless the Vessel has become a Total Loss as a result of such casualty) in order to restore the Vessel to the condition required hereunder.

(f)Owner shall bear no liability or expense whatsoever for the maintenance or repair of the Vessel, or for the replacement of any equipment, parts, or machinery during the Term of this Charter.  Owner shall have the right, at any time, on reasonable notice, and at its own risk and expense, to inspect the Vessel, and Charterer’s records with respect thereto, in order to ascertain whether the Vessel is being properly repaired and maintained; provided, however, that,such inspections shall be conducted at a time and in a manner so as not materially to interfere with the operations of Charterer.  Copies of any and all survey reports made with respect to the Vessel, irrespective of by whom made, shall be forwarded to the Owner upon request.

(g)Notwithstanding anything contained herein to the contrary and to the extent permitted by law and contract, during the Term hereof, Owner will pass through without representation to Charterer the benefit of all warranties (and covenants to the extent relating to the construction of the Vessel), if any, of the builder of the Vessel and the manufacturers of any components thereof, and so long as no Event of Default hereunder has occurred and is continuing, Charterer will have the right to, and will, directly avail itself of all warranties and covenants made by the builder and any such manufacturer with respect to the Vessel and her components.  In the event Charterer purchases the Vessel as provided herein, all such warranties and covenants will pass to Charterer with title to the Vessel.  Charterer will give Owner notice of any claim made by Charterer against the builder of the Vessel or the manufacturers of any equipment and components and any cash settlement of any such claim will be payable solely to Charterer and applied solely to the repair and restoration of the Vessel to the condition required hereunder (and otherwise to improve the Vessel).

14.Insurance.

(a)Throughout the Term, Charterer shall, at its own expense, and at no cost to Owner or any Participant, procure and maintain, or otherwise cause to be procured and maintained, in full force and effect the following insurance with respect to the Vessel:

(i)Marine Risks Insurance (in form reasonably satisfactory to the Owner and Participants) covering the physical loss of or damage to the Vessel by fire and other usual marine perils and collision liability, including coverage for hull and machinery risks, war and terrorism risks, and strikes, riots and civil commotion, with a stipulated agreed value in an amount not less than the greater of Capitalized Owner’s Cost or the Fair Market Value of the Vessel.  Such insurance shall include navigation limits adequate for the Vessel’s trade.

(ii)Unless otherwise covered by Protection and Indemnity Insurance, cargo legal liability insurance coverage sufficient to protect against physical loss or damage to cargo on board, in transit, in store and/or overboard.

(iii)Unless otherwise covered by Protection and Indemnity Insurance, pollution liability and clean-up insurance, on the WQIS Form or its equivalent, with limits per occurrence of not less than the greater of the limits of liability under the Oil Pollution Act of 1990, 33 U.S.C. §2701, et seq., and the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §9601, et seq., as each is amended from time to time, or $1,000,000,000.00.

(iv)Protection and Indemnity insurance in one or more layers covering such risks and in such amounts as is provided from time to time by member clubs of the International Group of P&I Clubs and as customarily maintained by Charterer (including, without limitation, personal injury and death, collision, war risks, contractual liability, pollution liability and wreck removal) but in no event shall the aggregate limits of such coverage be less than the greater of the Fair Market Value of the Vessel or such amounts as are in the opinion of the Insurance Broker, as expressed in the most recent opinion furnished pursuant to Section 14(c), advisable for protection of the interests of Owner (except that the aggregate limits for pollution coverage shall be not less than the limits stated in clause (iii) above).

(v)Innocent Owner’s Breach of Warranty Insurance issued under policy forms reasonably satisfactory to Owner and Participants with limits of not less than the Stipulated Loss Value of the Vessel.

All policies of insurance procured by Charterer under this Section shall be placed and kept with American, British or other insurance companies or underwriters’ associations approved by Owner (which approval shall not be unreasonably withheld or delayed) and which have an A.M. Best rating of B+ or higher or with a P&I club which is a member of the International Group of P&I Clubs.  All insurance required herein shall name Owner as an additional insured, as its interest may appear (except that Owner shall be included as a joint entrant with respect to the protection and indemnity insurance coverage procured for the Vessel), and shall be payable as provided in subsections (e) and (f) below, as applicable.  All policies shall further provide that the insurer’s right of subrogation against the Owner and the Participants are waived, and that such policies are primary to and without right of contribution from any other insurance which is carried by the Owner or any Participant.  No policy shall have a deductible in an amount greater than the deductibles applying to the Charterer’s fleet of vessels as a whole; provided, however, that in no event shall any deductibles with respect to the Vessel be greater than an amount approved by the Owner (such approval not to be unreasonably withheld or delayed).

(b)Charterer shall not navigate the Vessel outside the navigation limits of any policy of insurance covering the Vessel, unless, prior to any such navigation, Charterer procures an endorsement to the policies obtained hereunder authorizing such navigation.  Prior to, and as a condition to any consent by Owner under Section 7(a) for, any navigation of the Vessel beyond the navigation limits stated in that Section, Charterer shall procure such additional insurance with such limits as may be reasonably required by Owner.

(c)Charterer shall furnish, or cause to be furnished, to Owner and Participants on the Commencement Date, and not later than February 1 of each year thereafter throughout the Term, a detailed report, signed by Marsh Ltd. or another insurance broker designated by Charterer and reasonably satisfactory to Owner (the “Insurance Broker”), describing in detail the insurance carried on or with respect to the Vessel and the operation thereof and stating in effect that such insurance complies in all respects with the requirements of this Section 14.  Each such report shall state that, in the opinion of the Insurance Broker, based upon its experience in the insurance industry and its examination of information available to it concerning insurance carried by shipowners and managing agents that it considers to be prudent and generally recognized as being among the best in operating and maintaining vessels similar to the Vessel and engaged in similar trades, the liability insurance required under clauses (iii) and (iv) of subsection (a) of this Section as then in force is against such respective risks and in such respective forms, and the respective limits of such insurance are not less than such amounts, as are advisable for the protection of the interests of Owner and Participants, and that, in the opinion of the Insurance Broker, all insurance carried pursuant to subsection (a) of this Section is placed with satisfactory insurance companies, associations, clubs or underwriting funds.  In addition, Charterer shall cause the Insurance Broker on the Commencement Date (and upon replacement of the Insurance Broker during the Term) to furnish a written undertaking in favor of Owner throughout the Term (i) to advise Owner promptly of any default in the payment of any premiums, commissions, deductibles, club calls, assessments, advances or other sums (whether for new insurance or for insurance replacing, renewing or extending existing insurance), as well as of any other act, omission or circumstance of which the broker has knowledge and that in its judgment (A) might invalidate or render unenforceable, or cause the cancellation or lapse or prevent the renewal or extension of, in whole or in part, any insurance carried pursuant to subsection (a) of this Section 14, (B) has resulted or might result in any material modification of the terms of any such insurance, or (C) has resulted or might result in any such insurance not being in compliance with the requirements of this Section, and (ii) to furnish Owner from time to time, upon request, detailed information with respect to any of the insurance carried on or with respect to the Vessel or the operation thereof.

(d)Charterer shall not do any act, nor voluntarily suffer or permit any act to be done, whereby any insurance required by this Section shall or may be suspended, impaired or defeated, or suffer or permit the Vessel to engage in any voyage not permitted under the policies of insurance then in effect without first procuring insurance satisfactory to Owner in all respects for such voyage.

(e)All marine risks, war risks and other physical loss or damage coverages required under this Section shall name Owner and Charterer as loss payees, and shall provide that all policy proceeds shall be disbursed directly to Owner; provided, however, that such policies may provide that, unless notice of an Event of Default hereunder has been received by the applicable insurance broker or underwriter, and such Event of Default is continuing, proceeds payable on account of damage to the Vessel (but not on account of a Total Loss), up to an aggregate of $500,000.00, may be disbursed directly by the underwriters to Persons who have performed sue and labor, salvage, repairs and other services in connection with the repair of the Vessel or to Charterer in reimbursement for the cost of such services previously paid by Charterer. All proceeds of physical loss or damage coverages required under this Section and received by Owner shall be disbursed by Owner (after payment of commissions and other costs of collection of such proceeds) as follows:

(i)In the event of damage to the Vessel that does not result in a Total Loss (A) provided that an Event of Default is not then continuing, net policy proceeds shall be applied to pay for repairs, salvage, sue and labor and other charges with respect to the Vessel (including, but not limited to, reimbursing the Charterer for any sums expended by the Charterer in repairing any damage to the Vessel not consisting of a Total Loss), or (B) if an Event of Default is then continuing, net policy proceeds shall, at Owner’s sole option and in Owner’s discretion, either be applied against the outstanding balance of Charterer’s obligations under this Charterer (in such order as Owner may select) or to pay for repairs, salvage, sue and labor and other charges as provided in clause A of this subsection; or

(ii)In the event of the Total Loss of the Vessel, the net policy proceeds shall be applied firstto the payment of the Total Loss Payment with respect to the Vessel, with the balance of such proceeds, if any, being paid to Charterer.

If an event shall have occurred that, with the passage of time and the failure of Charterer to cure, would become an Event of Default hereunder, then the proceeds of all physical loss or damage coverages required under this Section and received by Owner shall be held (pending disbursement pursuant to the immediately succeeding sentence) by the Owner in a blocked cash collateral account in the sole control of the Owner.  If such event becomes an Event of Default, such proceeds shall be applied pursuant to the above provisions that apply if an Event of Default is then continuing; if such event does not become an Event of Default, such proceeds shall be applied (assuming there is no Event of Default of any type then existing) pursuant to the above provisions that apply if an Event of Default is not continuing.

(f)The proceeds of any protection and indemnity, pollution and other liability coverages required hereunder may be paid:  (i) directly to the Person to whom any liability covered by such policies has been incurred, or (ii) to Charterer to reimburse it for any loss, damage or expense incurred and paid by it with respect to third party liabilities and covered by such insurance; provided, however, that if an Event of Default is then continuing (and notice of any such Event of Default has been given by Owner to the applicable insurance broker or underwriters), any proceeds issued in reimbursement of sums paid by Charterer shall be payable solely to Owner to the extent necessary to offset sums owed by Charterer to Owner.

(g)Charterer shall be free to procure additional insurance on the Vessel in amounts in excess of Capitalized Owner’s Cost.  Charterer shall also be free to insure risks not normally covered by the marine risks and war risks policies required under Section 14(a)(i), but any such policies shall be endorsed as provided in subsection (a) and made payable as provided in subsection (e) of this Section 14.

(h)The cost of procuring and maintaining all insurance and endorsements required under this Section 14 shall be for the sole account of Charterer.  As between Owner and Participants and Charterer, Owner and Participants shall not be responsible for the payment ofpremiums, commissions, deductibles, club calls, assessments, advances or other sums with respect to any insurance required hereunder.  To the extent that the policies or entries do not provide that there shall be no recourse against Owner or Participants for the payment of premiums, commissions, deductibles, club calls, assessments, advances or other sums, Charterer shall hold harmless, defend and indemnify Owner and Participants from and against any liability for, and costs (including reasonable Attorneys’ Fees) incurred in connection with, the assessment and payment of such amounts, and shall promptly reimburse Owner and/or any Participant for anypremiums, commissions, deductibles, club calls, assessments, advances or other amounts paid by them.  Without limiting the foregoing, Charterer agrees to cause the protection and indemnity underwriters to agree that any liability of Owner to the underwriters for premiums, club calls, assessments, advances or other sums due on account of the status of Owner as a joint entrant in the club with respect to the Vessel shall be limited to the premiums due on account of, and for calls, assessments, advances or other sums based solely on the tonnage of, the Vessel without regard to or consideration of any other vessels in the fleet of Charterer entered with the club.

15.Accounting; Financial Statements; Financial Covenants; and Reports.

(a)During the Term of this Charter, Charterer shall maintain and cause Guarantor to maintain a system of accounts established and administered in accordance with generally accepted accounting principles (“GAAP”), consistently applied.

(b)Charterer shall, within 120 days after the close of each fiscal year of Charterer, deliver to Owner and Participants true and complete copies of the combined and consolidated annual financial statements of Guarantor and its Subsidiaries, including Charterer, for the immediately preceding fiscal year, each containing, without limitation, a balance sheet, a statement of income and surplus account and a statement of changes in financial position, and setting forth the corresponding figures for the prior fiscal year in comparative form, all in reasonable detail without any qualification or exception deemed material by Owner and Participants.  Such financial statements shall be prepared as an audit by Guarantor’s independent certified public accountants, and shall be certified by such accountants to have been prepared in accordance with GAAP.  Within forty-five (45) days after the close of each quarter of Charterer’s fiscal year, Charterer shall deliver to Owner and Participants true and complete copies of the combined and consolidated, internal, management-prepared financial statements of Guarantor and its Subsidiaries, including Charterer, for such quarter.  Each financial statement submitted to Owner and Participants shall be prepared in accordance with GAAP consistently applied and shall fairly and accurately present in all material respects the financial condition and results of operations of Guarantor and its Subsidiaries, including Charterer, for the period to which it pertains.

(c)At all times during the Term, Charterer shall cause Guarantor and its Subsidiaries to maintain the financial covenants set forth in this subsection and failure to do so shall constitute an Event of Default hereunder:

(i)Consolidated Tangible Net Worth.  Consolidated Tangible Net Worth, tested quarterly as of the end of each fiscal quarter, of not less than the sum of (A) $239,867,000, plus (B) 50% of all net income of Guarantor and its Subsidiaries, including Charterer (on a consolidated basis), earned after September 30, 2011.

(ii)EBITDAR to Fixed Charges.  A ratio of EBITDAR to Fixed Charges of Guarantor and its Subsidiaries, including Charterer, on a consolidated basis, tested quarterly at the end of each fiscal quarter based on the four most recent fiscal quarters for which financial information is available, of not less than 1.10 to 1.00 through the quarter-ending March 31, 2013, and of not less than 1.20 to 1.00 thereafter.

(iii)Consolidated Debt to Consolidated EBITDA Ratio.  A ratio of Consolidated Debt to Consolidated EBITDA of Guarantor and its Subsidiaries, including Charterer, of not more than 4.25 to 1.00 tested quarterly at the end of each fiscal quarter based on the four most recent fiscal quarters for which financial information is available.

(iv)Working Capital.  A ratio of current assets to current liabilities of Guarantor and its Subsidiaries, including Charterer, of not less than 1.00 to 1.00 tested on a consolidated basis quarterly as of the end of each quarter.

(v)Consolidated EBITDA to Interest Expense.  A ratio of Consolidated EBITDA to Interest Expense of Guarantor and its Subsidiaries, including Charterer, of not less than 2.50 to 1.00 tested quarterly at the end of each fiscal quarter based on the four most recent fiscal quarters for which financial information is available.

Charterer shall, within forty-five (45) days of the end of each fiscal quarter of Charterer, provide Owner and Participants with a certificate in the form attached hereto as Appendix B (a “Compliance Certificate”) representing that Guarantor and its Subsidiaries, including Charterer, are in full compliance (or, if not in full compliance, providing reasonable details of such non-compliance) with the foregoing financial covenants and setting forth the calculations used by Guarantor and Charterer to reach that conclusion, and representing that no Event of Default and no event which with notice or lapse of time or both would be an Event of Default has occurred and is continuing (or if an Event of Default or such an event has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto). The Compliance Certificate shall be signed (on behalf of the Charterer) by Guarantor’s and Charterer’s chief financial officer or, if either Guarantor or Charterer does not have a chief financial officer, such other officer or employee of that Person who performs the duties typically undertaken by a chief financial officer.

(d)For purposes of this Charter, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP.  Financial statements and other information furnished to Owner pursuant to this Section 15 shall be prepared in accordance with GAAP (as in effect at the time of such preparation) on a consistent basis.  In the event any “Accounting Changes” (as defined below) shall occur and such changes affect financial covenants, standards or terms in this Agreement, then Charterer and Owner agree to enter into negotiations in order to amend such provisions of this Charter so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the financial condition of Guarantor and its Subsidiaries shall be the same after such Accounting Changes as if such Accounting Changes had not been made, and until such time as such an amendment shall have been executed and delivered by the Charterer and the Owner, (i) all financial covenants, standards and terms in this Agreement shall be calculated and/or construed as if such Accounting Changes had not been made, and (ii) the Charterer shall cause Guarantor to prepare footnotes to the financial statements required to be delivered hereunder that show the differences between the financial statements delivered (which reflect such Accounting Changes) and the basis for calculating financial covenant compliance (without reflecting such Accounting Changes).  “Accounting Changes” means any changes in accounting principles required by GAAP and implemented by Guarantor and its Subsidiaries, and changes in accounting principles recommended by Guarantor’s or Charterer’s certified public accountants.

(e)At no time during the Term of this Charter shall Charterer, without the prior written consent of Owner and Participants (which consent shall not be unreasonably withheld or delayed):

(i)Incur, create, assume or in any manner become or be liable in respect of any Debt, direct or contingent, except for (A) Debt for borrowed money existing on the date hereof and reflected on the most recent balance sheet of Charterer submitted by the Charterer to the Participants, (B) the obligations, liabilities and indebtedness of Charterer to Owner and Participants under this Charter and the other Charter Documents, or (C) the obligations of Charterer to any Participant under any other credit facility opened by such Person in favor of Charterer; provided, however, that Charterer may incur Debt to finance the acquisition and construction of new vessels if the principal amount of such Debt does not exceed eighty percent (80%) of the acquisition or construction price (“Permitted Additional Debt”); or

(ii)[Intentionally Omitted]; or

(iii)Pay any Debt of the Charterer to any Affiliate of Charterer following the occurrence and during the continuance of an Event of Default until such time as such default is cured or until the payment and performance of all of the obligations, liabilities and indebtedness of Charterer to Owner and the Participants under this Charter and the other Charter Documents.

(f)Charterer hereby grants and shall cause Guarantor to grant Owner (either directly or through any Participant or their respective representatives) the right to examine and audit the books and records of Charterer and Guarantor at any reasonable time, to make copies (including electronic copies of computer records) and obtain print-outs of such books and records, and to contact and converse with Charterer’s and Guarantor’s employees, agents and independent accountants.

(g)Charterer shall give Owner immediate notice and copies of all tax notices, reports or inquiries, claims of liens, and of any damage, loss, seizure, attachment or judicial process in each case under this sentence, if same could reasonably be expected to materially and adversely affect the use, maintenance, operation, possession or ownership of the Vessel.  Charterer shall provide notice to Owner of the occurrence of an Event of Default hereunder, or the occurrence of any event that, with the passage of time and the failure of Charterer to cure would become an Event of Default hereunder, within ten (10) days after such event or occurrence becomes known (or in the exercise of reasonable diligence should have become known) to a responsible officer of Charterer. Charterer shall also furnish Owner with any other financial information deemed reasonably necessary by Owner or any Participant.  Charterer warrants that all information and representations furnished by Charterer to Owner concerning the Vessel or the financial condition of Charterer or the Guarantor shall be accurate and correct in all material respects.

16.Requisition.  In the event that the Vessel shall be requisitioned by, forfeited to, or otherwise taken by any governmental entity during the Term of this Charter, whether such requisition is a requisition of title, or made on the basis of a bareboat or time charter of the Vessel, Charterer does hereby assign to Owner all rights, actions, claims and causes of action in connection therewith.  Charterer agrees that it will turn over forthwith to the Owner all compensation, reimbursements or awards for such requisition, forfeiture or other taking of the Vessel received by Charterer as the result thereof; provided, however, that unless an Event of Default under this Charter or any other Charter Document has occurred and is then continuing, Charterer shall not be obligated to turn over to Owner compensation received by Charterer on account of a requisition for hire of (as opposed to a requisition of title to) the Vessel.  In the event of any such requisition, forfeiture or taking, Charterer shall promptly execute and deliver to Owner such documents, if any, and shall promptly do and perform such acts, if any, as in the opinion of Owner may be necessary or useful to facilitate or expedite the collection by the Owner of such compensation, reimbursement or award should the turn-over of such payment be required under the foregoing provisions of this Section 16.  Should the Vessel be under requisition for hire at or until the end of the Term of this Charter, (i) Charterer shall, if prevented by reason of the requisition from redelivering the Vessel, be relieved from the obligation to do so, but shall consult with the Owner as to the most convenient method of enabling Owner to obtain redelivery of the Vessel when released from such requisition, and (ii) after such release Charterer shall be given a reasonable opportunity of complying with Charterer’s obligation under Section 7(e) and of removing any such Additional Equipment as is referred to in Section 7(e) on the terms referred to therein.  A requisition for hire shall not relieve Charterer from the obligation to pay charter hire or from any other obligation under this Charter; provided, however, that all compensation and awards received by Owner as the result of such requisition shall be credited against charter hire otherwise payable by Charterer hereunder; and provided further that in the event of a requisition or forfeiture that results in a Total Loss, any compensation, reimbursements or awards shall first be applied to the Total Loss Payment.

17.Taxes.

(a)General Taxes.  Charterer shall comply, in all material respects, with all laws and regulations relating to, and, except as otherwise provided in Section 17(b) below, shall promptly pay when due and assume liability for, all license fees, registration fees, taxes, assessments and charges, whether levied or imposed upon Charterer, Owner, any Participant or the Vessel, or any part thereof, by any federal, state or local government or governmental subdivision or taxing authority in the United States, which may now or hereafter be imposed upon or with respect to the Vessel or upon the ownership, possession, lease, charter, operation, control, use, maintenance, delivery and/or return thereof by Charterer, including, without limitation, sales, use or rental taxes (hereinafter collectively referred to as “Taxes”), but excluding the following Taxes described in clauses (i) through (xiii) below (the “Excluded Taxes”):

(i)Taxes based on or measured by the net income, gross income or net receipts of Owner or any Participant (including, but not limited to, any minimum Taxes, any capital gain Taxes, or value added Taxes to the extent such Taxes replace or are in lieu of a tax on net income) or Taxes on or measured by items of tax preference of Owner or any Participant, other than (1) Taxes in the nature of or in lieu of sales, use or rental taxes; and (2) Taxes upon or with respect to indemnification payments made pursuant to this Section 17 and Section 18 below and imposed on Owner or any Participant;

(ii)whether or not described in clause (i) above, (1) Taxes (other than Taxes in the nature of sales, use or rental Taxes) imposed on Owner or any Participant that are, or are in the nature of, Taxes on, based upon, measured by or imposed with respect to gross receipts, (2) any Taxes on or measured by capital, net worth or excess profits, (3) any Taxes that are or are in the nature of capital stock taxes, franchise taxes, business or commercial activity or doing business taxes, and (4) any additions to tax, surcharges, interest, penalties, fines or other charges in respect of any of the foregoing;

(iii)Taxes included in Capitalized Owner’s Cost;

(iv)Taxes resulting from the voluntary transfer by Owner of any interest arising under this Charter or with respect to the Vessel;

(v)any Tax attributable to the Vessel that is imposed with respect to any period after the earliest of the following events:  (1) expiration of the Term of this Charter or consummation of the purchase of the Vessel by Charterer pursuant to Section 27(a); (2) discharge in full of Charterer's obligations to pay the Total Loss Payment and any other amounts due by Charterer with respect to the Vessel hereunder, and (3) the return of possession of the Vessel to Owner in accordance with Section 21 hereof; provided, however, that this exception shall not apply to Taxes (including any interest, penalties, and additions to tax with respect thereto whether or not such amounts relate to a period after such expiration) relating to events occurring or matters arising prior to or simultaneously with such event;

(vi)Taxes imposed on Owner or any Participant to the extent that such Taxes result from Owner or such Participant engaging in activities or transactions unrelated to any transaction contemplated by this Charter;

(vii)Taxes that are imposed on Owner should Owner not qualify as a “United States person” as defined in Section 7701(a)(30) of the Code;

(viii)Taxes that are imposed (1) as a result of the gross negligence, willful misconduct or bad faith of Owner, or (2) as a result of the inaccuracy or breach of a representation, warranty or covenant of Owner herein;

(ix)any Tax that is enacted or adopted as a substitute for or in lieu of any Tax that would not have been indemnified against pursuant to this Section 17;

(x)Taxes that have not been paid or credited and that are being contested in accordance with the provisions of Section 17(b) below, during the pendency of such contest;

(xi)any interest, penalties, fines or additions to taxes attributable to the failure of Owner to file any return or report properly and timely pursuant to its obligations under this Section, except to the extent that such failure is a result of the failure of Charterer to fulfill its obligations, if any, hereunder with respect to such return, report or claim;

(xii)Taxes imposed on Owner to the extent of the excess of such Taxes over the amount of such Taxes that would have been imposed had there not been a transfer of a Vessel or any interest therein or in Owner or any interest arising under this Charter by Owner; provided, however, that the exclusion set forth in this clause (xii) shall not apply if any such transfer shall occur in connection with any foreclosure or pursuit of remedies in connection with an Event of Default that has occurred and is continuing; and

(xiii)Taxes imposed on or in connection with any transfer by Owner by reason of any insolvency, bankruptcy, foreclosure or similar proceeding in respect of the Owner, other than any such proceeding arising as a result of an Event of Default.

Except with respect to Excluded Taxes, Charterer shall defend, indemnify and hold Owner and each Participant harmless against the non-payment of such Taxes, against the actual or asserted violations of the laws under which such Taxes are imposed and assessed, and against all reasonable costs and expenses of every character in connection therewith or arising therefrom, including interest, penalties and reasonable attorneys’ fees.

(b)Contest Provisions.  Notwithstanding the provisions of Section 17(a) above, Charterer shall not be required to pay any Taxes or other amount otherwise payable by Charterer to Owner pursuant to Section 17(a) above, so long as the payment of such Taxes or other amount related to such Taxes is being timely and diligently contested by Charterer, either on its own behalf or on behalf of Owner, in good faith and by appropriate proceedings (including, without limitation, by pursuit of administrative and judicial appeals), and such contest will not result in any sanctions or penalties assessed against Owner or any Participant, or in the seizure, attachment or forfeiture of the Vessel, on account of the failure to pay such Taxes.

(c)Payments.  All amounts payable as indemnities pursuant to this Section 17 shall be payable within thirty (30) days after receipt of written demand by Owner, but in any event not earlier than the date payment of such Taxes shall be due, which demand shall be accompanied by a written statement describing in reasonable detail the amount so payable.  No Taxes shall be payable to Owner before any contest to which Charterer is entitled under Section 17(b) above is finally concluded, unless prepayment of such Taxes is a condition to pursuing the contest.

(d)Reports and Returns.  Charterer agrees to cooperate with, and to provide promptly any and all information that may be reasonably required by, Owner in connection with the preparation and filing of reports and returns with respect to Taxes payable by Charterer under Section 17(a).

18.Income Tax Indemnity.

(a)Charterer hereby represents, warrants, and covenants to Owner as follows:

(i)This Charter will be a lease for federal and state income tax purposes; Owner will be treated as the purchaser, owner and lessor of the Vessel and Charterer will be treated as the lessee of the Vessel for such purposes.

(ii)Owner shall be entitled: (A) to depreciation deductions with respect to the Vessel as provided by Section 167(a) of the Code, determined under Section 168 of the Code by using (1) modified accelerated cost recovery depreciation based on 100% of Capitalized Owner’s Cost by using the straight line method, (2) the half year convention, (3) a recovery period of eighteen (18) years, and (4) zero salvage value (and Charterer warrants that the Vessel will be deemed to have an eighteen (18) year depreciable life under Alternative Depreciation System [“ADS”] tax guidelines), and (B) to corresponding depreciation deductions under applicable state law.

(iii)For purposes of determining depreciation deductions, the Vessel shall have an income tax basis equal to the Capitalized Owner’s Cost thereof, plus such expenses of the transaction incurred by Owner as may be included in the basis under Section 1012 of the Code.

(b)If for any reason whatsoever any of the representations, warranties, or covenants of Charterer contained in this Charter, or in any other agreement relating to the Vessel, shall prove to be incorrect and (i) it is determined by applicable taxing authorities that Owner is not entitled to claim all or any portion of the depreciation deductions with respect to the Vessel in the amounts and in the taxable years determined as specified in subsections (ii) and (iii) of section (a), above, or (ii) such depreciation deductions are disallowed, adjusted, recomputed, reduced, or recaptured, in whole or in part, by the Internal Revenue Service or applicable state taxing authority (such determination, disallowance, adjustment, recomputation, reduction, or recapture being herein called a “Tax Loss”), then Charterer shall pay to Owner as an indemnity and as additional charter hire such amount as shall, in the reasonable opinion of Owner, cause Owner’s after-tax economic yield (the “Net Economic Return”) to equal the Net Economic Return that would have been realized by Owner hereunder if such Tax Loss had not occurred.  The amount paid to Owner pursuant to this section shall be payable by Charterer on the next succeeding Charter Hire Installment Date after written demand therefore from Owner, accompanied by a written statement describing in reasonable detail such Tax Loss and the computation of the amount so payable.

(c)In the event there shall be any change, amendment, addition, or modification of any provision of the Code or of applicable state law, any regulations thereunder, or the interpretation thereof with respect to the matters set forth in this Section 18 that becomes effective prior to or after the Commencement Date, and which results in a decrease in Owner’s Net Economic Return hereunder, then Owner shall recalculate and submit to Charterer the modified charter hire rate required to provide Owner with the same Net Economic Return as it would have realized absent such change, and this Charter shall thereupon automatically be deemed to be amended to adopt such rate of charter hire.

(d)Notwithstanding anything to the contrary contained in this Charter, Charterer shall not be liable to the extent of any excess Tax Loss over the amount of such Tax Loss that would have occurred had there not been a transfer of a Vessel or any interest therein or in Owner or any interest arising under this Charter by Owner; provided, however, the exclusion set forth in this clause (d) shall not apply if any such transfer shall occur in connection with any foreclosure or pursuit of remedies in connection with an Event of Default that has occurred and is continuing.

19.Default.  Time is of the essence under this Charter and under the Charter Documents related hereto, and Charterer shall be in default in event of the occurrence of any of the following (each an “Event of Default”):

(a)any failure to pay the full amount of any payment required hereunder or under any other Charter Document, including, without limitation, charter hire, taxes, Liens, insurance, indemnification, repair or other charges, or any advances made by Owner or any Participant, when such payment is due; or

(b)any failure to maintainthe insurance coverage specified in Section 14 hereof; or

(c)any attempt by Charterer to sell, mortgage or encumber the Vessel, or should any Lien or other charge (other than a Permitted Maritime Lien) be asserted thereon which has not been released, bonded or otherwise secured or contested as provided in Section 8(d)(ii); or

(d)should any representation or warranty of Charterer, Guarantor or Gulf South in this Charter or in any other Charter Document, or in any certificate, report, notice, or financial statement furnished at any time in connection with this Charter, prove to have been false or materially misleading when made or deemed to have been made; or

(e)should Guarantor and Charterer, on a consolidated basis together with the Subsidiaries of Guarantor, default in the performance of the financial covenants of Section 15(c) or 15(e) hereof; or

(f)should Charterer, Guarantor or Gulf South fail to perform any of its other obligations, agreements, or affirmations under or emanating from this Charter, the Guaranty or any other Charter Document promptly when such performance is due under the terms of such agreements, or otherwise default under the terms of any such document, should such default continue beyond the expiration of any applicable period of grace or cure; or

(g)should a breach of the Change of Control covenant of Section 9(a)(iii) occur; provided, however, that Charterer shall not be deemed to be in default under this subsection if (i) Charterer reports the breach to Owner as provided under Section 15(g) of this Charter, and (ii) Charterer pays, within ten (10) days following demand, an amount equal to the Total Loss Payment as defined and determined in Section 11(b) (with the next scheduled Charter Hire Installment Date following the date of demand from Owner being deemed to be the Loss Payment Date for purposes of that calculation); or

(h)should Charterer cease to qualify as a citizen of the United States within the meaning of Section 2 of the Shipping Act of 1916 (46 U.S.C. §50501); or

(i)should Charterer, Guarantor or Gulf South (i) become insolvent or institute proceedings to be adjudged bankrupt or insolvent or become subject to a decree or order by a court having jurisdiction adjudging any such Person as bankrupt or insolvent, (ii) become the subject of an involuntary petition in bankruptcy and such petition shall not have been withdrawn, dismissed or stayed within sixty (60) days of filing, (iii) become subject as a debtor of any other proceeding under federal bankruptcy laws; make an assignment for benefit of creditors, or (iv) should any such Person be named in, or a substantial part of its property be subjected to, a suit for the appointment of a receiver, and such suit shall not have been withdrawn, dismissed or stayed within sixty (60) days of filing; or

(j)if the Vessel should be seized or levied upon under any legal or governmental process against Charterer or the Vessel (except with respect to any Lien imposed or otherwise created by, through or under the Owner) and Charterer has failed either to file a claim and to cause the release of the Vessel as provided in Section 8(e), or to pay to Owner the Total Loss Payment for the Vessel in the event that the Vessel has become a Total Loss on account of such seizure or levy within ten days of the date that such payment is due hereunder; or

(k)should Guarantor materially default under or attempt to terminate or repudiate its Guaranty of the obligations of Charterer hereunder; or

(l)should Charterer, Guarantor, Gulf South or any of their respective Affiliates be in default (after any applicable grace period) under any material provision of any loan or credit agreement, note, mortgage, security agreement, lease, charter, instrument or other agreement between any such Person and any Participant or Affiliates of any Participant; or

(m)should Charterer, Guarantor or Gulf South be in default under any material provision of any loan or credit agreement, note, mortgage, security agreement, lease, charter, instrument or other agreement (other than any loan or credit agreement, note, mortgage, security agreement lease, charter, or other agreement covered, at the  time of default, under clause (l) above) with respect to borrowed monies or other Debt in excess of $2,000,000 if (i) such default remains uncured after ten (10) days from the occurrence thereof or after the expiration of any period of grace contained in such agreement, whichever is greater, and (ii) the relevant creditor has accelerated the obligation or taken other steps to enforce its remedies on default or security interests; or

(n)should the Approved Time Charter be terminated prior to the expiration of the current term thereof (or prior to the expiration of any renewal term should the charterer thereunder exercise its option to renew the Approved Time Charter during the Term) other than on account of the requisition of the Vessel by the United States or any agency thereof unless Charterer has entered into a replacement time charter at current market rates for the Vessel for a term at least equal to the remaining term of the Approved Time Charter at the time of termination within three (3) months following the effective date of termination of the Approved Time Charter; or

(o)should Charterer default under the terms of the MSP Contract and fail to cure such default prior to the expiration of any applicable period of grace or cure.

20.Remedies on Default; Cumulative Nature of Remedies.

(a)Upon the occurrence and during the continuance of an Event of Default, Owner may, at its option, do one or more of the following:

(i)cancel or terminate this Charter;

(ii)proceed by appropriate court action to enforce performance of the terms of this Charter and all related Charter Documents and/or recover damages for the breach hereof or thereof, the measure of which damages hereunder shall take into account the value of all tax benefits lost to Owner and any Participant as a result of Charterer’s default or the enforcement by Owner of any remedy granted hereunder or by Applicable Law;

(iii)if permitted by applicable law, enter upon any premises where the Vessel may be located, without liability, and without notice or legal process, and take possession of the Vessel, and either store the Vessel on said premises or remove the same (any damages occasioned by such taking of possession, storage or removal being waived by Charterer, other than damages resulting from the gross negligence or willful misconduct of Owner);

(iv)recover from Charterer, as liquidated damages, and not as a penalty, an amount equal to the sum of (A) any accrued and unpaid charter hire as of the date of the applicable Event of Default hereunder; plus (B) the Stipulated Loss Value for the Vessel stated on the Stipulated Loss Value Schedule incorporated in this Charter as of the scheduled Charter Hire Installment Date immediately preceding the date of the applicable Event of Default hereunder; plus, (C) any indemnity payments owed by Charterer under this Charter, if then determinable, together with interest on the total amounts payable under this clause at the Default Rate; provided, however, that upon payment by Charterer of all amounts due under this clause (iv) in good and indefeasible funds, Owner shall transfer to Charterer all of Owner’s right, title and interest in the Vessel on an “AS-IS, WHERE-IS” basis, with all faults, without recourse and without representation or warranty of any kind, express or implied (other than those limited warranties set forth in Section 27(c)) and upon such payment this Charter shall terminate (provided that any unpaid indemnities hereunder shall survive such termination); and/or

(v)exercise any and all other remedies that may be provided under any other agreement between Owner or any Participant and Charterer or under Applicable Law.

(b)Should Owner elect to cancel or terminate this Charter as provided in Subsection (a)(i) of this Section, Owner shall forward written notice to Charterer to that effect at the address provided in this Charter.  Within five (5) days after transmittal of said Notice, or if the Vessel is on a voyage, within five (5) days after the Vessel arrives at its next port of call, Charterer, at its expense, shall assemble and surrender possession of and redeliver the Vessel to Owner as provided in Section 21 of this Charter, or as otherwise reasonably directed by Owner in said Notice, and all obligations of Charterer under Sections 7, 13 and 21 of this Charter shall apply to such redelivery.  Should Charterer fail or refuse to surrender and redeliver the Vessel to Owner within the delays set forth in this Section, Owner shall be entitled to recover possession of the Vessel in a possessory action or other appropriate proceedings initiated in any court or courts of competent jurisdiction, as well as to recover all costs and expenses thereof, including reasonable Attorneys’ Fees, together with interest on such amounts at the Default Rate.

(c)In the event of the repossession of the Vessel by Owner, Owner may (in its sole discretion), without notice to Charterer, after making any repairs deemed necessary by Owner, and after completing other commercially reasonable preparations, (i) hold or use the Vessel for any purpose whatsoever, (ii) sell the Vessel at public or private sale for cash or on credit and/or (iii) re-charter the Vessel upon such terms as Owner may reasonably determine, free of any rights or claims of Charterer in admiralty, in equity, at law or by statute, whether for loss or damage or otherwise, without any duty to account to Charterer except as herein expressly provided.  After any repossession of the Vessel by Owner, there shall be applied on account of the obligations of Charterer hereunder the net proceeds actually received by Owner from any sale or re-charter of the Vessel, after deduction of all expenses of sale and other expenses recoverable by Owner hereunder (including Attorneys’ Fees).

(d)No termination, repossession or other act by Owner after default shall relieve Charterer from any of its obligations hereunder.  In addition to all other charges under this Charter, Charterer shall pay to Owner, on demand, all fees, costs and expenses incurred by Owner as a result of such default, including, without limitation, reasonable attorneys’, surveyors’ and brokers’ fees and expenses and all costs of removal, repair, storage, transportation, insurance and disposition of the Vessel.

(e)The remedies granted to Owner under this Section 20 upon an Event of Default shall not be deemed to be exclusive, but shall be cumulative, and shall be in addition to all other remedies existing in admiralty, at law, in equity or in bankruptcy.  The election of Owner at any time to enforce any one or more remedies granted hereunder shall in no way bar the later enforcement of such remedy or of any other remedy.  Failure of Owner to enforce any of its rights granted hereunder shall not constitute a waiver of such rights.

21.Re-delivery.  Upon termination of this Charter without the exercise by Charterer of any of the purchase options provided in Section 27, Charterer shall (except in the case of a Total Loss or the delivery of the Vessel to Charterer pursuant to Section 20(a)(iv)) redeliver the Vessel at a redelivery point within the contiguous forty-eight states designated by Owner.  Upon redelivery, the Vessel shall be at least in the same order and condition as she was on the Commencement Date, less normal wear and tear, and shall be comparable in appearance (including cleanliness, and cosmetic dents, dings and scrapes) to other vessels of similar age and service owned or leased by Charterer or its Affiliates.  Without limiting the foregoing, the Vessel, when re-delivered, shall (i) have no water in water-tight areas; (ii) have engines with a minimum of fifty percent (50%) of the manufacturer’s recommended overhaul interval remaining prior to the next recommended overhaul; (iii) have aboard the same amount of unbroached provisions, paints, oils, ropes, spare parts and equipment, and other consumable stores, as were aboard on the Commencement Date; (iv) have a currently effective U.S. Coast Guard Certificate of Inspection issued by the United States Coast Guard for vessels of its age and type (should the Vessel become subject to inspection during the Term) with an expiration date not later than twelve (12) months following the date of redelivery; and (v) be in class for the A-1 Vehicle Carrier, AMS and ACCU classifications issued by the American Bureau of Shipping (or comparable classifications issued by any replacement classification society selected by Charterer and approved by Owner) with no outstanding requirements, recommendations or citations of the classification society, and with no scheduled classification survey due within twelve (12) months following the date of return of the Vessel.  Charterer shall be liable for all reasonable expenses necessary to restore the Vessel to the condition required by this Charter, and shall pay to Owner additional charter hire at the rate of 1/30th of the monthly rate of charter hire then applicable for the Vessel for each day the redelivery of the Vessel is delayed during the time such repair or restoration is being effected as additional charter hire.

22.On Charter and Off Charter Surveys.Prior to the Commencement Date, and immediately prior to the redelivery of the Vessel at the termination of this Charter, joint surveys will be made by an independent marine surveyor mutually acceptable to Owner and Charterer to determine the condition of the Vessel, and, at redelivery, to determine whether the Vessel has been maintained according to the terms of this Charter; provided, however, that if the Vessel is at sea on the Commencement Date the on-charter survey will be conducted contemporaneously with the special classification survey of the Vessel to be conducted by the classification society in 2012.  If a surveyor cannot be jointly agreed upon, the appointment shall be referred to the American Arbitration Association who shall appoint either Dufour Laskay & Strouse, North American Marine Consultants or Merrill Marine Services as the designated surveyor.  The surveys shall be conducted at Charterer’s expense.  Until the completion or in the absence of an on-charter survey, the Vessel shall be presumed, as between Owner and Charterer, to have been delivered in an undamaged condition free of any material defects or conditions and to be equipped with all ancillary equipment as is referenced in the specifications for the Vessel.

23.Lien and Security Interest on Freights and Subfreights; Security Deposit.

(a)Lien and Security Interest.  In order to secure the prompt payment and performance of all existing and future obligations, liabilities and indebtedness of Charterer arising under this Charter or under any additional Charter Document, Charterer hereby grants Owner a lien upon, and security interest in, all of Charterer’s right, title and interest in and to the following property, whether now owned or hereafter acquired:  (a) all charter (including the Approved Time Charter), operating, service or management agreements entered into by Charterer covering the charter (whether on a bareboat, demise, voyage or time charter basis), lease, use or operation of the Vessel, together with the benefits, rights and remedies thereunder, including, without limitation, all charter hire payments and other compensation, earnings or monies now or hereafter due or to become due pursuant to said agreements; (b) all freights, subfreights, accounts, salvage or requisition awards or recoveries, recoveries in general average, equipment, machinery, inventory (but only inventory that constitutes spares and stores of the Vessel) arising out of the use or operation of, or otherwise related to, the Vessel or any existing or future charter, operating, service, towage, fleeting or management agreement concerning the Vessel; (c) all amounts due from underwriters under any insurance on the Vessel as payment of losses, or as return premiums, or otherwise; as well as (d) all cash and non-cash proceeds of any of the foregoing.  Charterer agrees and covenants that, notwithstanding this assignment, Owner shall have none of Charterer’s obligations under any assigned contract.  It is expressly agreed that, anything herein contained to the contrary notwithstanding, upon the occurrence and during the continuance of any Event of Default or any material default by Charterer under any assigned contract, the Charterer’s obligations under such agreements may be performed by Owner or any subsequent assignee of Owner without releasing Charterer therefrom, but Owner shall not, by reason of this assignment, be obligated to perform any of Charterer’s obligations under any such agreement or to file any claim or take any other action to collect or enforce any payment assigned hereunder.  Charterer further agrees and covenants that none of said assigned contracts shall be amended, revised or altered in such a manner so as to materially affect the rights of Owner.

(b)Security Deposit.

(i)On the Commencement Date, Charterer shall pay the Security Deposit into the designated account of the Participant to be held as further security for the prompt payment and performance of all existing and future obligations, liabilities and indebtedness of Charterer arising under this Charter or under any additional Charter Document.  Upon an Event of Default, Owner may, without prejudice to any other available remedy, apply the Security Deposit towards either the cure of the Event of Default (if a cure can be effected by the payment of money) or as compensation for any loss or damage arising from the Event of Default for which a monetary loss or damage is ascertainable. If at any time Owner applies part or all of the Security Deposit as specified above, the Charterer shall pay to Owner the amount so applied, so that Owner shall have on hand the full original Security Deposit or such lesser amount as is required under this Charter at such time after giving effect to those provisions of this Charter that authorize or permit the amount of the Security Deposit to be reduced from time to time.  At the expiration of the Term of this Charter, if no Event of Default has occurred and is then continuing, Owner shall return the unapplied balance of the Security Deposit to the Charterer. The Charterer agrees that it shall have no right to apply any portion of the Security Deposit against any of its obligations to pay charter hire except as provided below in this Section 23(b).  If Owner assigns its rights under this Charter and the Charter Documents, and forwards the Security Deposit, to a transferee who assumes the obligations of Owner hereunder, Owner shall be released from liability with respect to the Security Deposit, but any transferee shall be and remain subject to all the provisions hereof with respect to the Security Deposit.  The Charterer shall not mortgage, assign or encumber its interest in the Security Deposit, and any attempt to do so shall be void.

(ii)Upon request by Charterer at any time after the thirty-sixth (36th) month of the Term, Owner shall return the Security Deposit (or any portion thereof requested by Charterer) to Charterer, provided that (A) no Event of Default under this Charter or under any other Charter Document has occurred and is then continuing, (B) there has not been any material adverse change in the business, condition (financial or otherwise), operations or properties of Charterer and/or the Guarantor, as determined by Owner and the Participants in their reasonable discretion, and (C) the Approved Time Charter has been renewed by ******, or a substitute time charter in form and substance satisfactory to Owner and the Participants in their reasonable discretion has been placed by Charterer, on equal or better terms and at or above then existing rates.  Upon the return of any portion of the Security Deposit to Charterer, the installments of charter hire payable under Section 2(a) will be adjusted by Owner, if necessary, to maintain the same net economic return as realized by Owner and the Participants prior to the release.  Owner shall notify Charterer of any such increase in the rate of charter hire payable hereunder and provide reasonable calculations evidencing the basis for such increase not less than ten (10) days prior to any increase.

24.Subordination. [Intentionally Omitted].

25.Transfer of Interest.

(a)Charterer will not assign this Charter or any interest therein, or subcharter the Vessel on a bareboat basis, to any Person without the prior written consent of Owner, such consent not to be unreasonably withheld or delayed.  Notwithstanding the foregoing, Charterer may sub-charter the Vessel to any controlled Affiliates of Charterer or Guarantor, and enter into time charters of the Vessel in the ordinary course of business without the prior consent of Owner; provided, however, that (i) the performance of any such sub-charter or time charter by Charterer will not constitute or result in the breach of the Approved Time Charter or the MSP Contract; (ii) any such sub-charter or time charter shall contain a provision placing the charterer on notice of this Charter and subordinating any and all rights of such charterer to the rights of Owner hereunder; (iii) the term of any such sub-charter or time charter, including options, shall not exceed one year without the prior written consent of Owner, which consent shall not be unreasonably withheld or delayed (but in no case shall the term of any sub-charter or time charter extend beyond the then-current Term of this Charter); (iv) the sub-charterer under any sub-bareboat charter qualifies as a citizen of the United States under Section 2 of the Shipping Act of 1916 (46 U.S.C. §50501), and (v) notwithstanding any such sub-charter or time charter, Charterer shall remain liable for the payment of all charter hire and other sums and the performance of all obligations of Charterer hereunder and under any Charter Documents related hereto.

(b)Owner may sell, assign or otherwise transfer this Charter or Owner’s interest in the Vessel, without notice to Charterer, provided that: (i) the purchaser or assignee: (A) qualifies as a “documentation citizen” of the United States within the meaning of 46 U.S.C. §12103, eligible to document the Vessel in its name with a registry endorsement under 46 U.S.C. §12103(b) and 46 U.S.C. §12111(a), or (B) is a trust which qualifies as a “United States Citizen Trust” within the meaning of 46 U.S.C. §53101, so that the Vessel shall remain eligible (at all times during the Term) to be documented with, and operated under, a registry endorsement under the laws of the United States, and so that the Vessel will not be disqualified from enrollment in the Maritime Security Fleet pursuant to Chapter 531 of Title 46, United States Code by virtue of the citizenship of the purchaser or assignee; (ii) such purchaser or assignee expressly takes subject to the terms and conditions of this Charter, including, but not limited to, any purchase options covering the Vessel; and (iii) the value of the Vessel does not exceed 50% of the value of all assets of such purchaser or assignee.  Charterer agrees that it will not assert against any purchaser or assignee of Owner any defense (except the Charterer’s performance in accordance with the terms and provisions hereof), counter-claim or off-set that Charterer may have against Owner.  Notwithstanding the foregoing, any sale or assignment by Owner shall not materially change Charterer’s duties or obligations under this Charter, nor materially increase the burdens or risks imposed on Charterer.  Following any assignment of this Charter by Owner, the assignee shall succeed to the rights and obligations of “Owner” hereunder (including, without limitation, the obligation to retain such title to the Vessel as the Charterer transferred to the Owner, subject, however, to further transfers permitted under this Section 25(b)).

26.Notice.  All demands, notices, and other communications under this Charter shall be in writing and shall either be personally delivered or deposited with a reputable commercial courier or express delivery service, or with the United States Postal Service, certified mail, first class postage prepaid, return receipt requested, addressed as follows:

To Owner -                                Wells Fargo Bank Northwest, National Association

299 South Main Street, 12th Floor

Salt Lake City, Utah 84111

MAC: U1228-120

Facsimile: (801) 246-5053

Attention: David Wall

To Charterer -                                           Waterman Steamship Corporation

11 North Water St., Suite 18290

Mobile, Alabama 36602

Facsimile: (251) 706-0756

                                           Attention: Chief Financial Officer

or at such other addresses as may hereafter be furnished in writing by either party to the other.  Any such notice shall be effective upon receipt or by refusal of the recipient at the applicable address for notice provided herein.  Demands, notices and other communications may also be transmitted by facsimile provided that a hard copy of such transmittal is deposited with a reputable commercial courier or express service for overnight delivery at the applicable address for notices within one (1) Business Day following such transmittal.  Any demand, notice, or other communication so transmitted by facsimile shall be deemed to have been duly given upon receipt by the sender of an electronic answer-back.

27.Mid-Term and End-of-Term Options.

(a)Early Buy-Out Options.  So long as no Event of Default has occurred and is continuing under this Charter or any related Charter Document, Charterer shall have successive options to purchase the Vessel (each, an “Early Buy-Out Option”) on the scheduled Charter Hire Installment Date for the payment of the sixtieth (60th) installment of charter hire payable hereunder and if not exercised again on the scheduled Charter Hire Installment Date for the payment of the eighty-fourth (84th) installment of charter hire payable hereunder (each, an “Early Buy-Out Option Date”).  The option price for the initial Early Buy-Out Option shall be $45,216,289.79 (76.637779% of Capitalized Owner’s Cost) and for the second Early Buy-Out Option, $38,102,387.03 (64.580317% of Capitalized Owner’s Cost), in each case plus any applicable sales or use taxes assessed in connection with such purchase under Applicable Law and all additional sums (if any) then due and owing hereunder (each, the “EBO Option Price”).  The applicable EBO Option Price shall not be deemed to be the anticipated residual value of the Vessel as of the stated time.  An Early Buy-Out Option may be exercised by Charterer only by and upon written notice to Owner, which notice must be received by Owner not more than two hundred forty (240) days but not less than one hundred eighty (180) days prior to the applicable Early Buy-Out Option Date.  If exercised, Charterer must pay the applicable EBO Option Price stipulated above to Owner, in cash, on or prior to the applicable Early Buy-Out Option Date (unless there has been a Total Loss in the interim in which case the provisions of Section 11(b) shall apply).  Each Early Buy-Out Option is exercisable only during the period indicated, and shall terminate at 5:00 p.m. Central Time as of the applicable Early Buy-Out Option Date.  Should Charterer fail to provide timely notice of its intent to exercise an Early Buy-Out Option, should an Early Buy-Out Option be suspended on the applicable Early Buy-Out Option Date because an Event of Default then exists, or should Charterer fail to consummate the acquisition of the Vessel prior to the termination of the applicable Early Buy-Out Option, the lease or charter of the Vessel hereunder shall continue for the remainder of the Base Term, subject however to any right of Charterer to exercise any remaining Early Buy-Out Option, and subject to the provisions of Section 20 and any other applicable termination provisions hereof.

(b)End of Term Purchase Option.  As long as no Event of Default shall have occurred and then be continuing under this Charter, Charterer may (at its option) purchase the Vessel on February 28, 2022, the end of the Base Term (the “End of Term Option Date”), for its Fair Market Value as of that date, plus all applicable sales and use taxes (if any) imposed in connection with such sale and all additional sums (if any) then due and owing hereunder (the “EOT Option Price”).  The foregoing purchase option (the “End of Term Option”) may be exercised by Charterer only by and upon written notice to Owner, which notice must be received by Owner not more than two hundred forty (240) days but not less than one hundred eighty (180) days prior to the End of Term Option Date.  If Charterer elects to purchase the Vessel, and the End of Term Option has been timely exercised and otherwise remains open, Charterer must pay the EOT Option Price to Owner, in cash, on or prior to the End of Term Option Date (unless there has been a Total Loss in the interim in which case the provisions of Section 11(b) shall apply). The End of Term Option is exercisable only during the period indicated, and shall terminate at 5:00 p.m. Central Time on the End of Term Option Date.  In the event that Charterer fails to exercise the End of Term Option prior to the End of Term Option Date, or in the event that the End of Term Option has otherwise terminated in accordance with the terms and provisions hereof, Charterer shall return the Vessel to Owner in accordance with, and in the condition required by, Section 21.

(c)Title Passage.  Following (i) the timely exercise of an Early Buy-Out Option or the End of Term Option to purchase the Vessel, and (ii) the receipt of the applicable option price, in cash, together with all sales or use taxes due in connection therewith, and any and all additional sums (if any) then due and owing hereunder, this Charter shall terminate (other than with respect to Charterer’s indemnity obligations which shall survive any termination of the Charter) and Owner shall transfer (pursuant to a bill of sale in recordable form) all of its right, title and interest in and to the Vessel to Charterer subject to the disclaimers and limited warranties below.  ANY SALE OF THE VESSEL TO CHARTERER PURSUANT TO THIS SECTION 27 SHALL BE MADE WITHOUT ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER, EITHER EXPRESS OR IMPLIED, EXCEPT THAT OWNER SHALL REPRESENT AND WARRANT THAT IT HAS SUCH TITLE TO THE VESSEL AS THE CHARTERER TRANSFERRED TO THE OWNER WHEN OWNER PURCHASED THE VESSEL FROM THE CHARTERER, THAT THE VESSEL IS FREE AND CLEAR OF ANY LIENS IMPOSED OR OTHERWISE CREATED BY, THROUGH OR UNDER OWNER, AND THAT OWNER HAS COMPLIED WITH SECTION 9(B) ABOVE THROUGH AND INCLUDING THE DATE OF SUCH SALE.  WITHOUT LIMITING THE FOREGOING, ANY SUCH SALE SHALL BE ON AN “AS IS, WHERE IS” BASIS WITH NO WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO THE DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, SEAWORTHINESS, CLASSIFICATION OR CONDITION OF THE VESSEL, OR ELIGIBILITY OF THE VESSEL TO ENGAGE IN ANY PARTICULAR TRADE.  ALL SUCH WARRANTIES SHALL BE EXPRESSLY WAIVED BY CHARTERER AT THE TIME OF SUCH SALE.  ALL SALES AND USE TAXES WHICH MAY BECOME DUE AS A RESULT OF THE SALE SHALL BE FOR THE SOLE ACCOUNT OF CHARTERER.  IT IS UNDERSTOOD AND AGREED THAT CERTAIN PROVISIONS OF THIS CHARTER (IN ADDITION TO SECTIONS 27(a) AND 27(b)) REFER TO THIS SECTION 27(c) IN CONNECTION WITH TRANSFERS OF THE VESSEL PURSUANT TO SUCH PROVISIONS; SUCH REFERENCES MEAN THAT SUCH TRANSFERS SHALL BE TRANSFERS (PURSUANT TO A BILL OF SALE IN RECORDABLE FORM) BY THE OWNER TO THE CHARTERER OF ALL OF THE OWNER’S RIGHT, TITLE AND INTEREST IN THE VESSEL ON AN “AS IS, WHERE IS” BASIS WITHOUT ANY REPRESENTATIONS OR WARRANTIES EXCEPT THE LIMITED REPRESENTATIONS AND WARRANTIES SET FORTH SET FORTH IN THIS SECTION 27(c) BEING MADE BY THE OWNER TO THE CHARTERER.  In the event that Charterer purchases the Vessel pursuant to the terms hereof, Owner shall execute and deliver such documents, including bills of sale, as Charterer may reasonably request (and consistent with the other terms and provisions hereof), in each case at Charterer’s expense.  As used in this subsection and elsewhere in this Charter, any reference to any Lien being “imposed”, “created”, “incurred”, “assumed”, “suffered to exist” “placed” or words of similar import include (whether in connection with Liens by, through or under the Owner or the Charterer, as the case may be) both consensual and involuntary Liens (whether arising by operation of law, by attachment, execution or other process, or otherwise); provided, however, that in no event shall the phrase “imposed or otherwise created by, through or under Owner” be construed to encompass Liens arising out of the acts or omissions of Charterer, out of the breach by Charterer of its obligations hereunder, or Liens otherwise created or imposed by Charterer.

28.Charterer’s Waivers.  To the extent permitted by Applicable Law, Charterer hereby waives  any rights to: (i) cancel or otherwise terminate this Charter (other than as expressly authorized herein); (ii) repudiate this Charter; (iii) reject the Vessel after the execution and delivery of this Charter and a Delivery and Acceptance Certificate covering the Vessel; (iv) revoke acceptance of the Vessel; (v) claim a lien or security interest in the Vessel or her appurtenant equipment for any reason; or (vi) deduct all or part of any unliquidated damages resulting from Owner’s default, if any, under this Charter or under any related Charter Document.

29.Net Lease.  This Charter is intended to effect a net-lease transaction.  During the Term hereof, the possession, use, operation, maintenance, repair or replacement of the Vessel shall be at the sole risk, cost and expense of Charterer, except as may be expressly provided to the contrary herein.

30.Advances by Owner.  Subject to ten (10) days prior notice to Charterer, Owner, at its option, may pay any tax, assessments, insurance premiums, calls or assessments, expenses, repair, release, confiscation or seizure expenses, Liens or other charges or fees payable hereunder by Charterer following any failure of Charterer to make such payments as provided in this Charter, or to contest such payment by appropriate proceedings in a timely manner, and any amount so paid shall be reimbursed by Charterer as additional charter hire on demand together with interest at the Default Rate until paid.  The rights secured hereby shall not constitute a waiver of any other rights of Owner arising from breach by Charterer of any of the covenants hereof.

31.Owner’s Costs.  Charterer hereby agrees to pay to Owner on demand: (a) all reasonable out-of-pocket costs and expenses incurred by Owner or any Participant in connection with the preparation, negotiation, and execution of this Charter, and any additional Charter Documents between Charterer and Owner or any Participant, and any and all amendments, modifications, renewals, extensions, and supplements thereof and thereto, including, without limitation, reasonable Attorneys’ Fees and expenses; and (b) all reasonable out-of-pocket costs and expenses incurred by Owner or any Participant by reason of Charterer’s breach or default under any of its obligations under this Charter or under any related Charter Document, including, without limitation, reasonable costs and expenses incurred in collecting any charter hire or other sums due under this Charter, costs and expenses of repossession, storing, holding, transporting, insuring, servicing, repairing, maintaining, re-chartering and selling the Vessel, and collecting charter hire, rents or other proceeds of the disposition thereof, and the reasonable fees and expenses of attorneys and other professionals employed by Owner or any Participant in connection with the protection and enforcement of its interest in the Vessel and its rights under this Charter.

32.Multiple Parties.  Where more than one obligor has signed this Charter, or has otherwise become obligated hereunder, whether as co-charterer, guarantor, or otherwise, liability hereunder shall be joint and several and Owner or its assigns may, with the consent of any one of such obligors, modify, extend or change any of the terms hereof without the consent or knowledge of the others, and without in any way releasing, waiving or impairing any rights granted Owner against such others.

33.Non Waiver.  No delay or omission in the exercise of any power or remedy herein provided or otherwise available to Owner shall impair or affect Owner’s right thereafter to exercise the same.  Any extension of time for payment hereunder or other indulgence granted to Charterer shall not otherwise alter or affect the obligations of Charterer or Owner’s rights hereunder with respect to any subsequent payments or default herein.

34.Jury Trial Waiver.  OWNER AND CHARTERER HEREBY EACH WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS CHARTER OR ANY CHARTER DOCUMENT RELATED HERETO, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION OR PROCEEDING TO WHICH OWNER OR CHARTERER MAY BE PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS CHARTER OR ANY CHARTER DOCUMENT RELATED HERETO OR ANY PROVISION HEREOF OR THEREOF.  THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND VOLUNTARILY BY OWNER AND CHARTERER WHO EACH ACKNOWLEDGE THAT NO REPRESENTATIONS HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS CHARTER OR ANY RELATED CHARTER DOCUMENT.

35.Governing Law.  This charter shall be construed and interpreted, and the rights and liabilities of the parties determined, in accordance with the general maritime law of the United States, to the extent applicable, and otherwise in accordance with the laws of the State of New York, without giving effect to its rules for conflicts of law.

36.Severability.  If any of the provisions of this Charter are contrary to, prohibited by, or held invalid under applicable laws or regulations of any jurisdiction in which it is sought to be enforced, then that provision shall be considered inapplicable and omitted but shall not invalidate the remaining provisions.  Should the payment of any interest stipulated under this Charter be held to violate applicable usury laws or other applicable laws regulating the payment of interest, the rate of interest payable under this Agreement shall thereupon be reduced automatically to the maximum rate of interest permitted under such law.

37.Survival.  All indemnities in favor of each party contained hereinshall survive the expiration or other termination of this Charter.  Such indemnities are expressly made for the benefit of, and shall be enforceable by, each party, its successors and assigns.

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

39.Entire Agreement; Successors.  THIS CHARTER AND THE OTHER CHARTER DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, PROPOSALS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO.  THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.  No waiver or modification by a party of any of the terms or conditions hereof shall be effective unless in writing and signed by an officer of such party.  This Charter shall be binding on, and shall inure to the benefit of, Owner and Charterer and their respective successors and assigns.

40.Limitation on Liability of Trust Company. It is understood and agreed that the Trust Company is entering into this Charter solely in its capacity as Trustee under the Trust Agreement and that all of the representations, warranties, undertakings and agreements of, by and for the purpose of binding Owner are not the responsibility of the Trust Company individually but are intended solely for the purpose of binding the Trust and that the Trust Company shall not be liable or accountable in its individual capacity in any circumstances whatsoever except as otherwise expressly provided in the Charter or in the Trust Agreement.  It is further agreed that all Persons having any claims against the Owner as a result of this Charter or transactions contemplated hereby shall look solely to the trust estate for satisfaction thereof.  It is also understood and agreed that, absent written instructions from the Participants pursuant to the Trust Agreement, the Trustee shall not be under any obligation to exercise any of the permissive rights or powers granted to it under this Charter.

[SIGNATURE PAGES FOLLOW]

IN WITNESS WHEREOF, the parties hereto have caused this Charter to be executed, by their respective officers, duly authorized, to be effective as of the day, month and year first written above.

Owner:

WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,

as Trustee of the The Green Bay Vessel Trust

By:           /s/ Jon Croasmun                                                                

Name:                      Jon Croasmun

Title:           Vice President

Charterer:

WATERMAN STEAMSHIP CORPORATION

By:           /s/ D. B. Drake                                                                           

Name:                      D. B. Drake

Title:           Vice President and Treasurer

COUNTERPART NO. __ OF 3 SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS.  TO THE EXTENT THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.

S-

ACKNOWLEDGMENTS

STATE OF UTAH

COUNTY OF SALT LAKE

On this 22nd day of February, 2012, personally came and appeared before me, a Notary Public in and for the State and County set forth above, Jon Croasmun, to me known, who acknowledged execution of the foregoing instrument in his/her capacity as the duly authorized Vice President of WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as the free act and deed of that corporation, not in its individual capacity, but solely as the Trustee of the The Green Bay Vessel Trust, for the purposes therein expressed.

IN WITNESS WHEREOF, I hereunto set my hand and official seal the day and year first above written.

/s/ Lindsay Anderson                                                                

NOTARY PUBLIC in and for the State of Utah

Printed Name:                                Lindsay Anderson

My commission expires:   10/20/2013

STATE OF ALABAMA

COUNTY OF MOBILE

On this 22nd day of February, 2012, personally came and appeared before me, a Notary Public in and for the State and County set forth above, David B. Drake, to me known, who acknowledged execution of the foregoing instrument in his capacity as the duly authorized Vice President and Treasurer of WATERMAN STEAMSHIP CORPORATION, as the free act and deed of that corporation, for the purposes therein expressed.

IN WITNESS WHEREOF, I hereunto set my hand and official seal the day and year first above written.

/s/ Patsy J. Fisher                                                      

NOTARY PUBLIC in and for the State of Alabama

Printed Name:                                Patsy J. Fisher

My commission expires:   3/27/2013

S-

APPENDIX A

TO

BAREBOAT CHARTER AGREEMENT

Definitions.Unless the context otherwise requires, as used in this Charter, the following terms shall have the respective meanings indicated below and shall be equally applicable to both the singular and the plural forms thereof.  Capitalized terms not otherwise defined herein shall have the meaning given in the Charter Documents.

(a)“Additional Equipment” has the meaning assigned in Section 7(d).

(b)“Approved Time Charter” means that certain Time Charter of the Vessel dated June 24, 2010 between Charterer and to ******, a stock company organized under the laws of Japan, as such agreement may be amended, modified, renewed, extended, or supplemented from time to time.

(c)“Affiliate” means, as to any Person, any other Person (i) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such Person; (ii) that directly or indirectly beneficially owns or holds five percent (5%) or more of any class of voting stock of such Person; or (iii) five percent (5%) or more of the voting stock of which is directly or indirectly beneficially owned or held by the Person in question.  The term “control” means the possession, directly or indirectly, of the power to direct or cause direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

(d)“Affiliate Mortgages” means those certain statutory mortgages dated of even date herewith, executed by Gulf South in accordance with the laws of the Republic of Singapore, and bearing against the Affiliate Vessels and the other collateral described therein, whether now owned or hereafter acquired, which mortgages were granted to secure all existing and future obligations, liabilities and indebtedness of Charterer to Owner or any Participant arising under the Charter and other Charter Documents, as such mortgages may be amended, modified, renewed, extended, or supplemented from time to time.

(e)“Affiliate Vessels” means the vessels BALI SEA, Official No. 386602, IMO No. 8106068, and BANDA SEA, Official No. 386603, IMO No. 8106056, each a Singapore-flagged RO-RO cargo vessel owned by Gulf South, which vessels are encumbered in favor of Owner pursuant to the Affiliate Mortgages.

(f)“Applicable Law” shall mean all applicable Federal, state, local and foreign laws, ordinances, judgments, decrees, injunctions, writs, rules, regulations, orders, licenses and permits of any Governmental Authority.

(g)“Assignments of Insurances” means the Assignments of Insurances executed by Charterer and Gulf South in favor of Owner, pursuant to which Owner will be collaterally assigned and granted a security interest in all insurance policies issued with respect to the Vessel and the Affiliate Vessels as security for the obligations, liabilities and indebtedness of Charterer arising under this Charter and the other Charter Documents.

(h)“Attorneys’ Fees” shall include any and all attorneys’ fees incurred by Owner or any Participant (whether by its use of in-house counsel or otherwise, and whether on the basis of a flat fee, retainer, contingent fee or hourly charges) incident to, arising out of or in any way connected with the preparation, negotiation, and execution of this Charter and the other Charter Documents (and any and all amendments, modifications, renewals, extensions, and supplements thereof and thereto) or with Owner’s or any Participant’s enforcement of its rights and interests under this Charter or any other Charter Document, including attorneys’ fees incurred by Owner or any Participant to collect sums due, during any work-out, with respect to settlement negotiations, or in any bankruptcy proceeding (including attorneys’ fees incurred in connection with any motion for relief from the automatic stay).

(i)“Business Day” means any day on which commercial banks are not authorized or required to close in Birmingham, Alabama.

(j)“Capital Expenditures” means, with respect to Guarantor and its Subsidiaries, including Charterer, on a consolidated basis, for any period (without duplication), any expenditures for fixed assets or that is properly chargeable to a capital account in accordance with GAAP.

(k)“Capitalized Owner’s Cost” has the meaning assigned in the demise clause on page one of the Charter.

(l)“Change of Control” means (i) any “person” (as such term is used in Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended), other than the existing owners, that becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 promulgated under the Securities Exchange Act), directly or indirectly, of more than 30% of the total voting power of the Guarantor or (ii) Guarantor ceases to own (beneficially and of record) and control all of the issued and outstanding shares of capital stock of the Charterer and to own (beneficially and of record) and control, either directly or through a wholly-owned Subsidiary of Guarantor, all of the issued and outstanding shares of capital stock of Gulf South.  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, by family relationship or otherwise; and the terms "controlling" and "controlled" have the meanings correlative to the foregoing.

(m)“Charter” shall mean this Bareboat Charter Agreement between Owner and Charterer covering the Vessel, as amended, supplemented or restated by Owner and Charterer from time to time.

(n)“Charter Assignment and Security Agreement” shall mean that certain “Charter Assignment and Security Agreement” dated of even date herewith executed by Charterer in favor of Owner, together with all amendments thereto, restatements thereof and substitutions or replacements therefore.

(o)“Charter Documents” shall mean, collectively, the Agreement to Acquire and Charter, the Charter, the Charter Assignment and Security Agreement, the Affiliate Mortgages, the Assignments of Insurances, the Guaranty and all other documents prepared by Owner and now or hereafter executed by and between or among Owner and/or any Participant, on the one hand, and Charterer, Guarantor and/or Gulf South, on the other, in connection herewith or therewith as such agreements may be amended, supplemented or restated from time to time.

(p)“Charter Hire Installment Date” means a date for the payment of charter hire scheduled in Section 2(a) of the Charter.

(q)“Code” means the Internal Revenue Code of 1986, as amended.

(r)“Commencement Date” has the meaning assigned in Section 1 of the Charter.

(s)“Consolidated Debt” means all Debt of Guarantor and its Subsidiaries, including Charterer, determined on a consolidated basis in accordance with GAAP.

(t)“Consolidated EBITDA” means, for any period, with respect to Guarantor and its Subsidiaries, including Charterer, the sum of (without duplication): (i) Consolidated Net Income; (ii) all Interest Expense of Guarantor and its Subsidiaries; (iii) income taxes of Guarantor and its Subsidiaries; and (iv) depreciation and amortization of Guarantor and its 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 EBITDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of Consolidated Net Income attributable to such Subsidiary multiplied by (B) the percentage ownership interest in the income of such Subsidiary not owned by Guarantor on the last day of such period.

(u)“Consolidated Net Income” means, for any period, the consolidated net income of Guarantor and its Subsidiaries, including Charterer, for such period as shown on the consolidated financial statements of Guarantor and its Subsidiaries delivered in accordance with Section 15(b).

(v)“Consolidated Tangible Net Worth” means, with respect to Guarantor and its Subsidiaries, including Charterer, at any date for which a determination is to be made (determined on a consolidated basis without duplication in accordance with GAAP) (i) the amount of the capital stock, plus (ii) the amount of surplus and retained earnings (or, in the case of a surplus and retained earnings deficit, minus the amount of such deficit), plus (iii) deferred charges to the extent amortized and acquired contract costs net of accumulated amortization as stated on the then most recent audited balance sheet of Guarantor, minus (iv) the sum of (a) the cost of treasury shares and (B) the book value of all assets that should be classified as intangible (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 reserved and any write up in the book value of assets resulting from the revaluation thereof subsequent to December 31, 1996.

(w)“Debt” 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 taking 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 the fair market value of such asset at such date of determination and the amount of such indebtedness); and (vii) all indebtedness of other Persons guaranteed by suchPerson to the extent guaranteed.  The amount of Debt 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 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 of such indebtedness at such time as determined in conformity to GAAP; and provided further that Debt shall not include any liability for current or deferred federal, state, local or other taxes, or any trade payables.

(x)“Default” or “default” shall mean any event or condition which, with the passage of time or the giving of notice, or both, would constitute an Event of Default.

(y)“Default Rate” means the Maximum Rate or, if no Maximum Rate exists, eighteen percent (18%) per annum.

(z)“Delivery and Acceptance Certificate” means Owner’s form of “Delivery and Acceptance Certificate and Authorization to Pay Proceeds” covering the Vessel.

(aa)“Dollars” or “$” means lawful money of the United States of America.

(bb)“EBITDAR” means, with respect to Guarantor and its Subsidiaries, including Charterer, 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).

(cc)“Environmental Laws” means any and all federal, state, and local laws, regulations, and requirements pertaining to health, safety, or the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq., the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq., the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq., the Hazardous Materials Transportation Safety and Security Reauthorization Act of 2005, 49 U.S.C. §5101 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., and all similar laws, regulations, and requirements of any Governmental Authority having jurisdiction over the Vessel or over Charterer or any of its properties or assets, as such laws, regulations, and requirements may be amended or supplemented from time to time.

(dd)“Event of Default”means an event described in subsections (a) through (o) of Section 19 of the Charter.

(ee)“Fair Market Value” means the amount, in terms of Dollars, at which the Vessel would exchange for sale in an arm’s-length transaction between an informed and willing third party buyer, under no compulsion to buy, and an informed and willing third party seller, under no compulsion to sell; provided, however, that in such determination (i) it shall be assumed (whether or not it is true) that the Vessel has been maintained and would have been returned to the Owner in compliance with the requirements of this Charter, in class with no with no outstanding requirements, recommendations or citations, ready to be placed in revenue service,and with all required certificates of inspection, load line certificates and other applicable operational certificates in force, and (ii) if any item of equipment belonging to the Vessel which would be included with the Vessel upon redelivery but has been removed and not replaced with equipment of equal or better value, then the fair market value of such item of equipment shall be included in the value of the Vessel on an installed basis, in place and in use.  If Owner and Charterer are unable to agree on the Fair Market Value of the Vessel, the fair market value shall be determined by an appraisal performed by a qualified, independent marine surveyor or appraiser jointly selected by Owner and Charterer.  If the parties are unable to agree on a single independent marine surveyor or appraiser, Fair Market Value shall be determined by a panel of three independent marine surveyors or appraisers, one selected by each of Owner and Charterer. The third independent marine surveyor or appraiser shall be selected by agreement of the first two independent marine surveyors or appraisers, or if such two independent marine surveyors or appraisers are unable to agree upon a third independent marine surveyor or appraiser, such appointment shall be referred to the American Arbitration Association (or its successors) who shall appoint either DuFour Laskay & Strouse, North American Marine Consultants or Merrill Marine Services as the third surveyor on the panel. Each independent marine surveyor or appraiser appointed pursuant to the foregoing procedure shall be experienced, and shall be independent of Owner and Charterer. The determination of the Fair Market Value shall be the average of the three appraisals rendered by the independent marine surveyors or appraisers, and such determination shall be final, binding and conclusive upon the parties. In the event, however, that the lowest or the highest of the three appraisals, or both, varies by more than ten percent from the middle appraisal, the appraisal or appraisals so varying shall be disregarded.  The Owner and Charterer shall share equally the fees and expenses of the foregoing appraisal procedure, except that Charterer shall pay all such fees and expenses if an Event of Default shall have occurred and be continuing.

(ff)“Fixed Charges” means with respect to Guarantor and its Subsidiaries, including Charterer, 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; provided, however, that “Fixed Charges” shall not include the $12,000,000 new market tax credit balloon payment payable by Guarantor in the fourth quarter of 2012.

(gg)“GAAP” means generally accepted accounting principles, consistently applied, as promulgated by the Financial Accounting Standards Board.

(hh)“Governmental Authority”means the United States federal government, the government of any nation in whose territorial waters or exclusive economic zone the Vessel is operated, the government of any state, or any political subdivision of any of the foregoing, and any Person exercising executive, legislativejudicial, regulatory or administrative functions of or pertaining to government and any other governmental entity with authority over Owner, Charterer or the operation of the Vessel.

(ii)“Guarantor” means International Shipholding Corporation, a Delaware corporation, and any other Person (if any) that may now or in the future be a guarantor, surety or accommodation party with respect to the obligations of Charterer hereunder and under the other Charter Documents, together with their respective heirs, successors and permitted assigns.

(jj)“Guaranty” means that certain Guaranty Agreement dated of even date herewith executed by Guarantor in favor of Owner, together with all amendments thereto, restatements thereof and substitutions or replacements therefore.

(kk)“Gulf South” means Gulf South Shipping Pte. Ltd., an Affiliate of Charterer, and the owner of the Affiliate Vessels encumbered pursuant to the Affiliate Mortgages.

(ll)“Hazardous Substances” means any substance, product, waste, pollutant, material, chemical, contaminant, constituent, or other material which is or becomes listed, regulated, or addressed under any Environmental Law, including, without limitation, asbestos and polychlorinated biphenyls.

(mm)“Interest Expense” means, with respect to Guarantor and its Subsidiaries, including Charterer, on a consolidated basis, for any period (without duplication), interest expense, whether paid or accrued (including the interest component of capitalized leases), on all Debt of the Guarantor and its Subsidiaries for such period, net of interest income, all determined in accordance with GAAP.

(nn)“ISM Code” means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organization, as the same may be amended or supplemented from time to time (and the terms “safety management system”, “Safety Management Certificate” and “Document of Compliance” have the same meanings as are given to them in the ISM Code).

(oo)“ISM Code Documentation” includes, in respect of the Vessel: (a) the Document of Compliance and Safety Management Certificate issued pursuant to the ISM Code in relation to the Vessel within the periods specified by the ISM Code; (b) all other documents and data which are relevant to the safety management system and its implementation and verification which the Owner may require; and (c) any other documents which are prepared or which are otherwise relevant to establish and maintain the compliance of the Vessel or the compliance of the Charterer with the ISM Code which the Owner may require.

(pp)“ISPS Code” means the International Ship and Port Facility Security Code as adopted by the International Maritime Organization, as the same may be amended or supplemented from time to time.

(qq)“ISPS Code Documentation” includes the ISSC and all other documents and data which are relevant to the ISPS Code and its implementation and verification which are applicable to Charterer and its Affiliates or the Vessel that the Owner may require.

(rr)“ISSC” means a valid and current International Ship Security Certificate issued under the ISPS Code with respect to the Vessel.

(ss)“Lease Expense” means, with respect to Guarantor and its Subsidiaries, including Charterer, 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.

(tt)“Lien” means any lien, privilege, mortgage, security interest, pledge, attachment, sequestration, levy or other encumbrance of any kind whatsoever.

(uu)“Loss Payment Date” has the meaning set forth in Section 11(b) of the Charter.

(vv)“Maximum Rate” means the maximum rate of non-usurious interest permitted from day to day by Applicable Law.

(ww)“MSP Contract” means that certain Maritime Security Program Operating Agreement, Agreement No. MA/MSP-104, concerning the Vessel, dated February 1, 2005, between Charterer and the United States of America, represented by the Secretary of Transportation acting through the Maritime Administrator, as amended.

(xx)“Oil” has the meaning assigned in the Oil Pollution Act of 1990, 33 U.S.C. §2701, et seq.

(yy)“Participant” means each of Regions Equipment Finance, Ltd., an Alabama limited partnership, and any additional Person who is or becomes a beneficiary under the Trust as a party to the Trust Agreement, together with their respective successors and assigns.

(zz)“Permitted Maritime Lien” has the meaning assigned in Section 8(b) of the Charter.

(aaa)“Permitted Merger” means, so long as no Default or Event of Default shall have occurred and be continuing and so long as no Default or Event of Default would result therefrom, (i) with respect to Charterer, a merger or consolidation of any Subsidiary of Charterer with and into Charterer (provided, that Charterer is the surviving entity and remains a wholly-owned Subsidiary of the Guarantor), and (ii) with respect to the Guarantor, either (A) a merger or consolidation of any Subsidiary of the Guarantor (other than Charterer) with and into the Guarantor provided, that the Guarantor is the surviving entity (and Charterer remains a wholly-owned Subsidiary of the Guarantor), or (B) a merger or consolidation of any Person who is not an Affiliate of Guarantor as of the date of this Charter with and into the Guarantor provided that Guarantor is the surviving entity, Charterer remains a wholly-owned Subsidiary of the Guarantor, and as a result of the merger or consolidation the Consolidated Tangible Net Worth or Guarantor and its Subsidiaries, including Charterer, will equal or exceed Consolidated Tangible Net Worth prior to the merger or consolidation.

(bbb)“Person” means any individual, corporation, business trust, association, company, partnership, limited liability company, joint venture, governmental authority, or other entity.

(ccc)“Security Deposit” means that certain cash deposit to be posted by the Charterer in the amount of $2,000,000 to be held by Owner subject to the provisions of Section 23(b) as security for the prompt payment and performance of all existing and future obligations, liabilities and indebtedness of Charterer arising under this Charter or under any additional Charter Document.

(ddd)“Stipulated Loss Value” means as of any date of determination the value set forth on the Stipulated Loss Schedule attached to this Charter as Schedule 1.

(eee)“Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits or distributions or general or limited partnership interests of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.  Unless otherwise specified herein, the term Subsidiary shall mean a Subsidiary of the Charterer or of the Guarantor, as the case may be.

(fff)“Term” means the Interim Period, if any, and the Base Term, as the Base Term may be extended pursuant to the provisions of the Charter.

(ggg)“Total Loss” means the occurrence of:  (i) the actual or constructive total loss, or compromised, agreed or arranged total loss, of the Vessel under the policies of hull and machinery insurance, war risk and related coverages that Charterer is required to procure and maintain pursuant to Section 14 of the Charter; or (ii) the loss, theft, hijacking, disappearance or destruction of the Vessel or damage thereto to such extent as shall make repair thereof uneconomical or shall render the Vessel permanently unfit for normal use for any reason whatsoever; or (iii) the requisition of title to or other compulsory acquisition of the Vessel (otherwise than by requisition for hire which does not extend beyond the Term); or (iv) the condemnation, capture, seizure, forfeiture, arrest, detention, confiscation or other taking of title of the Vessel by any Person or Governmental Authority, or by Persons acting or purporting to act on behalf of any government, unless the Vessel shall be released from such capture, seizure, arrest or detention within fifteen (15) days after such occurrence, but in all events prior to the expiration or earlier cancellation or termination of the Term.  An actual Total Loss shall be deemed to have occurred on the actual date on which the Vessel was lost, or if the date of loss is unknown, the date that the Vessel was last heard from.  A constructive Total Loss shall be deemed to have occurred on the earliest of (1) the date that a claim for Total Loss is allowed by the underwriters, (2) if the underwriters do not allow a claim for Total Loss, on the date that a Total Loss is subsequently finally adjudged by a court of competent jurisdiction or an arbitration panel to have occurred, or (3) upon receipt by Owner of a report prepared by an independent, certified marine surveyor selected by Owner (and reasonably acceptable to Charterer) concluding that salvage, repair and associated costs to restore the Vessel to the condition required in Section 13 would exceed the fair market value of the Vessel in sound condition.  An agreed or arranged Total Loss shall be deemed to have occurred at the effective time of any agreement by the underwriters or other appropriate Person with respect thereto, and any Total Loss resulting from condemnation, seizure, forfeiture, arrest or similar actions shall be deemed to have occurred upon entry of a final order with respect thereto by the applicable Governmental Authority.

(hhh)“Trust” means The Green Bay Vessel Trust, a trust established under the laws of the State of Utah pursuant to the Trust Agreement.

(iii)“Trust Agreement” means that certain Trust Agreement dated as of February 22, 2012 between the Trust Company and Participants that are party thereto which agreement establishes and governs the Trust.  The term “Trust Agreement” includes the Trust Agreement as such agreement may be amended, restated, supplemented or otherwise modified from time to time by the parties thereto.

(jjj)“Trust Company” means Wells Fargo Bank Northwest, National Association, together with its successors and assigns, in its individual capacity and not as Trustee under the Trust.

(kkk)“UCC” shall mean the Uniform Commercial Code as adopted in New York.  Where applicable and except as otherwise defined herein, terms used in this Charter shall have the meaning assigned to them in the UCC.

(lll)“Vessel” has the meaning assigned in the demise clause on page one of the Charter.

A-

APPENDIX B

TO

BAREBOAT CHARTER AGREEMENT

Form of Compliance Certificate

COMPLIANCE CERTIFICATE

Reference is made that certain Bareboat Charter Agreement dated February 22, 2012 (the “Charter”) between WATERMAN STEAMSHIP CORPORATION, a New York corporation (the “Charterer”), and WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as the Trustee of The Green Bay Vessel Trust (“Owner”), and to that certain Guaranty Agreement dated February 22, 2012 (the “Guaranty”) issued by INTERNATIONAL SHIPHOLDING CORPORATION, a Delaware corporation (“Guarantor”), in favor of Owner with respect to the obligations of the Charterer under the Charter and related Charter Documents.  Capitalized terms used in this certificate and the Schedule attached hereto, unless otherwise defined herein, have the meanings assigned to them in the Charter.

The undersigned does hereby certify to the Owner 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 Charter, the Guaranty and the other Charter 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 Owner.  No Event of Default or event that upon notice or lapse of time or both would constitute an Event of Default under the Charter or other Charter Documents has occurred and is continuing as of the date this certificate is delivered to the Owner 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 ______________, 20___ (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 Owner.

Dated: _____________, 20_____

INTERNATIONAL SHIPHOLDING CORPORATION,

 a Delaware corporation

By:  ______________________________________

Its:  ______________________________________

B-

SCHEDULE 1

STIPULATED LOSS VALUES

“SLV” means Stipulated Loss Value

“Capitalized Owner’s Cost” is $59,000,000.00 (U.S. Dollars)

Payment Date	SLV as a % of Capitalized Owner’s Cost	Payment Date	SLV as a % of Capitalized Owner’s Cost
3/1/2012	105.11	4/1/2017	80.46
4/1/2012	104.76	5/1/2017	80.00
5/1/2012	104.40	6/1/2017	79.53
6/1/2012	104.05	7/1/2017	79.06
7/1/2012	103.70	8/1/2017	78.59
8/1/2012	103.34	9/1/2017	78.12
9/1/2012	102.98	10/1/2017	77.64
10/1/2012	102.62	11/1/2017	77.16
11/1/2012	102.26	12/1/2017	76.68
12/1/2012	101.90	1/1/2018	76.20
1/1/2013	101.54	2/1/2018	75.72
2/1/2013	101.17	3/1/2018	75.23
3/1/2013	100.80	4/1/2018	74.74
4/1/2013	100.43	5/1/2018	74.25
5/1/2013	100.06	6/1/2018	73.76
6/1/2013	99.69	7/1/2018	73.26
7/1/2013	99.31	8/1/2018	72.77
8/1/2013	98.94	9/1/2018	72.27
9/1/2013	98.56	10/1/2018	71.77
10/1/2013	98.18	11/1/2018	71.26
11/1/2013	97.79	12/1/2018	70.76
12/1/2013	97.41	1/1/2019	70.25
1/1/2014	97.02	2/1/2019	69.74
2/1/2014	96.64	3/1/2019	69.23
3/1/2014	96.25	4/1/2019	68.71
4/1/2014	95.85	5/1/2019	68.19
5/1/2014	95.46	6/1/2019	67.67
6/1/2014	95.07	7/1/2019	67.15
7/1/2014	94.67	8/1/2019	66.63
8/1/2014	94.27	9/1/2019	66.10
9/1/2014	93.87	10/1/2019	65.57
10/1/2014	93.47	11/1/2019	65.04
11/1/2014	93.06	12/1/2019	64.51
12/1/2014	92.65	1/1/2020	63.98
1/1/2015	92.25	2/1/2020	63.44
2/1/2015	91.83	3/1/2020	62.90
3/1/2015	91.42	4/1/2020	62.35
4/1/2015	91.01	5/1/2020	61.81
5/1/2015	90.59	6/1/2020	61.26
6/1/2015	90.17	7/1/2020	60.71
7/1/2015	89.75	8/1/2020	60.16
8/1/2015	89.33	9/1/2020	59.61
9/1/2015	88.90	10/1/2020	59.05
10/1/2015	88.48	11/1/2020	58.49
11/1/2015	88.05	12/1/2020	57.93
12/1/2015	87.62	1/1/2021	57.37
1/1/2016	87.19	2/1/2021	56.80
2/1/2016	86.75	3/1/2021	56.23
3/1/2016	86.32	4/1/2021	55.66
4/1/2016	85.88	5/1/2021	55.09
5/1/2016	85.44	6/1/2021	54.51
6/1/2016	85.00	7/1/2021	53.94
7/1/2016	84.55	8/1/2021	53.36
8/1/2016	84.11	9/1/2021	52.77
9/1/2016	83.66	10/1/2021	52.19
10/1/2016	83.21	11/1/2021	51.60
11/1/2016	82.76	12/1/2021	51.01
12/1/2016	82.30	1/1/2022	50.42
1/1/2017	81.84	2/1/2022	49.82
2/1/2017	81.39	3/1/2022	50.00
3/1/2017	80.92

Schedule 1-

EX-10.19

The portion of this Exhibit 10.19 marked “******” has been omitted and confidentially filed with the Securities and Exchange Commission pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.

NOTICE AND ACKNOWLEDGMENT OF

COLLATERAL ASSIGNMENT OF TIME CHARTER AND

SUBORDINATION AGREEMENT

TO: ******

PLEASE BE ADVISED that Waterman Steamship Corporation (“Waterman”) has entered into a sale/leaseback transaction with Wells Fargo Bank Northwest, National Association, a national banking association organized under the laws of the United States of America, with offices at 299 South Main Street, 12th Floor, Salt Lake City, Utah 84111, not in its individual capacity, but solely as the Trustee of The Green Bay Vessel Trust (together with its successors and assigns, the “Trustee”), involving the M/V GREEN BAY, Official Number 1204654 (the “Vessel”), under the terms of that certain Bareboat Charter Agreement dated February 22, 2012 between Waterman, as “Charterer”, and the Trustee, as “Owner” (the “Bareboat Charter”).  As security for the payment and performance of the obligations of Waterman under the Bareboat Charter and the Charter Documents (as defined in the Bareboat Charter) related thereto, Waterman has collaterally assigned and granted a security interest in (a) all of its right, title and interest in and to that certain Time Charter of the Vessel, dated June 24, 2010 (the “Time Charter”), between Waterman and ****** (hereinafter “you” or “******”), and (b) all charter hire, freights, subfreights, earnings, demurrage, detention and other earnings, accounts and general intangibles payable under the Time Charter, to and in favor of the Trustee (the “Assignment”).  A copy of the Assignment is attached hereto for your files.

The assignment of the Time Charter is only for the purposes of security, and Waterman will continue to perform all of its obligations under the Time Charter.  Until such time, if any, that you receive written notice from the Trustee of a default by Waterman under the Bareboat Charter, and a demand by the Trustee for the payment of charter hire and other sums due from ****** to Waterman under the Time Charter directly to the Trustee, you may continue to tender all performance due under the Time Charter to Waterman.  Upon receipt of written notice from the Trustee of a default by Waterman under the Bareboat Charter, and a written demand from the Trustee to tender all further payments of charter hire and other sums payable under the Time Charter directly to the Trustee, you are hereby authorized and directed immediately, without further consent or authorization from Waterman, to tender all further payments and performance under the Time Charter to the Trustee, in accordance with and subject to the terms and conditions of the Time Charter.  Any tender of performance to the Trustee pursuant to this authorization shall be deemed to satisfy any and all of the obligations of ****** to Waterman under the Time Charter, to the extent of such performance, as fully as if such performance had been tendered directly to Waterman.

It is a condition to the consummation of the sale/leaseback transaction that ****** agree to subordinate all of its right, title and interest in and to the Vessel under the Time Charter to the interests of the Trustee under the Bareboat Charter.  By signing below, ****** agrees that, under the terms of this subordination, notwithstanding the effective date of the Time Charter and the delivery of the Vessel thereunder, all right, title and interest of the Trustee in and to the Vessel, and all right, title, interest, liens and security interests of the Trustee arising from the Bareboat Charter, shall, for all times and for all purposes, be superior in rank, preference and priority to any right, interest, claim, lien or security interest in or against the Vessel, whether now existing or hereafter arising, in favor of ******, whether arising under the Time Charter or otherwise.  Without limiting the foregoing, ****** agrees that at no time and under no circumstance shall it seek to challenge, invalidate or assert priority over any right, title or interest of the Trustee in and to the Vessel, or any right, title, interest, liens and security interests of the Trustee under the Bareboat Charter or the Assignment.  ****** further agrees that, so long as the Bareboat Charter remains in effect, it will forbear from exercising any lien rights against the Vessel arising under the Time Charter or under applicable law and that it will not foreclose on any claim, lien and/or security interest created in its favor under the Time Charter or otherwise without the prior written consent of the Trustee first being obtained.  In the event of foreclosure by ******, ****** shall not accept any proceeds from any foreclosure (or sale) of the Vessel unless and until the indebtedness and other obligations of Waterman (including all interest, fees and expenses) to the Trustee under the Bareboat Charter and related Charter Documents have been fully paid.

Finally, in addition to its right to collect charter hire payable by ****** under the terms of the Time Charter referenced above, following the occurrence and during the continuance of a default by Waterman under the Bareboat Charter, the Trustee is authorized, in its discretion, among other remedies, to terminate the Bareboat Charter, recover possession of the Vessel and sell or re-charter the Vessel under terms acceptable to the Trustee.  In consideration of the agreement of ****** to subordinate and forbear from the enforcement of any lien rights in its favor against the Vessel, the Trustee agrees that, should the Trustee elect to terminate the Bareboat Charter and sell or re-charter the Vessel following a default by Waterman, prior to any such termination and such sale or re-charter, the Trustee will forward notice of the default and its intention to terminate the Bareboat Charter and sell or re-charter the Vessel (a “Notice of Intent”) to ******, and grant to ****** the following options which shall be exercisable by ****** only so long as the Time Charter remains in force in accordance with its terms.

If the Trustee elects to re-charter the Vessel, the Trustee in the Notice of Intent shall request ****** to name a replacement operator to take over the position of Waterman under the Bareboat Charter within ten (10) business days following receipt of the Notice of Intent.  Any such replacement operator must meet all approval requirements of the United States Maritime Administration or any successor agency of the United States government charged with the administration of United States vessel transfer restrictions (collectively, “MARAD”), agree to assume all Bareboat Charter obligations of Waterman, and meet all internal credit approval requirements of the Trustee.

In the event that the Trustee has elected to sell the Vessel (either at auction or by private sale), the Notice of Intent shall disclose that intention, and prior to any such sale or re-charter, ****** or its nominee shall have the option to purchase the Vessel for a cash purchase price (the “Purchase Price”) equal to (a) the stipulated loss value of the Vessel stated on the table attached hereto determined as of one month prior to the last charter hire installment date under the Bareboat Charter through which the Trustee has received full payment of charter hire in good and indefeasible funds (either from Waterman and/or by application of charter hire paid by ****** to the Trustee under the Time Charter pursuant to the instructions of the Trustee) plus (b) any taxes, duties, fees, assessments or charges of any nature imposed by any governmental authority relating to the sale, registration, use, delivery of the Vessel.  Any sale of the Vessel to ****** pursuant to the foregoing option is subject to the prior written consent of MARAD, and shall be on an “AS IS, WHERE IS” basis without any warranties whatsoever (other than a warranty that the Trustee will transfer such title to the Vessel as was conveyed to the Trustee by Waterman free and clear of any liens or other encumbrances imposed by the Trustee).  If ****** elects to purchase the Vessel pursuant to the foregoing option, ****** shall provide written notice to the Trustee of that election within ten (10) business days following receipt by ****** of the Notice of Intent issued by the Trustee.  Upon the timely receipt of such notice from ******, the Trustee will proceed to apply to MARAD for, and use commercially reasonable efforts to obtain, permission to transfer the Vessel to ****** during which time ****** shall finalize all board of director and shareholder approval required for the purchase.  Should MARAD grant permission for the sale of the Vessel to ******, the Trustee will forward notice of such approval to ******, and ****** shall consummate the purchase by tender of the Purchase Price to the Trustee, in U.S. Dollars, and in good and indefeasible funds, within ten (10) business days following the receipt by ****** of notice from the Trustee of the grant by MARAD of permission for the sale or sixty (60) business days from the date of the Notice of Intent, whichever is later (the “Closing Date”).

If, as applicable, (i) ****** fails to name a replacement operator as provided above, (ii) provide timely notice of its election to purchase the Vessel pursuant to the foregoing purchase option and consummate the purchase of the Vessel by the Closing Date, or (iii) the re-charter to ******’s suggested operator or the sale of the Vessel to ****** is not approved by MARAD, the Trustee may proceed to sell or re-charter the Vessel to any person free of any liens or other interest arising in favor of ****** under the Time Charter.  Any right, interest, claim, lien or security interest in or against the Vessel in favor of ****** arising under the terms of the Time Charter shall remain subject and subordinate to the rights of the Trustee as provided above and shall be deemed to attach, if at all, only to any proceeds of the sale of the Vessel remaining after the satisfaction of all indebtedness and other obligations of Waterman (including all interest, fees and expenses) to the Trustee under the Bareboat Charter.

Please acknowledge your receipt of this notice, your agreement to comply with the instructions set forth above, your agreement to subordinate your interests in the Vessel arising pursuant to the Time Charter and applicable law to the interests of the Trustee in the Vessel arising pursuant to the Bareboat Charter and related Charter Documents under the terms set forth above and your agreement to and understanding of the terms of the purchase option granted above by signing in the signature block below.  By signing below, you acknowledge that the Trustee is relying on this Notice and Acknowledgment, and your agreement to subordinate your rights with respect to the Vessel under the Time Charter as provided herein, as an inducement to provide financing to Waterman.  Except as provided above, your signature below is without prejudice to any rights which ****** may have under the Time Charter including but not limited to the right to make deductions from the payment of charter hire to the extent of claims which ****** may have against Waterman or the Vessel to the extent permitted pursuant to the terms of the Time Charter.

Dated:  February 22, 2012

WATERMAN STEAMSHIP CORPORATION

By:           /s/ D. B. Drake

Name:                      D. B. Drake

Title:           Vice President and Treasurer

WELLS FARGO BANK NORTHWEST, N.A.,

 as Trustee of The Green Bay Vessel Trust

By:           /s/ Jon Croasmun                                                                

Name:                      Jon Croasmun

Title:           Vice President

ACKNOWLEDGED, ACCEPTED AND

AGREED THIS 22ND DAY OF

FEBRUARY, 2012

******

By:           /s/           ******                                                      

Name:                      ******                                                      

Title:           ******                                                      

STIPULATED LOSS VALUES

“SLV” means stipulated loss value

“Capitalized Owner’s Cost” is $59,000,000.00 (U.S. Dollars)

Payment Date	SLV as a % of Capitalized Owner’s Cost	Payment Date	SLV as a % of Capitalized Owner’s Cost
3/1/2012	105.11	4/1/2017	80.46
4/1/2012	104.76	5/1/2017	80.00
5/1/2012	104.40	6/1/2017	79.53
6/1/2012	104.05	7/1/2017	79.06
7/1/2012	103.70	8/1/2017	78.59
8/1/2012	103.34	9/1/2017	78.12
9/1/2012	102.98	10/1/2017	77.64
10/1/2012	102.62	11/1/2017	77.16
11/1/2012	102.26	12/1/2017	76.68
12/1/2012	101.90	1/1/2018	76.20
1/1/2013	101.54	2/1/2018	75.72
2/1/2013	101.17	3/1/2018	75.23
3/1/2013	100.80	4/1/2018	74.74
4/1/2013	100.43	5/1/2018	74.25
5/1/2013	100.06	6/1/2018	73.76
6/1/2013	99.69	7/1/2018	73.26
7/1/2013	99.31	8/1/2018	72.77
8/1/2013	98.94	9/1/2018	72.27
9/1/2013	98.56	10/1/2018	71.77
10/1/2013	98.18	11/1/2018	71.26
11/1/2013	97.79	12/1/2018	70.76
12/1/2013	97.41	1/1/2019	70.25
1/1/2014	97.02	2/1/2019	69.74
2/1/2014	96.64	3/1/2019	69.23
3/1/2014	96.25	4/1/2019	68.71
4/1/2014	95.85	5/1/2019	68.19
5/1/2014	95.46	6/1/2019	67.67
6/1/2014	95.07	7/1/2019	67.15
7/1/2014	94.67	8/1/2019	66.63
8/1/2014	94.27	9/1/2019	66.10
9/1/2014	93.87	10/1/2019	65.57
10/1/2014	93.47	11/1/2019	65.04
11/1/2014	93.06	12/1/2019	64.51
12/1/2014	92.65	1/1/2020	63.98
1/1/2015	92.25	2/1/2020	63.44
2/1/2015	91.83	3/1/2020	62.90
3/1/2015	91.42	4/1/2020	62.35
4/1/2015	91.01	5/1/2020	61.81
5/1/2015	90.59	6/1/2020	61.26
6/1/2015	90.17	7/1/2020	60.71
7/1/2015	89.75	8/1/2020	60.16
8/1/2015	89.33	9/1/2020	59.61
9/1/2015	88.90	10/1/2020	59.05
10/1/2015	88.48	11/1/2020	58.49
11/1/2015	88.05	12/1/2020	57.93
12/1/2015	87.62	1/1/2021	57.37
1/1/2016	87.19	2/1/2021	56.80
2/1/2016	86.75	3/1/2021	56.23
3/1/2016	86.32	4/1/2021	55.66
4/1/2016	85.88	5/1/2021	55.09
5/1/2016	85.44	6/1/2021	54.51
6/1/2016	85.00	7/1/2021	53.94
7/1/2016	84.55	8/1/2021	53.36
8/1/2016	84.11	9/1/2021	52.77
9/1/2016	83.66	10/1/2021	52.19
10/1/2016	83.21	11/1/2021	51.60
11/1/2016	82.76	12/1/2021	51.01
12/1/2016	82.30	1/1/2022	50.42
1/1/2017	81.84	2/1/2022	49.82
2/1/2017	81.39	3/1/2022	50.00
3/1/2017	80.92

EX-10.20

GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT (as amended, restated, extended, supplemented, or otherwise modified from time to time, this “Guaranty”) dated February 22, 2012 is executed by INTERNATIONAL SHIPHOLDING CORPORATION, a corporation organized under the laws of Delaware, with offices at 11 North Water St., Suite 18290, Mobile, Alabama 36602 (together with its successors and permitted assigns, “Guarantor”) in favor of WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION (together with its successors and assigns, the “Trust Company”), a national banking association organized under the laws of the United States of America, with offices at 299 South Main Street, 12th Floor, Salt Lake City, Utah 84111, not in its individual capacity, but solely as the Trustee of The Green Bay Vessel Trust (the “Trust”).

RECITALS

A.           Waterman Steamship Corporation, a corporation organized under the laws of the State of New York, and a direct, wholly-owned subsidiary of Guarantor (together with its successors and permitted assigns, the “Charterer”), and the Trust Company, solely in its capacity as the Trustee under the Trust, have agreed to enter into a sale-leaseback transaction with respect to the M/V GREEN BAY, a 199.99 m, U.S.-flag, RO-RO, pure car/truck carrier, U.S. Official Number 1204654 (the “Vessel”), pursuant to the terms of that certain Bareboat Charter Agreement dated of even date herewith (as amended, restated, extended, supplemented, or otherwise modified from time to time, the “Charter”) and certain additional Charter Documents related thereto. 

B.           Under the terms of the Charter Documents, it is a condition to the consummation of the sale/leaseback transaction that Guarantor enter into this Guaranty and guaranty all existing and future obligations, liabilities and indebtedness of the Charterer to the Trust and to the Participants who are beneficiaries under the Trust under the Charter and all Charter Documents related thereto or otherwise arising in connection with the sale/leaseback transaction (as more fully described and defined below, the “Guaranteed Obligations”), subject to the terms hereof.

C.           Guarantor, as the direct parent of the Charterer, expects to realize both direct and indirect economic and business benefits from the consummation of the sale/leaseback transaction pursuant to the terms of the Charter and the related Charter Documents, so it is in the best interests of Guarantor to furnish this Guaranty.

AGREEMENT

NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Guarantor hereby covenants and agrees as follows:

1.           Definitions.  The following terms when used in this Guaranty, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):

“Charter” has the meaning assigned in Recital A.

“Charter Documents” has the meaning assigned in the Charter.  The terms “Charter Documents” includes the Charter, and also includes any Charter Document as such document may be amended, restated, extended, supplemented, or otherwise modified from time to time.

“Charterer” has the meaning assigned in Recital A.

“Collateral” means all property, whether real or personal, tangible or intangible, now or hereafter subject to any mortgage, lien or security interest granted under the terms of any Charter Document as security for the obligations, liabilities and indebtedness of Charterer.

“Guaranteed Obligations” has the meaning assigned in Section 2.  The Guaranteed Obligations include, without limitation, interest accruing after the commencement of a proceeding under bankruptcy, insolvency or similar laws of any jurisdiction at the applicable rate or rates provided in the Charter Documents.

“Guarantor” has the meaning assigned in the preamble.

“Guaranty” has the meaning assigned in the preamble.

“Insolvent” means, with respect to any Person at any time, (a) a condition under which the fair saleable value of such Person’s assets is, on the date of determination, less than the total amount of such Person’s liabilities (including contingent and unliquidated liabilities) at such time; (b) such Person is not able to pay all of its liabilities as such liabilities mature; and (c) such Person has unreasonably small capital with which to conduct its business.  For purposes of this definition (i) the amount of a Person’s contingent or unliquidated liabilities at any time shall be that amount which, in light of all the facts and circumstances then existing, represents the amount which can reasonably be expected to become an actual or matured liability; (ii) the “fair saleable value” of an asset shall be the amount which may be realized within a reasonable time either through collection or sale of such asset at its regular market value; and (iii) the “regular market value” of an asset shall be the amount which a capable and diligent business person could obtain for such asset from an interested buyer who is willing to purchase such asset under ordinary selling conditions.

“Participant” means each of Regions Equipment Finance, Ltd., an Alabama limited partnership, and any additional Person who is or becomes a beneficiary under the Trust, together with their respective successors and assigns.

“Person” means any individual, corporation, business trust, association, company, partnership, limited liability company, joint venture, governmental authority, or other entity.

“Trust” means The Green Bay Vessel Trust established under the laws of Utah pursuant to that certain Trust Agreement, dated as of February 22, 2012, among the Trust Company, as Trustee, and the Participants who are beneficiaries of the trust estate.

“Trustee” means the Trust Company in its capacity as the Trustee under the Trust, and any co-Trustee or successor Trustee appointed under the terms of the Trust Agreement governing the Trust, as such agreement may be amended, supplemented or restated from time to time.

Additional capitalized terms used but not otherwise defined herein shall have the meanings assigned in the Charter.

2.           Unconditional, Unlimited and Irrevocable Guaranty.  Guarantor, for itself and its successors and assigns, hereby unconditionally, absolutely and irrevocably guarantees to the Trust, to the Trust Company as Trustee under the Trust, and to the Participants, as a primary obligor and not merely as a surety, that Charterer shall (a) promptly pay in full all charter hire, rents, stipulated loss value payments, total loss payments, termination payments, purchase option payments, liquidated or other damages arising in connection with the breach of any Charter Document, late charges, interest, premiums of insurance, taxes, assessments, liens, indemnities, reimbursements, expenses, costs, Attorneys’ Fees and any other fees, charges or sums whatsoever when due under the terms of the Charter Documents, whether at stated maturity, upon acceleration, upon demand or otherwise, and at all times thereafter, and (b) promptly pay and perform all additional obligations, liabilities and indebtedness of every nature and description of Charterer to the Trust, to the Trust Company as Trustee under the Trust, and/or to the Participants under or in connection with the Charter Documents, or otherwise arising out of or in connection with the sale/leaseback of the Vessel, whether now existing or hereafter arising, due or to become due, and whether such obligations, liabilities and indebtedness are absolute or contingent, liquidated or unliquidated, owed individually or jointly, severally or jointly and severally with others, as a principal obligor or as a surety (collectively, the “Guaranteed Obligations”).  This Guaranty is an absolute and unconditional guarantee of payment and not of collection.  The liability of Guarantor hereunder is unlimited and is not conditioned or contingent upon the genuineness, validity, sufficiency or enforceability of the Guaranteed Obligations or any Charter Documents evidencing or securing the Guaranteed Obligations, or any security or Collateral therefore, or the pursuit by the Trust, the Trust Company as Trustee under the Trust, or any Participant of any rights or remedies which it now has or may hereafter have.  This Guaranty is cumulative and does not supersede any other outstanding guaranties, and the liability of Guarantor under this Guaranty is exclusive of Guarantor’s liability under any other guaranties signed by Guarantor.

3.           Obligations Direct and Primary.  Guarantor hereby agrees that its obligations hereunder are direct and primary and that the Trustee, on behalf of the Trust and the Participants, may proceed directly and in the first instance against Guarantor and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Guaranteed Obligations; and Guarantor hereby waives any right to require the Trustee to proceed against the Charterer, to proceed against any other guarantor(s) of the Guaranteed Obligations, to proceed against the Vessel or any Collateral for the Guaranteed Obligations granted by the Charterer or other Person, or to pursue any other action in the power of Trustee or any Participant whatsoever.

4.           Rights of Trustee and Participants.  Guarantor authorizes the Trustee or any Participant, without notice to, demand on, or the further assent of, Guarantor, and without affecting the liability of Guarantor hereunder, from time to time to: (a) renew, compromise, extend, accelerate, or otherwise change the time for payment or other terms of, the Guaranteed Obligations or any part thereof, including increase or decrease of the rate of charter hire payable thereunder, or otherwise change the terms of any Charter Documents; (b) receive and hold security for the payment of this Guaranty or any Guaranteed Obligation and exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any such security; (c) apply such security and direct the order or manner of sale thereof as the Trustee or any Participant in its discretion may determine; and (d) release or substitute any one or more of any endorsers or other guarantors of any of the Guaranteed Obligations.

5.           Guaranty Absolute.  Guarantor guarantees that the Guaranteed Obligations shall be paid and performed strictly in accordance with the terms of the Charter Documents regardless of any law, regulation or order now or hereafter in effect of any jurisdiction affecting any of such terms or the rights of the Trustee or any Participant with respect thereto. The liability of the Guarantor under this Guaranty is absolute and unconditional irrespective of: (a) any change in the time, manner or place of payment, of or in any other terms of, all or any of the Charter Documents or the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from any of the terms of any Charter Document or Guaranteed Obligation; (b) any release or amendment or waiver of, or consent to departure from, any other guaranty or supporting obligation, or any exchange, release, impairment or nonperfection of any security interest in the Vessel or any Collateral, for any or all of the Charter Documents or Guaranteed Obligations; (c) any compromise, settlement, release or termination of any of the obligations or agreements of Charterer or any other obligor under any of the Charter Documents or otherwise under the Guaranteed Obligations; (d) any present or future law, regulation or order of any jurisdiction (whether of right or in fact) or of any agency thereof purporting to reduce, amend, restructure or otherwise affect any term of any Charter Document or Guaranteed Obligation; (e) the death of, voluntary or involuntary liquidation, reorganization or dissolution of, sale or other disposition of all or substantially all the assets of, or the marshaling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, merger, consolidation, other reorganization, arrangement, composition or readjustment of, or other similar proceeding affecting, Charterer or any other obligor with respect to the Guaranteed Obligations, or any of the assets of any such Person, or any action taken by any trustee, receiver, custodian or other officer with similar powers, or by any court in any such proceeding, or the disallowance, rejection or postponement in any such proceeding of any of the Guaranteed Obligations; (f) any limitation on or exculpation from the liabilities or obligations of Charterer or any other obligor under any of the Charter Documents (whether pursuant to the terms of any of the Charter Documents or otherwise), any termination, cancellation, invalidity or unenforceability, in whole or in part, of any of the Charter Documents or any limitation that may now or hereafter exist with respect to any of the Charter Documents or the obligations of Charterer or any other obligor thereunder; (g) any defense or counterclaim that the Charterer may assert with respect to any of the Guaranteed Obligations, including failure of consideration, breach of warranty, fraud or other vices of consent, statute of frauds, bankruptcy, statute of limitations, lender liability, accord and satisfaction, or usury; or (h) any other defense whatsoever that might constitute a defense available to, or discharge of, a borrower, lessee, guarantor, surety or other obligor other than full and final payment and performance of the Guaranteed Obligations.  The obligations of Guarantor hereunder shall continue and survive the repossession of the Vessel by the Trustee as “Owner” under the terms of the Charter or the repossession or foreclosure of any security interest in any Collateral held by the Trustee as security for the payment or performance of the Guaranteed Obligations whether or not such repossession or foreclosure constitutes an election of remedies against the Charterer or any other Person.  Guarantor agrees that, until all of the Guaranteed Obligations have been fully performed and paid in full in good and indefeasible funds, and any commitments of the Trustee or the Participants with respect to the Guaranteed Obligations under the Charter Documents have been terminated, Guarantor shall not be released by or because of the taking, or failure to take, any action that might in any manner or to any extent vary the risks of Guarantor under this Guaranty or that, but for this paragraph, might discharge or otherwise reduce, limit, or modify Guarantor’s obligations under this Guaranty.  Guarantor waives and surrenders any defense to any liability under this Guaranty based upon any such action, including but not limited to any action of the Trust, the Trust Company as Trustee under the Trust or any Participant described in the immediately preceding paragraph of this Guaranty.  It is the express intent of Guarantor that Guarantor’s obligations under this Guaranty are and shall be absolute and unconditional, and that nothing shall discharge the liability of the Guarantor hereunder except the full and final payment and performance of the Guaranteed Obligations.

6.           Guarantor’s Waivers of Certain Rights and Certain Defenses.  Guarantor waives:

(a) Any right to require the Trustee or any Participant to proceed against the Charterer, repossess the Vessel, proceed against or exhaust any security for the Guaranteed Obligations, or pursue any other remedy available to the Trustee or any Participant under any Charter Document or applicable law;

(b) Any defense arising by reason of any disability or other defense of Charterer or any other guarantor, or the cessation from any cause whatsoever of the liability of Charterer or any other guarantor;

(c) Any defense based on any claim that Guarantor’s obligations exceed or are more burdensome than those of the Charterer;

(d) Any defense arising by reason of the death or dissolution of Charterer or any other guarantor; and

(e) The benefit of any statute of limitations affecting the liability of Guarantor hereunder.

No provision or waiver in this Guaranty shall be construed as limiting the generality of any other waiver contained in this Guaranty.

7.           Subrogation.  Until the Guaranteed Obligations have been paid and performed in full, and any commitment of the Trustee or the Participants under the Charter Documents with respect to the Guaranteed Obligations expires or has been terminated, Guarantor agrees to forbear from the exercise of any right of subrogation, reimbursement, indemnification and contribution (contractual, statutory, or otherwise) including, without limitation, any claim or right of subrogation under the Bankruptcy Code (Title 11, United States Code) or any successor statute, arising from the existence or performance of this Guaranty, and Guarantor waives, to the extent permitted by applicable law, any right to enforce any remedy that the Trust, the Trust Company as Trustee under the Trust or any Participant now has or may hereafter have against Charterer, and waives any benefit of, and any right to participate in, any security now or hereafter held by the Trustee or any Participant with respect to the Guaranteed Obligations.

8.           Waiver of Notice of Acceptance, Presentment, etc.  Guarantor waives presentment, demand, notice of default or nonpayment, protest, notice of protest, notice of dishonor, notice of intent to accelerate, notice of acceleration, notice of any suit or any other action against Charterer or any other Person, any other notices to any party liable on any Charter Document (including Guarantor), notice of acceptance of this Guaranty, notice of the existence, creation, or incurring of any new or additional Guaranteed Obligation to which this Guaranty applies or any other obligations, liabilities or indebtedness of Charterer to the Trustee or any Participant, notice of any fact that might increase the risk of Guarantor, and any and all other notices to which Guarantor may be entitled under applicable law.

9.           Waivers of Exemption Rights, Rights of Appraisal, etc.

(a) Guarantor waives the benefit of all exemption, one action, moratorium, stay and homestead laws.

(b) Guarantor (i) agrees that the Trustee may collect from Guarantor without first repossessing the Vessel or foreclosing on any security for the Guaranteed Obligations granted by the Charterer or any other Person; and (ii) acknowledges that if the Trustee or any Participant repossesses the Vessel or forecloses on any Collateral pledged by Charterer or any other Person:  (A) the amount of the Guaranteed Obligations may be reduced only by the price for which the Vessel or that Collateral is sold at the foreclosure sale or otherwise disposed of in exercise of the remedies provided under the Charter Documents (net of the costs of any such disposition), even if the Vessel or the other Collateral is worth more than the sale price or other consideration realized on such disposition, and (B) the Trustee or any Participant may collect from Guarantor even if the Trustee or any Participant, by repossessing the Vessel or by foreclosing on the Collateral, has affected, impaired or eliminated any right Guarantor may have to collect from the Charterer or other Person under principles of subrogation, indemnity or other applicable law.  Guarantor hereby unconditionally and irrevocably waives all rights and defenses that Guarantor may have because of any such actions by the Trustee or any Participant. 

(c)  Guarantor waives any right to appraisal of the Vessel or any Collateral and any defense it may have at law or equity, to a fair market value hearing or action to determine a deficiency judgment after a foreclosure.

10.           Subordination.  In addition to the agreement of Guarantor to forbear from the exercise of any right of subrogation as set forth in Section 7 of this Guaranty, Guarantor agrees that, following the occurrence and during the continuance of any Event of Default under the Charter, Guarantor shall not demand, take, or receive from the Charterer, by setoff or in any other manner, payment of any other obligations of the Charterer to Guarantor until all of the Guaranteed Obligations have been performed or paid in full in good and indefeasible funds and any commitments of the Trustee or the Participants under the Charter Documents with respect to the Guaranteed Obligations have been terminated, unless expressly permitted by the Charter Documents.  If any payments are received by Guarantor in violation of this Section 10, such payments shall be received by Guarantor as trustee for the Trustee and the Participant and shall be paid over to the Trustee on account of the Guaranteed Obligations, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty.  Any security interest, lien, or other encumbrance that Guarantor may now or hereafter have on any property of Charterer is hereby subordinated to any security interest, lien, or other encumbrance that the Trust or any Participant may have on any such property.

11.           Guaranty Irrevocable.  This Guaranty is a continuing guaranty and shall remain in full force and effect, and may not be revoked by Guarantor, until all indebtedness and liabilities of the Charterer under the Guaranteed Obligations are paid in full, in good and indefeasible funds, and all obligations of the Charterer under the Guaranteed Obligations are fully performed.

12.           Reinstatement of Guaranty.  This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Trustee or any Participant on the insolvency, bankruptcy or reorganization of the Charterer or otherwise, all as though the payment had not been made.

13.           Stay of Acceleration.  In the event that acceleration of the time for payment of any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy, or reorganization of the Charterer or otherwise, all such Guaranteed Obligations shall nonetheless be payable by Guarantor, in full, immediately upon demand by the Trustee.

14.  No Setoff or Deductions; Taxes.

(a) All payments by Guarantor hereunder shall be paid in full without setoff or counterclaim or any deduction or withholding whatsoever, including, without limitation, for any and all present and future taxes.  If any withholding or other taxes (other than income taxes on the net income of the Trustee and/or the Participants arising out of such payment) are at any time imposed on any payments under or in respect of this Guaranty including, but not limited to, payments made pursuant to this paragraph, Guarantor shall pay all such taxes to the relevant authority in accordance with applicable law such that the Trustee and the Participants receive the sum they would have received had no such deduction or withholding been made (or, if Guarantor cannot legally comply with the foregoing, Guarantor shall pay to the Trustee such additional amounts as will result in the Trust receiving the sum it would have received had no such deduction or withholding been made).  Further, Guarantor shall also pay to the Trustee, on demand, all additional amounts that the Trustee or any Participant specifies as necessary to preserve the after-tax yield the Trust would have received if such taxes had not been imposed.

(b) Guarantor shall promptly provide the Trustee with an original receipt or certified copy issued by the relevant authority evidencing the payment of any such amount required to be deducted or withheld.

15.           Information Relating to the Charterer.  Guarantor acknowledges and agrees that it has made such independent examination, review, and investigation of the Charterer and the Charter Documents as Guarantor deems necessary and appropriate, including, without limitation, any covenants pertaining to Guarantor contained therein, and Guarantor shall have sole responsibility to obtain from the Charterer any information required by Guarantor about any modifications thereto.  Guarantor further acknowledges and agrees that it shall have the sole responsibility for, and has adequate means of, obtaining from the Charterer such information concerning Charterer’s financial condition or business operations as Guarantor may require, and that neither the Trustee nor any Participant has any duty, and Guarantor is not relying on the Trustee or any Participants, at any time to disclose to Guarantor any information relating to the business operations or financial condition of the Charterer.

16.           Certain Warranties and Covenants of Guarantor.   Guarantor represents, warrants and covenants to the Trustee and the Participants that:

(a) Financial Information and Reporting.  All information concerning Guarantor, including (without limitation) financial statements and other financial information, furnished to the Trustee or the Participants in connection with the sale/leaseback of the Vessel, was true, complete and accurate as of the date of delivery thereof to the Trustee or the Participant, as applicable, that all such information remains true, complete and accurate as of the date hereof, and that there have been no material adverse changes in the financial condition of Guarantor since the date of the most recent financial statements referenced above.  In the event of any breach of Guarantor’s representations and warranties herein or any material adverse change in the financial condition of Guarantor, upon the request of the Trustee or the Participants, Guarantor shall promptly furnish to the Trustee for the benefit of the Trust such security or additional security for the performance of Guarantor’s obligations hereunder as the Trustee or the Participants may reasonably request.  Guarantor shall maintain a system of accounts established and administered in accordance with generally accepted accounting principles (“GAAP”), consistently applied.  So long as any of the Guaranteed Obligations remain unpaid and this Guaranty remains in force, Guarantor shall deliver to the Trustee and the Participants: (i) the audited combined and consolidated annual financial statements of Guarantor and its Subsidiaries, including Charterer, which statements shall include, without limitation, a balance sheet, a statement of income, a statement of cash flow, a statement of changes in equity, and notes to financial statements, within 120 days after the fiscal year end of Guarantor, (ii) the management-prepared combined and consolidated quarterly financial statements of Guarantor and its Subsidiaries, including Charterer, within 45 days after the close of each fiscal quarter of Guarantor, and (iii) all additional information requested by the Trustee or any Participant which such Person deems reasonably necessary to determine the current financial condition of Guarantor and its Subsidiaries and the faithful performance of the terms of the Charter Documents within 30 days after the receipt of such request.  Annual statements shall set forth the corresponding figures for the prior fiscal year in comparative form, all in reasonable detail without any qualification or exception deemed material by the Trustee or any Participant.  Unless otherwise accepted by the Trustee and the Participants, each financial statement submitted to the Trustee and the Participants shall be prepared in accordance with GAAP consistently applied and shall fairly and accurately present the financial condition and results of operations of Guarantor and its Subsidiaries for the period to which it pertains.

(c) Compliance with Charter Covenants.  Guarantor shall comply with the continuity covenants of Section 9(a)(iii) of the Charter, and Guarantor and its Subsidiaries, including Charterer, shall at all times during the Term maintain the financial covenants set forth in Section 15(c) of the Charter.

(d) Inspection and Audit of Books by Trustee and Participants.  Guarantor hereby grants to Trustee and the Participants (either directly or through any of their respective representatives) the right to examine and audit the books and records of Guarantor and its subsidiaries at any reasonable time, to make copies (including electronic copies of computer records) and obtain print-outs of such books and records, and to contact and converse with Guarantor’s employees, agents and independent accountants.

(e) Substantial Financial and Business Benefits.  This Guaranty has been furnished by Guarantor as an inducement to the Trustee and to the Participants to consummate the sale/leaseback transaction involving the Vessel under the Charter and related Charter Documents.  Because Guarantor is the direct parent of the Charterer and the indirect parent of Gulf South Shipping Pte. Ltd., an Affiliate of Charterer, who will each use the proceeds of the transaction to retire certain indebtedness, and because Guarantor will also receive a portion of the proceeds of the transaction for use as working capital, Guarantor expects to realize both direct and indirect economic and business benefits from the sale/leaseback of the Vessel under the terms of the Charter and the other Charter Documents.

(f) Solvency.  Guarantor is not currently Insolvent, and the execution and delivery of this Guaranty will not cause Guarantor to become Insolvent.

17.           Remedies.  In the event of any default in regard to Guarantor’s obligations hereunder, or in the event of any default by the Charterer under the Charter Documents or otherwise under the Guaranteed Obligations, or in the event of death, incompetency, termination, dissolution or insolvency of the Charterer or other obligor under the Guaranteed Obligations, or if a receiver, liquidator or conservator be appointed for any part of the property or assets of the Charterer, or if the Charterer shall make an assignment for the benefit of creditors, or if the Charterer shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against the Charterer (whether or not any such event occurs at a time when any of the Guaranteed Obligations is otherwise due and payable, and whether or not any such event gives rise to an enforceable legal right on the part of the Trustee or any Participant to demand payment of or collect any sums from Charterer or to accelerate the maturity of any sums to become due and payable thereafter), then, and in any such case, Guarantor agrees to pay to the Trustee, upon demand, for the benefit of the Trust, the full amount which would be payable hereunder by Guarantor if all the Guaranteed Obligations, including, but not limited to, any remaining payments owing pursuant to the Charter or any of the other Charter Documents, were then due and payable.  Without limiting the foregoing, following the occurrence and during the continuance of a default or an event of default under the Guaranteed Obligations, the Trustee and any Participant may (a) exercise any remedy provided under the Charter Documents and all rights and remedies available to a creditor and, to the extent applicable, a secured party, under applicable law; and (b) set off against any or all liabilities of Guarantor all money owed by the Trust or any Participant, or any of their respective Affiliates, in any capacity to Guarantor, whether or not due, and also set off against all other liabilities of Guarantor to the Trustee or any Participant all money owed by the Trustee, the Trust or any Participant in any capacity to Guarantor (if exercised by the Trustee or any Participant, the Trustee or such Participant shall be deemed to have exercised such right of setoff and to have made a charge against any such money immediately upon the occurrence of such default although made or entered on the books subsequent thereto).  Each power or remedy herein given to the Trustee or any Participant, or granted to the Trustee, the Trust or any Participant under the Charter Documents or applicable law, shall be cumulative and in addition to every other power or remedy specifically given in this Guaranty or existing in admiralty, in equity, at law or by statute.  Each power or remedy may be exercised as often as deemed expedient by the Trustee or any Participant.  No delay or omission by the Trustee or any Participant in the exercise of any power or remedy shall impair any such power or remedy, or shall be construed to be a waiver of any event of default.

18.           Notices.  All demands, notices, and other communications under this Guaranty shall be in writing and shall either be personally delivered or deposited with a reputable commercial courier or express delivery service, or with the United States Postal Service, certified mail, first class postage prepaid, return receipt requested, addressed as follows:

To Trustee -                                Wells Fargo Bank Northwest, National Association

299 South Main Street, 12th Floor

Salt Lake City, Utah 84111

MAC: U1228-120

Facsimile: (801) 246-5053

Attention: David Wall

To Guarantor -                                           International Shipholding Corporation

11 North Water St., Suite 18290

Mobile, Alabama 36602

Facsimile: (251) 706-0756

                                           Attention: Chief Financial Officer

or at such other addresses as may hereafter be furnished in writing by either party to the other.  Any such notice shall be effective upon receipt or by refusal of the recipient at the applicable address for notice provided herein.  Demands, notices and other communications may also be transmitted by facsimile provided that a hard copy of such transmittal is deposited with a reputable commercial courier or express service for overnight delivery at the applicable address for notices within one (1) Business Day following such transmittal.  Any demand, notice, or other communication so transmitted by facsimile shall be deemed to have been duly given upon receipt by the sender of an electronic answer-back.

19.           Successors and Assigns.  This Guaranty: (a) binds Guarantor and Guarantor’s administrators, successors, and assigns, provided that Guarantor may not assign its rights or obligations under this Guaranty without the prior written consent of the Trustee, and (b) inures to the benefit of the Trustee and the Participants, and their respective endorsees, successors, and assigns.  The Trustee and any Participant may, without notice to Guarantor and without affecting Guarantor’s obligations hereunder, sell, assign, grant participations in, pledge as collateral, or otherwise transfer to any other Person the Guaranteed Obligations and this Guaranty, in whole or in part.  Guarantor agrees that the Trustee and the Participants may disclose to any assignee or purchaser, or any prospective assignee or purchaser, of all or part of the Guaranteed Obligations any and all information in their possession concerning Guarantor, this Guaranty, and any security for this Guaranty.

20.           Amendments, Waivers, and Severability.  No provision of this Guaranty may be amended or waived except in writing.  No failure by the Trustee or any Participant to exercise, and no delay in exercising, any of its rights, remedies, or powers shall operate as a waiver thereof, and no single or partial exercise of any such right, remedy, or power shall preclude any other or further exercise thereof or the exercise of any other right, remedy, or power.  The unenforceability or invalidity of any provision of this Guaranty shall not affect the enforceability or validity of any other provision of this Guaranty.

21.           Costs and Expenses.  Guarantor agrees to pay all reasonable Attorneys’ Fees, and all other costs and expenses that may be incurred by the Trustee or any Participant (a) in the enforcement of this Guaranty or (b) in the preservation, protection, or enforcement of any rights of the Trustee or any Participant in any case commenced by or against Guarantor or the Charterer under the Bankruptcy Code (Title 11, United States Code) or any similar or successor statute.

22.           Governing Law and Jurisdiction.  This Guaranty shall be governed by and construed in accordance with the laws of the United States of America, to the extent applicable, and otherwise in accordance with the laws of the State of New York.  Guarantor agrees that service of process upon it may be made by certified or registered mail, return receipt requested, at the address set forth in Section 18 or at any other address provided by Guarantor for notice.  Nothing herein shall affect the right of the Trustee or any Participant to serve process in any other manner permitted by law.

23.           No Fraudulent Conveyance.  Notwithstanding any provision of this Guaranty to the contrary, it is intended that the obligations of Guarantor under this Guaranty shall not constitute a “fraudulent conveyance” (as defined below).  Consequently, Guarantor and the Trustee agree that if the obligations of Guarantor under this Guaranty would, but for the application of this paragraph, constitute a fraudulent conveyance, the obligations of Guarantor under this Guaranty shall be valid and enforceable only to the maximum extent that would not cause such obligations to constitute a fraudulent conveyance, and this Guaranty shall be deemed automatically to have been amended accordingly with respect to Guarantor at all relevant times.  For purposes of this paragraph, “fraudulent conveyance” means a fraudulent conveyance under Section 548 of the United States Bankruptcy Code or a fraudulent conveyance or a fraudulent transfer under the provisions of any applicable fraudulent conveyance or fraudulent transfer law or similar law of any state, nation or governmental authority as in effect from time to time.

24.           ENTIRE AGREEMENT.THIS GUARANTY AND THE OTHER CHARTER DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES THERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, PROPOSALS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO.  THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES THERETO.  No waiver or modification by a party of any of the terms or conditions hereof shall be effective unless in writing and signed by an officer of such party.

25.           WAIVER OF JURY TRIAL.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, GUARANTOR HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OTHER CHARTER DOCUMENT, THE GUARANTEED OBLIGATIONS OR ANY SECURITY THEREFORE, THE ACTIONS OF THE TRUSTEE OR ANY PARTICIPANT IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT OF ANY OF THE FOREGOING, OR THE SALE/LEASEBACK OF THE VESSEL.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty as of the date first written above.

INTERNATIONAL SHIPHOLDING CORPORATION

By:           /s/ D. B. Drake

Name:                      D. B. Drake

Title:           Vice President and Treasurer

EX-31.1

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 quarterly 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;

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

a)   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;

b)   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; and

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:

a)  All significant deficiencies and material weaknesses 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

b)  Any fraud, 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: August 07, 2012

/s/ Niels M. Johnsen

______________________________

Niels M. Johnsen

Chairman of the Board of Directors and Chief Executive Officer

International Shipholding Corporation

EX-31.2

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 quarterly 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;

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

a)   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;

b)   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;

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; and

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:

a)   All significant deficiencies and material weaknesses 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

b)  Any fraud, 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: August 07, 2012

/s/ Manuel G. Estrada

______________________________

Manuel G. Estrada

Vice President and Chief Financial Officer

International Shipholding Corporation

EX-32.1

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, 2012 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 13a or 15d 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:  August 07, 2012

/s/ Niels M. Johnsen

                                                                                                  _______________________________

Niels M. Johnsen

Chairman of the Board of Directors 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

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, 2012 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 13a or 15d 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: August 7, 2012

                 /s/ Manuel G. Estrada

                                                                                       ____________________________________

                    Manuel G. Estrada

Vice President and Chief Financial 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.

XML

Dry Bulk Cape Holding, Inc Step Acquisition (Details) (Dry Bulk [Member], USD $)	3 Months Ended
	Mar. 31, 2011	Mar. 25, 2011	Mar. 24, 2011
Dry Bulk [Member]
Business Acquisition [Line Items]
Equity interest previously held by company (in hundredths)			50.00%
Equity interest previously held by co-venturer (in hundredths)			50.00%
Number of Capesize vessels controlled by acquiree		1	2
Number of Handymax Newbuildings controlled by acquiree		1	2
Subsidiary ownership interest acquired (in hundredths)		100.00%
Number of former subsidiaries of acquiree transferred to co-venturer		2
Number of Capesize vessels transferred to co-venturer		1
Number of Handymax Newbuildings transferred to co-venturer		1
Number of subsidiaries of acquiree controlling remaining Capesize vessels and Handymax Newbuildings		2
Number of vessels controlled by acquirer		2
Appraised value of Capesize vessels	$ 84,000,000
Book value of Capesize vessels	53,600,000
Fair value of intangible asset relating to time charter contracts in place	5,200,000
Percentage of total fair value discounted (in hundredths)	50.00%
Discount rate (in hundredths)	5.10%
Calculation of the gain on the previously held equity interest [Abstract]
Fair Value of Previously Held 50% Interest	32,700,000
Less: Book Value of Previously Held Interest	(14,400,000)
Gain on Previously Held 50% Interest	18,300,000
Additional ownership interest acquired (in hundredths)	50.00%
Calculation of bargain purchase gain [Abstract]
Fair Value of Net Assets Acquired	69,000,000
Less: Fair Value of Purchase Consideration	(35,800,000)
Less: Fair Value of Previously Held 50% Interest	(32,700,000)
Bargain Purchase Gain	$ 500,000

XML

Marketable Securities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Schedule of Available-for-sale Securities [Line Items]
Cost basis	$ 12,795
AOCI unrealized holding gain	316	[1]
Fair value	13,111
Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost basis	8,679	[2]
AOCI unrealized holding gain	187	[1],[2]
Fair value	8,866	[2]
Mutual Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost basis	4,116
AOCI unrealized holding gain	129	[1]
Fair value	$ 4,245

[1] Accumulated Other Comprehensive Income

[2] Various maturity dates from February 2014 - January 2017.

XML

Sale and Leaseback Transaction (Details) (USD $)	1 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2012	Feb. 22, 2012	Aug. 28, 2007
Sale and Leaseback Transaction [Abstract]
Gross proceeds		$ 59,000,000
Repayments of debt from proceeds of sale and leaseback transaction		54,500,000
Lease term		10 years
Deferred gain on sale				14,900,000	1,400,000
Net gain due to early buy-out	430,000		430,000
Unrecognized gain from 2007 sale leaseback transaction			710,000
Sale Leaseback Transaction, Other Payments Required	$ 280,000

XML

Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Derivative Instruments [Abstract]

Notional and fair value of derivative instruments

The notional and fair value amounts of our derivative instruments as of June 30, 2012 were as follows:

(Amounts in thousands)			Asset Derivatives				Liability Derivatives
	Current Notional		Balance Sheet		Fair Value		Balance Sheet		Fair Value
	Amount		Location				Location
Interest Rate Swaps - S/T	$	12,145		N/A		-	Current Liabilities			(247	)
Interest Rate Swaps - L/T*	$	109,162		N/A		N/A	Other Liabilities		$	(7,826	)
Foreign Exchange Contracts	$	900	Other Current Assets		$	42		N/A		N/A
Foreign Exchange Contracts	$	3,800		N/A			Current Liabilities		$	(116	)
Total Derivatives Designated as Hedging Instruments	$	126,007		-	$	42		-	$	(8,190	)

*We have outstanding a variable-to-fixed interest rate swap with respect to a Yen-based facility for the financing of a PCTC delivered in March 2010.   The notional amount under this contract is $69,506,745 (based on a Yen to USD exchange rate of 79.81 as of June 30, 2012).  With the bank exercising its option to reduce the underlying Yen loan from 80% to 65% funding of the vessel's delivery cost, the 15% reduction represents the ineffective portion of this swap, which consists of the portion of the derivative instrument that is no longer supported by underlying borrowings.  The change in fair value related to the ineffective portion of this swap was a $117,000 loss for the quarter ended June 30, 2012 and this amount was included in earnings.

Schedule of derivative instruments, effect on other comprehensive income (loss)

The effect of derivative instruments designated as cash flow hedges on our condensed consolidated statement of operations for the six months ended June 30, 2012 was as follows:

(Amounts in thousands)	Net Gain / (Loss) Recognized in  Other  Comprehensive  Income			Location of Gain  (Loss) Reclassified  from AOCI to  Income		(Loss)  Reclassified  from AOCI to  Income			Gain Recognized in  Income from  Ineffective  portion
	2012					2012			2012
Interest Rate Swaps	$	1,236		Interest Expense		$	(1,723	)	$	32
Foreign Exchange contracts	$	(180	)	Voyage Expenses		$	(111	)		-
Total	$	1,056			-	$	(1,834	)	$	32

Schedule of interest rate derivatives

As of June 30, 2012, we had the following swap contracts outstanding:

Effective Date	Termination Date	Current Notional  Amount		Swap Rate			Type
11/30/05	11/30/12		12,145,000		5.17	%	Fixed
3/31/08	9/30/13	$	8,551,667		3.46	%	Fixed
9/30/10	9/30/13	$	8,551,667		2.69	%	Fixed
9/30/10	9/30/13	$	8,551,667		2.45	%	Fixed
9/26/05	9/28/15	$	7,000,000		4.41	%	Fixed
9/26/05	9/28/15	$	7,000,000		4.41	%	Fixed
3/15/09	9/15/20	$	*69,506,745		2.065	%	Fixed
Total:		$	121,306,746

*Notional amount converted from Yen at June 30, 2012 at a Yen to USD exchange rate of 79.81

Schedule of notional amount of foreign exchange contracts

The following table summarizes the notional value of these contracts:

(Amounts in Thousands)
Transaction Date	Type of  Currency	Transaction Amount  in Dollars		Fair Value of Contracts - Asset  (Liability)			Effective Date	Expiration Date
August 2011	Peso	$	450,000	$	27,245		September 2011	December 2012
September 2011	Peso	$	450,000		14,442		July 2012	December 2012
September 2011	Peso	$	300,000		(16,006	)	October 2011	December 2012
May 2012	Peso	$	750,000		(6,512	)	January 2013	May 2013
May 2012	Peso	$	250,000		(11,600	)	January 2013	May 2013
May 2012	Peso	$	700,000		(35,979	)	June 2013	December 2013
May 2012	Rupiah	$	1,800,000		(46,312	)	July 2012	December 2012
		$	4,700,000	$	(74,722	)

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Subsequent Events

6 Months Ended

Jun. 30, 2012

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 19. Subsequent Events

On August 6, 2012, the Company acquired the common stock and membership interest of Frascati Shops, Inc. and Tower LLC, respectively for a total of $4.3 million (consisting of a $600,000 cash payment and assumption of all debt for both companies).  These two Companies own and operate a certified rail-car repair yard facility near the port of Mobile, Alabama and will be used to service and repair rail-cars from third party customers and  service and repair rail-cars that are transported via the Company's Rail-Ferry vessels.  While the transaction is deemed immaterial, it will be accounted for as a business combination.

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Employee Benefit Plans (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Pension Plan [Member]
Components of net periodic benefit cost [Abstract]
Service cost	$ 164,000	$ 136,000	$ 328,000	$ 272,000
Interest cost	357,000	368,000	715,000	736,000
Expected return on plan assets	(497,000)	(475,000)	(994,000)	(950,000)
Amortization of prior service cost	(1,000)	(1,000)	(2,000)	(2,000)
Amortization of Net (Gain)/Loss	192,000	83,000	385,000	166,000
Net periodic benefit cost	215,000	111,000	432,000	222,000
Contribution to pension plan	400,000	156,000	800,000	313,000
Anticipated additional contributions for the remainder of the year	800,000		800,000
Postretirement Benefits [Member]
Components of net periodic benefit cost [Abstract]
Service cost	13,000	22,000	26,000	44,000
Interest cost	130,000	143,000	260,000	286,000
Expected return on plan assets	0	0	0	0
Amortization of prior service cost	(3,000)	(3,000)	(6,000)	(6,000)
Amortization of Net (Gain)/Loss	71,000	55,000	142,000	110,000
Net periodic benefit cost	$ 211,000	$ 217,000	$ 422,000	$ 434,000

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Changes in Accounting Estimate (Details) (USD $)	6 Months Ended
	Jun. 30, 2012
Changes in Accounting Estimate [Abstract]
Period between salvage value reviews	3 years
Period used to determine reasonableness of salvage values	3 years
Change in Salvage Value [Member]
Change in Accounting Estimate [Line Items]
Number of vessels for which salvage values were adjusted	8
Decrease in Future Depreciation Expense	$ 3,800,000
Increase in pre-tax income	1,890,000
Increase in net income	$ 1,890,000
Increase in Basic Earnings per Share	$ 0.26
Increase in diluted earnings per share (in dollars per share)	$ 0.26

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Operating Segments (Details) (USD $)	3 Months Ended					6 Months Ended
	Jun. 30, 2012		Mar. 31, 2012	Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
Segment Reporting Information [Line Items]
Number of operating segments						5
Segment Profit and Loss [Abstract]
Revenue from External Customers	$ 60,320,000			$ 69,961,000		$ 125,524,000		$ 134,295,000
Intersegment Revenues (Eliminated)	(5,250,000)			(5,554,000)		(10,311,000)		(9,331,000)
Intersegment Expenses (Eliminated)	5,250,000			5,554,000		10,311,000		9,331,000
Voyage Expenses (Income)	47,026,000			51,814,000		97,852,000		100,804,000
Add back [Abstract]
Operating Lease Expense	1,810,000			4,153,000		3,172,000		7,662,000
Direct Finance Lease Amortization	760,000			1,380,000		2,279,000		2,711,000
Gross Voyage Profit *	15,864,000	[1]		23,680,000	[1]	33,123,000	[1]	43,864,000	[1]
Gross Voyage Profit percentage (in hundredths)	26.00%			34.00%		26.00%		33.00%
Less [Abstract]
Operating Lease Expense	1,810,000			4,153,000		3,172,000		7,662,000
Direct Finance Lease Amortization	760,000			1,380,000		2,279,000		2,711,000
Vessel Depreciation	5,723,000			6,095,000		12,080,000		11,469,000
Gross Profit (Loss)	7,571,000	[1]		12,052,000	[1]	15,592,000	[1]	22,022,000	[1]
Interest Expense	2,281,000			2,330,000		5,008,000		4,620,000
Segment Profit (Loss)	5,290,000			9,722,000		10,584,000		17,402,000
Reconciliation of Profit (Loss) from Segments to Consolidated [Abstract]
Total Profit for Reportable Segments	5,290,000			9,722,000		10,584,000		17,402,000
Unallocated Amounts [Abstract]
Administrative and General Expenses	(4,720,000)			(5,455,000)		(10,228,000)		(11,284,000)
Gain on Sale/Purchase of Other Assets	667,000		3,799,000	0		4,466,000		0
Derivative Income (Loss)	(117,000)			(106,000)		32,000		15,000
Gain on Sale of Investment	24,000			114,000		66,000		114,000
Other Income from Vessel Financing	605,000			672,000		1,227,000		1,360,000
Investment Income	146,000			185,000		274,000		385,000
Foreign Exchange Gain (Loss)	(1,734,000)			(1,900,000)		1,914,000		(411,000)
Gain on Dry Bulk Transaction	0			130,000		0		18,844,000
Income Before Provision for Income Taxes and Equity in Net (Loss) Income of Unconsolidated Entities	161,000			3,362,000		8,335,000		26,425,000
Time Charter Contracts - U.S. Flag [Member]
Segment Profit and Loss [Abstract]
Revenue from External Customers	34,488,000			39,290,000		73,506,000		78,307,000
Intersegment Revenues (Eliminated)	0			0		0		0
Intersegment Expenses (Eliminated)	0			0		0		0
Voyage Expenses (Income)	27,858,000			29,952,000		58,952,000		59,951,000
Add back [Abstract]
Operating Lease Expense	900,000			1,060,000		1,364,000		2,119,000
Direct Finance Lease Amortization	760,000			662,000		1,499,000		1,305,000
Gross Voyage Profit *	8,290,000	[1]		11,060,000	[1]	17,417,000	[1]	21,780,000	[1]
Gross Voyage Profit percentage (in hundredths)	24.00%			28.00%		24.00%		28.00%
Less [Abstract]
Operating Lease Expense	900,000			1,060,000		1,364,000		2,119,000
Direct Finance Lease Amortization	760,000			662,000		1,499,000		1,305,000
Vessel Depreciation	2,310,000			2,495,000		4,876,000		5,004,000
Gross Profit (Loss)	4,320,000	[1]		6,843,000	[1]	9,678,000	[1]	13,352,000	[1]
Interest Expense	550,000			678,000		1,308,000		1,353,000
Segment Profit (Loss)	3,770,000			6,165,000		8,370,000		11,999,000
Reconciliation of Profit (Loss) from Segments to Consolidated [Abstract]
Total Profit for Reportable Segments	3,770,000			6,165,000		8,370,000		11,999,000
Time Charter Contracts - International Flag [Member]
Segment Profit and Loss [Abstract]
Revenue from External Customers	11,931,000			15,813,000		25,234,000		27,023,000
Intersegment Revenues (Eliminated)	0			0		0		0
Intersegment Expenses (Eliminated)	0			0		0		0
Voyage Expenses (Income)	7,252,000			8,294,000		14,394,000		15,179,000
Add back [Abstract]
Operating Lease Expense	0			2,195,000		0		3,746,000
Direct Finance Lease Amortization	0			718,000		780,000		1,406,000
Gross Voyage Profit *	4,679,000	[1]		10,432,000	[1]	11,620,000	[1]	16,996,000	[1]
Gross Voyage Profit percentage (in hundredths)	39.00%			66.00%		46.00%		63.00%
Less [Abstract]
Operating Lease Expense	0			2,195,000		0		3,746,000
Direct Finance Lease Amortization	0			718,000		780,000		1,406,000
Vessel Depreciation	2,702,000			2,699,000		5,792,000		4,689,000
Gross Profit (Loss)	1,977,000	[1]		4,820,000	[1]	5,048,000	[1]	7,155,000	[1]
Interest Expense	1,213,000			1,337,000		2,828,000		2,638,000
Segment Profit (Loss)	764,000			3,483,000		2,220,000		4,517,000
Reconciliation of Profit (Loss) from Segments to Consolidated [Abstract]
Total Profit for Reportable Segments	764,000			3,483,000		2,220,000		4,517,000
COA [Member]
Segment Profit and Loss [Abstract]
Revenue from External Customers	4,207,000			4,500,000		7,600,000		8,731,000
Intersegment Revenues (Eliminated)	0			0		0		0
Intersegment Expenses (Eliminated)	0			0		0		0
Voyage Expenses (Income)	4,081,000			4,601,000		8,367,000		8,912,000
Add back [Abstract]
Operating Lease Expense	910,000			898,000		1,808,000		1,797,000
Direct Finance Lease Amortization	0			0		0		0
Gross Voyage Profit *	1,036,000	[1]		797,000	[1]	1,041,000	[1]	1,616,000	[1]
Gross Voyage Profit percentage (in hundredths)	25.00%			18.00%		14.00%		19.00%
Less [Abstract]
Operating Lease Expense	910,000			898,000		1,808,000		1,797,000
Direct Finance Lease Amortization	0			0		0		0
Vessel Depreciation	0			0		0		0
Gross Profit (Loss)	126,000	[1]		(101,000)	[1]	(767,000)	[1]	(181,000)	[1]
Interest Expense	259,000			0		259,000		0
Segment Profit (Loss)	(133,000)			(101,000)		(1,026,000)		(181,000)
Reconciliation of Profit (Loss) from Segments to Consolidated [Abstract]
Total Profit for Reportable Segments	(133,000)			(101,000)		(1,026,000)		(181,000)
Rail-Ferry Service [Member]
Segment Profit and Loss [Abstract]
Revenue from External Customers	9,396,000			9,867,000		18,597,000		18,921,000
Intersegment Revenues (Eliminated)	0			0		0		0
Intersegment Expenses (Eliminated)	0			0		0		0
Voyage Expenses (Income)	7,948,000			8,807,000		16,316,000		16,438,000
Add back [Abstract]
Operating Lease Expense	0			0		0		0
Direct Finance Lease Amortization	0			0		0		0
Gross Voyage Profit *	1,448,000	[1]		1,060,000	[1]	2,281,000	[1]	2,483,000	[1]
Gross Voyage Profit percentage (in hundredths)	15.00%			11.00%		12.00%		13.00%
Less [Abstract]
Operating Lease Expense	0			0		0		0
Direct Finance Lease Amortization	0			0		0		0
Vessel Depreciation	701,000			899,000		1,399,000		1,771,000
Gross Profit (Loss)	747,000	[1]		161,000	[1]	882,000	[1]	712,000	[1]
Interest Expense	161,000			193,000		383,000		386,000
Segment Profit (Loss)	586,000			(32,000)		499,000		326,000
Reconciliation of Profit (Loss) from Segments to Consolidated [Abstract]
Total Profit for Reportable Segments	586,000			(32,000)		499,000		326,000
Other [Member]
Segment Profit and Loss [Abstract]
Revenue from External Customers	298,000			491,000		587,000		1,313,000
Intersegment Revenues (Eliminated)	(5,250,000)			(5,554,000)		(10,311,000)		(9,331,000)
Intersegment Expenses (Eliminated)	5,250,000			5,554,000		10,311,000		9,331,000
Voyage Expenses (Income)	(113,000)			160,000		(177,000)		324,000
Add back [Abstract]
Operating Lease Expense	0			0		0		0
Direct Finance Lease Amortization	0			0		0		0
Gross Voyage Profit *	411,000	[1]		331,000	[1]	764,000	[1]	989,000	[1]
Gross Voyage Profit percentage (in hundredths)	138.00%			67.00%		130.00%		75.00%
Less [Abstract]
Operating Lease Expense	0			0		0		0
Direct Finance Lease Amortization	0			0		0		0
Vessel Depreciation	10,000			2,000		13,000		5,000
Gross Profit (Loss)	401,000	[1]		329,000	[1]	751,000	[1]	984,000	[1]
Interest Expense	98,000			122,000		230,000		243,000
Segment Profit (Loss)	303,000			207,000		521,000		741,000
Reconciliation of Profit (Loss) from Segments to Consolidated [Abstract]
Total Profit for Reportable Segments	$ 303,000			$ 207,000		$ 521,000		$ 741,000

[1] Information used by Chief Decision Makers.

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Out of Period Adjustments (Details) (Oslo Bulk AS [Member], USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Sep. 30, 2011	Jun. 30, 2012	Jul. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Oslo Bulk AS [Member]
Schedule of Equity Method Investments [Line Items]
Equity investee ownership interest (in hundredths)	25.00%			25.00%	25.00%	25.00%	25.00%
Amount of ineffectiveness on investment hedges	$ 674,000	$ 42,000
Out of period adjustments related to net charter revenues and lease termination			239,000	324,000
Gain from out of period adjustments	$ 631,000

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	$ 13,111
Derivative assets	42
Derivative liabilities	(8,189)
Vessels	37,070	[1]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Rail-Ferry Vessels	37,070	[1]
Appraised Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Vessels	37,070
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Rail-Ferry Vessels	37,070
Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Vessels	33,200
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Rail-Ferry Vessels	33,200
Level 1 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	13,111
Derivative assets	0
Derivative liabilities	0
Vessels	0
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Rail-Ferry Vessels	0
Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0
Derivative assets	42
Derivative liabilities	(8,189)
Vessels	37,070	[1]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Rail-Ferry Vessels	37,070	[1]
Level 3 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0
Derivative assets	0
Derivative liabilities	0
Vessels	0
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Rail-Ferry Vessels	$ 0

[1] Represents the appraised fair value of our Rail-Ferry vessels after the impairment charge taken in the third quarter of 2010. The valuation technique used was a weighted average of the cost, comparable sales and income approaches. The carrying value of the Rail-Ferry vessels ($33.2 million as of June 30, 2012) no longer equals the fair value.

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Unconsolidated Entities

6 Months Ended

Jun. 30, 2012

Unconsolidated Entities [Abstract]

Unconsolidated Entities

Note 3.  Unconsolidated Entities

In December 2009, we acquired for $6.25 million a 25% investment in Oslo Bulk AS ("Oslo Bulk") which in 2008 contracted to build eight new Mini Bulkers.  During 2010, we invested an additional $3.9 million in Oslo Bulk Holding Pte. Ltd. (formerly "Tony Bulkers"), an affiliate of Oslo Bulk, for our 25% share of the installment payments for two additional new Mini-Bulkers. These investments are accounted for under the equity method and our share of earnings or losses is reported in our consolidated statements of operations, net of taxes.  All ten of these Mini-Bulkers are managed by an affiliate of Oslo Bulk.  We contributed $750,000 to Oslo Bulk in the first quarter of 2012 and $250,000 in July, 2012 for working capital purposes. Our portion of the aggregate earnings of Oslo Bulk and Tony Bulkers, was $660,000 for the six months ended June 30, 2012. Included in the second quarter 2012 results of unconsolidated entities was an out of period adjustment of $716,000. See Note 17 for further disclosure of this adjustment. Our portion of the aggregate earnings of Oslo Bulk and Tony bulkers, which included final 2010 income adjustments of $143,000 for Oslo Bulk, were losses of $399,000 and $108,000, respectively, for the six months ended June 30, 2011, largely due to initial positioning of the newly delivered vessels.

Our 2011 second quarter results also included our portion of earnings of Dry Bulk Cape Holding Inc. ("Dry Bulk"). In 2003, we acquired for $3,479,000 a 50% investment in Dry Bulk. Historically, we have accounted for this investment under the equity method and our share of earnings or losses has been reported in our consolidated statements of income, net of taxes.  On March 25, 2011, we acquired 100% ownership of Dry Bulk.  Following the acquisition, Dry Bulk's results are no longer accounted for under the equity method.  For further information on this acquisition, see Note 4 below.

Our portion of earnings of Dry Bulk for the first six months of 2011, recorded under the equity method, was a profit of $1.3 million.  During the first quarter of 2011 we received a $750,000 cash dividend distribution from Dry Bulk prior to acquiring full ownership of it on March 25, 2011.

Our portion of the earnings of our remaining investments in unconsolidated entities for the six months ended June 30, 2012 and 2011 were losses of $79,000 and $62,000, respectively.

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Numerator [Abstract]
Net Income - Basic	$ 704	$ 2,838	$ 8,640	$ 26,918
Net Income - Diluted	$ 704	$ 2,838	$ 8,640	$ 26,918
Denominator - Weighted Avg Shares of Common Stock Outstanding [Abstract]
Basic (in shares)	7,203,860	7,228,252	7,187,236	7,230,530
Plus: Effect of dilutive restrictive stock (in shares)	30,645	36,840	15,323	30,068
Diluted (in shares)	7,234,505	7,265,092	7,202,559	7,260,598
Basic and Diluted Earnings Per Common Share [Abstract]
Net income per share - basic (in dollars per share)	$ 0.10	$ 0.39	$ 1.20	$ 3.72
Net income per share - diluted (in dollars per share)	$ 0.10	$ 0.39	$ 1.20	$ 3.70

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2012

Stockholders' Equity [Abstract]

Summary of changes in stockholders' equity

A summary of the changes in Stockholders' equity for the six months ended June 30, 2012 is as follows:

	Stockholders'
(Amounts in thousands)	Equity
Balance December 31, 2011	$	249,355
Net Income		8,640
Dividend Payments		(4,805	)
Unrealized Foreign Currency Translation Loss		(79	)
Unrealized Holding Gain on Marketable Securities		188
Net Change in Fair Value of Derivatives		70
Stock-based compensation expense      (net of forfeited shares)		(125	)
Balance  June 30, 2012	$	253,244

Issuer purchases of equity securities

This table provides certain information with respect to the Company's purchase of shares of its common stock during the first six months of 2012:

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, 2012- April 30, 2012		-		-		-		285,377
May 1, 2012 - May 31, 2012		-		-		-		285,377
June  1, 2012 - June 30, 2012		-		-		-		285,377

Cash dividends paid

During the six months ended June 30, 2012, we paid cash dividends as follows:

(Amounts in Thousands Except per Share Data )				Total
		Per Share		Dividend
Record Date	Payment Date	Amount		Paid
February 15, 2012	March 1, 2012	$	0.375	$	2,690
May 16, 2012	June 1, 2012	$	0.250	$	1,801
				$	4,491

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Calculation of basic and diluted earnings per share

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Numerator
Net Income - Basic:
	$	704	$	2,838	$	8,640	$	26,918
Net Income  - Diluted:
	$	704	$	2,838	$	8,640	$	26,918
Denominator
Weighted Avg Shares of Common Stock Outstanding:
Basic		7,203,860		7,228,252		7,187,236		7,230,530
Plus:
Effect of dilutive restrictive stock		30,645		36,840		15,323		30,068
Diluted		7,234,505		7,265,092		7,202,559		7,260,598
Basic and Diluted Earnings Per Common Share:
Net Income per share - Basic
	$	.10	$	0.39	$	1.20	$	3.72
Net Income per share - Diluted:
	$	.10	$	0.39	$	1.20	$	3.70

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Stockholders' Equity (Details) (USD $)	1 Months Ended					3 Months Ended			6 Months Ended		12 Months Ended
	Jun. 30, 2012	May 31, 2012	Apr. 30, 2012	Mar. 31, 2012	Feb. 29, 2012	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2008	Jan. 25, 2008
Summary of changes in stockholders' equity [Roll Forward]
Balance at beginning of period									$ 249,355,000
Net Income						704,000	2,838,000		8,640,000	26,918,000
Dividend Payments									(4,805,000)
Unrealized Foreign Currency Translation Gain						(170,000)	56,000		(79,000)	74,000
Unrealized Holding Gain on Marketable Securities						37,000	(4,000)		188,000	83,000
Net Change in Fair Value of Derivatives						(1,127,000)	(590,000)		70,000	403,000
Share-based compensation expense (net of forfeited shares)									(125,000)
Balance at end of period	253,244,000					253,244,000			253,244,000
Stock Repurchase Program [Abstract]
Shares authorized for repurchase (in shares)												1,000,000
Total number of shares purchased (in shares)	0	0	0					223,051			491,572
Payments for shares purchased								5,200,000			11,500,000
Average Price Paid per Share (in dollars per share)	$ 0	$ 0	$ 0
Total Number of Shares Purchased as Part of Publicly Announced Plan (in shares)	0	0	0
Maximum Number of Shares that May Yet Be Purchased Under the Plan (in shares)	285,377	285,377	285,377			285,377			285,377
Treasury stock shares retired to meet tax liabilities				16,439	13,665
Dividend Payments [Abstract]
Record Date	May 16, 2012			Feb. 15, 2012
Payment Date	Jun. 01, 2012			Mar. 01, 2012
Per Share Amount (in dollars per share)	$ 0.250			$ 0.375
Total Dividend Paid	1,801,000			2,690,000					4,805,000	5,625,000
Total dividends paid, excluding dividends related to unvested stock awards									4,491,000
Payment of cash dividends related to unvested stock awards									$ 314,000

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Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Stock Based Compensation [Abstract]

Share-based compensation activity

On January 18, 2012, our independent Directors received unrestricted stock awards of 5,712 shares from the 2011 Stock Incentive Plan (the plan").  Recently, the Compensation Committee of the Board of Directors approved an expansion of our stock-based compensation programs to include the grant of restricted stock units ("RSUs") to certain key individuals.  On May 7, 2012, the Company granted 65,500 restricted stock units payable in shares of our common stock, $1.00 par value per share, to 10 key individuals.  The grants consisted of three tranches of RSUs - Time-Based RSUs, Absolute Performance-Based RSUs, and Relative Performance-Based RSUs.  If we attain certain performance targets, the 65,500 RSUs could result in us issuing up to 81,875 shares of our stock.  Our operating results, net income and net income before taxes for the periods set forth below include (i) the following amounts of compensation expenses associated with the above-described stock grants and RSUs and (ii) the related reductions in earnings per share:

	Six Months Ended June 30,						Three Months ended June 30,
	2012			2011			2012			2011
Stock-Based Compensation Expense	$	544,000		$	1,006,000		$	214,000		$	428,000
Related Reduction in Earnings Per Share 1	$	(0.08	)	$	(0.15	)	$	(0.03	)	$	(0.06	)

1  Same for basic and diluted earnings per share

Summary of activity for stock awards

A summary of the activity for stock awards during the six months ended June 30, 2012 is as follows:

	Shares			Weighted Average Fair  Value Per  Share
Non-vested -December 31, 2011		87,500		$	22.91
Unrestricted Shares Granted		5,712		$	21.01
Shares Vested		(93,212	)	$	22.79
Non-vested - June 30, 2012		-			-

Schedule of RSU Activity

A summary of our  RSU activity and related information for the six months ended June 30, 2012 is as follows:

	Number of RSUs		Weighted- Average  Grant Date  Fair Value
Non-vested -December 31, 2011		-		-
Restricted Stock Units Granted		65,500	$	21.48
Shares Vested		-		-
Non-vested - June 30, 2012		65,500	$	21.48

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Summary of financial assets and financial liabilities measured at fair value on a recurring and non-recurring basis

The following table summarizes certain of our financial assets and financial liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2012, 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	$	13,111	$	-		$	-	$	13,111
Derivative assets	$	-	$	42		$	-	$	42
Derivative liabilities	$	-	$	(8,189	)	$	-	$	(8,189	)
Vessels (1)	$	-	$	37,070		$	-	$	37,070

(1) Represents the appraised fair value of our Rail-Ferry vessels after the impairment charge taken in the third quarter of 2010. The valuation technique used was a weighted average of the cost, comparable sales and income approaches. The carrying value of the Rail-Ferry vessels ($33.2 million as of June 30, 2012) no longer equals the fair value.

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Operating Segments

6 Months Ended

Jun. 30, 2012

Operating Segments [Abstract]

Operating Segments

Note 2.  Operating Segments

Our five operating segments, Time Charter Contracts - U.S. Flag, Time Charter Contracts - International Flag,Contracts of Affreightment ("COA"), Rail-Ferry Service and Other, are identified primarily by the characteristics of the contracts and terms under which our vessels are operated.  We report in the Other category the results of several of our subsidiaries that provide ship charter brokerage, ship management services and agency services.  Also included in the Other category are corporate related items, results of insignificant operations, and income and expense items not allocated to the other reportable segments. We manage each reportable segment separately, as each requires different resources depending on the nature of the contract or terms under which the vessels within the segment operate.

We allocate interest expense to the segments in proportion to the fixed assets (defined as the carrying value of vessels, property, and other equipment) within each segment.  We do not allocate to our segments administrative and general expenses, gain on Dry Bulk transaction, gain on sale/purchase of other assets, derivative (income) loss,  income taxes, gain on sale of investment, other income from vessel financing, investment income, foreign exchange loss (gain) and equity in net (loss) income of unconsolidated entities.  Intersegment revenues are based on market prices and include revenues earned by our subsidiaries that provide specialized services to our operating companies.

The following table presents information about segment profit and loss for the three months ended June 30, 2012 and 2011:

(Amounts in Thousands)	Time  Charter  Contracts- U.S. Flag			Time  Charter  Contracts-  International  Flag			COA			Rail-Ferry  Service			Other			Total
Three months ended June 30, 2012
Revenues from External Customers	$	34,488		$	11,931		$	4,207		$	9,396		$	298		$	60,320
Intersegment Revenues (Eliminated)		-			-			-			-			(5,250	)		(5,250	)
Intersegment Expenses (Eliminated)		-			-			-			-			5,250			5,250
Voyage Expenses (Income)		27,858			7,252			4,081			7,948			(113	)		47,026
Add back:
Operating Lease Expense		900			-			910			-			-			1,810
Direct Finance Lease Amortization		760			-			-			-			-			760
Gross Voyage Profit *		8,290			4,679			1,036			1,448			411			15,864
Gross Voyage Profit Percentage		24	%		39	%		25	%		15	%		138	%		26	%
Less:
Operating Lease Expense		900			-			910			-			-			1,810
Direct Finance Lease Amortization		760			-			-			-			-			760
Vessel Depreciation		2,310			2,702			-			701			10			5,723
Gross Profit *		4,320			1,977			126			747			401			7,571
Interest Expense		550			1,213			259			161			98			2,281
Segment Profit (Loss)		3,770			764			(133	)		586			303			5,290
Three months ended June 30, 2011
Revenues from External Customers	$	39,290		$	15,813		$	4,500		$	9,867		$	491		$	69,961
Intersegment Revenues (Eliminated)		-			-			-			-			(5,554	)		(5,554	)
Intersegment Expenses (Eliminated)		-			-			-			-			5,554			5,554
Voyage Expenses		29,952			8,294			4,601			8,807			160			51,814
Add Back:
Operating Lease Expense		1,060			2,195			898			-			-			4,153
Direct Finance Lease Amortization		662			718			-			-			-			1,380
Gross Voyage Profit *		11,060			10,432			797			1,060			331			23,680
Gross Voyage Profit Percentage		28	%		66	%		18	%		11	%		67	%		34	%
Less:
Operating Lease Expense		1,060			2,195			898			-			-			4,153
Direct Finance Lease Amortization		662			718			-			-			-			1,380
Vessel Depreciation		2,495			2,699			-			899			2			6,095
Gross  Profit (Loss)*		6,843			4,820			(101	)		161			329			12,052
Interest Expense		678			1,337			-			193			122			2,330
Segment Profit (Loss)		6,165			3,483			(101	)		(32	)		207			9,722

*Information used by Chief Decision Makers.

The following table presents information about segment profit and loss for the six months ended June 30, 2012 and 2011:

(Amounts in Thousands)	Time  Charter  Contracts- U.S. Flag			Time  Charter  Contracts- International Flag			COA			Rail-Ferry  Service			Other			Total
Six months ended June 30, 2012
Revenues from External Customers	$	73,506		$	25,234		$	7,600		$	18,597		$	587		$	125,524
Intersegment Revenues (Eliminated)		-			-			-			-			(10,311	)		(10,311	)
Intersegment Expenses (Eliminated)		-			-			-			-			10,311			10,311
Voyage Expenses (Income)		58,952			14,394			8,367			16,316			(177	)		97,852
Add back:
Operating Lease Expense		1,364			-			1,808			-			-			3,172
Direct Finance Lease Amortization		1,499			780			-			-			-			2,279
Gross Voyage Profit *		17,417			11,620			1,041			2,281			764			33,123
Gross Voyage Profit Percentage		24	%		46	%		14	%		12	%		130	%		26	%
Less:
Operating Lease Expense		1,364			-			1,808			-			-			3,172
Direct Finance Lease Amortization		1,499			780			-			-			-			2,279
Vessel Depreciation		4,876			5,792			-			1,399			13			12,080
Gross Profit (Loss) *		9,678			5,048			(767	)		882			751			15,592
Interest Expense		1,308			2,828			259			383			230			5,008
Segment Profit (Loss)		8,370			2,220			(1,026	)		499			521			10,584
Six Months ended June 30, 2011
Revenues from External Customers	$	78,307		$	27,023		$	8,731		$	18,921		$	1,313		$	134,295
Intersegment Revenues (Eliminated)		-			-			-			-			(9,331	)		(9,331	)
Intersegment Expenses (Eliminated)		-			-			-			-			9,331			9,331
Voyage Expenses		59,951			15,179			8,912			16,438			324			100,804
Add Back:
Operating Lease Expense		2,119			3,746			1,797			-			-			7,662
Direct Finance Lease Amortization		1,305			1,406			-			-			-			2,711
Gross Voyage Profit *		21,780			16,996			1,616			2,483			989			43,864
Gross Voyage Profit Percentage		28	%		63	%		19	%		13	%		75	%		33	%
Less:
Operating Lease Expense		2,119			3,746			1,797			-			-			7,662
Direct Finance Lease Amortization		1,305			1,406			-			-			-			2,711
Vessel Depreciation		5,004			4,689			-			1,771			5			11,469
Gross  Profit (Loss)*		13,352			7,155			(181	)		712			984			22,022
Interest Expense		1,353			2,638			-			386			243			4,620
Segment Profit (Loss)		11,999			4,517			(181	)		326			741			17,402

*Information used by Chief Decision Makers.

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:	2012			2011			2012			2011
Total Profit for Reportable Segments	$	10,584		$	17,402		$	5,290		$	9,722
Unallocated Amounts:
Administrative and General Expenses		(10,228	)		(11,284	)		(4,720	)		(5,455	)
Gain on Sale/Purchase of Other Assets		4,466			-			667			-
Derivative Income (Loss)		32			15			(117	)		(106	)
Gain on Sale of Investment		66			114			24			114
Other Income from Vessel Financing		1,227			1,360			605			672
Investment Income		274			385			146			185
Foreign Exchange Gain (Loss)		1,914			(411	)		(1,734	)		(1,900	)
Gain on Dry Bulk Transaction		-			18,844			-			130
Income Before Provision for    Income Taxes and Equity in Net Income of Unconsolidated Entities	$	8,335		$	26,425		$	161		$	3,362

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Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2012

Marketable Securities [Abstract]

Cost and valuation information on investment securities

The following table includes cost and valuation information on our markeatble securities at June 30, 2012:

(Amounts In Thousands)			AOCI**
			Unrealized
Securities Available for Sale	Cost Basis		Holding Gain		Fair Value
Bonds*	$	8,679	$	187	$	8,866
Mutual Funds		4,116		129		4,245
Total	$	12,795	$	316	$	13,111

* Various maturity dates from February 2014 - January 2017.

** Accumulated Other Comprehensive Income

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Gain on Sale/Purchase of Other Assets (Details) (USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Gain on Sale/Purchase of Other Assets [Abstract]
Number of International Flag Pure Car Truck Carriers sold				2
Proceeds from sale of other assets		$ 73,900,000
Gain on sale of other assets	667,000	3,799,000	0	4,466,000	0
Repayments of debt from sale proceeds		$ 36,100,000

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Subsequent Events (Details) (Frascati Shops, Inc. and Tower LLC [Member], USD $)	Aug. 06, 2012
Frascati Shops, Inc. and Tower LLC [Member]
Subsequent Event [Line Items]
Total purchase price	$ 4,300,000
Cash payment included in purchase price	$ 600,000
Number of companies acquired	2

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) [Abstract]
Revenues	$ 60,320,000	$ 69,961,000	$ 125,524,000	$ 134,295,000
Operating Expenses:
Voyage Expenses	47,026,000	51,814,000	97,852,000	100,804,000
Vessel Depreciation	5,723,000	6,095,000	12,080,000	11,469,000
Administrative and General Expenses	4,720,000	5,455,000	10,228,000	11,284,000
Gain on Dry Bulk Transaction	0	(130,000)	0	(18,844,000)
Gain on Sale/Purchase of Other Assets	(667,000)	0	(4,466,000)	0
Total Operating Expenses	56,802,000	63,234,000	115,694,000	104,713,000
Operating Income	3,518,000	6,727,000	9,830,000	29,582,000
Interest and Other:
Interest Expense	2,281,000	2,330,000	5,008,000	4,620,000
Derivative Loss (Income)	117,000	106,000	(32,000)	(15,000)
Gain on Sale of Investment	(24,000)	(114,000)	(66,000)	(114,000)
Other Income from Vessel Financing	(605,000)	(672,000)	(1,227,000)	(1,360,000)
Investment Income	(146,000)	(185,000)	(274,000)	(385,000)
Foreign Exchange Loss (Gain)	1,734,000	1,900,000	(1,914,000)	411,000
Total Interest and Other Income	3,357,000	3,365,000	1,495,000	3,157,000
Aggregate earnings, including income adjustments	161,000	3,362,000	8,335,000	26,425,000
Provision for Income Taxes:
Current	108,000	173,000	276,000	381,000
Income Tax Expense (Benefit)	108,000	173,000	276,000	381,000
Equity in Net Income (Loss)of Unconsolidated Entities (Net of Applicable Taxes)	651,000	(351,000)	581,000	874,000
Net Income	$ 704,000	$ 2,838,000	$ 8,640,000	$ 26,918,000
Basic and Diluted Earnings Per Common Share:
Basic Earnings Per Common Share: (in dollars per share)	$ 0.10	$ 0.39	$ 1.20	$ 3.72
Diluted Earnings Per Common Share: (in dollars per share)	$ 0.10	$ 0.39	$ 1.20	$ 3.70
Weighted Average Shares of Common Stock Outstanding:
Basic (in shares)	7,203,860	7,228,252	7,187,236	7,230,530
Diluted (in shares)	7,234,505	7,265,092	7,202,559	7,260,598
Dividends Per Share (in dollars per share)	$ 0.250	$ 0.375	$ 0.500	$ 0.750

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Stock Based Compensation (Details) (USD $)	3 Months Ended				6 Months Ended				3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012 Stock Awards [Member]	Jun. 30, 2012 Stock Awards [Member]	Jun. 30, 2012 Restricted Stock Units (RSUs) [Member]	Jun. 30, 2012 Restricted Stock Units (RSUs) [Member]	Mar. 31, 2012 Unrestricted stock [Member]	Jun. 30, 2012 Time Based Restricted Stock Units [Member]	Jun. 30, 2012 Time Based Restricted Stock Units [Member] Executive Officer [Member]	Jun. 30, 2012 Absolute Performance Based Restricted Stock Units [Member]	Jun. 30, 2012 Absolute Performance Based Restricted Stock Units [Member] Executive Officer [Member]	Jun. 30, 2012 Relative Performance Based Restricted Stock Units [Member]	Jun. 30, 2012 Relative Performance Based Restricted Stock Units [Member] Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares received by independent Directors (in shares)											65,500		5,712
Common stock, par value (in dollars per share)											$ 1.00	$ 1.00
Number of key individuals	10				10
Shares available for grant on attainment of performance targets (in shares)											81,875	81,875
Share-based Compensation [Abstract]
Share-based Compensation Expense	$ 214,000		$ 428,000		$ 544,000		$ 1,006,000
Related Reduction in Earnings Per Share	$ (0.03)	[1]	$ (0.06)	[1]	$ (0.08)	[1]	$ (0.15)	[1]
Share-based Compensation Expense [Abstract]
Allocated share-based compensation expense									$ 30,000	$ 360,000	$ 184,000	$ 184,000
Reduction of basic and diluted earnings per share due to stock-based compensation charges (in dollars per share)										$ 0.05	$ 0.03	$ 0.03
Shares [Roll Forward]
Non-vested - Beginning of Period (in shares)										87,500		0
Shares/Stock Units Granted (in shares)										5,712		65,500
Shares Vested (in shares)										(93,212)		0
Non-vested - End of Period (in shares)									0	0	65,500	65,500
Weighted Average Fair Value Per Share [Roll Forward]
Non-vested - Beginning of Period (in dollars per share)										$ 22.91		$ 0
Shares/Stock units Granted (in dollars per share)										$ 21.01		$ 21.48
Shares Vested (in dollars per share)										$ 22.79		$ 0
Non-vested - End of Period (in dollars per share)									$ 0	$ 0	$ 21.48	$ 21.48
Number of top executives											2	2
Maximum shares allocated to each share based compensation unit														1		1.5		1.5
Vesting period														3 years	1 year	3 years	1 year	3 years	1 year

[1] Same for basic and diluted earnings per share

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash Flows from Operating Activities:
Net Income	$ 8,640,000	$ 26,918,000
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation	12,357,000	11,961,000
Amortization of Deferred Charges and Other Assets	5,214,000	4,004,000
Gain on Dry Bulk Transaction	0	(18,844,000)
Non-Cash Stock Based Compensation	544,000	1,006,000
Equity in Net Income of Unconsolidated Entities	(581,000)	(874,000)
Distributions from Unconsolidated Entities	0	750,000
Gain on Purchase / Sale of Assets	(4,466,000)	0
Gain on Sale of Investments	(66,000)	(114,000)
Gain (Loss) on Foreign Currency Exchange	(1,914,000)	411,000
Changes in:
Deferred Drydocking Charges	(7,623,000)	(4,359,000)
Accounts Receivable	277,000	(4,817,000)
Inventories and Other Current Assets	(624,000)	1,816,000
Other Assets	1,950,000	114,000
Accounts Payable and Accrued Liabilities	(594,000)	(121,000)
Other Long-Term Liabilities	(3,204,000)	1,249,000
Net Cash Provided by Operating Activities	9,910,000	19,100,000
Cash Flows from Investing Activities:
Principal payments received under Direct Financing Leases	2,279,000	2,711,000
Capital Improvements to Vessels and Other Assets	(46,103,000)	(17,216,000)
Proceeds from Sale of Assets	130,315,000	0
Purchase of Marketable Securities	(5,000)	(85,000)
Proceeds from Sale of Marketable Securities	159,000	2,755,000
Investment in Unconsolidated Entities	(750,000)	(1,796,000)
Acquisition of Unconsolidated Entity	0	7,092,000
Net Decrease/(Increase) in Restricted Cash Account	6,907,000	(6,549,000)
Proceeds from Note Receivables	2,507,000	2,069,000
Net Cash Provided by (Used In) Investing Activities	95,309,000	(11,019,000)
Cash Flows from Financing Activities:
Proceeds from borrowings of long-term debt	41,175,000	58,079,000
Repayment of Debt	(141,559,000)	(49,378,000)
Additions to Deferred Financing Charges	(264,000)	(1,479,000)
Common Stock Dividends Paid	(4,805,000)	(5,625,000)
Net Cash (Used In) Provided by Financing Activities	(105,453,000)	1,597,000
Net (Decrease) / Increase in Cash and Cash Equivalents	(234,000)	9,678,000
Cash and Cash Equivalents at Beginning of Period	21,437,000	24,158,000
Cash and Cash Equivalents at End of Period	$ 21,203,000	$ 33,836,000

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Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2012

Long-Term Debt [Abstract]

Long-term debt

Long-term debt consisted of the following on the dates set forth below:

( in thousands)			Interest Rate								Total Principal Due
			June 30,			December 31,			Maturity		June 30,			December 31,
Description			2012			2011			Date		2012			2011
Secured:
Notes Payable - Variable Rate	(4	)		1.4616	%		1.5738	%		2015	$	14,000		$	15,333
Notes Payable - Variable Rate	(4	)		4.6700	%		0.0000	%		2012		12,145			12,845
Notes Payable - Variable Rate	(3	)(4)		1.7106	%		1.8293	%		2013		14,242			29,389
Notes Payable - Variable Rate	(1	)		2.9616	%		3.0632	%		2018		20,614			22,332
Notes Payable - Variable Rate	(3	)		N/A			3.2702	%		2014		-			13,318
Notes Payable - Variable Rate	(3	)(4)		1.1000	%		1.0957	%		2020		47,875			60,808
Notes Payable - Variable Rate	(3	)		N/A			3.0600	%		2017		-			41,656
Notes Payable - Variable Rate				2.9700	%		2.88-2.92	%		2018		50,600			52,440
Notes Payable- Variable Rate	(3	)		N/A			3.2458	%		2018		-			24,162
Notes Payable - Variable Rate				2.5898	%		2.6440	%		2017		14,742			15,675
Notes Payable - Variable Rate				3.1306	%		3.2458	%		2018		17,040			18,460
Notes Payable - Variable Rate	(1	)		2.9657	%		3.0000	%		2018		18,536			6,175
Unsecured Line of Credit	(2	)		4.0214	%		4.0349	%		2013		10,000			9,500
												219,794			322,093
			Less Current Maturities									(27,849	)		(36,079	)
											$	191,945		$	286,014

(1) We entered into a variable rate financing agreement with ING Bank N.V., London branch on June 20, 2011 for a seven year facility to finance the acquisition of a Cape Size vessel and a Handymax Bulk Carrier Newbuilding, both of which were assumed in the acquisition of Dry Bulk.  Pursuant to the terms of the facility, the lender agreed to provide a secured term loan facility divided into two tranches:  Tranche A, fully drawn on June 20, 2011 in the amount of $24.2 million, and Tranche B, providing up to $23.3 million of additional credit.  Under Tranche B, $6.1 million was drawn in November 2011 and the final draw of $12.7 million was drawn on January 24, 2012.

(2) In March, 2012, we amended our unsecured line of credit to extend the expiration date until April, 2014.  At December 31, 2011, we had $9.5 million drawn and during the first quarter of 2012, an additional $18.5 million was drawn.  The entire $28 million was repaid by March 31, 2012.  During the second quarter of 2012, $10 million was drawn.  This $10 million was repaid in July, 2012.  Associated with this credit facility is a commitment fee of .125% per year on the undrawn portion of this facility.

(3)  In the first quarter of 2012, we used proceeds from the sale of capital assets to pay off three loans in full and two loans in part, including approximately $10 million of the Japanese Yen facility.

(4) We have interest rate swap agreements in place to fix the interest rates on these variable rate notes payables.

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Long-Term Debt

6 Months Ended

Jun. 30, 2012

Long-Term Debt [Abstract]

Long-Term Debt

Note 16. Long-Term Debt

Long-term debt consisted of the following on the dates set forth below:

( in thousands)			Interest Rate								Total Principal Due
			June 30,			December 31,			Maturity		June 30,			December 31,
Description			2012			2011			Date		2012			2011
Secured:
Notes Payable - Variable Rate	(4	)		1.4616	%		1.5738	%		2015	$	14,000		$	15,333
Notes Payable - Variable Rate	(4	)		4.6700	%		0.0000	%		2012		12,145			12,845
Notes Payable - Variable Rate	(3	)(4)		1.7106	%		1.8293	%		2013		14,242			29,389
Notes Payable - Variable Rate	(1	)		2.9616	%		3.0632	%		2018		20,614			22,332
Notes Payable - Variable Rate	(3	)		N/A			3.2702	%		2014		-			13,318
Notes Payable - Variable Rate	(3	)(4)		1.1000	%		1.0957	%		2020		47,875			60,808
Notes Payable - Variable Rate	(3	)		N/A			3.0600	%		2017		-			41,656
Notes Payable - Variable Rate				2.9700	%		2.88-2.92	%		2018		50,600			52,440
Notes Payable- Variable Rate	(3	)		N/A			3.2458	%		2018		-			24,162
Notes Payable - Variable Rate				2.5898	%		2.6440	%		2017		14,742			15,675
Notes Payable - Variable Rate				3.1306	%		3.2458	%		2018		17,040			18,460
Notes Payable - Variable Rate	(1	)		2.9657	%		3.0000	%		2018		18,536			6,175
Unsecured Line of Credit	(2	)		4.0214	%		4.0349	%		2013		10,000			9,500
												219,794			322,093
			Less Current Maturities									(27,849	)		(36,079	)
											$	191,945		$	286,014

(1) We entered into a variable rate financing agreement with ING Bank N.V., London branch on June 20, 2011 for a seven year facility to finance the acquisition of a Cape Size vessel and a Handymax Bulk Carrier Newbuilding, both of which were assumed in the acquisition of Dry Bulk.  Pursuant to the terms of the facility, the lender agreed to provide a secured term loan facility divided into two tranches:  Tranche A, fully drawn on June 20, 2011 in the amount of $24.2 million, and Tranche B, providing up to $23.3 million of additional credit.  Under Tranche B, $6.1 million was drawn in November 2011 and the final draw of $12.7 million was drawn on January 24, 2012.

(2) In March, 2012, we amended our unsecured line of credit to extend the expiration date until April, 2014.  At December 31, 2011, we had $9.5 million drawn and during the first quarter of 2012, an additional $18.5 million was drawn.  The entire $28 million was repaid by March 31, 2012.  During the second quarter of 2012, $10 million was drawn.  This $10 million was repaid in July, 2012.  Associated with this credit facility is a commitment fee of .125% per year on the undrawn portion of this facility.

(3)  In the first quarter of 2012, we used proceeds from the sale of capital assets to pay off three loans in full and two loans in part, including approximately $10 million of the Japanese Yen facility.

(4) We have interest rate swap agreements in place to fix the interest rates on these variable rate notes payables.

As of June 30, 2012, we were in compliance with all financial covenants related to our debt obligations, and we believe that we will continue to meet such covenants in the near future.

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Basis of Preparation (Details)	6 Months Ended
	Jun. 30, 2012
Basis of Preparation [Abstract]
Minimum percentage of ownership considered for consolidation (in hundredths)	50.00%
Minimum percentage of ownership considered for equity method of accounting for investments (in hundredths)	20.00%
Maximum percentage of ownership considered for equity method of accounting for investments (in hundredths)	50.00%
Maximum percentage of ownership considered for cost method of accounting for investments (in hundredths)	20.00%

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New Accounting Pronouncements

6 Months Ended

Jun. 30, 2012

New Accounting Pronouncements [Abstract]

New Accounting Pronouncements

Note 18.  New Accounting Pronouncements

In May 2011, the Financial Accounting Standard Board ("FASB") issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 clarifies some existing concepts, eliminates wording differences between U.S. GAAP and International Financial Reporting Standards ("IFRS"), and in some limited cases, changes some principles to achieve convergence between U.S. GAAP and IFRS. ASU 2011-04 results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. ASU 2011-04 became effective for International Shipholding Corporation beginning on December 15, 2011. The adoption of ASU 2011-04 did not have a material effect on our operating results or financial position.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income , which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of equity. ASU 2011-05 became effective for International Shipholding Corporation for the quarters beginning on December 15, 2011. The adoption of ASU 2011-05 did not have a material effect on our operating results or financial position, and have applied these new requirements in the first quarter of 2012.

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Basis of Preparation

6 Months Ended

Jun. 30, 2012

Basis of Preparation [Abstract]

Basis of Preparation

Note 1.  Basis of Preparation

We operate a diversified fleet of U.S. and Foreign flag vessels that provide international and domestic maritime transportation services. For additional information on our business see Item 2 of Part I of this report.

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, 2011.  The condensed consolidated balance sheet as of December 31, 2011 included in this report has been derived from the audited financial statements at that date.

The foregoing 2012 interim results are not necessarily indicative of the results of operations for the full year 2012.  Management believes that it has made all adjustments necessary, consisting only of normal recurring adjustments, for a fair statement of the information presented.

Our policy is to consolidate each subsidiary 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 or economic interest and have the ability to exercise significant influence over their operating and financial activities, and the cost method to account for investments in entities in which we hold a 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-FerryService and Contracts of Affreightment segments' 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.  Based on our prior experience, we believe there is no material difference between recording estimated expenses ratably over the voyage versus recording expenses as incurred.  Revenues and expenses relating to our other segments' voyages, which require limited estimates or assumptions, are recorded when earned or incurred during the reporting period.

The attached financial statements include out of period adjustments which the Company concluded were immaterial to the prior periods affected and projected full year 2012.  These out of period adjustments were corrected during the three month period ended June 30, 2012. See Note 17 for further details.

We have eliminated all significant intercompany balances, accounts and transactions in consolidation.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
Net Income	$ 704	$ 2,838	$ 8,640	$ 26,918
Other Comprehensive Income:
Unrealized Foreign Currency Translation (Loss)Gain	(170)	56	(79)	74
Unrealized Holding Gain(Loss) on Marketable Securities	37	(4)	188	83
Change in Fair Value of Derivatives	(1,127)	(590)	70	403
Comprehensive (Loss) Income	$ (556)	$ 2,300	$ 8,819	$ 27,478

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Sale and Leaseback Transaction

6 Months Ended

Jun. 30, 2012

Sale and Leaseback Transaction [Abstract]

Sale and Leaseback Transaction

Note 11. Sale and Leaseback Transactions

On February 22, 2012, we completed a sale and leaseback transaction with Wells Fargo Bank Northwest, National Association, of our 2007-built PCTC.  The transaction generated gross proceeds of $59.0 million, which we used to pay down debt of $54.5 million. We are leasing the vessel back under a ten year lease agreement with early buyout options that can be exercised in 2017 and 2019.  The sale resulted in a gain of $14.9 million, which has been recorded as a deferred liability on the balance sheet and will be recognized over the term of the lease. Refer to our Current Report Form 8-K dated February 22, 2012 for further information.

On June 15, 2012, we negotiated the early buy-out of the operating lease related to our molten-sulphur carrier which constitutes the sole vessel in our Contract of Affreightment segment. In 2007, we sold the vessel in a sale-leaseback transaction to ISC-Sulphur Holding, Inc. (a wholly-owned subsidiary of Capital One).  The 2007 sale-leaseback transaction generated a gain of approximately $1.4 million which we deferred and have been recognizing ratably over the 10-year  life of the lease.  Our negotiation of the early buy-out resulted in us recording in the second quarter of 2012 a net gain of $430,000.  This was caused by accelerating the remaining $710,000 of unrecognized gain from the 2007 sale-leaseback, partially offset by the remaining $280,000 of unamortized deferred charges incurred in connection with the establishment of the operating lease.  This gain has been recognized in the statement of operations under the caption "Gain on Sale/Purchase of Other Assets".

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	INTERNATIONAL SHIPHOLDING CORP
Entity Central Index Key	0000278041
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding	7,203,860
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2012

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Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 12. Fair Value Measurements

ASC 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 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 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 transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, 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 following: 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 assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. In that regard, ASC 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:

*       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.

*       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.

*       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 certain of our financial assets and financial liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2012, 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	$	13,111	$	-		$	-	$	13,111
Derivative assets	$	-	$	42		$	-	$	42
Derivative liabilities	$	-	$	(8,189	)	$	-	$	(8,189	)
Vessels (1)	$	-	$	37,070		$	-	$	37,070

(1) Represents the appraised fair value of our Rail-Ferry vessels after the impairment charge taken in the third quarter of 2010. The valuation technique used was a weighted average of the cost, comparable sales and income approaches. The carrying value of the Rail-Ferry vessels ($33.2 million as of June 30, 2012) no longer equals the fair value.

The carrying amounts of our accounts receivable, accounts payable and accrued liabilities approximated their fair value at June 30, 2012 and December 31, 2011. We estimated the fair value of our variable rate long-term debt at June 30, 2012, including current maturities, to equal the carrying value due to the variable rate nature of the debt as well as to the underlying value of the collateral. Credit risk has also been considered and has been determined to be a non-issue.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current Assets:
Cash and Cash Equivalents	$ 21,203	$ 21,437
Restricted Cash	0	8,907
Marketable Securities	13,111	12,827
Accounts Receivable, Net of Allowance for Doubtful Accounts of $100 and $100 in 2012 and 2011:	20,276	20,553
Federal Income Taxes Receivable	0	242
Net Investment in Direct Financing Leases	3,310	6,278
Other Current Assets	3,596	4,411
Notes Receivable	4,430	4,450
Material and Supplies Inventory	4,603	5,034
Total Current Assets	70,529	84,139
Investment in Unconsolidated Entities	13,180	12,800
Net Investment in Direct Financing Leases	15,291	43,837
Vessels, Property, and Other Equipment, at cost:
Vessels	561,632	581,705
Leasehold Improvements	26,348	26,128
Construction in Progress	252	20,729
Furniture and Equipment	9,529	9,372
Vessels, Property, Plant and Equipment, Gross	597,761	637,934
Less - Accumulated Depreciation	(179,235)	(171,820)
Net Vessels, Property, Plant and Equipment	418,526	466,114
Other Assets:
Deferred Charges, Net of Accumulated Amortization of $15,821 and $17,429 in 2012 and 2011, Respectively	19,066	15,983
Intangible Assets, Net	1,932	3,219
Due from Related Parties	1,633	1,571
Notes Receivable	35,561	37,714
Other	5,180	202
Other Assets Total	63,372	58,689
TOTAL ASSETS	580,898	665,579
Current Liabilities:
Current Maturities of Long-Term Debt	27,849	36,079
Accounts Payable and Accrued Liabilities	32,152	28,343
Total Current Liabilities	60,001	64,422
Long-Term Debt, Less Current Maturities	191,945	286,014
Other Long-Term Liabilities:
Lease Incentive Obligation	6,571	6,640
Other	69,137	59,148
TOTAL LIABILITIES	327,654	416,224
Stockholders' Equity:
Common Stock	8,600	8,606
Additional Paid-In Capital	85,711	85,830
Retained Earnings	207,944	204,109
Treasury Stock	(25,403)	(25,403)
Accumulated Other Comprehensive (Loss)	(23,608)	(23,787)
TOTAL STOCKHOLDERS' EQUITY	253,244	249,355
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 580,898	$ 665,579

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Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

Note 6. Income Taxes

We recorded a provision for income taxes of $276,000 on our $8.3 million of income before taxes and equity in net income (loss) of unconsolidated entities for the six months of 2012.  For the first six months of 2011 our income tax provision was $381,000 on our $26.4 million of income before equity in net income (loss) of unconsolidated entities.  These provision amounts represent our qualifying U.S. flag operations, which continue to be taxed under a "tonnage tax" regime rather than under the normal U.S. corporate income tax regime and foreign tax withholdings.  We established a valuation allowance against deferred tax assets in 2010 because, based on available information, we could not conclude that it was more likely than not that the full amount of deferred tax assets generated primarily by NOL carryforwards and AMT credits would be realized through the generation of taxable income in the near future. We have and will continue to evaluate the need for a valuation allowance on an annual basis. For further information on certain tax laws and elections, see our Annual Report on Form 10-K filed for the year ended December 31, 2011, including "Note G - Income Taxes" to the consolidated financial statements included therein.

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Gain on Sale/Purchase of Other Assets

6 Months Ended

Jun. 30, 2012

Gain on Sale/Purchase of Other Assets [Abstract]

Gain on Sale/Purchase of Other Assets

Note 5.  Gain on Sale/Purchase of Other Assets

In March 2012, we sold two of our International Flag Pure Car Truck Carriers ("PCTC") to Norwegian Car Carriers ASA.  As a result of this transaction, we received total gross proceeds of $73.9 million and realized a gain of $3.8 million. These proceeds were used to pay down approximately $36.1 million of debt.  Refer to our Current Report on Form 8-K dated March 26, 2012 for further information.

Also included under this line item in our condensed consolidated statements of operation is the recognition of deferred gains of approximately $239,000 and $430,000 related to the purchase of one US Flag PCTC vessel and one molten-sulphur carrier respectively.  See Note 17 (Out of Period Adjustments) for details related to the gain on the purchase of the PCTC vessel.  Details of the gain on the purchase of the molten-sulphur carrier are disclosed in Note 11 (Sale and Leaseback Transactions).  Both vessels were purchased as a result of early buy-outs of lease agreements.

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Out of Period Adjustments

6 Months Ended

Jun. 30, 2012

Out of Period Adjustments [Abstract]

Out of Period Adjustments

Note 17.  Out of Period Adjustments

In July of 2011, Oslo Bulk, an entity in which we hold a 25% equity interest and account for under the equity method, entered into an interest rate swap to reduce its exposure to variable interest rates on its outstanding debt.  At the inception of this swap, the related hedge documentation indicated that the swap did not qualify for hedge accounting.  Therefore, we accounted for the derivative as an ineffective hedge and reported the change in fair value of the derivative in the statement of operations under the caption "Equity in Net (Loss) Income of Unconsolidated Entities" from inception of the swap to December 31, 2011.  The ineffectiveness recorded in the third and fourth quarters of 2011 resulted in an aggregate loss of approximately $674,000.  As of the filing of the Company's Form 10-K for the year ended December 31, 2011, Oslo Bulk's financial statement audit had not been completed and its auditors had not reached any final conclusions with respect to hedge effectiveness of the aforementioned swap.  Oslo Bulk's 2011 financial statement audit was completed during  the second quarter of 2012.  In conjunction therewith, Oslo Bulk's auditors concluded that the interest rate swap did, in fact, qualify for hedge accounting and that all required documentation pertaining thereto existed at the inception of the swap.  In light of this information, we recorded an out of period ("OOP") adjustment during the three months ended June 30, 2012 to correct the $674,000 of ineffectiveness that was previously recorded in 2011, and $42,000 in the first quarter of 2012.  In conjunction with our evaluation of this OOP adjustment, we also recorded a $324,000 negative OOP adjustment related to net charter revenues that were not previously recorded on a straight-line basis in prior periods from 1999 to 2011, and a $239,000 positive OOP adjustment related to a gain from the termination of a lease and the subsequent purchase of one of our  PCTC vessels  in the third quarter of 2011.  The net impact of these OOP adjustments was a positive $631,000 gain.  We evaluated the impact of the OOP adjustments on the results of our previously issued financial statements for each of the periods affected and concluded that the impact was not material.  Accordingly, we have not revised or restated our financial statements for any of our prior periods.  We also evaluated the impact of correcting the cumulative effect of the OOP adjustments in the current year and concluded that the impact was not material to our projected results for 2012.  Accordingly, a net adjustment of $631,000 was recorded to correct the OOP errors in the three month period ended June 30, 2012.  

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Marketable Securities

6 Months Ended

Jun. 30, 2012

Marketable Securities [Abstract]

Marketable Securities

Note 13.  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, 2012.

The following table includes cost and valuation information on our markeatble securities at June 30, 2012:

(Amounts In Thousands)			AOCI**
			Unrealized
Securities Available for Sale	Cost Basis		Holding Gain		Fair Value
Bonds*	$	8,679	$	187	$	8,866
Mutual Funds		4,116		129		4,245
Total	$	12,795	$	316	$	13,111

* Various maturity dates from February 2014 - January 2017.

** Accumulated Other Comprehensive Income

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Stockholders' Equity

6 Months Ended

Jun. 30, 2012

Stockholders' Equity [Abstract]

Stockholders' Equity

Note 9. Stockholders' Equity

A summary of the changes in Stockholders' equity for the six months ended June 30, 2012 is as follows:

	Stockholders'
(Amounts in thousands)	Equity
Balance December 31, 2011	$	249,355
Net Income		8,640
Dividend Payments		(4,805	)
Unrealized Foreign Currency Translation Loss		(79	)
Unrealized Holding Gain on Marketable Securities		188
Net Change in Fair Value of Derivatives		70
Stock-based compensation expense      (net of forfeited shares)		(125	)
Balance  June 30, 2012	$	253,244

Stock Repurchase Program

On January 25, 2008, the Company's Board of Directors approved a share repurchase program for up to a total of 1,000,000 shares of the Company's common stock. We expect that any share repurchases under this program will be made from time to time for cash in open market transactions at prevailing market prices. The timing and amount of any purchases under the program will be determined by management based upon market conditions and other factors.  In 2008, we repurchased 491,572 shares of our common stock for $11.5 million. Thereafter, we suspended repurchases until the second quarter of 2010, when 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 first six months of 2012:

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, 2012- April 30, 2012		-		-		-		285,377
May 1, 2012 - May 31, 2012		-		-		-		285,377
June  1, 2012 - June 30, 2012		-		-		-		285,377

On February 1, 2012 and March 9, 2012, 13,665 and 16,439 shares of common stock, respectively, were retired in order to meet tax liabilities associated with the vesting of Restricted Stock grants by our executive officers.

Dividend Payments

During the six months ended June 30, 2012, we paid cash dividends as follows:

(Amounts in Thousands Except per Share Data )				Total
		Per Share		Dividend
Record Date	Payment Date	Amount		Paid
February 15, 2012	March 1, 2012	$	0.375	$	2,690
May 16, 2012	June 1, 2012	$	0.250	$	1,801
				$	4,491

During this period, we paid an additional $314,000 in cash dividends related to unvested stock awards that accrued quarterly dividend payments, paid upon the shares vesting in the first six months of 2012.

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Changes in Accounting Estimate

6 Months Ended

Jun. 30, 2012

Changes in Accounting Estimate [Abstract]

Changes in Accounting Estimate

Note 7. Changes in Accounting Estimate

Based on company policy, we review the reasonableness of our salvage values for our fleet every three years based on the most recent three year average price of scrap steel per metric ton. In the first quarter of 2012 we reviewed and adjusted the salvage values on eight of our vessels, based on material change in the market value of scrap steel.  The adjustments resulted in increasing the salvage values and reducing our depreciation expense on these eight vessels by approximately $3.8 million annually.  This adjustment increased both our pre-tax and net income by $1,890,000, or $0.26 per share, for the six months ended June 30, 2012.  Due to the company being in a valuation allowance position there was no impact on income taxes.

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Earnings Per Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

Note 8.  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 (Amountsin thousands except share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Numerator
Net Income - Basic:
	$	704	$	2,838	$	8,640	$	26,918
Net Income  - Diluted:
	$	704	$	2,838	$	8,640	$	26,918
Denominator
Weighted Avg Shares of Common Stock Outstanding:
Basic		7,203,860		7,228,252		7,187,236		7,230,530
Plus:
Effect of dilutive restrictive stock		30,645		36,840		15,323		30,068
Diluted		7,234,505		7,265,092		7,202,559		7,260,598
Basic and Diluted Earnings Per Common Share:
Net Income per share - Basic
	$	.10	$	0.39	$	1.20	$	3.72
Net Income per share - Diluted:
	$	.10	$	0.39	$	1.20	$	3.70

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Stock Based Compensation

6 Months Ended

Jun. 30, 2012

Stock Based Compensation [Abstract]

Stock Based Compensation

Note 10.  Stock Based Compensation

On January 18, 2012, our independent Directors received unrestricted stock awards of 5,712 shares from the 2011 Stock Incentive Plan (the plan").  Recently, the Compensation Committee of the Board of Directors approved an expansion of our stock-based compensation programs to include the grant of restricted stock units ("RSUs") to certain key individuals.  On May 7, 2012, the Company granted 65,500 restricted stock units payable in shares of our common stock, $1.00 par value per share, to 10 key individuals.  The grants consisted of three tranches of RSUs - Time-Based RSUs, Absolute Performance-Based RSUs, and Relative Performance-Based RSUs.  If we attain certain performance targets, the 65,500 RSUs could result in us issuing up to 81,875 shares of our stock.  Our operating results, net income and net income before taxes for the periods set forth below include (i) the following amounts of compensation expenses associated with the above-described stock grants and RSUs and (ii) the related reductions in earnings per share:

	Six Months Ended June 30,						Three Months ended June 30,
	2012			2011			2012			2011
Stock-Based Compensation Expense	$	544,000		$	1,006,000		$	214,000		$	428,000
Related Reduction in Earnings Per Share 1	$	(0.08	)	$	(0.15	)	$	(0.03	)	$	(0.06	)

1  Same for basic and diluted earnings per share

Stock Awards

For the six months ended June 30, 2012, our net income included $360,000 of stock-based compensation expense charges, exclusive of expense related to the RSUs discussed below, which reduced both basic and diluted earnings per share by $0.05 per share.

For the three months ended June 30, 2012, the Company's net income included $30,000 of stock-based compensation expense charges, exclusive of expense related to the RSUs discussed below, which did not have a material effect on both basic and diluted earnings per share.

A summary of the activity for stock awards during the six months ended June 30, 2012 is as follows:

	Shares			Weighted Average Fair  Value Per  Share
Non-vested -December 31, 2011		87,500		$	22.91
Unrestricted Shares Granted		5,712		$	21.01
Shares Vested		(93,212	)	$	22.79
Non-vested - June 30, 2012		-			-

Restricted Stock Units

For the six months ended June 30, 2012, our net income included $184,000 of stock-based compensation expense charges, exclusive of the stock awards discussed above, which reduced both basic and diluted earnings per share by $0.03 per share. For the three months ended June 30, 2012, the Company's net income included $184,000 of stock-based compensation expense charges, exclusive of the stock awards discussed above, which reduced both basic and diluted earnings per share by $0.03 per share. As these RSUs were first granted in the second quarter of 2012, net income for the three and the six months ended June 30, 2011 did not include any RSU-related compensation expense charges.

Our Time-Based RSUs represent the right to receive one share of our common stock and will vest evenly over a three year period, except that the Time-Based RSUs for our two top executives will vest on the first anniversary of the grant date.  Each of our Absolute Performance-Based RSUs represent the right to receive a maximum of one-and-a-half shares of our common stock. These RSUs will pay out based on our basic earnings per share for fiscal year 2012, with the actual number of shares of common stock received dependent on our level of achievement as measured against the target. The shares due under these RSUs will vest evenly over three years beginning in fiscal 2013, except that each of our two top executives will receive any shares due under these RSUs in fiscal year 2013.

Each of our Relative Performance-Based RSUs represent the right to receive a maximum of one-and-a-half shares of our common stock. These RSUs will pay out in shares of our common stock based on how our total stockholder return for the three-year period (or the one-year period, for our top two executives) beginning January 1, 2012 compares relative to the total stockholder return of the companies comprising the Russell 2000 index for the same period or periods. Any shares due under these RSUs will be paid out in the fiscal year following the end of the applicable performance period.

In all cases, vesting is contingent upon continued employment with the company.

A summary of our  RSU activity and related information for the six months ended June 30, 2012 is as follows:

	Number of RSUs		Weighted- Average  Grant Date  Fair Value
Non-vested -December 31, 2011		-		-
Restricted Stock Units Granted		65,500	$	21.48
Shares Vested		-		-
Non-vested - June 30, 2012		65,500	$	21.48

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Employee Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2012

Employee Benefit Plans [Abstract]

Components of net periodic benefit cost

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, 2012 and 2011:

	Pension Plan						Postretirement Benefits
( Amounts in Thousands)	Three Months Ended June 30,						Three Months Ended June 30,
Components of net periodic benefit cost:	2012			2011			2012			2011
Service cost	$	164		$	136		$	13		$	22
Interest cost		357			368			130			143
Expected return on plan assets		(497	)		(475	)		-			-
Amortization of prior service cost		(1	)		(1	)		(3	)		(3	)
Amortization of Net Loss		192			83			71			55
Net periodic benefit cost	$	215		$	111		$	211		$	217

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, 2012 and 2011:

(All Amounts in Thousands)	Pension Plan						Postretirement Benefits
	Six Months Ended June 30,						Six Months Ended June 30,
Components of net periodic benefit cost:	2012			2011			2012			2011
Service cost	$	328		$	272		$	26		$	44
Interest cost		715			736			260			286
Expected return on plan assets		(994	)		(950	)		-			-
Amortization of prior service cost		(2	)		(2	)		(6	)		(6	)
Amortization of Net (Gain)/Loss		385			166			142			110
Net periodic benefit cost	$	432		$	222		$	422		$	434

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Long-Term Debt (Details) (USD $)				3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended				6 Months Ended				6 Months Ended				6 Months Ended				6 Months Ended				6 Months Ended				6 Months Ended				6 Months Ended	12 Months Ended	6 Months Ended				6 Months Ended		6 Months Ended		6 Months Ended				1 Months Ended	3 Months Ended			6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 20, 2011 Notes Payable - Variable Rate 2018 [Member]	Jun. 30, 2011 Notes Payable - Variable Rate 2018, Tranche A [Member]	Mar. 31, 2012 Notes Payable - Variable Rate 2018, Tranche B [Member]	Dec. 31, 2011 Notes Payable - Variable Rate 2018, Tranche B [Member]	Nov. 30, 2011 Notes Payable - Variable Rate 2018, Tranche B [Member]	Mar. 31, 2012 Secured Debt [Member]	Mar. 31, 2011 Secured Debt [Member]	Jun. 30, 2012 Secured Debt [Member] Notes Payable - Variable Rate 2015 [Member]		Dec. 31, 2011 Secured Debt [Member] Notes Payable - Variable Rate 2015 [Member]		Jun. 30, 2012 Secured Debt [Member] Notes Payable - Variable Rate 2012 [Member]		Dec. 31, 2011 Secured Debt [Member] Notes Payable - Variable Rate 2012 [Member]		Jun. 30, 2012 Secured Debt [Member] Notes Payable - Variable Rate 2013 [Member]		Dec. 31, 2011 Secured Debt [Member] Notes Payable - Variable Rate 2013 [Member]		Jun. 30, 2012 Secured Debt [Member] Notes Payable - Variable Rate 2018, Tranche A [Member]		Dec. 31, 2011 Secured Debt [Member] Notes Payable - Variable Rate 2018, Tranche A [Member]		Jun. 30, 2012 Secured Debt [Member] Notes Payable - Variable Rate 2014 [Member]		Dec. 31, 2011 Secured Debt [Member] Notes Payable - Variable Rate 2014 [Member]		Jun. 30, 2012 Secured Debt [Member] Notes Payable - Variable Rate 2020 [Member]		Dec. 31, 2011 Secured Debt [Member] Notes Payable - Variable Rate 2020 [Member]		Jun. 30, 2012 Secured Debt [Member] Notes Payable - Variable Rate 2017 [Member]		Dec. 31, 2011 Secured Debt [Member] Notes Payable - Variable Rate 2017 [Member]		Jun. 30, 2012 Secured Debt [Member] Notes Payable - Variable Rate 2018d [Member]	Dec. 31, 2011 Secured Debt [Member] Notes Payable - Variable Rate 2018d [Member]	Jun. 30, 2012 Secured Debt [Member] Notes Payable - Variable Rate 2018b [Member]		Dec. 31, 2011 Secured Debt [Member] Notes Payable - Variable Rate 2018b [Member]		Jun. 30, 2012 Secured Debt [Member] Notes Payable - Variable Rate 2017b [Member]	Dec. 31, 2011 Secured Debt [Member] Notes Payable - Variable Rate 2017b [Member]	Jun. 30, 2012 Secured Debt [Member] Notes Payable - Variable Rate 2018c [Member]	Dec. 31, 2011 Secured Debt [Member] Notes Payable - Variable Rate 2018c [Member]	Jun. 30, 2012 Secured Debt [Member] Notes Payable - Variable Rate 2018, Tranche B [Member]		Dec. 31, 2011 Secured Debt [Member] Notes Payable - Variable Rate 2018, Tranche B [Member]		Mar. 31, 2012 Unsecured Line of Credit [Member]	Jun. 30, 2012 Unsecured Line of Credit [Member]		Mar. 31, 2012 Unsecured Line of Credit [Member]	Jun. 30, 2012 Unsecured Line of Credit [Member]		Dec. 31, 2011 Unsecured Line of Credit [Member]
Debt Instrument [Line Items]
Interest rate (in hundredths)										1.4616%	[1]	1.5738%	[1]	4.67%	[1]	0.00%	[1]	1.7106%	[1],[2]	1.8293%	[1],[2]	2.9616%	[3]	3.0632%	[3]			3.2702%	[2]	1.10%	[1],[2]	1.0957%	[1],[2]			3.06%	[2]	2.97%				3.2458%	[2]	2.5898%	2.644%	3.1306%	3.2458%	2.9657%	[3]	3.00%	[3]		4.0214%	[4]		4.0214%	[4]	4.0349%	[4]
Interest rate, minimum (in hundredths)																																							288.00%
Interest rate, maximum (in hundredths)																																							292.00%
Maturity date										2015	[1]			2012	[1]			2013	[1],[2]			2018	[3]			2014	[2]			2020	[1],[2]			2017	[2]			2018		2018	[2]			2017		2018		2018	[3]							2013	[4]
Total principal due	$ 219,794,000	$ 322,093,000								$ 14,000,000	[1]	$ 15,333,000	[1]	$ 12,145,000	[1]	$ 12,845,000	[1]	$ 14,242,000	[1],[2]	$ 29,389,000	[1],[2]	$ 20,614,000	[3]	$ 22,332,000	[3]	$ 0	[2]	$ 13,318,000	[2]	$ 47,875,000	[1],[2]	$ 60,808,000	[1],[2]	$ 0	[2]	$ 41,656,000	[2]	$ 50,600,000	$ 52,440,000	$ 0	[2]	$ 24,162,000	[2]	$ 14,742,000	$ 15,675,000	$ 17,040,000	$ 18,460,000	$ 18,536,000	[3]	$ 6,175,000	[3]		$ 10,000,000	[4]		$ 10,000,000	[4]	$ 9,500,000	[4]
Less current maturities	(27,849,000)	(36,079,000)
Long-term debt - non-current	191,945,000	286,014,000
Term of financing agreement			7 years
Number of tranches			2
Proceeds from borrowings of long-term debt				24,200,000	12,700,000	6,100,000																																															10,000,000		18,500,000
Maximum borrowing capacity							23,300,000
Line of Credit Facility, Extended Expiration Date																																																				April, 2014
Repayment of line of credit																																																					10,000,000		28,000,000
Commitment fee on undrawn portion of facility (in hundredths)																																																								0.125%
Number of loans paid off from sale proceeds								3
Number of loans paid down from sale proceeds									2
Repayments of Japanese Yen facility from sale proceeds								$ 10,000,000

[1] We have interest rate swap agreements in place to fix the interest rates on these variable rate notes payables.

[2] In the first quarter of 2012, we used proceeds from the sale of capital assets to pay off three loans in full and two loans in part, including approximately $10 million of the Japanese Yen facility.

[3] We entered into a variable rate financing agreement with ING Bank N.V., London branch on June 20, 2011 for a seven year facility to finance the acquisition of a Cape Size vessel and a Handymax Bulk Carrier Newbuilding, both of which were assumed in the acquisition of Dry Bulk. Pursuant to the terms of the facility, the lender agreed to provide a secured term loan facility divided into two tranches: Tranche A, fully drawn on June 20, 2011 in the amount of $24.2 million, and Tranche B, providing up to $23.3 million of additional credit. Under Tranche B, $6.1 million was drawn in November 2011 and the final draw of $12.7 million was drawn on January 24, 2012.

[4] In March, 2012, we amended our unsecured line of credit to extend the expiration date until April, 2014. At December 31, 2011, we had $9.5 million drawn and during the first quarter of 2012, an additional $18.5 million was drawn. The entire $28 million was repaid by March 31, 2012. During the second quarter of 2012, $10 million was drawn. This $10 million was repaid in July, 2012. Associated with this credit facility is a commitment fee of .125% per year on the undrawn portion of this facility.

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Employee Benefit Plans

6 Months Ended

Jun. 30, 2012

Employee Benefit Plans [Abstract]

Employee Benefit Plans

Note 15.  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, 2012 and 2011:

	Pension Plan						Postretirement Benefits
( Amounts in Thousands)	Three Months Ended June 30,						Three Months Ended June 30,
Components of net periodic benefit cost:	2012			2011			2012			2011
Service cost	$	164		$	136		$	13		$	22
Interest cost		357			368			130			143
Expected return on plan assets		(497	)		(475	)		-			-
Amortization of prior service cost		(1	)		(1	)		(3	)		(3	)
Amortization of Net Loss		192			83			71			55
Net periodic benefit cost	$	215		$	111		$	211		$	217

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, 2012 and 2011:

(All Amounts in Thousands)	Pension Plan						Postretirement Benefits
	Six Months Ended June 30,						Six Months Ended June 30,
Components of net periodic benefit cost:	2012			2011			2012			2011
Service cost	$	328		$	272		$	26		$	44
Interest cost		715			736			260			286
Expected return on plan assets		(994	)		(950	)		-			-
Amortization of prior service cost		(2	)		(2	)		(6	)		(6	)
Amortization of Net (Gain)/Loss		385			166			142			110
Net periodic benefit cost	$	432		$	222		$	422		$	434

We contributed $800,000 to our pension plan for the six months ended June 30, 2012 and anticipate making approximately $800,000 in additional contributions for the remainder of 2012.

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Operating Segments (Tables)

6 Months Ended

Jun. 30, 2012

Operating Segments [Abstract]

Schedule of segment reporting information by segment

The following table presents information about segment profit and loss for the three months ended June 30, 2012 and 2011:

(Amounts in Thousands)	Time  Charter  Contracts- U.S. Flag			Time  Charter  Contracts-  International  Flag			COA			Rail-Ferry  Service			Other			Total
Three months ended June 30, 2012
Revenues from External Customers	$	34,488		$	11,931		$	4,207		$	9,396		$	298		$	60,320
Intersegment Revenues (Eliminated)		-			-			-			-			(5,250	)		(5,250	)
Intersegment Expenses (Eliminated)		-			-			-			-			5,250			5,250
Voyage Expenses (Income)		27,858			7,252			4,081			7,948			(113	)		47,026
Add back:
Operating Lease Expense		900			-			910			-			-			1,810
Direct Finance Lease Amortization		760			-			-			-			-			760
Gross Voyage Profit *		8,290			4,679			1,036			1,448			411			15,864
Gross Voyage Profit Percentage		24	%		39	%		25	%		15	%		138	%		26	%
Less:
Operating Lease Expense		900			-			910			-			-			1,810
Direct Finance Lease Amortization		760			-			-			-			-			760
Vessel Depreciation		2,310			2,702			-			701			10			5,723
Gross Profit *		4,320			1,977			126			747			401			7,571
Interest Expense		550			1,213			259			161			98			2,281
Segment Profit (Loss)		3,770			764			(133	)		586			303			5,290
Three months ended June 30, 2011
Revenues from External Customers	$	39,290		$	15,813		$	4,500		$	9,867		$	491		$	69,961
Intersegment Revenues (Eliminated)		-			-			-			-			(5,554	)		(5,554	)
Intersegment Expenses (Eliminated)		-			-			-			-			5,554			5,554
Voyage Expenses		29,952			8,294			4,601			8,807			160			51,814
Add Back:
Operating Lease Expense		1,060			2,195			898			-			-			4,153
Direct Finance Lease Amortization		662			718			-			-			-			1,380
Gross Voyage Profit *		11,060			10,432			797			1,060			331			23,680
Gross Voyage Profit Percentage		28	%		66	%		18	%		11	%		67	%		34	%
Less:
Operating Lease Expense		1,060			2,195			898			-			-			4,153
Direct Finance Lease Amortization		662			718			-			-			-			1,380
Vessel Depreciation		2,495			2,699			-			899			2			6,095
Gross  Profit (Loss)*		6,843			4,820			(101	)		161			329			12,052
Interest Expense		678			1,337			-			193			122			2,330
Segment Profit (Loss)		6,165			3,483			(101	)		(32	)		207			9,722

*Information used by Chief Decision Makers.

The following table presents information about segment profit and loss for the six months ended June 30, 2012 and 2011:

(Amounts in Thousands)	Time  Charter  Contracts- U.S. Flag			Time  Charter  Contracts- International Flag			COA			Rail-Ferry  Service			Other			Total
Six months ended June 30, 2012
Revenues from External Customers	$	73,506		$	25,234		$	7,600		$	18,597		$	587		$	125,524
Intersegment Revenues (Eliminated)		-			-			-			-			(10,311	)		(10,311	)
Intersegment Expenses (Eliminated)		-			-			-			-			10,311			10,311
Voyage Expenses (Income)		58,952			14,394			8,367			16,316			(177	)		97,852
Add back:
Operating Lease Expense		1,364			-			1,808			-			-			3,172
Direct Finance Lease Amortization		1,499			780			-			-			-			2,279
Gross Voyage Profit *		17,417			11,620			1,041			2,281			764			33,123
Gross Voyage Profit Percentage		24	%		46	%		14	%		12	%		130	%		26	%
Less:
Operating Lease Expense		1,364			-			1,808			-			-			3,172
Direct Finance Lease Amortization		1,499			780			-			-			-			2,279
Vessel Depreciation		4,876			5,792			-			1,399			13			12,080
Gross Profit (Loss) *		9,678			5,048			(767	)		882			751			15,592
Interest Expense		1,308			2,828			259			383			230			5,008
Segment Profit (Loss)		8,370			2,220			(1,026	)		499			521			10,584
Six Months ended June 30, 2011
Revenues from External Customers	$	78,307		$	27,023		$	8,731		$	18,921		$	1,313		$	134,295
Intersegment Revenues (Eliminated)		-			-			-			-			(9,331	)		(9,331	)
Intersegment Expenses (Eliminated)		-			-			-			-			9,331			9,331
Voyage Expenses		59,951			15,179			8,912			16,438			324			100,804
Add Back:
Operating Lease Expense		2,119			3,746			1,797			-			-			7,662
Direct Finance Lease Amortization		1,305			1,406			-			-			-			2,711
Gross Voyage Profit *		21,780			16,996			1,616			2,483			989			43,864
Gross Voyage Profit Percentage		28	%		63	%		19	%		13	%		75	%		33	%
Less:
Operating Lease Expense		2,119			3,746			1,797			-			-			7,662
Direct Finance Lease Amortization		1,305			1,406			-			-			-			2,711
Vessel Depreciation		5,004			4,689			-			1,771			5			11,469
Gross  Profit (Loss)*		13,352			7,155			(181	)		712			984			22,022
Interest Expense		1,353			2,638			-			386			243			4,620
Segment Profit (Loss)		11,999			4,517			(181	)		326			741			17,402

*Information used by Chief Decision Makers.

Reconciliation from segment totals to consolidated

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:	2012			2011			2012			2011
Total Profit for Reportable Segments	$	10,584		$	17,402		$	5,290		$	9,722
Unallocated Amounts:
Administrative and General Expenses		(10,228	)		(11,284	)		(4,720	)		(5,455	)
Gain on Sale/Purchase of Other Assets		4,466			-			667			-
Derivative Income (Loss)		32			15			(117	)		(106	)
Gain on Sale of Investment		66			114			24			114
Other Income from Vessel Financing		1,227			1,360			605			672
Investment Income		274			385			146			185
Foreign Exchange Gain (Loss)		1,914			(411	)		(1,734	)		(1,900	)
Gain on Dry Bulk Transaction		-			18,844			-			130
Income Before Provision for    Income Taxes and Equity in Net Income of Unconsolidated Entities	$	8,335		$	26,425		$	161		$	3,362

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Derivative Instruments (Details) (USD $)	6 Months Ended																3 Months Ended							6 Months Ended								6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012 Swap 1 [Member]	Jun. 30, 2012 Swap 2 [Member]	Jun. 30, 2012 Swap 3 [Member]	Jun. 30, 2012 Swap 4 [Member]	Jun. 30, 2012 Swap 5 [Member]	Jun. 30, 2012 Swap 6 [Member]	Jun. 30, 2012 Swap 7 [Member]		Jun. 30, 2012 Foreign Exchange Contract 1 [Member]	Jun. 30, 2012 Foreign Exchange Contract 2 [Member]	Jun. 30, 2012 Foreign Exchange Contract 3 [Member]	Jun. 30, 2012 Foreign Exchange Contract 4 [Member]	Jun. 30, 2012 Foreign Exchange Contract 5 [Member]	Jun. 30, 2012 Foreign Exchange Contract 6 [Member]	Jun. 30, 2012 Foreign Exchange Contract 7 [Member]	Jun. 30, 2012 Oslo Bulk AS [Member]	Mar. 31, 2012 Oslo Bulk AS [Member]	Jul. 31, 2011 Oslo Bulk AS [Member]	Dec. 31, 2010 Oslo Bulk AS [Member]	Dec. 31, 2009 Oslo Bulk AS [Member]	Jun. 30, 2012 Accumulated Other Comprehensive Loss [Member]	Dec. 31, 2011 Accumulated Other Comprehensive Loss [Member]	Jun. 30, 2012 Interest Rate Swaps [Member]	Jun. 30, 2012 Interest Rate Swaps [Member] Interest Expense [Member]	Jun. 30, 2012 Interest Rate Swap - ST [Member]	Jun. 30, 2012 Interest Rate Swap - ST [Member] Current Liabilities [Member]	Jun. 30, 2012 Interest Rate Swap - LT [Member]		Jun. 30, 2012 Interest Rate Swap - LT [Member] Other Liabilities [Member]		Jun. 30, 2012 Foreign Exchange Contracts [Member]	Jun. 30, 2012 Foreign Exchange Contracts [Member] Voyage Expenses [Member]	Jun. 30, 2012 Foreign Exchange Contracts [Member] Other Current Assets [Member]	Jun. 30, 2012 Foreign Exchange Contracts [Member] Current Liabilities [Member]
Derivative Instruments [Abstract]
Maximum potential future exposure on derivatives	$ 8,100,000
Fair value of contract, posted collateral	390,000
Derivatives, Fair Value [Line Items]
Unrealized loss related to derivative instruments included in accumulated other comprehensive loss, net of tax																						7,700,000	8,600,000
Asset derivatives, current notional amount																																900,000
Liability derivatives, current notional amount																										12,145,000		109,162,000	[1]			3,800,000
Derivatives, current notional amount	126,007,000
Asset derivatives, fair value	42,000																									0		0	[1]					42,000
Liability derivatives, fair value	(8,190,000)																										(247,000)			(7,826,000)	[1]	0			(116,000)
Equity investee ownership interest (in hundredths)																	25.00%		25.00%	25.00%	25.00%
Amount of ineffectiveness on investment hedges																	674,000	42,000
Derivative Instruments, Gain (Loss) [Line Items]
Net gain (loss) recognized in Other Comprehensive Income	1,056,000																							1,236,000								(180,000)
(Loss) reclassified from AOCI to income	(1,834,000)																								(1,723,000)								(111,000)
Income recognized in income from ineffective portion	32,000																							32,000								0
Derivative [Line Items]
Effective date		Nov. 30, 2005	Mar. 31, 2008	Sep. 30, 2010	Sep. 30, 2010	Sep. 26, 2005	Sep. 26, 2005	Mar. 15, 2009
Termination date		Nov. 30, 2012	Sep. 30, 2013	Sep. 30, 2013	Sep. 30, 2013	Sep. 28, 2015	Sep. 28, 2015	Sep. 15, 2020
Current notional amount	121,306,746	12,145,000	8,551,667	8,551,667	8,551,667	7,000,000	7,000,000	69,506,745	[2]
Swap rate (in hundredths)		5.17%	3.46%	2.69%	2.45%	4.41%	4.41%	2.065%
Type		Fixed	Fixed	Fixed	Fixed	Fixed	Fixed	Fixed
Exchange rate								79.81		12.4717	13.036	14.0292	13.7787	14.2939	14.5700	9,315
Original funding of vessel's delivery cost (in hundredths)								80.00%
Revised funding of vessel's delivery cost (in hundredths)								65.00%
Reduction in funding of vessel's delivery cost (in hundredths)								15.00%
Change in fair value related to ineffective portion of derivative instrument								117,000
Number of foreign currency derivatives held	3
Notional amount of forward purchase contracts										1,200,000	450,000	750,000	750,000	250,000	700,000	2,100,000
Projected Peso exposure represented by Mexican Peso foreign exchange contracts (in hundredths)	100.00%
Projected Rupiah exposure represented by Indonesian Rupiah foreign exchange contracts	66.00%
Transaction date										August 2011	September 2011	September 2011	May 2012	May 2012	May 2012	May 2012
Type of currency										Peso	Peso	Peso	Peso	Peso	Peso	Rupiah
Transaction amount	4,700,000									450,000	450,000	300,000	750,000	250,000	700,000	1,800,000
Fair Value of Contracts - Assets (Liability)	$ (74,722)									$ 27,245	$ 14,442	$ (16,006)	$ (6,512)	$ (11,600)	$ (35,979)	$ (46,312)
Effective date										September 2011	July 2012	October 2011	January 2013	January 2013	June 2013	July 2012
Expiration date										December 2012	December 2012	December 2012	May 2013	May 2013	December 2013	December 2012

[1] We have outstanding a variable-to-fixed interest rate swap with respect to a Yen-based facility for the financing of a PCTC delivered in March 2010. The notional amount under this contract is $69,506,745 (based on a Yen to USD exchange rate of 79.81 as of June 30, 2012). With the bank exercising its option to reduce the underlying Yen loan from 80% to 65% funding of the vessel's delivery cost, the 15% reduction represents the ineffective portion of this swap, which consists of the portion of the derivative instrument that is no longer supported by underlying borrowings. The change in fair value related to the ineffective portion of this swap was a $117,000 loss for the quarter ended June 30, 2012 and this amount was included in earnings.

[2] Notional amount converted from Yen at June 30, 2012 at a Yen to USD exchange rate of 79.81

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Income Taxes [Abstract]
Provision for income taxes	$ 108	$ 173	$ 276	$ 381
Income before taxes and equity in net (loss) income of unconsolidated entitites	$ 161	$ 3,362	$ 8,335	$ 26,425

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current Assets:
Accounts Receivable, Allowance for Doubtful Accounts	$ 100	$ 100
Other Assets:
Deferred Charges, Accumulated Amortization	$ 15,821	$ 17,429

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Dry Bulk Cape Holding, Inc Step Acquisition

6 Months Ended

Jun. 30, 2012

Dry Bulk Cape Holding, Inc. Step Acquisition [Abstract]

Dry Bulk Cape Holding, Inc. Step Acquisition

Note 4.  Dry Bulk Cape Holding, Inc. Step Acquisition

On March 25, 2011, Cape Holding, Ltd. (one of our indirect wholly-owned subsidiaries) and DryLog Ltd. completed a transaction that restructured their respective 50% interests in Dry Bulk.

Prior to this transaction, Dry Bulk controlled through various subsidiaries two Capesize vessels and two Handymax Newbuildings.  In connection with this transaction, (i) Cape Holding, Ltd. increased its ownership in Dry Bulk from 50% to 100% and (ii) in consideration, DryLog Ltd. received ownership of two former Dry Bulk subsidiaries holding one Capesize vessel and one shipbuilding contract relating to a Handymax vessel scheduled to be delivered in the second quarter of 2012.  Following the transfer of these subsidiaries, Dry Bulk continued to control, through two subsidiaries, one Cape Size vessel and one shipbuilding contract relating to a Handymax vessel delivered in January of 2012.  As a result of completing this transaction, we now own 100% of Dry Bulk and have complete control of the two remaining vessels.

During the first quarter of 2011, we retained an independent, third party firm with shipping industry experience to assist us in determining the fair value of Dry Bulk and the fair value of our previous 50% interest in Dry Bulk.

At the time of the acquisition, the assets of Dry Bulk consisted of cash, trade receivables, prepayments, inventory, two Capesize vessels, two Handymax vessels under construction and time charter agreements on the two Capesize vessels which expire in early 2013 and are currently fixed at attractive time charter rates. Current liabilities consisted primarily of accrued interest on debt and the non-current liabilities consisting primarily of floating rate bank borrowings. With the exception of the Capesize vessels and the intangible value assigned to the above-market time charter contracts, the fair value of all assets and liabilities were equal to the carrying values.

As of March 31, 2011, the combined appraised value for both Capesize vessels was $84.0 million as compared to the book value of approximately $53.6 million. In determining the appraised fair value of the Capesize vessels, the cost and comparable sales approaches were used with equal weight applied to each approach. In addition to the fair value adjustment on the Capesize vessels, an intangible asset was established reflecting the difference between the existing value of the time charter contracts in place as compared to current market rates for similar vessels under short-term contracts, discounted back to present value. Based on the income approach, the fair value of the intangible asset was calculated to be $5.2 million and will be amortized over the remaining life of the contract, which is set to expire on January 7, 2013. As a result of the combined fair value adjustments noted above, we concluded that the total fair value of the net assets of Dry Bulk acquired was $69.0 million.

In order to arrive at the fair value of our existing interest in Dry Bulk, 50% of the total fair value of $69.0 million was discounted by 5.1%, reflecting our lack of control of Dry Bulk as a 50% owner. The discount rate of 5.1% was derived from a sample of recent industry data. As a result, we concluded that the fair value of our existing 50% interest was $32.7 million.

Under Accounting Standards Codification ("ASC") 805, a step up to fair value is required when an equity interest changes from a non-controlling interest to a controlling interest (step acquisition). Based on the step up from a 50% interest to a 100% interest in Dry Bulk, a gain of approximately $18.3 million was generated determined by taking the difference between the fair value of our previously held 50% interest less the book value of the previously held interest. This calculation is shown below:

(Amounts in thousands)
Fair Value of Previously Held 50% Interest	$	32,700
Less: Book Value of Previously Held Interest		(14,400	)
Gain on Previously Held 50% Interest	$	18,300

We also recognized a bargain purchase gain of $0.5 million with respect to the step up to fair value of the 50% interest we acquired, calculated as follows:

(Amounts in thousands)
Fair Value of Net Assets Acquired	$	69,000
Less: Fair Value of Purchase Consideration		(35,800	)
Less: Fair Value of Previously Held 50% Interest		(32,700	)
Bargain Purchase Gain	$	500

We recorded substantially all of these above-described gains in the first quarter of 2011.

Previously, we accounted for our non-controlling interest in Dry Bulk under the equity method. We now include the financial results of Dry Bulk in our consolidated financial results.

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Dry Bulk Cape Holding, Inc Step Acquisition (Tables)

6 Months Ended

Jun. 30, 2012

Dry Bulk Cape Holding, Inc. Step Acquisition [Abstract]

Calculation of gain on previously held equity interest

Under Accounting Standards Codification ("ASC") 805, a step up to fair value is required when an equity interest changes from a non-controlling interest to a controlling interest (step acquisition). Based on the step up from a 50% interest to a 100% interest in Dry Bulk, a gain of approximately $18.3 million was generated determined by taking the difference between the fair value of our previously held 50% interest less the book value of the previously held interest. This calculation is shown below:

(Amounts in thousands)
Fair Value of Previously Held 50% Interest	$	32,700
Less: Book Value of Previously Held Interest		(14,400	)
Gain on Previously Held 50% Interest	$	18,300

Calculation of bargain purchase gain

We also recognized a bargain purchase gain of $0.5 million with respect to the step up to fair value of the 50% interest we acquired, calculated as follows:

(Amounts in thousands)
Fair Value of Net Assets Acquired	$	69,000
Less: Fair Value of Purchase Consideration		(35,800	)
Less: Fair Value of Previously Held 50% Interest		(32,700	)
Bargain Purchase Gain	$	500

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Unconsolidated Entities (Details) (USD $)	3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended							6 Months Ended		3 Months Ended	6 Months Ended			6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012 Oslo Bulk AS [Member]	Mar. 31, 2012 Oslo Bulk AS [Member]	Jun. 30, 2012 Oslo Bulk AS [Member]	Jun. 30, 2011 Oslo Bulk AS [Member]	Jul. 31, 2012 Oslo Bulk AS [Member]	Jul. 31, 2011 Oslo Bulk AS [Member]	Dec. 31, 2010 Oslo Bulk AS [Member]	Dec. 31, 2009 Oslo Bulk AS [Member]	Dec. 31, 2008 Oslo Bulk AS [Member]	Jun. 30, 2012 Oslo Bulk AS and Oslo Bulk Holding Pte. Ltd. [Member]	Jun. 30, 2010 Oslo Bulk AS and Oslo Bulk Holding Pte. Ltd. [Member]	Mar. 31, 2011 Dry Bulk Cape Holding Inc. [Member]	Jun. 30, 2011 Dry Bulk Cape Holding Inc. [Member]	Jun. 30, 2012 Dry Bulk Cape Holding Inc. [Member]	Mar. 25, 2012 Dry Bulk Cape Holding Inc. [Member]	Jun. 30, 2012 Other Equity Investments [Member]	Jun. 30, 2011 Other Equity Investments [Member]
Schedule of Equity Method Investments [Line Items]
Aggregate cost											$ 3,900,000	$ 6,250,000						$ 3,479,000
Equity investee ownership interest (in hundredths)					25.00%		25.00%			25.00%	25.00%	25.00%						50.00%
Subsidiary ownership interest acquired (in hundredths)																			100.00%
Number of Mini Bulkers					10		10				2		8
Contribution to working capital of equity investee						750,000			250,000
Adjustments to net income of equity investee														660,000	143,000
Out of period adjustment to net income of equity investee					674,000	42,000								716,000
Earnings (loss) from equity investee	651,000	(351,000)	581,000	874,000			(399,000)	(108,000)									1,300,000			(79,000)	(62,000)
Dividends from equity investee			$ 0	$ 750,000												$ 750,000

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Derivative Instruments

6 Months Ended

Jun. 30, 2012

Derivative Instruments [Abstract]

Derivative Instruments

Note 14.  Derivative Instruments

We use derivative instruments to manage certain foreign currency and interest rate risk exposures. We do not use derivative instruments for speculative trading purposes.  All derivative instruments are 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 our derivative contracts contain credit-risk related contingent features that would require us to settle the contract upon the occurrence of such contingency.  However, all of our contracts contain clauses specifying events of default under specified circumstances, including failure to pay or deliver, breach of agreement, default under the specific agreement to which the hedge relates bankruptcy, misrepresentation and the occurrence of certain transactions.  The remedy for default is settlement in entirety or payment of the fair value of the contracts, which is $8.1 million in the aggregate for all of our contracts, with $390,000 of posted collateral as of June 30, 2012.  The unrealized loss related to our derivative instruments included in accumulated other comprehensive loss, net of taxes was $7.7 million as of June 30, 2012 and $8.6 million as of December 31, 2011.

The notional and fair value amounts of our derivative instruments as of June 30, 2012 were as follows:

(Amounts in thousands)			Asset Derivatives				Liability Derivatives
	Current Notional		Balance Sheet		Fair Value		Balance Sheet		Fair Value
	Amount		Location				Location
Interest Rate Swaps - S/T	$	12,145		N/A		-	Current Liabilities			(247	)
Interest Rate Swaps - L/T*	$	109,162		N/A		N/A	Other Liabilities		$	(7,826	)
Foreign Exchange Contracts	$	900	Other Current Assets		$	42		N/A		N/A
Foreign Exchange Contracts	$	3,800		N/A			Current Liabilities		$	(116	)
Total Derivatives Designated as Hedging Instruments	$	126,007		-	$	42		-	$	(8,190	)

*We have outstanding a variable-to-fixed interest rate swap with respect to a Yen-based facility for the financing of a PCTC delivered in March 2010.   The notional amount under this contract is $69,506,745 (based on a Yen to USD exchange rate of 79.81 as of June 30, 2012).  With the bank exercising its option to reduce the underlying Yen loan from 80% to 65% funding of the vessel's delivery cost, the 15% reduction represents the ineffective portion of this swap, which consists of the portion of the derivative instrument that is no longer supported by underlying borrowings.  The change in fair value related to the ineffective portion of this swap was a $117,000 loss for the quarter ended June 30, 2012 and this amount was included in earnings.

In July of 2011, Oslo Bulk, an entity in which we hold a 25% ownership interest and account for under the equity method, entered into an interest rate swap agreement to mitigate is exposure to fluctuating interest rates.  We were unsuccessful in obtaining adequate documentation and reaching a conclusion on the effectiveness of the swap prior to filing both our 2011 Annual Report on Form 10-K and Form 10-Q for the first quarter of 2012.  Therefore, we accounted for the swap as if it were ineffective, recognizing the losses incurred in earnings under the caption "Equity in Net (Loss) Income of Unconsolidated Entities."

Oslo's 2011 financial statement audit was completed in the second quarter of 2012 and Oslo Bulk's auditors concluded that the swap did, in fact, meet all of the criteria for hedge accounting at its inception.  As a result of this information, we prior year ineffectiveness of approximately $674,000 during the three months ended June 30, 2012.  Ineffectiveness for the first quarter of 2012 was approximately $42,000.  See Note 17 (Out of Period Adjustments) for further details.

The effect of derivative instruments designated as cash flow hedges on our condensed consolidated statement of operations for the six months ended June 30, 2012 was as follows:

(Amounts in thousands)	Net Gain / (Loss) Recognized in  Other  Comprehensive  Income			Location of Gain  (Loss) Reclassified  from AOCI to  Income		(Loss)  Reclassified  from AOCI to  Income			Gain Recognized in  Income from  Ineffective  portion
	2012					2012			2012
Interest Rate Swaps	$	1,236		Interest Expense		$	(1,723	)	$	32
Foreign Exchange contracts	$	(180	)	Voyage Expenses		$	(111	)		-
Total	$	1,056			-	$	(1,834	)	$	32

Interest Rate Swap Agreements

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 our 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.

As of June 30, 2012, we had the following swap contracts outstanding:

Effective Date	Termination Date	Current Notional  Amount		Swap Rate			Type
11/30/05	11/30/12		12,145,000		5.17	%	Fixed
3/31/08	9/30/13	$	8,551,667		3.46	%	Fixed
9/30/10	9/30/13	$	8,551,667		2.69	%	Fixed
9/30/10	9/30/13	$	8,551,667		2.45	%	Fixed
9/26/05	9/28/15	$	7,000,000		4.41	%	Fixed
9/26/05	9/28/15	$	7,000,000		4.41	%	Fixed
3/15/09	9/15/20	$	*69,506,745		2.065	%	Fixed
Total:		$	121,306,746

*Notional amount converted from Yen at June 30, 2012 at a Yen to USD exchange rate of 79.81

Foreign Exchange Rate Risk.

We have entered into foreign exchange contracts to hedge certain firm foreign currency purchase commitments.  In 2011, we entered into three forward purchase contracts which expire in 2012. The first was for Mexican Pesos for $1,200,000 U.S. Dollar equivalents at an exchange rate of 12.4717, the second was for Mexican Pesos for $450,000 U.S. Dollar equivalents at an exchange rate of 13.036 and the third was for Mexican Pesos for $750,000 U.S. Dollar equivalents at an exchange rate of 14.0292. In 2012, we entered into three forward purchase contracts which expire in 2013. The first was for Mexican Pesos for $750,000 U.S. Dollar equivalents at an exchange rate of 13.7787, the second was for Mexican Pesos for $250,000 U.S. Dollar equivalents at an exchange rate of 14.2939 and the third was for Mexican Pesos for $700,000 U.S. Dollar equivalents at an exchange rate of 14.5700.  Our Mexican Peso foreign exchange contracts represent approximately 100% of our projected Peso exposure.

In May 2012, we entered into a forward purchase contract which expires in 2012. The contract was for Indonesian Rupiah for $2,100,000 U.S. Dollar equivalents at an exchange rate of 9315.  Our Indonesian Rupiah foreign exchange contracts represent approximately 66% of our projected Rupiah exposure.

The following table summarizes the notional value of these contracts:

(Amounts in Thousands)
Transaction Date	Type of  Currency	Transaction Amount  in Dollars		Fair Value of Contracts - Asset  (Liability)			Effective Date	Expiration Date
August 2011	Peso	$	450,000	$	27,245		September 2011	December 2012
September 2011	Peso	$	450,000		14,442		July 2012	December 2012
September 2011	Peso	$	300,000		(16,006	)	October 2011	December 2012
May 2012	Peso	$	750,000		(6,512	)	January 2013	May 2013
May 2012	Peso	$	250,000		(11,600	)	January 2013	May 2013
May 2012	Peso	$	700,000		(35,979	)	June 2013	December 2013
May 2012	Rupiah	$	1,800,000		(46,312	)	July 2012	December 2012
		$	4,700,000	$	(74,722	)