TRAILER BRIDGE INC, S-1/A, 1997-07-21

TRAILER BRIDGE INC
S-1/A, 1997-07-21
TRUCKING (NO LOCAL)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1997

REGISTRATION NO. 333-28221
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------

AMENDMENT NO. 2

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------

TRAILER BRIDGE, INC.
(Exact name of Registrant as specified in its charter)
---------------------

<TABLE>
<S> <C> <C>
DELAWARE 4213 13-3617986
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

9550 REGENCY SQUARE BOULEVARD, SUITE 500
JACKSONVILLE, FLORIDA 32225
(904) 724-4400

(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
------------------
RALPH W. HEIM
PRESIDENT AND CHIEF OPERATING OFFICER
TRAILER BRIDGE, INC.
9550 REGENCY SQUARE BOULEVARD, SUITE 500
JACKSONVILLE, FLORIDA 32225
(904) 724-4400

(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------
Copies to:

<TABLE>
<C> <C> <C>
WILLIAM G. GOTIMER, JR., ESQ. LINDA Y. KELSO, ESQ. BRUCE E. MACDONOUGH, ESQ.
TRAILER BRIDGE, INC. FOLEY & LARDNER GREENBERG TRAURIG HOFFMAN
500 PARK AVENUE, SUITE 540 200 LAURA STREET LIPOFF ROSEN & QUENTEL, P.A.
NEW YORK, NEW YORK 10022 JACKSONVILLE, FLORIDA 32202 1221 BRICKELL AVENUE
(212) 935-9518 (904)359-2000 MIAMI, FLORIDA 33131
(305) 579-0500
</TABLE>

------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION
JULY 21, 1997

2,700,000 Shares

[Trailer Bridge Logo]

TRAILER BRIDGE, INC.
Common Stock
------------------

All of the shares of Common Stock offered hereby are being sold by Trailer
Bridge, Inc. ("Trailer Bridge" or the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $11.00 and
$13.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Common Stock
has been approved for quotation on the Nasdaq National Market under the symbol
"TRBR."

Existing stockholders will beneficially own approximately 71% of the
outstanding Common Stock after the offering. See "Principal Stockholders."
Approximately $6.2 million of the net proceeds of the offering will be used to
repay indebtedness of the Company to an affiliate and $6.0 million will be used
to pay an S Corporation dividend to existing stockholders. See "Use of
Proceeds." The Common Stock is subject to certain restrictions on ownership by
non-U.S. citizens designed to maintain the Company's eligibility to own and
operate vessels in the U.S. domestic trade. Non-U.S. citizens will be required
to redeem or sell their Common Stock if ownership of the Common Stock by
non-U.S. citizens exceeds these restrictions. See "Description of Capital
Stock -- Foreign Ownership Restrictions and Possible Divestiture of Stock."

------------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8.
------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=============================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- -------------------------------------------------------------------------------------------------------------
Total(2).......................... $ $ $
=============================================================================================================
</TABLE>

(1) Before deducting expenses of the offering estimated at $332,000.

(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 405,000 shares of Common Stock solely to cover over
allotments, if any. To the extent that the option is exercised, the
Underwriters will offer the additional shares to the public at the Price to
Public shown above. If the option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company will
be $ , $ and $ , respectively. See
"Underwriting."

-----------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1997.

ALEX. BROWN & SONS
INCORPORATED

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3
Omitted Graphic and Image Material

The following is a narrative description of graphic and image material
contained in the printed version of the Prospectus which has been omitted from
the version filed electronically.

Inside front cover:

Three photographs (counterclockwise from the top) depicting (i)
a Trailer Bridge tractor and trailer leaving a customer's premises,
(ii) a trailer being pulled onto one of the Company's tripledeck
barges, and (iii) the loaded barge being towed out to the open sea.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

The Company intends to furnish its stockholders with annual reports
containing audited financial statements and an opinion thereon expressed by
independent certified public accountants and with quarterly reports for the
first three quarters of each year containing unaudited financial information.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. Except as otherwise specified, all information in this
Prospectus assumes (i) a 15,700-for-one split of the shares of Common Stock, and
(ii) no exercise of the Underwriters' over-allotment option. See "Underwriting."

THE COMPANY

Trailer Bridge, headquartered in Jacksonville, Florida, is an integrated
trucking and marine freight carrier that provides truckload freight
transportation primarily between the continental U.S. and Puerto Rico. Founded
in 1991 by transportation pioneer Malcom P. McLean, the Company combines an
efficient and dedicated motor carrier with a low cost barge and tug marine
transportation system. Trailer Bridge is the only company serving markets
governed by the Jones Act which exclusively operates marine vessels fully
configured to carry 48' and 53' long, 102" wide, "high-cube" trailers. This
configuration enables the Company to achieve equipment utilization rates and
other operating efficiencies not readily available to traditional ocean carriers
that primarily use smaller capacity equipment, such as 40' containers. The
Company believes that as a result of these and other efficiencies, its total
unit costs per mile are the lowest of any carrier operating between the
continental U.S. and Puerto Rico.

Trailer Bridge intends to achieve significant growth by providing the
lowest cost freight transportation service to markets well suited to its
high-cube integrated truckload and marine freight system. Based on volume and
pricing data, the Company believes that there are a number of markets in which
the Company's unique transportation system can provide superior full-load
service at a significant cost advantage over existing modes of truckload and
rail intermodal transportation.

Trailer Bridge's differentiated service quickly gained the acceptance of
U.S. to Puerto Rico shippers, leading to rapid growth and high equipment
utilization. In 1993, the Company's first full year of operation, Trailer Bridge
achieved a 93% outbound (continental U.S. to Puerto Rico) vessel utilization
rate and captured 5% of the continental U.S. to Puerto Rico marine freight
market. In response to the rapid market share gains experienced by Trailer
Bridge, in 1996 the Company increased its vessel capacity by 56% by inserting
midsections ("mid-bodies") into its two existing barges, increasing the capacity
of each barge from 266 to 416 48' equivalent truckload units. These
roll-on/roll-off barges are chartered from an affiliate.

Trailer Bridge will increase its vessel capacity by an additional 56% in
late 1997 and early 1998 when it takes delivery of two 408' long container
carrying barges designed specifically for the Company's integrated truckload
marine transportation system and bearing the Company's Triplestack Box
Carrier(TM) trade name. The Triplestack Box Carriers(TM) will be versatile,
low-draft vessels that have a capacity of 213 53' containers, stacked three-high
on a single deck. Construction of these two vessels began in March 1997. Upon
completion, the vessels will be deployed in the Company's existing Puerto Rico
freight operation. Trailer Bridge also intends to contract for the construction
of three additional Triplestack Box Carriers(TM) which it intends to deploy in
coastwise service between New York and Florida. The Company plans to investigate
other marine markets which are well suited for its unique, cost-efficient
transportation service, such as from the continental U.S. to Hawaii or Alaska.

Management believes that the Company's principal competitive strengths are:

Significant Operating Cost Advantage. Trailer Bridge believes that it
is the lowest cost provider of freight transportation between the
continental U.S. and Puerto Rico. Lower overall operating costs are
achieved through significantly higher equipment utilization and lower
marine linehaul costs than those of traditional ocean carriers. The
Company's inland trucking operation achieves higher equipment utilization
and lower unit trucking costs by using 48' and
3
<PAGE> 5

53' high-cube trailers. These trailers provide customers with over 50% more
interior capacity than 40' marine containers but with similar inland
trucking costs. The Company's marine system uses towed ocean-going barges
instead of self-propelled container ships to deliver equivalent units of
capacity at significantly lower capital and operating costs.

Domestic Truckload Operations. The Company believes that it is the
only carrier using its own fleet of tractors and high-cube dry van trailers
to provide transportation services between interior points within the
continental U.S. and Puerto Rico. By using high-cube equipment, the
mainstay of the domestic truckload industry and a centralized dispatch
system, the Company can more effectively compete for and obtain domestic
non-Puerto Rico truckload freight while repositioning equipment for Puerto
Rico shipments. As a result, the Company believes that it operates with
lower empty miles and higher equipment utilization than its competitors in
the Puerto Rico trade.

Centralized Operation in Strategic Location. Trailer Bridge operates
a centralized truckload operation from its headquarters in Jacksonville.
Because approximately 70% of the Company's truckload freight is dispatched
through Jacksonville on a regular schedule to meet weekly barge sailings to
Puerto Rico, the Company is able to achieve purchasing, maintenance and
other operating efficiencies and higher driver retention. Additionally, the
Company's centralized Jacksonville headquarters is strategically located
near key southern rail and highway endpoints which connect U.S. cities to
Puerto Rico and other Caribbean points.

Emphasis on U.S. Domestic Ocean Trade. The Company concentrates its
marine operations in markets governed by the Jones Act. The Jones Act
prevents foreign-built or foreign-crewed vessels from competing in ocean
trade between ports in the U.S., including the non-contiguous areas of
Puerto Rico, Alaska, Hawaii and Guam.

Experienced Management Team. The Company's officers and directors
have extensive experience in the transportation industry, including an
average of over 15 years in the marine and trucking industries. All but one
member of the Company's management team have been with the Company since
its inception. The scope of management experience at Trailer Bridge is well
balanced between both trucking and marine transportation.

Trailer Bridge's strategy for continuing its profitable growth includes (i)
increasing capacity in its Puerto Rico service by 56% with the addition of two
new Triplestack Box Carriers(TM), (ii) initiating a new coastwise marine
transportation service that will offer twice-weekly sailings from New York to
Florida utilizing three additional Triplestack Box Carriers(TM) to be built in
1998, and (iii) initiating marine service to other Jones Act protected markets
such as Hawaii and Alaska.

Trailer Bridge was incorporated under the laws of Delaware in April 1991.
The Company's headquarters is located at 9550 Regency Square Blvd, Jacksonville,
Florida 32225, and its telephone number is (800) 554-1589.
4
<PAGE> 6

THE OFFERING

Common Stock offered hereby................. 2,700,000 shares

Common Stock to be outstanding after the
offering.................................... 9,372,500 shares (1)

Use of Proceeds............................. To purchase revenue equipment
($13.2 million), reduce
indebtedness to an affiliate
($6.2 million), fund an S
Corporation dividend to existing
stockholders ($6.0 million),
partially fund the acquisition
of new vessels ($2.2 million)
and increase working capital
($2.2 million). Dollar amounts
are approximations. See "Use of
Proceeds."

Nasdaq National Market Symbol............... TRBR
- ---------------

SUMMARY FINANCIAL AND OPERATING DATA
(In thousands, except per share amounts and operating data)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ -----------------
1992 1993 1994 1995 1996(1) 1996(1) 1997
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.................... $ 38,778 $67,613 $72,192 $62,531 $63,148 $14,568 $16,446
Operating income (loss)............... (9,309) 5,094 6,175 8,778 4,425 966 1,748
Nonoperating expense (net)............ (864) (944) (1,805) (1,314) (1,015) (256) (264)
Income (loss) before provision and pro
forma provision (benefit) for income
taxes............................... (10,173) 4,150 4,370 7,464 3,410 710 1,484
Pro forma net income (loss)(2)........ (6,313) 2,526 2,343 4,360 2,073 443 909
Pro forma net income per common
share(3)............................ $ .29 $ .13
Pro forma weighted average shares
outstanding(3)...................... 7,173 7,173
Supplementary pro forma net income per
common share(4)..................... $ .30 $ .12
OPERATING DATA:
Operating ratio(5).................... 124.0% 92.5% 91.4% 86.0% 93.0% 93.4% 89.4%
Vessel utilization outbound........... 60.1% 93.5% 90.9% 96.0% 88.4%(6) 96.3% 78.1%(6)
Vessel utilization inbound............ 12.1% 36.6% 52.8% 51.6% 42.0%(6) 59.8% 33.6%(6)
Overall vessel capacity utilization... 36.1% 65.0% 71.8% 73.8% 65.3%(6) 78.1% 55.8%(6)
Tractor loaded mile percentage........ 77.3% 87.1% 86.2% 81.0% 81.5% 83.0% 80.5%
Weighted average tractors............. 178 199 256 187 163 174 154
Weighted average trailers............. 923 1,629 1,605 1,458 1,762 1,400 1,983
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997 PRO FORMA
----------------------- AS
ACTUAL PRO FORMA(7) ADJUSTED(8)
-------- ------------ -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................. $ (2,823) $(8,823)(9) $ 5,577
Net property and equipment................................ 14,349 14,349 27,549
Total assets.............................................. 26,440 26,440 44,362
Long-term debt, capital lease obligations and due to
affiliate(10)........................................... 15,242 15,242 9,364
Stockholders' equity...................................... 6,314 314 29,464
</TABLE>

- ---------------

(3) Pro forma net income per share reflects a 15,700-for-1 stock split that
will become effective in connection with the offering and the issuance of
500,000 shares of Common Stock to fund the payment of a $6.0 million S
Corporation dividend to existing stockholders with a portion of the net
proceeds of the offering.
(4) The Company expects to use a portion of the net proceeds from the offering
to repay amounts due to affiliate. Supplementary pro forma net income per
share reflects the interest savings and the issuance of approximately
652,000 shares of Common Stock to fund the repayment, assuming the issuance
and repayment had occurred on January 1, 1996.
(5) Operating expenses as a percentage of revenue.
(6) From mid-February through mid-July 1996, only one of the Company's two
vessels was in service at a time due to the Company's mid-body expansion
program, and the Company operated during this period with a second, smaller
substitute vessel. Vessel capacity outbound to Puerto Rico and inbound to
the U.S. increased from 266 48' trailer equivalents at February 1, 1996 to
416 48' trailer equivalents at July 31, 1996.
(7) Adjusted to reflect the $6.0 million S Corporation dividend to be paid to
existing stockholders with a portion of the net proceeds of the offering.
(8) Adjusted to reflect (i) the sale of 2,700,000 shares of Common Stock
offered by the Company at an assumed price of $12.00 per share and the
application of the estimated net proceeds therefrom as described under "Use
of Proceeds," and (ii) a non-cash charge (that would have been
approximately $650,000 at March 31, 1997) that will result from the
termination of the Company's S Corporation status. See "S Corporation
Status."
(9) Reflects short-term obligation to fund dividend payable to existing
stockholders.
(10) Includes current maturities.
7
<PAGE> 9

RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating an investment in the
Company's Common Stock.

OPERATIONS DEPENDENT ON LIMITED FLEET AND SPECIAL LOADING STRUCTURES

The Company's current operations are dependent upon two vessels and triple
deck loading ramps at the Company's port facilities in Jacksonville, Florida and
San Juan, Puerto Rico, the loss of any of which could have a material adverse
effect on the Company. The operation of any marine vessel involves the risk of
catastrophic events due to various perils of sea. In addition, port facilities
in Jacksonville and San Juan are vulnerable to the risk of hurricanes. In the
event of either a total loss of or major damage to any vessel or ramp, there can
be no assurance that the Company could locate a suitable replacement, or if
available, that such replacement could be obtained on suitable terms. The
Company also would be adversely affected if unexpected maintenance or repairs
were required for any vessel or ramp, all of which have been specially
configured for the Company. The Company does not maintain business interruption
insurance. Accordingly, there can be no assurance that the loss of, damage to or
significant required repair to any of the Company's vessels or port facilities
in the future would not have a material adverse effect on the Company.

CURRENT RELIANCE ON SINGLE MARKET

Most of the Company's present revenue is attributable to freight moving
either to or from Puerto Rico. Freight moving to or from Puerto Rico accounted
for 89.2% of the Company's revenue in 1996 and 93.5% during the three months
ended March 31, 1997. The Company's current results are therefore affected by
economic conditions and business cycles in Puerto Rico that may or may not be
similar to those in the U.S. The Company's present reliance on the Puerto Rico
market makes it susceptible to changes that it would not otherwise be exposed to
if it operated in a more geographically diverse market, including a downturn in
the local economy, local economic and competitive factors, changes in government
regulations and political changes. The U.S. Congress has passed legislation that
establishes a phase-out of Section 936 of the Internal Revenue Code, which
allows for favorable U.S. tax treatment of profits resulting from manufacturing
operations in Puerto Rico. The phase-out began in January 1996 and continues
until January 2006. This favorable tax provision has contributed to economic
growth in Puerto Rico in the past by enticing U.S. corporations to establish
manufacturing operations in Puerto Rico. Any change in Puerto Rico's political
status with the U.S., or the ongoing debate on such status, could affect the
economy of Puerto Rico. The ultimate effect of the phase-out of Section 936 or
of possible changes in Puerto Rico's governmental and political status is
uncertain and, accordingly, there can be no assurance that such issues will not
adversely affect the Company.

NEW VENTURE RISKS

A key element of the Company's strategy for future growth is to expand into
new markets, including the domestic coastwise traffic lanes such as New York to
Florida, while continuing to build the Company's presence in the Puerto Rico
market. In addition, the Company's expansion in both the Puerto Rico and
coastwise traffic lanes will be accomplished with its new Triplestack Box
Carrier(TM) vessels which will require the Company's acquisition of containers,
chassis units and loading equipment that may not be compatible with the
Company's existing vessels and revenue equipment. The planned use of Triplestack
Box Carriers(TM) and expansion into coastal traffic lanes are subject to risks
of establishing a new business, including lack of experience, unforeseen design,
operating and maintenance problems and lack of market acceptance. In the case of
the coastwise traffic lanes, there is presently no comparable marine service and
the Company will be competing with the rail intermodal and truckload industries.
Many competitors in these industries have substantially greater financial
resources, operate more equipment, or carry a larger volume of freight than the
Company. Moreover, the expansion in Puerto Rico with the Triplestack Box
Carriers(TM) and

8
<PAGE> 10

the entry into new coastal traffic lanes will require new marketing strategies,
additional personnel and a continuing evaluation of management structure. No
assurance can be given that Trailer Bridge will be able to attract a sufficient
number of customers at freight rates that result in profitable operations in
Puerto Rico, the Company's anticipated new traffic lanes and the markets it
expects to expand into in the future. See "Business -- Growth Strategy."

SHIP CONSTRUCTION RISKS

The Company has entered into a fixed-price contract for the Company's two
Triplestack Box Carriers(TM), and construction has commenced with the first
vessel scheduled for delivery in November 1997 and the second vessel scheduled
for delivery two months later. No assurance can be given that there will be no
changes in the contract specifications, either as required by various regulatory
bodies or as requested by the Company, which result in an increase in
construction cost and/or a delay in the delivery of the vessels. Construction of
the Triplestack Box Carriers(TM) also involves the risks associated with any
large construction project, such as weather interference, labor shortages, work
stoppages and unforeseen engineering problems, any of which could have the
effect of increasing project costs and/or delaying delivery. During the
construction of a vessel, as a matter of state law, laborers and others who
perform services in connection with such construction may have liens against the
vessel under construction.

RAPID GROWTH OF BUSINESS

The Company expects to increase its capacity by approximately 56% between
October 31, 1997 and January 31, 1998. This new vessel capacity will result in a
need for additional revenue equipment (tractors and trailers) and drivers. There
can be no assurance that the Company will be able to attract and retain enough
qualified drivers to operate planned additions to the equipment fleet. Further,
expected growth, if achieved, may place a significant strain on the Company's
management, working capital, and accounting and other operating systems. There
is no assurance that such systems will be adequate to handle such growth or that
operating margins will not be adversely affected by future changes in and
expansion of the Company's business. Finally, the Company may be required to
curtail its plans for growth due to changes in economic conditions.

POTENTIAL LOSS OF JONES ACT PROTECTION

The Company's marine operations are conducted in the U.S. domestic trade,
which, by virtue of a set of federal laws known as the Jones Act, require that
only U.S. built, owned and crewed vessels move freight between ports in the
U.S., including the non-contiguous areas of Puerto Rico, Alaska, Hawaii and
Guam. There have been repeated attempts to repeal these laws, and efforts to
effect such repeal are expected to continue in the future. The Company is
already subject to vigorous competition and potential additional competition in
its marine operations, including competition by companies with financial
resources greater than those of the Company that could be committed to the
construction of new vessels in excess of market requirements. Repeal of or
significant changes to the Jones Act could result in additional competition from
vessels built in lower-cost foreign shipyards and manned by foreign nationals
accepting lower wages than U.S. citizens. There is no assurance that such repeal
or changes would not have a material adverse effect on the Company in the
domestic trades it now serves or expects to serve in the future.

ECONOMIC FACTORS

The Company has no control over economic factors such as fuel prices, fuel
tax, interest rate fluctuations, recessions or customers' business cycles.
Significant increases in fuel or other operating costs and interest rates, to
the extent not offset by increases in freight rates, would adversely affect the
Company's operating results. Economic recessions, temporary inventory imbalances
or downturns in customers' business cycles also could have a material adverse
effect upon the operating results of the Company. If the resale value of the
Company's revenue equipment were to decline, the

9
<PAGE> 11

Company could receive less upon the disposition of equipment or find it
necessary to retain its equipment longer, with a resulting increase in operating
expenses. The marine and trucking industries are cyclical with corresponding
changes in revenue and profits. Changes in the level of economic growth as well
as changes in the supply and demand of vessel and trucking capacity can impact
both rates and resale values. The amount and timing of new vessel deliveries to
competing carriers in the Puerto Rico market and rate reductions from increased
capacity, excess capacity or slow market growth could result in rate instability
that could have a material adverse effect upon the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

RECRUITMENT AND RETENTION OF QUALIFIED DRIVERS

Competition for drivers is intense in the trucking industry, and the
Company occasionally experiences difficulty attracting and retaining enough
qualified drivers. There is, and historically has been, an industry-wide
shortage of qualified drivers, and this shortage could affect the quality and
reliability of the Company's service, force the Company to significantly
increase the compensation it pays to driver employees, curtail the Company's
growth or otherwise affect the Company's profitability. Difficulty in attracting
and retaining qualified drivers would have a material adverse effect upon the
Company's operations and ability to grow. See "Business -- Driver Recruiting and
Retention."

ACQUISITION OF REVENUE EQUIPMENT

The Company's strategy for continued growth is dependent on the acquisition
and deployment of additional revenue equipment. The Company currently has orders
for the purchase of 100 tractors through February 1998 as part of its normal
tractor replacement program. The Company also has contracted for the
construction of 53' containers and chassis units whose delivery is expected to
coincide with the vessel construction schedule for its new Triplestack Box
Carriers(TM). Delays in the availability of equipment could occur due to work
stoppages at the manufacturer, equipment or supply shortages or other factors
beyond the Company's control. Any delay or interruption in the availability of
equipment in the future could have a material adverse effect on the Company.

COMPETITION

The trucking industry is highly competitive and fragmented and the Puerto
Rico freight market is also highly competitive. The Company currently competes
with other truckload carriers that provide domestic dry van service, private
fleets operated by existing and potential customers, and marine carriers that
provide ocean service between the continental U.S. and Puerto Rico. The
Company's planned service in the coastwise traffic lanes will compete with rail
intermodal service and trucking companies. Competition for the freight
transported by the Company is based primarily on freight rates, and, to a lesser
degree, on service and efficiency. Most of the Company's current and future
competitors have substantially greater financial resources, operate more
equipment, or carry a larger volume of freight than the Company. See
"Business -- Competition."

DEPENDENCE ON KEY PERSONNEL

The Company's success depends upon key members of management, particularly
John D. McCown. The loss of Mr. McCown could have a material adverse effect on
the Company. The Company does not maintain key man life insurance policies on
any of its officers or management.

Because Mr. McCown also serves as President and Chief Executive Officer of
the Company's affiliate that owns the two barges operated by the Company, he
will not devote 100% of his working time to Trailer Bridge. It is anticipated
that he will devote less than 5% of his working time to his duties with the
affiliate. See "Management."

10
<PAGE> 12

SEASONALITY

The Company's operations are affected by the seasonality of the Puerto Rico
freight market where shipments are generally reduced during the first calendar
quarter and increased during the fourth calendar quarter of each year in
anticipation of Christmas. This seasonality is expected to have a greater impact
on the Company when it increases its capacity with the addition of two new
Triplestack Box Carriers(TM). In addition, the Company's operating expenses have
historically been higher in the winter months due to decreased fuel efficiency
and increased maintenance costs in colder weather. The Company's operating
revenue and net income may vary as a result of these factors, and accordingly,
results of operations are subject to fluctuation, and results in any period
should not be considered indicative of the results to be expected for any future
period. Fluctuations in operating results may also result in fluctuations in the
price of the Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Seasonality."

FUEL PRICE FLUCTUATIONS

Fuel is one of the Company's largest operating expenses and was 9.5% of
total revenue for the three months ended March 31, 1997. The cost and
availability of fuel is subject to many economic and political factors. Any
increase in fuel taxes or fuel prices, to the extent not offset by freight rate
increases, or any interruption in the supply of fuel, could have a material
adverse effect on the Company's operating results. The Company has no agreement
in place that assures either price or availability and a dramatic increase in
the price of fuel or a shortage of fuel could have a material adverse impact on
the Company. See "Business -- Fuel Availability and Cost."

ENVIRONMENTAL MATTERS

The Company's operations are subject to various environmental laws and
regulations dealing with the transportation, storage, presence, use, disposal
and handling of hazardous materials and hazardous wastes, discharge of storm
water and vessel fuel delivery. The Company does not maintain either aboveground
or underground fuel storage tanks on its properties. Contractors under the
direction of the tug owner handle the delivery of fuel to ocean-going tugs. The
Company is not aware of any fuel spills on land or at sea or hazardous substance
contamination on its properties and believes that its operations are in material
compliance with existing environmental laws and regulations. However, if any
such substances were found on the Company's properties or if the Company were
found to be in violation of applicable laws and regulations, the Company could
be responsible for clean-up costs, property damage, and fines or other
penalties, any one of which could have a material adverse effect on the Company.

CLAIMS EXPOSURE AND INSURANCE COSTS

Trucking and marine transportation companies, including the Company, face
multiple claims for personal injury and property damage relating to accidents,
cargo damage and workers' compensation. The Company currently maintains a broad
range of liability and property insurance covering its business. To the extent
that the Company experiences a material increase in the frequency or severity of
accidents or workers' compensation claims, or unfavorable developments on
existing claims, the Company's operating results and financial condition could
be materially adversely affected. Significant increases in the Company's claims
and insurance cost, to the extent not offset by rate increases, would reduce the
Company's profitability. See "Business -- Safety and Insurance."

GOVERNMENT REGULATION

The Company is subject to regulation by various federal and state agencies,
including the Surface Transportation Board, the successor agency to the
Interstate Commerce Commission, the United States Department of Transportation,
the U.S. Coast Guard and various similar state agencies.

11
<PAGE> 13

These regulatory authorities have broad powers, generally governing activities
such as authority to engage in motor carrier operations, operational safety,
accounting systems, tariff filings of freight rates, certain mergers,
consolidations and acquisitions, and financial reporting. The Company's marine
operations are conducted in the U.S. domestic trade, which, by virtue of a set
of federal laws known as the Jones Act, require that only U.S. built, owned and
crewed vessels move freight between ports in the U.S., including the
noncontiguous areas of Puerto Rico, Alaska, Hawaii and Guam. The Company is also
subject to regulations promulgated by the Environmental Protection Agency and
similar state agencies. Although management believes that its operations are in
material compliance with current laws and regulations, there can be no assurance
that current regulatory requirements will not change or that currently
unforeseen environmental incidents will not occur or that contamination or past
noncompliance with environmental laws will not be discovered on properties on
which the Company has operated. See "Business -- Regulation."

RELIANCE ON SIGNIFICANT CUSTOMERS

For the year ended December 31, 1996, the Company's 25 largest customers
represented 35.2% of revenue, its ten largest customers represented 22.9% of
revenue, and its five largest customers represented 15.8% of revenue. Those same
customers represented 26.7%, 17.8% and 13.6%, respectively, of total revenue for
the year ended December 31, 1995. Most of the Company's contracts with customers
are cancelable on 30 days' notice and the penalties for a shipper for breach of
contract are minimal. The loss of any of its major customers could have a
material adverse effect on the Company's operating results and profitability.
See "Business -- Marketing and Customers."

CAPITAL REQUIREMENTS

The trucking industry and the vessels utilized to move truckload freight
require extensive investment in revenue equipment. The Company historically has
relied upon vessel charters, debt and equipment leases to finance revenue
equipment, and it has granted its lenders liens on substantially all of its
assets. If in the future the Company were unable to borrow sufficient funds,
enter into acceptable lease arrangements, sell or trade its used equipment at
acceptable prices, or raise additional equity capital, the resulting capital
shortage would limit the Company's growth and force the Company to operate its
revenue equipment for longer periods, which would be likely to adversely affect
the Company's growth and profitability. See "Use of Proceeds," "Capitalization,"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

VOTING CONTROL OF THE COMPANY

Upon completion of the offering, Malcom P. McLean and Clara L. McLean will
beneficially own approximately 71% of all of the outstanding shares of Common
Stock. Accordingly, Malcom P. McLean and Clara L. McLean will have the ability
to elect the entire Board of Directors of the Company, determine the outcome of
all matters involving a stockholder vote, and take certain actions by written
consent with notice to the other stockholders. See "Principal Stockholders" and
"Description of Capital Stock."

RESTRICTION ON FOREIGN OWNERSHIP AND POSSIBLE REQUIRED DIVESTITURE OF STOCK

In order to maintain the eligibility of the Company to own and operate
vessels in the U.S. domestic trade, 75% of the outstanding capital stock and
voting power of the Company is required to be held by U.S. citizens. Although
the Company's Certificate of Incorporation contains provisions limiting
non-citizenship ownership of its capital stock, the Company could lose its
ability to conduct operations in the U.S. domestic trade if such provisions
prove unsuccessful in maintaining the required level of citizen ownership. Such
loss would have a material adverse effect on the Company. If the Company
determines that persons who are not citizens of the U.S. own more than 24.99% of
the Company's outstanding capital stock or more than 24.99% of the voting power
of the Company,

12
<PAGE> 14

the Company may redeem such stock or, if redemption is not permitted by
applicable law or the Board of Directors, in its discretion, elects not to make
such redemption, the Company may require the non-citizens who most recently
acquired shares to divest such excess shares to persons who are U.S. citizens in
such manner as the Board of Directors directs. The required redemption would be
at a price equal to the average closing price during the preceding 30 trading
days, which price could be materially different from the current price of the
Common Stock or the price at which the non-citizen acquired the Common Stock. If
a non-citizen purchases the Common Stock, there can be no assurance that he will
not be required to divest the shares and such divestiture could result in a
material loss. See "Description of Capital Stock -- Foreign Ownership
Restrictions."

LIMITATIONS ON TAKEOVERS

Certain corporate governance and statutory provisions may inhibit changes
in control of the Company. Applicable provisions of Delaware law restrict the
ability of certain acquirers to engage in un-approved business combinations with
the Company. The Company's Certificate of Incorporation permits the issuance of
additional shares of authorized but unissued Common Stock and allows the Board
of Directors to establish all relevant provisions of and issue up to 1,000,000
shares of preferred stock without further action by the stockholders. Such
preferred stock could be used, for example, in a stockholder rights plan. See
"Description of Capital Stock." In addition, Malcom P. McLean and Clara L.
McLean beneficially own stock entitled to a majority of the voting power of all
of the Company's outstanding Common Stock. The effect of these provisions and
the concentration of stock ownership could be to make a takeover more difficult
or to discourage a person from attempting a takeover, including a takeover that
some stockholders may deem to be in their best interests.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of Common Stock or the availability
of such shares for sale in the public market following the offering may
adversely affect prevailing market prices for the Common Stock and may make it
more difficult for the Company to sell its equity securities in the future on
terms it deems acceptable. Upon completion of the offering, the Company will
have 9,372,500 shares of outstanding Common Stock. All 2,700,000 shares of
Common Stock offered hereby will be freely tradable without restriction. The
remaining 6,672,500 shares owned by existing stockholders will be eligible for
sale under Rule 144 of the Securities Act of 1933 (the "Securities Act")
beginning 180 days after the date of this Prospectus.

LACK OF DIVIDENDS

After the closing of the offering, the Company intends to retain its
earnings to finance the growth and development of its business and does not
anticipate paying cash dividends. Any payment of cash dividends in the future
will depend upon the Company's financial condition, capital requirements,
earnings, restrictions under loan agreements and other factors the Board of
Directors may deem relevant. See "Dividend Policy."

NO PRIOR PUBLIC MARKET FOR COMMON STOCK; DETERMINATION OF OFFERING PRICE

Prior to the offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or, if developed, that such market will be sustained or that the stock will
trade at or above the initial public offering price. The initial public offering
price of the Common Stock offered hereby will be determined by negotiation
between the Company and the Underwriters and may bear no relationship to the
price at which the Common Stock will trade after completion of the offering. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. In addition, from time to time the stock
market experiences price and volume volatility, which may affect the market
price of the Common Stock for reasons unrelated to the Company's performance.

13
<PAGE> 15

DILUTION

Purchasers of Common Stock in the offering will incur immediate and
substantial dilution in net tangible book value of $8.96 per share. While such
purchasers will have provided virtually 100% of the aggregate consideration paid
for the shares of Common Stock that will be outstanding after the offering, they
will beneficially own only 28.8% of such shares. See "Dilution."

S CORPORATION STATUS

Since January 1, 1992, the Company has been treated as an S Corporation
under the Internal Revenue Code and the laws of the states that recognize S
Corporation status. Accordingly, the Company's net income was reported by and
taxed directly to the Company's stockholders rather than to the Company. The
Company's S Corporation status will terminate with the closing of the offering,
and in future periods the Company will be subject to federal and state taxes at
applicable rates. The termination of the Company's S Corporation status will
result in a one-time, non-cash charge to the Company (that would have been
approximately $650,000 at March 31, 1997) in recognition of deferred income
taxes.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,700,000 shares of
Common Stock offered hereby are estimated to be approximately $29.8 million
(assuming an initial public offering price of $12.00 per share), after deducting
underwriting discounts, commissions and estimated expenses of the offering.

Approximately $13.2 million of the net proceeds will be used to purchase
revenue equipment scheduled for delivery in late 1997 and early 1998. The
revenue equipment includes the 53' containers and chassis units that will be
utilized with the two Triplestack Box Carriers(TM) now being constructed to
expand the Company's service in the Puerto Rico traffic lane. Approximately $6.2
million of the net proceeds will be used to repay debt due to Kadampanattu
Corp., which is wholly owned by Malcom P. McLean, the Company's principal
stockholder. An additional $6.0 million will be used to fund the payment of an S
Corporation dividend to existing stockholders. The debt to be repaid bears
interest at 8.0% per annum and matures on December 31, 1997. Approximately $1.5
million of such debt was incurred in 1997 to fund the Company's 12.5% down
payment on the construction of two Triplestack Box Carriers(TM). Approximately
$2.2 million of the net proceeds will be used to fund the required 12.5% down
payment on three additional Triplestack Box Carriers(TM), which is currently
expected to be made in the third quarter of 1997. The approximately $2.2 million
of remaining proceeds will be used for working capital and general corporate
purposes.

Pending application of the net proceeds as described above, the Company
intends to invest such proceeds in short-term, investment grade,
interest-bearing securities.

DIVIDEND POLICY

The Company currently intends to retain its earnings to finance the growth
and development of its business and does not anticipate paying cash dividends.
Any payment of cash dividends in the future will depend upon the Company's
financial condition, capital requirements, earnings, restrictions under loan
agreements and other factors the Board of Directors may deem relevant.

As an S Corporation, the Company has paid dividends to its stockholders
from time to time in part to partially fund or offset their tax liability with
respect to S Corporation earnings. See "S Corporation Status." Since the
Company's inception, it has paid aggregate dividends of $2.6 million. The
Company also intends to pay an S Corporation dividend of $6.0 million to its
existing stockholders with a portion of the net proceeds of the offering.

14
<PAGE> 16

CAPITALIZATION

The following table sets forth the current portion of long-term debt,
capital lease obligations, due to affiliate and capitalization of the Company as
of March 31, 1997 (i) on an actual basis after giving retroactive effect to the
stock split and related increase in authorized capital stock in connection with
this offering, (ii) on a pro forma basis to give effect to the contemplated $6.0
million S Corporation dividend to existing stockholders, and (iii) on a pro
forma basis as adjusted to give effect to the application of the net proceeds
from the sale of the 2,700,000 shares of Common Stock pursuant to this offering
(at an assumed offering price of $12.00 per share) as set forth in "Use of
Proceeds":

<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt and capital lease
obligations........................................ $ 2,902 $2,902 $ 2,902
Due to affiliate..................................... 5,878 5,878 --
------- ------ -------
$ 8,780 $8,780 $ 2,902
======= ====== =======

Long-term debt and capital lease obligations (net of
current portion)................................... $ 6,462 $6,462 $ 6,462
Stockholders' equity:
Preferred stock: $.01 par value, 1,000,000 shares
authorized, no shares outstanding............... -- -- --
Common Stock, $.01 value, 20,000,000 shares
authorized; 6,672,500 shares issued and
outstanding, 9,372,500 shares issued and
outstanding as adjusted(1)...................... 67 67 94
Additional paid-in capital........................... (67) (67) 29,706
Retained earnings.................................... 6,314 314 (336)(2)
------- ------ -------
Total stockholders' equity...................... 6,314 314 29,464(2)
------- ------ -------
Total capitalization....................... $12,776 $6,776 $35,926
======= ====== =======
</TABLE>

- ---------------

(1) Excludes 785,000 shares of Common Stock reserved for issuance to employees
under the Company's Incentive Stock Plan (of which options to purchase
471,000 shares at the initial public offering price have been granted). See
"Management -- Incentive Stock Plan."
(2) Reflects a non-cash charge (that would have been $650,000 at March 31, 1997)
that will result from the termination of the Company's S Corporation status.
See Note 3 to the Financial Statements.

15
<PAGE> 17

DILUTION

The net tangible book value of the Company's Common Stock as of March 31,
1997 was approximately $5.4 million, or $.80 per share. Net tangible book value
per share represents the amount of the Company's stockholders' equity, less
intangible assets (consisting of goodwill), divided by 6,672,500 shares of
Common Stock outstanding.

Net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of shares of Common Stock in the
offering made hereby and the pro forma net tangible book value per share of
Common Stock immediately after completion of the offering. After giving effect
to (i) the sale of 2,700,000 shares of Common Stock in the offering at an
assumed price of $12.00 per share, (ii) the application of the estimated net
proceeds therefrom, and (iii) the non-cash charge (that would have been $650,000
at March 31, 1997) in recognition of deferred income taxes as described in "S
Corporation Status," the pro forma net tangible book value of the Company as of
March 31, 1997, would have been $28.5 million, or $3.04 per share. This
represents an immediate increase in net tangible book value of $2.34 per share
to existing stockholders and an immediate dilution in pro forma net tangible
book value of $8.96 per share to purchasers of shares of Common Stock in the
offering, as illustrated in the following table:

<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $12.00
Net tangible book value per share at March 31, 1997....... $ .80
Pro forma non-cash adjustment to recognize deferred income
taxes.................................................. (.10)
Increase per share attributable to new investors.......... 2.34
Pro forma net tangible book value per share after the
offering.................................................. 3.04
------
Net tangible book value dilution per share to new
investors................................................. $ 8.96
======
</TABLE>

The following table sets forth as of March 31, 1997 the difference between
existing stockholders and the purchasers of shares in the offering (at an
assumed offering price of $12.00 per share) with respect to the number of shares
purchased from the Company, the total consideration paid, and the average price
per share paid:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................. 6,672,500 71.2% $ 425 --% $ --
New investors......................... 2,700,000 28.8% 32,400,000 100.0% $12.00
--------- ----- ----------- -----
Total....................... 9,372,500 100.0% $32,400,425 100.0%
========= ===== =========== =====
</TABLE>

16
<PAGE> 18

SELECTED FINANCIAL AND OPERATING DATA

The selected financial data set forth below has been derived from the
financial statements of the Company. The financial statements as of December 31,
1995 and 1996 and for each of the three years in the period ended December 31,
1996 have been audited by Deloitte & Touche LLP, independent auditors, and such
financial statements and the report thereon are included in this Prospectus. The
financial statements as of December 31, 1992, 1993 and 1994 and for each of the
two years in the period ended December 31, 1993 have also been audited and are
not included herein. The financial statements as of March 31, 1996 and 1997 and
for the three months then ended are unaudited. However, in the opinion of
management, all adjustments of a normal recurring nature which are necessary to
present a fair statement of the results for the interim periods have been made.
The unaudited results of operations for the interim periods are not necessarily
indicative of the results for the full year. The selected financial information
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements appearing elsewhere in this Prospectus, including the notes thereto.

<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996(1) 1996(1) 1997
-------- -------- -------- -------- -------- -------- --------
(In thousands, except per share amounts and operating data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues...................... $ 38,778 $ 67,613 $ 72,192 $ 62,531 $ 63,148 $ 14,568 $ 16,446
Operating expenses:
Salaries, wages and benefits.......... 10,443 15,831 19,307 14,592 13,289 3,435 3,404
Rent and purchased transportation..... 17,320 23,398 19,616 14,497 16,231 3,430 4,211
Fuel.................................. 3,440 4,240 5,429 5,256 5,883 1,468 1,557
Operations and maintenance............ 7,512 9,192 11,781 10,553 14,211 3,046 3,206
Taxes and licenses.................... 392 989 960 589 455 138 156
Insurance and claims.................. 1,331 2,051 2,202 1,861 2,121 514 522
Communications and utilities.......... 631 824 834 621 608 143 134
Depreciation and amortization......... 1,418 1,370 2,647 2,761 2,944 701 689
Other operating expenses.............. 5,600 4,624 3,241 3,023 2,981 727 819
-------- -------- -------- -------- -------- -------- --------
Total operating expenses.......... 48,087 62,519 66,017 53,753 58,723 13,602 14,698
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)................. (9,309) 5,094 6,175 8,778 4,425 966 1,748
Interest expense, net................... (864) (1,384) (1,817) (1,362) (1,082) (247) (264)
Gain (loss) on sale of equipment........ -- 440 12 48 67 (9) --
-------- -------- -------- -------- -------- -------- --------
Total nonoperating expense, net... (864) (944) (1,805) (1,314) (1,015) (256) (264)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before provision and pro
forma provision (benefit) for income
taxes................................. (10,173) 4,150 4,370 7,464 3,410 710 1,484
Provision for income taxes.............. -- 9 12 67 39 8 29
-------- -------- -------- -------- -------- -------- --------
Income (loss) before pro forma provision
(benefit) for income taxes............ (10,173) 4,141 4,358 7,397 3,371 702 1,455
Pro forma provision (benefit) for income
taxes(2).............................. (3,860) 1,615 2,015 3,037 1,298 259 546
-------- -------- -------- -------- -------- -------- --------
Pro forma net income (loss)(2).......... $ (6,313) $ 2,526 $ 2,343 $ 4,360 $ 2,073 $ 443 $ 909
======== ======== ======== ======== ======== ======== ========
Pro forma net income per common
share(3).............................. $ .29 $ .13
======== ========
Pro forma weighted average shares
outstanding(3)........................ 7,173 7,173
Supplementary pro forma net income per
common share(4)....................... $ .30 $ .12
OPERATING DATA:
Operating ratio(5)...................... 124.0% 92.5% 91.4% 86.0% 93.0% 93.4% 89.4%
Vessel utilization outbound............. 60.1% 93.5% 90.9% 96.0% 88.4%(6) 96.3% 78.1%(6)
Vessel utilization inbound.............. 12.1% 36.6% 52.8% 51.6% 42.0%(6) 59.8% 33.6%(6)
Overall vessel capacity utilization..... 36.1% 65.0% 71.8% 73.8% 65.3%(6) 78.1% 55.8%(6)
Tractor loaded mile percentage.......... 77.3% 87.1% 86.2% 81.0% 81.5% 83.0% 80.5%
Weighted average tractors............... 178 199 256 187 163 174 154
Weighted average trailers............... 923 1,629 1,605 1,458 1,762 1,400 1,983
</TABLE>

17
<PAGE> 19

<TABLE>
<CAPTION>
December 31, March 31,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996(1) 1996(1) 1997
-------- -------- -------- -------- -------- -------- --------
(In thousands, except per share amounts and operating data)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital deficit................. $(16,867) $(13,174) $(10,188) $ (4,697) $ (1,719) $ (3,712) $ (2,823)
Net property and equipment.............. 3,366 9,428 11,118 8,851 12,512 8,189 14,349
Total assets...................... 13,816 20,688 23,521 20,226 24,764 18,557 26,440
Long-term debt, capitalized leases and
due to affiliate(7)................... 15,322 22,771 20,776 13,461 13,879 11,085 15,242
Stockholders' equity (deficit).......... (11,356) (7,214) (2,856) 2,673 6,045 3,376 6,314
</TABLE>

- ---------------

(1) During 1996, each of the Company's barge vessels was increased in size
through a mid-body expansion program that resulted in a 56% increase in
vessel capacity and was accomplished over a six-month period. From
mid-February through mid-July 1996, only one of the Company's vessels was in
service at a time. To maintain weekly service frequency, a smaller
substitute vessel was utilized, resulting in both reduced revenue and
additional costs. For these reasons, management believes that overall 1996
results are not indicative of the results that would be expected had both of
the Company's vessels remained in service throughout the year.
(2) Since January 1, 1992, the Company has operated as an S Corporation under
the Internal Revenue Code and the laws of the states that recognize S
Corporation status. As a result, the Company's taxable earnings were taxed
directly to the Company's then-existing stockholders. Pro forma net income
assumes that the Company was subject to federal and state income taxes and
was taxed as a C Corporation at the effective tax rates that would have
applied for all periods. See Note 2 to the Financial Statements. With the
closing of the offering, the Company will become subject to federal and
state income taxes. The pro forma statement of operations data do not give
effect to a non-cash charge (that would have been approximately $650,000 at
March 31, 1997) in recognition of deferred income taxes that will result
from the termination of the Company's S Corporation status upon
effectiveness of the offering.
(3) Pro forma net income per share reflects a 15,700-for-1 stock split that will
become effective in connection with the offering and the issuance of 500,000
shares of Common Stock to fund the payment of a $6.0 million S Corporation
dividend to existing stockholders with a portion of the net proceeds of the
offering.
(4) The Company expects to use a portion of the net proceeds from the offering
to repay amounts due to affiliate. Supplementary pro forma net income per
share reflects the interest savings and the issuance of approximately
652,000 shares of Common Stock to fund the repayment, assuming the issuance
and repayment had occurred on January 1, 1996.
(5) Operating expenses as a percentage of revenue.
(6) From mid-February through mid-July 1996, only one of the Company's two
vessels was in service at a time due to the Company's mid-body expansion
program, and the Company operated during this period with a second, smaller
substitute vessel. Vessel capacity outbound to Puerto Rico and inbound to
the U.S. increased from 266 48' trailer equivalents at February 1, 1996 to
416 48' trailer equivalents at July 31, 1996.
(7) Includes current maturities.

18
<PAGE> 20

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Trailer Bridge was incorporated in 1991. In February 1992, the Company
commenced integrated truckload and marine services between the U.S. and Puerto
Rico utilizing high-cube truckload equipment and two ocean-going barges. The
Company generates revenue by providing integrated truckload and marine freight
transportation between Puerto Rico and points within the continental U.S.
("Puerto Rico revenue") and to a lesser extent by providing truckload freight
transportation between points within the continental U.S. ("non-Puerto Rico
revenue"). In April 1992, Trailer Bridge acquired a Midwestern truckload carrier
with significant non-Puerto Rico revenue, primarily to increase the size of the
Company's truckload fleet. Starting in late 1994, Trailer Bridge began to
increase its focus on serving marine related markets by reducing inland
truckload service in traffic lanes which were not complementary to lanes serving
Puerto Rico freight customers.

The table below reflects Puerto Rico revenue, non-Puerto Rico revenue and
total revenue for the three years ended December 31, 1996 and the three months
ended March 31, 1996 and 1997:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- -------------------------------------
1994 1995 1996 1996 1997
----------------- ----------------- ----------------- ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Puerto Rico............. $50,829 70.4% $53,167 85.0% $56,347 89.2% $12,638 86.8% $15,378 93.5%
Non-Puerto Rico......... 21,363 29.6 9,364 15.0 6,801 10.8 1,930 13.2 1,068 6.5
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total................... $72,192 100.0% $62,531 100.0% $63,148 100.0% $14,568 100.0% $16,446 100.0%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

During 1996, each of the Company's barge vessels was increased in size
through a mid-body expansion program that resulted in a 56% increase in vessel
capacity and was accomplished over a six-month period. From mid-February through
mid-July 1996, only one of the Company's vessels was in service at a time. To
maintain weekly service frequency, a smaller substitute vessel was utilized,
resulting in both reduced revenue and additional costs. For these reasons,
management believes that overall 1996 results are not indicative of the results
that would be expected had both of the Company's vessels remained in service
throughout the year.

The Company is in the process of compiling preliminary results for the
second quarter of 1997 and expects to report revenues of approximately $16
million for the three months ended June 30, 1997. See "-- Seasonality." In
addition, on May 21, 1997, the majority stockholder of the Company granted to
the Company's Chairman and Chief Executive Officer, an option to purchase up to
942,000 shares of Common Stock (adjusted for the 15,700-for-1 stock split) owned
by him at $.95 per share or an aggregate price of $891,330 for all shares. These
options are immediately exercisable and have a term of 10 years. In connection
with this option, the Company expects to record a nonrecurring, noncash charge
for compensation expense and a credit to paid-in capital of approximately $10.4
million in the second quarter of 1997, representing the difference between the
exercise price and an assumed initial public offering price of $12.00 per share.
This option does not involve the issuance of additional shares of Common Stock
by the Company and therefore, any subsequent purchase of shares under the option
will not have a dilutive effect on the Company's book value or earnings per
share amounts. As a result of the grant of the option, the Company will report a
significant loss in the second quarter of 1997.

19
<PAGE> 21

RESULTS OF OPERATIONS

The following table sets forth the percentage relationship of certain items
to operating revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------ -------------
1994 1995 1996 1996 1997
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Operating revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages, and benefits.................... 26.7 23.3 21.0 23.6 20.7
Rent and purchased transportation................ 27.2 23.2 25.7 23.6 25.6
Fuel............................................. 7.5 8.4 9.3 10.1 9.5
Operations and maintenance....................... 16.3 17.0 22.5 20.9 19.5
Taxes and licenses............................... 1.3 0.9 0.7 0.9 0.9
Insurance and claims............................. 3.1 3.0 3.4 3.5 3.2
Communications and utilities..................... 1.2 1.0 1.0 1.0 0.8
Depreciation and amortization.................... 3.7 4.4 4.7 4.8 4.2
Other operating expenses......................... 4.4 4.8 4.7 5.0 5.0
----- ----- ----- ----- -----
Total operating expenses................. 91.4 86.0 93.0 93.4 89.4
----- ----- ----- ----- -----
Operating income................................... 8.6 14.0 7.0 6.6 10.6
Interest expense, net.............................. (2.5) (2.2) (1.7) (1.7) (1.6)
Gain (loss) on sale of equipment................... 0.0 0.1 0.1 (0.0) 0.0
----- ----- ----- ----- -----
Total nonoperating expense, net.................. (2.5) (2.1) (1.6) (1.7) (1.6)
Income before provision and pro forma provision for
income taxes..................................... 6.1 11.9 5.4 4.9 9.0
Provision for income taxes......................... 0.1 0.1 0.1 0.1 0.2
----- ----- ----- ----- -----
Income before pro forma provision for income
taxes............................................ 6.0 11.8 5.3 4.8 8.8
Pro forma provision for income taxes............... 2.8 4.8 2.0 1.8 3.3
----- ----- ----- ----- -----
Pro forma net income............................... 3.2% 7.0% 3.3% 3.0% 5.5%
===== ===== ===== ===== =====
</TABLE>

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996

Operating revenues increased $1.8 million, or 12.9%, to $16.4 million
during the three months ended March 31, 1997 from $14.6 million during the year
earlier period. This increase was due to a $2.7 million (21.7%) increase in
Puerto Rico revenue through the utilization of a portion of the additional
capacity resulting from the mid-body project, partially offset by a $862,000
(44.7%) decrease in non-Puerto Rico revenue as available tractor capacity was
targeted further towards Puerto Rico revenue. Vessel capacity utilization on the
core continental U.S. to Puerto Rico traffic lane was 78.1% during the three
months ended March 31, 1997, compared to 96.3% during the year earlier period
during which a smaller substitute vessel was utilized.

Salaries, wages, and benefits expense was $3.4 million for the three months
ended March 31, 1997, a decrease of $31,000 from the year earlier period due to
a reduction in drivers. As a percentage of revenue, salaries, wages and benefits
expense decreased to 20.7% during the three months ended March 31, 1997 from
23.6% for the year earlier period. This decrease was attributable to the
increased relative proportion of Puerto Rico revenue, which is not as labor
intensive as non-Puerto Rico revenue.

Rent and purchased transportation expense (which includes the tug
time-charter and vessel charter paid by the Company as well as expenses related
to leasing of rolling stock) increased $781,000 from the year earlier period
primarily due to a $980,000 increase in charter fees for the expanded vessels,
partially offset by a $242,000 net reduction in rolling stock rental costs as a
result

20
<PAGE> 22

of an increase in the proportion of owned as compared to leased equipment. Rent
and purchased transportation increased to 25.6% of revenue during the three
months ended March 31, 1997 compared to 23.6% of revenue during the year earlier
period as a result of the increased charter fees.

Fuel expense as a percentage of revenue was 9.5% during the three months
ended March 31, 1997 compared to 10.1% during the year earlier period. This
decrease was primarily due to additional Puerto Rico revenue that generally has
a lower fuel cost compared to non-Puerto Rico revenue, partially offset by an
increase in average fuel prices.

Operations and maintenance expense (which includes marine terminal rental
and cargo-handling costs) was $3.2 million for the three months ended March 31,
1997, up from $3.0 million for the year earlier period. As a percentage of
revenue, operations and maintenance expense decreased to 19.5% from 20.9% during
the year earlier period. The improvement resulted from the elimination of
temporary inefficiencies and increased per unit handling costs associated with
the use of a smaller substitute vessel during the 1996 mid-body expansion
program, partially offset by the higher operating costs associated with the
Company's expanded Puerto Rico operations.

Insurance and claims expense decreased to 3.2% of revenue during the three
months ended March 31, 1997 from 3.5% of revenue during the year earlier period.
This decrease was attributable to additional Puerto Rico revenue, which
generally has a lower payroll insurance cost than non-Puerto Rico revenue.

Communications and utilities expense decreased to 0.8% of revenue during
the three months ended March 31, 1997 from 1.0% of revenue during the year
earlier period. This decrease was attributable to additional Puerto Rico
revenue, which generally requires less communication and therefore has a lower
communication cost than non-Puerto Rico revenue.

Depreciation and amortization expense decreased to 4.2% of revenue during
the three months ended March 31, 1997 from 4.8% of revenue during the year
earlier period. This decrease was attributable to the increased relative
significance of Puerto Rico revenue, which to date has not required the same
proportionate investment in depreciable equipment as non-Puerto Rico revenue.
Unlike the present vessels, the Triplestack Box Carriers(TM) being built in 1997
will be owned by the Company and will be depreciated by the Company.

Other operating expense (which includes office building rent and general
supplies) was $819,000 during the three months ended March 31, 1997, compared to
$727,000 for the year earlier period. As a percentage of revenue, other
operating expense remained constant at 5.0%.

The Company's operating ratio improved to 89.4% during the first quarter of
1997 from 93.4% during the year earlier period primarily as a result of the
increased Puerto Rico revenue that resulted from the Company's 1996 mid-body
expansion program, as well as a related increase in the Company's ability to use
available trucking capacity for its more profitable core Puerto Rico traffic.

Interest expense (net) decreased slightly to 1.6% of revenue during the
three months ended March 31, 1997 due to reductions in average outstanding
balances (primarily amounts owed to an affiliate).

As a result of the factors described above, pro forma net income more than
doubled to $909,000 (5.5% of revenue) during the three months ending March 31,
1997 from $443,000 (3.0% of revenue) during the year earlier period.

Year ended December 31, 1996 Compared to Year ended December 31, 1995

During 1996, the Company implemented an expansion program that increased
the capacity of its vessels by 56% through the insertion of a mid-body in both
of its vessels. Throughout the six-month construction period, only one of the
Company's vessels was in service along with, first, a substitute vessel
one-third smaller, followed by a substitute vessel more than two-thirds smaller
than the Company's pre-modified vessels. One of the Company's vessels was out of
service from

21
<PAGE> 23

mid-February to mid-May, while the other was out of service from mid-May to
mid-July 1996. Although weekly service was maintained, the resulting
fluctuations in vessel capacity led to inefficiencies, temporary loss of
business and increased costs in all cost categories, most notably in the marine
cargo handling area.

Operating revenues increased $617,000 (1.0%) to $63.1 million during 1996
from $62.5 million during 1995. This reflects a $3.2 million (6.0%) increase in
Puerto Rico revenue, substantially offset by a $2.6 million (27.4%) decrease in
non-Puerto Rico revenue. The decrease in non-Puerto Rico revenue resulted from a
shift in the Company's business away from domestic traffic lanes which were not
complementary to Puerto Rico traffic lanes and a decrease in the average length
of domestic hauls.

Salaries, wages and benefits expense decreased slightly to $13.3 million
during 1996 from $14.6 million for 1995, and decreased as a percentage of
revenue to 21.0% during 1996 from 23.3% during 1995. This decrease as a
percentage of revenues was attributable to the shift away from non-Puerto Rico
domestic traffic lanes, resulting in a reduction in the number of truck drivers
employed by the Company.

Rent and purchased transportation expense increased $1.7 million to $16.2
million due to a $2.2 million increase in charter fees on the enlarged vessels,
partially offset by a $500,000 decrease in rolling stock rental expense. As a
percentage of revenue, rent and purchased transportation expense increased to
25.7% during 1996 compared to 23.2% during 1995. Such increase was primarily due
to (i) the increase in post-modification barge charter fees, and (ii) the
Company's payment of pre-modification charter fees during the mid-body project
while using smaller capacity substitute vessels. While the Company's larger
roll-on/roll-off barges were undergoing renovations, the Company leased smaller
substitute barges from a third party and incurred $1.2 million of additional
barge rent and $500,000 of other transitional expenses, which were reimbursed by
the charterer of the roll-on/roll-off vessels. Accordingly, there was not a net
increase in the aggregate rental expense attributable to the substitute vessels.

Fuel expense increased $627,000 to $5.9 million and increased to 9.3% of
revenue during 1996 from 8.4% of revenue during 1995, primarily due to an
increase in average fuel prices.

Operations and maintenance expense increased $3.6 million to $14.2 million
in 1996 from $10.6 million in 1995. Operations and maintenance expense increased
as a percentage of revenue to 22.5% during 1996 from 17.0% during 1995. These
increases were attributable to an increase in cargo handling costs related to
the complexity of loading substitute vessels during the mid-body modification
project.

Taxes and licenses expense decreased to .7% of revenue during 1996 compared
to .9% of revenue during 1995. This decrease resulted from a reduction in
non-Puerto Rico revenue which has a higher tax and license cost (primarily
highway taxes and local taxes and licenses) than Puerto Rico revenue.

Insurance and claims expense increased to 3.4% of revenue during 1996 from
3.0% of revenue during 1995. This increase was attributable to increased cargo
claims due to the use of smaller substitute vessels during the mid-body
modification project and increased insurance levels related to a higher
concentration of owned revenue equipment and the higher replacement cost of the
enlarged vessels.

Depreciation and amortization expense increased to $2.9 million, or 4.7% of
revenue, during 1996 from $2.8 million, or 4.4% of revenue, during 1995. This
increase resulted from increases in owned trailers, some of which replaced
trailers utilized under operating leases, partially offset by a reduction in
owned tractors which were previously utilized in the non-Puerto Rico traffic
lanes.

Other operating expense remained flat at $3.0 million during 1995 and 1996.
There was a slight decrease in other operating expense as a percentage of
revenue to 4.7% for 1996 from 4.8% for 1995.

22
<PAGE> 24

The Company's operating ratio increased to 93.0% during 1996 from 86.0%
during 1995 primarily as a result of the midbody expansion project and
inefficiencies related to the substitute vessels, including increased labor and
cargo handling fees and use of specialized equipment, temporary loss of business
and increased charter fees for the expanded vessels.

Interest expense (net) decreased to $1.1 million, or 1.7% of revenue,
during 1996 from $1.4 million, or 2.2% of revenue, during 1995 due to reductions
in average outstanding balances (primarily amounts owed to an affiliate).

As a result of the factors described above, pro forma net income decreased
52.5% to $2.1 million (3.3% of revenue) during 1996 from $4.4 million (7.0% of
revenue) during 1995.

Year ended December 31, 1995 Compared to Year ended December 31, 1994

During 1995, the Company continued to tailor its non-Puerto Rico revenue
services to its core Puerto Rico traffic lanes. As a result, many of the traffic
lanes previously served by a truckload carrier acquired in 1992 which did not
complement the Company's continental U.S. to Puerto Rico traffic lanes were
eliminated, and non-Puerto Rico trucking revenue decreased 56.2% to $9.4 million
in 1995 from $21.4 million in 1994.

Operating revenues decreased 13.4% to $62.5 million during 1995 from $72.2
million during 1994 as a direct result of a $12.0 million, or 56.2%, reduction
in non-Puerto Rico revenue, partially offset by a $2.3 million increase in
Puerto Rico revenue. Overall, Puerto Rico revenue increased 4.6% in 1995
compared to 1994.

Salaries, wages and benefits expense decreased $4.7 million to $14.6
million, or 23.3% of revenue, during 1995 from $19.3 million, or 26.7% of
revenue, during 1994. This decrease was primarily attributable to the reduction
in non-Puerto Rico revenue and the related reduction in the number of drivers
employed by the Company, primarily owner-operators.

Rent and purchased transportation expense was $14.5 million, or 23.2% of
revenue, during 1995 compared to $19.6 million, or 27.2% of revenue, during
1994. This decrease resulted from a reduction in the number of owner-operator
tractors due to the reduction in non-Puerto Rico revenue.

Although fuel expense decreased slightly to $5.3 million in 1995 from $5.4
million in 1994, it increased to 8.4% of revenue in 1995 compared to 7.5% of
revenue in 1994 due to the reduction in the number of owner-operator tractors,
whose fuel cost is included in rent and purchased transportation.

Operations and maintenance expense decreased to $10.6 million in 1995 from
$11.8 million in 1994, primarily due to a reduction in the number of
owner-operators. Operations and maintenance expense as a percentage of revenue
increased to 17.0% in 1995 from 16.3% in 1994, reflecting a higher proportion of
Puerto Rico revenue and its related cargo handling expense.

Taxes and licenses expense decreased to .9% of revenue during 1995 from
1.3% of revenue during 1994. This decrease was attributable to the reduction in
non-Puerto Rico revenue, which generally has a higher tax and license cost than
Puerto Rico revenue.

Insurance and claims expense decreased to 3.0% of revenue during 1995 from
3.1% of revenue during 1994. This decrease was attributable to the reduction in
non-Puerto Rico revenue, which generally has a higher insurance cost than Puerto
Rico revenue.

Communications and utilities expense decreased to 1.0% of revenue during
1995 from 1.2% during 1994. This decrease was attributable to the lower level of
non-Puerto Rico revenue, which generally requires more communication and
therefore has a higher communication cost than Puerto Rico revenue.

23
<PAGE> 25

Depreciation and amortization expense increased to $2.8 million, or 4.4% of
revenue, during 1995 from $2.6 million, or 3.7% of revenue, during 1994 as a
result of purchases of both tractor and trailer equipment and a reduction in
non-Puerto Rico revenue.

Other operating expenses increased to 4.8% of revenue in 1995 from 4.4% of
revenue in 1994 due to a non-recurring expense for the off-hire of equipment
utilized in domestic traffic lanes which were not complementary to Puerto Rico
traffic lanes.

The Company's operating ratio improved to 86.0% in 1995 from 91.4% during
1994 primarily as a result of elimination of non-Puerto Rico traffic lanes and
increase in Puerto Rico revenue.

Interest expense (net) decreased to $1.4 million, or 2.2% of revenue,
during 1995 from $1.8 million, or 2.5% of revenue, during 1994 due to reductions
in outstanding average balances (primarily amounts owed to an affiliate).

As a result of the factors described above, pro forma net income increased
86.1% to $4.4 million (7.0% of revenue) in 1995 from $2.3 million (3.2% of
revenue) during 1994.

LIQUIDITY AND CAPITAL RESOURCES

The growth of the Company's business has required significant investment in
revenue equipment that the Company historically has financed with charters,
borrowings under installment notes payable to commercial lending institutions
and equipment leases from third-party lessors. The Company's primary sources of
liquidity historically have been funds provided by operations, borrowings,
leases with financial institutions and financial support from an affiliate.

At March 31, 1997, working capital was negative $2.8 million, which
reflects $5.8 million due to an affiliate that will be repaid from the net
proceeds of the offering. The Company expects that in future years it will
continue to finance substantially all revenue equipment additions through
borrowing or leasing transactions. Management also expects that the offering and
its effect on the Company's capitalization will enable Trailer Bridge to finance
revenue equipment on more favorable terms than those obtained in the past. The
Company currently has a line of credit from a financial institution for up to
$7.1 million to fund the replacement of 125 tractors, the material terms of
which are described below. At March 31, 1997, approximately $1.1 million was
utilized under this line of credit, which is secured by the purchased tractors.
The interest rate on amounts outstanding under the line of credit is 1.40% above
the financial institution's three-year cost of funds in effect from time to time
(7.98% at March 31, 1997). The Company may elect different interest accrual
options for future borrowings under the line of credit (see Note 7 to the
Financial Statements). The Company had outstanding long-term debt, capitalized
lease obligations and due to affiliate (including current portions) of
approximately $15.2 million at March 31, 1997, most of which comprised
obligations for the purchase of revenue equipment. See Notes 6 and 7 to the
Financial Statements.

Net cash provided by operating activities was $7.2 million in 1996,
compared to $8.1 million in 1995. The difference between the Company's 1996 cash
flow and its $3.4 million in net income was primarily attributable to $3.0
million of depreciation, a $674,000 provision for bad debt and a $659,000
increase in payables. The Company's operating cash flow of $2.9 million during
the first quarter of 1997 reflects $690,000 of depreciation, a $620,000 decrease
in prepaid expenses, and a $590,000 increase in accrued liabilities, partially
offset by a $620,000 decrease in accounts payable.

Net cash used in investing activities was $9.5 million in 1996 compared to
$5.0 million in 1995. The Company's 1996 cash flow reflects $6.7 million of
capital expenditures and $3.2 million of repayments of debt to an affiliate. Net
cash used in investing activities of $1.2 million in the first quarter of 1997
reflects $2.5 million of capital expenditures, which was primarily attributable
to the down-payment on the Company's two new Triplestack Box Carriers(TM) as
well as the purchase of revenue equipment, and an increase in due to affiliate
of $1.2 million.

24
<PAGE> 26

Net cash provided by financing activities was $3.4 million in 1996,
compared to $4.5 million of net cash used in financing activities in 1995. The
Company's 1996 cash flow reflects increased borrowings to finance the Company's
capital expenditure program. Net cash used in financing activities of $1.0
million for the first quarter of 1997 reflects $1.2 million in dividends
partially offset by net additional borrowings under notes payable of $152,000.

The Company expects vessel and equipment purchases to total approximately
$32.3 million in 1997, of which $12.0 million will be used for new vessel
purchases, $13.2 million for related container and chassis equipment additions
and $7.1 million for replacement tractors. The Company's projected capital
expenditures for its new Triplestack Box Carriers(TM) have been funded with a
12.5% down-payment ($1.5 million) from working capital advanced by the Company's
affiliate and to be repaid out of the proceeds of this offering. The 87.5%
remaining balance will be funded from the $10.5 million escrowed proceeds of a
Title XI bond offering completed in June 1997. The Title XI bonds require equal
semi-annual sinking fund payments of $210,300 over a 25 year term and bear
interest at a rate of 7.07% per annum. The approximately $13.2 million in 53'
container and chassis equipment for the new vessels will be funded from the net
proceeds of this offering. See "Use of Proceeds." The Company's $7.1 million
tractor replacement program will be funded through the sale of used tractors and
the line of credit described above.

During 1997, the Company will complete the construction of a new office
building adjacent to its Jacksonville truck terminal that will centralize all
Jacksonville administrative personnel. The remaining cost of the office building
will be funded with escrowed proceeds from an existing mortgage and cash flows
from operations.

The Company has a pending application with the U.S. Maritime Administration
for a Title XI guaranty commitment to finance 87.5% of the construction costs of
an additional three Triplestack Box Carriers(TM) which the Company intends to
utilize in the coastwise traffic lanes. The required $2.2 million down payment,
which is expected to be funded in the third quarter of 1997, will be funded from
the net proceeds of this offering. The Company anticipates that, subsequent to
this offering, it will obtain a formal Title XI commitment from the U.S.
Maritime Administration similar to that obtained in connection with the first
two Triplestack Box Carriers(TM). Construction of those vessels will then
commence immediately under the Company's fixed-priced contract with Halter
Marine Group, Inc. The initial vessel is expected to be delivered seven months
after construction commences, with additional vessels to follow in two month
increments. Trailer Bridge intends to finance the approximately $17.7 million in
container and chassis equipment needed in 1998 for these three Triplestack Box
Carriers(TM) under existing proposals it has received from financial
institutions.

The Company utilizes tugs, terminals, office space, certain trailers and
miscellaneous equipment under a number of operating leases, some of which
include labor and other cost items. The minimum expected payment under all of
these operating leases is $16.1 million in 1997, including $7.6 million due an
affiliate for charter of existing vessels. The Company also expects to enter
into operating leases for additional miscellaneous equipment related to its
Triplestack Box Carriers(TM), including reacher-stacker lift trucks used in
cargo operations.

Management believes that available borrowings under the line of credit,
equipment financings, cash flow generated from operations and the net proceeds
of this offering will allow the Company to meet its working capital
requirements, anticipated capital expenditures and other obligations at least
through calendar 1998.

INFLATION

Inflation has had a minimal effect upon the Company's profitability in
recent years. Most of the Company's operating expenses are inflation-sensitive,
with inflation generally producing increased costs of operation. The Company
expects that inflation will affect its costs no more than it affects those of
other truckload and marine carriers.

25
<PAGE> 27

SEASONALITY

The Company's marine operations are subject to the seasonality of the
Puerto Rico freight market where shipments are generally reduced during the
first calendar quarter and increased during the fourth calendar quarter of each
year in anticipation of Christmas. This seasonality is expected to have a
greater impact on the Company when it increases its capacity with the addition
of two new Triplestack Box Carriers(TM). However, to date, the Company has not
been materially affected by such seasonality because its vessel capacity
utilization has been relatively high due to the Company's capacity limits prior
to the mid-body expansion program. The Company's over-the-road truckload
operation experiences some seasonal fluctuations in freight volume, as shipments
have historically decreased during the first calendar quarter. In addition, the
Company's operating expenses historically have been higher in the winter months
due to decreased fuel efficiency and increased maintenance costs in colder
weather. Moreover, the Company's quarterly operating revenue and net income may
continue to fluctuate due to the timing of changes in capacity and other
factors. Accordingly, results of operations are subject to fluctuation, and
results in any period should not be considered indicative of the results to be
expected for any future period.

The following table sets forth certain unaudited financial information for
the Company for each of the last nine quarters (in thousands except per share
amounts):

<TABLE>
<CAPTION>
1995 1996 1997
------------------------------------- ------------------------------------- -------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues............. $15,257 $15,832 $15,430 $16,012 $14,568 $14,274 $16,288 $18,018 $16,446
Operating income (loss)........ 2,097 2,537 1,790 2,354 966 (187) 1,331 2,315 1,748
Pro forma net income
(loss)(1).................... 1,039 1,254 841 1,226 443 (199) 636 1,193 909
</TABLE>

- ---------------

(1) See Note 3 to the Financial Statements.

26
<PAGE> 28

INDUSTRY OVERVIEW

Trailer Bridge currently operates in the full-load dry van segment of the
continental U.S. to Puerto Rico freight market and to a lesser degree in the
truckload segment of the domestic trucking industry. The Company also intends to
initiate integrated truckload and marine service between interior points along
the east coast of the continental U.S. which will compete primarily with
truckload and rail intermodal service in north-south traffic lanes. Management
is investigating a number of other potential markets in which the Company could
replicate its unique integrated service model.

The ocean freight market between the continental U.S. and Puerto Rico is
approximately an $800 million market and is currently estimated to consist of
approximately 310,000 loads per year. The market is unbalanced with more than
three times as much cargo moving to Puerto Rico from the continental U.S. as is
moving in the opposite direction. North-south freight flow imbalances result in
equipment imbalances at interior U.S. points and significantly lower rates for
inbound U.S. cargo compared to outbound U.S. cargo. Puerto Rico shippers select
carriers based primarily upon price. To a lesser extent, criteria such as
frequency, transit time, consistency, billing accuracy and claims experience are
considered.

Freight moving between the continental U.S. and Puerto Rico is primarily
carried via truck over the inland segment of the freight shipment and via ship
or barge over the marine segment. Most traditional ocean carriers in the Puerto
Rico trade use standard containerized freight systems, employing 20' and 40'
marine containers which for over-the-water shipment are carried on container
ships and for over-the-road shipment are placed on chassis and pulled by
conventional tractors. Ocean carriers generally provide motor carriage of
containers through independent contractors, hired on an as-needed basis.

As customers realized the cost benefits of consolidating more freight in a
single movement and federal and state governments eased restrictions on
equipment sizes, the prevailing standard trailer size in the domestic inland
truckload industry progressively increased to today's high capacity 53' long,
102" wide dry van trailer. By contrast, the capacity of freight containers used
by shipping companies has not progressively increased over the past 25 years due
to, among other reasons, the significant capital expenditures required to
reconfigure existing ships. Despite the trend of motor carriers toward more
efficient high-cube trailers, the ocean liner trade has retained the use of 20'
and 40' marine containers as the standard unit of containerized marine freight
capacity. Today, no major truckload motor carrier in the U.S. operates 40'
trailers.

The Company plans to be the first carrier to provide integrated truckload
and marine service between U.S. domestic coastwise points along the eastern
seaboard such as New York and Florida, utilizing high-cube 53' equipment. Based
on studies by Reebie Associates, an independent consultant, the Company believes
that the eastern domestic long-haul, north-to-south full load market is
approximately $3.8 billion per year. The Company will target its planned
coastwise service primarily at long-haul, price-sensitive domestic freight which
is currently moving on rail intermodal. The railroad movement of trailers and
containers on flatcars has rapidly grown into a $5.8 billion industry in recent
years, primarily due to the per mile linehaul cost advantage of rail intermodal
over comparable truckload rates on longer hauls. The Company's planned
integrated coastwise truckload and marine freight service is designed to take
further advantage of shippers' proven willingness to move from one mode of
transport to another to reduce distribution costs. Accordingly, the Company will
primarily compete with truckload and rail intermodal service on the basis of
price.

27
<PAGE> 29

BUSINESS

OVERVIEW

COMPETITIVE STRENGTHS

Management believes that the Company's principal competitive strengths are:

- Significant Operating Cost Advantage. Trailer Bridge believes that it is
the lowest cost provider of freight transportation between the continental
U.S. and Puerto Rico. Lower overall operating costs are achieved through
significantly higher equipment utilization and lower marine linehaul costs
than those of traditional ocean carriers. The Company's inland trucking
operation achieves higher equipment utilization and lower unit trucking
costs by using 48' and 53' high-cube trailers. This system provides
customers with over 50% more interior capacity than 40' marine containers
but with similar inland trucking costs. The Company's marine system uses
towed ocean-going barges instead of self propelled container ships to
deliver equivalent units of capacity at significantly lower capital and
operating costs. Barges are less complex and equipment intensive and
therefore can be acquired or built at lower costs per unit of capacity
than container ships. Furthermore, towed barge systems can be

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operated with lower per unit personnel and fuel costs due to the less
restrictive Coast Guard manning requirements and lower maximum speed of
ocean going tugs. Other components of the Company's low-cost operating
structure include Trailer Bridge's use of uniform, modern fleet equipment
to maximize utilization and flexibility and minimize operating costs, as
well as an emphasis on hiring and retaining qualified and reliable drivers
to reduce the costs of insurance, recruiting, fuel and maintenance.

- Domestic Truckload Operations. The Company believes that it is the only
carrier using its own fleet of tractors and high-cube dry van trailers to
provide transportation services between interior points in the continental
U.S. and Puerto Rico. By using high-cube equipment, the mainstay of the
domestic truckload industry, and a centralized dispatch system, the
Company can more effectively compete for and obtain domestic non-Puerto
Rico truckload freight while repositioning equipment for Puerto Rico
shipments. As a result, the Company believes that it operates with lower
empty miles and higher equipment utilization than its competitors in the
Puerto Rico trade. The Company believes that it is able to provide more
reliable and consistent service with a company-operated truckload fleet
than traditional ocean carriers generally provide using a variety of
smaller independent contractors.

- Centralized Operation in Strategic Location. Trailer Bridge operates a
centralized truckload operation from its headquarters in Jacksonville.
Because approximately 70% of the Company's truckload freight is dispatched
through Jacksonville on a regular schedule to meet weekly barge sailings
to Puerto Rico, the Company is able to purchase a large portion of its
fuel locally at favorable bulk rates and can schedule and perform routine
maintenance at the Company's terminal facilities at lower cost and with
minimal interruption to tractor dispatch efficiency. Regular truck routing
through Jacksonville also enables the Company to offer its drivers a more
routine schedule with more frequent stops at home, leading to higher
driver retention. Additionally, the Company's centralized Jacksonville
headquarters is also strategically located near key southern rail and
highway endpoints, connecting cities in the continental U.S. to Puerto
Rico and other Caribbean points.

- Emphasis on U.S. Domestic Ocean Trade. The Company concentrates its
marine operations in markets governed by the Jones Act. The Jones Act
prevents foreign-built or foreign-crewed vessels from competing in ocean
trade between ports in the U.S., including the non-contiguous areas of
Puerto Rico, Alaska, Hawaii and Guam. Although the Company believes that
its costs are competitive with those of foreign flagged carriers, it has
initially focused on Jones Act protected markets to take advantage of the
larger differential between its costs and the costs of other Jones Act
protected U.S. flag carriers. Furthermore, two of the largest carriers in
the Puerto Rico trade have agreed with the U.S. Maritime Administration to
certain restrictions on adding capacity in the Jones Act trades, including
their respective Puerto Rico services, as a condition to the receipt of
certain payments.

- Experienced Management Team. The Company's officers and directors have
extensive experience in the transportation industry, including an average
of over 15 years in the marine and trucking industries. All but one member
of the Company's management team have been with the Company since its
inception. The scope of management experience at Trailer Bridge is
well-balanced between both trucking and marine transportation. The
Company's Chief Executive Officer and President have been involved in
maritime trade for 19 and 26 years, respectively, and the Company's Vice
President of Sales has over 25 years of experience in the trucking
industry. The Company believes that the diverse skills of its management
team have permitted Trailer Bridge to conceive, implement and expand a
unique integrated transportation system that applies the best practices of
this country's cost-efficient truckload business to the marine sector.

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<PAGE> 31

GROWTH STRATEGY

The following are the key elements of the Company's growth strategy:

- Increased Market Share of Puerto Rico Market. Trailer Bridge plans to
increase the capacity of its Puerto Rico service by adding two Triplestack
Box Carriers(TM), which will increase the Company's overall capacity by
56% and allow the Company to increase its frequency of service to Puerto
Rico to two sailings per week from the current weekly service. Management
believes that the Company's lack of available capacity and its limited
service frequency have, to date, limited its volume of business with
certain existing customers and precluded other customers from utilizing
the Company's services. The Triplestack Box Carriers(TM) are designed
specifically to carry high capacity 53' containers, which the Company
believes are preferred by customers and will therefore increase demand for
its services. Added vessel capacity and frequency will also allow the
Company to pursue additional backhaul revenue opportunities and seek high
equipment utilization because of the more balanced availability of
trucking capacity.

- Initiation of Coastwise Service. Following its planned expansion of
Puerto Rico service, the Company intends to commence a twice-weekly New
York to Florida coastwise service utilizing three additional Triplestack
Box Carriers(TM). These vessels, combined with the Company's trucking
capabilities and expertise in operating an integrated system, are expected
to provide lower linehaul costs than typical intermodal truckload and rail
doublestack train service. This will in turn allow the Company to compete
effectively with truckload and rail intermodal carriers on the basis of
price. The Company believes the New York to Florida traffic lane is the
most attractive market in which to initiate its coastwise service but
believes there are numerous other coastwise traffic lanes (including Gulf
coast and West coast lanes) in which the Company can provide a more cost
efficient freight service for shippers. There can be no assurance that the
Company will be able to compete effectively with truckload and rail
intermodal carriers. The Company will not be able to match the delivery
times offered by many truckload carriers and may not be able to match the
delivery times of all rail intermodal carriers.

- Service to Other Jones Act and Offshore Markets. The freight markets
between the continental U.S. and points in Hawaii and Alaska are similar
in overall size to the Puerto Rico market and are served by traditional
marine carriers that do not utilize 48' or 53' conveyance units. The lack
of appropriate and available port facilities in Hawaii and Alaska acts as
a barrier to entry in those markets. However, the design and loading
requirements of the Company's Triplestack Box Carrier(TM) should allow the
Company to serve these and other new markets from waterfront sites that do
not require the traditional infrastructure investments associated with
port facilities. Additionally, the Company believes there are other
potential non-Jones Act markets such as the Dominican Republic and Mexico
where the Triplestack Box Carrier(TM) system could be quickly implemented
with minimal investment in port facilities. The Company has no current
plans to expand to any such markets.

- Capacity and Environmental Constraints on Other Modes. On a longer-term
basis, the Company believes that its planned coastwise service will
benefit from growing capacity constraints in both the rail and highway
systems. Management also believes that the Company's planned coastwise
service will be more environmentally attractive than the rail and truck
transport sectors, as it emits lower fuel emissions and operates at
greater distances from densely populated areas. Finally, the increasing
publicity attendant to train and truck accidents, particularly those
involving passenger automobiles, should offer an attractive political
environment for expansion of the Company's maritime service.

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<PAGE> 32

OPERATIONS

Trailer Bridge operates a fleet of 154 tractors and 1,937 high-cube
trailers which transport truckload freight between the Company's Jacksonville
port facility and inland points in the U.S. The Company also provides full
truckload service between interior points within the continental U.S., primarily
to increase equipment utilization, minimize empty miles and maximize revenue
while repositioning equipment to carry Puerto Rico bound freight. The Company
maintains a centralized dispatch and customer service operation at its
Jacksonville headquarters to schedule pickup and delivery of customer freight.
The operations center features a fully integrated computerized dispatch and
customer service network. Customer service representatives solicit and accept
freight, quote freight rates and serve as the primary contact with customers.
Dispatch and customer service personnel work together to coordinate Puerto Rico
and non-Puerto Rico freight to achieve the most optimum load balance and
minimize empty miles within the Company's truckload operation.

Trailer Bridge currently operates two 736' triple-deck, roll-on/roll-off
ocean-going barges chartered from an affiliate. See "Certain Transactions."
Loading of the barges is performed with small maneuverable yard tractors
operated by stevedores hired by an outside contractor. Once per week, the
Company's two barge vessels sail between San Juan and Jacksonville, one in each
direction. One vessel is scheduled to arrive in Jacksonville on Tuesday at 8:00
a.m. and depart on Thursday at 2:00 p.m., while the other vessel is scheduled to
arrive in San Juan on Wednesday at 6:00 a.m. and depart on Wednesday at 8:00
p.m. Each barge is towed at approximately 9 knots by one 8,000 horsepower
diesel-powered tug. The tugs are time-chartered and are manned by employees of
the unaffiliated tug owner. Compared to a self-propelled vessel, a towed barge
has reduced Coast Guard manning requirements and higher fuel efficiency.
Similarly, the large number of U.S. tugs available for charter provides the
Company with a reliable source for towing services.

MARKETING AND CUSTOMERS

The Company's sales and marketing function is led by senior management and
sales professionals based in Jacksonville, San Juan and other key strategic U.S.
cities. These sales personnel aggressively market Trailer Bridge to shippers as
a customer-oriented provider of value-priced and dependable service. The Company
targets major shippers with high volume, repetitive shipments whose freight
lends itself to integrated trucking and marine service.

The Company believes that price is the primary determinant in the freight
lanes in which it is involved. Nonetheless, the Company also believes that
Trailer Bridge has a competitive advantage through its ability to provide better
service that results from its single company control of the entire freight
movement over land and water. This service frees the customer from the
operational complexities of coordinating the interface between over-the-road and
marine service. The Company's customer service philosophy has generated
increasing demand from existing customers for additional equipment and sailings
and has led to ongoing relationships with customers such as Chrysler, General
Motors, K Mart, General Electric and DuPont.

The Company has a diversified customer base. Typical shipments to Puerto
Rico include furniture, consumer goods, toys, new and used cars and apparel.
Typical shipments from Puerto Rico include health products, electronics, shoes
and scrap aluminum. Management intends to continue the Company's efforts both to
increase business with existing customers and add new core carrier
relationships. The Company's top 5, 10, and 25 customers accounted for 15.8%,
22.9% and 35.2% of revenue, respectively, in 1996.

The Company has written contracts with the majority of its customers. These
contracts generally specify service standards and rates, eliminating the need
for negotiating the rate for individual shipments. Although a contract typically
runs for a specified term of at least one year, it generally may be terminated
by either party upon 30 days' notice. The penalties for a shipper for breach of
contract are minimal.

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<PAGE> 33

EXISTING AND PLANNED VESSELS

The Company's present vessels are 736' by 104' triple-deck roll-on/roll-off
barges chartered from an affiliate. Each deck has ten lanes which are accessed
from the stern of the vessel via ramp structures in Jacksonville and San Juan
that have been built specifically for the Company. Four lanes on each vessel
have been converted to carry new and used automobiles on car decks that allow
approximately 11 cars to fit in the space previously used for one 48' trailer.
The trailers are secured on the vessel by attachment to pullman stands which are
engaged and disengaged with specially configured yard tractors used to pull the
trailers into position on the vessel. The present vessels can be fully
discharged and re-loaded within one eight hour shift, although the Company
generally makes use of additional available slack time in Jacksonville to
schedule cargo activity over periods that will minimize total cost.

The two Triplestack Box Carriers(TM) to be used in the Puerto Rico traffic
lane are single deck barges. These 408' by 100' vessels are being built at
Halter Marine Group, Inc.'s Pearlington, Mississippi shipyard under fixed-priced
contracts which call for delivery of the first vessel in November 1997 and the
second vessel in January 1998. In the Puerto Rico service, the two Triplestack
Box Carriers(TM) are expected to achieve the scheduled service speed of 9 knots
with a 6,500 horsepower tug and attain tow speeds of approximately 11 knots with
larger tugs. These vessels will utilize the same port facilities as the existing
barge vessels. See "Business -- Port Facilities." Wheeled vehicles known as
reacher-stackers will carry and load the containers. These highly maneuverable
vehicles are currently used by railroads to load containers on rail cars for
intermodal transportation. The reacher-stackers are significantly less expensive
than the cranes typically required for loading and unloading containers from the
holds of large cargo ships and will instead directly access the deck of the
vessel via simple and movable linear ramps. The Company believes that the total
cargo handling cost per unit of the Triplestack Box Carriers(TM) in the Puerto
Rico traffic lane will be similar to that experienced with its present
roll-on/roll-off vessels. The Company intends to acquire three additional
Triplestack Box Carriers(TM) in 1998 to use in the coastwise traffic lanes as a
cost-efficient alternative to truckload and rail intermodal. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Growth
Strategy."

REVENUE EQUIPMENT

Trailer Bridge's equipment strategy is to operate modern tractors and
trailers in order to (i) reduce fuel, maintenance and parts costs, (ii) increase
reliability, and (iii) help attract and retain drivers. At March 31, 1997, the
Company had 154 tractors. The Company's practice is to trade or replace its
tractors on a 450,000-mile cycle which generally occurs during the fourth year.

Trailer Bridge has scheduled deliveries of approximately 75 new tractors
during the remainder of 1997 and 25 new tractors during 1998. After the planned
trade-in or sale during 1997 of all its model year 1993 tractors, the Company
will have a fleet of approximately 145 owned tractors with an average age of
nine months. Management anticipates that the Company's ongoing fleet upgrade
program will significantly decrease its maintenance, repair and parts expenses.
In addition, the Company has a fuel consumption incentive program for the
drivers, which is expected to improve the fuel consumption of its new fleet. All
of the new power units are conventional tractors (engine-forward) that are
preferred by drivers. These units include, among other amenities, a large
"condo" sleeper compartment with full standing room.

At March 31, 1997, the Company operated 1,937 dry van trailers, 1,772 of
which were 48' x 102" models and 165 of which were 53' x 102" models. The
Company's current practice is to trade or replace owned trailers on a seven-year
cycle and replace leased trailers with owned trailers as leases expire. Since
the trailers spend a significant amount of time on the Company's vessels and in
Puerto Rico, the Company's trailers incur less mileage per year than those used
by a typical truckload carrier. For instance, in 1996 the Company averaged
approximately 10,500 highway miles per trailer

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compared to approximately 50,000 miles per year averaged by typical domestic
truckload carriers. For this reason, the Company believes that its trailers have
a longer effective life despite the corrosive ocean environment encountered on
the vessels.

The Company has scheduled deliveries of approximately 850 new containers
during late 1997 and early 1998, all of which are 53' models that will be
utilized by the two new Triplestack Box Carriers(TM) to be deployed in the
Puerto Rico traffic lane. These containers are being built to the Company's
specifications and are similar to the 53' containers utilized on the most
efficient rail doublestack operation. The Company has also contracted to
purchase 550 new chassis units which will be utilized in combination with the
53' containers for over-the-road carriage. Under its fixed-price contract with a
large container manufacturer, Trailer Bridge has an option to increase its order
by up to 250 additional 53' container and chassis units.

The Company performs preventative maintenance on equipment at its
Jacksonville operations center, with major maintenance and repairs handled by
outside contractors.

DRIVER RECRUITING AND RETENTION

Trailer Bridge places great emphasis on driver satisfaction and has made
significant investments to improve its drivers' employment experience. The
Company offers competitive compensation and full health care benefits
differentiating it from many truckload operators. Management also promotes
driver retention by assigning drivers to a single dispatcher, regardless of
geographic area, awarding dedicated routes and offering more predictable home
time resulting from a central hub of operations. The Company believes its driver
turnover is well below that typically reported by other truckload carriers
despite an industry-wide driver shortage and vigorous competition for drivers
during the past several years.

In recent periods the Company has significantly reduced the number of
owner-operators in connection with its decision to decrease domestic truckload
business not related to Puerto Rico movements. At March 31, 1997, the Company
had only 13 owner-operators. Nevertheless, the Company intends to utilize the
flexibility of adding and removing owner-operators from its driver work force to
address driver and equipment needs in the future. The Company compensates owner-
operators as employees, affording them the same benefits as regular Company
drivers. Owner-operators receive a flat rate per mile to cover equipment costs,
fuel and maintenance.

FUEL AVAILABILITY AND COST

The Company actively manages its fuel costs by requiring drivers to fuel in
Jacksonville at an offsite fuel facility where the Company has established a
bulk purchasing arrangement. Whenever possible enroute, drivers are required to
fuel at truck stops and service centers with which the Company has established
volume purchasing arrangements. The Company offers fuel-conservation bonuses to
its drivers based on achieving miles per gallon goals.

Although the Company pays for the marine fuel used by the large tugs it
charters, the actual fuel loading is controlled by tug crew personnel employed
by the tug owner. The fuel is purchased and loaded in Jacksonville at a nearby
fuel facility during cargo loading operations. By negotiating directly with fuel
vendors and offering volume contracts for its marine fuel needs, the Company has
obtained better prices than it would have otherwise been able to attain.

Trailer Bridge does not engage in any fuel hedging activities. The Company
historically has been able to pass through most increases in fuel prices to
customers in the form of higher rates, although there can be no assurance that
this will continue in the future. See "Risk Factors -- Fuel Price Fluctuations."

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SAFETY AND INSURANCE

Trailer Bridge emphasizes safety in all aspects of its operations. The
Company maintains its own strict standards for recruiting drivers, including a
minimum of five years of verifiable commercial driving experience, a safe
driving history and a successful physical examination, including drug and
alcohol testing. Its ongoing driver safety program includes an initial
orientation for all new drivers, 100% log monitoring and strong adherence to all
speed and weight regulations.

The Company bids annually for both marine and land insurance policies.
Major coverages include hull and protection indemnity, pollution, excess
liability, marine cargo, truckers liability, workers' compensation and
commercial property. Management believes existing coverages are adequate to
cover reasonably anticipated claims. However, there can be no assurance that
premium levels will not increase or that coverage will be adequate in the
future. See "Risk Factors -- Claims Exposure and Insurance Costs."

TECHNOLOGY

The Company utilizes an IBM AS-400 computer system to handle its accounting
and operations requirements. The computer system links Company headquarters, the
truck operations center, the San Juan office and the marine terminals in
Jacksonville and San Juan. The system enhances the Company's operating
efficiency by providing cost effective access to detailed information concerning
available equipment, loads, shipment status and specific customer requirements,
and permits the Company to respond promptly and accurately to customer requests.

The Company's electronic data interchange ("EDI") capability allows
customers to tender loads, receive load confirmation, check load status and
receive billing information via computer. The Company's EDI system also is
designed to accelerate receivables collection. The Company's largest customers
require EDI service from their core carriers. Management believes that advanced
technology will be required by an increasing number of large shippers as they
reduce the number of carriers they use in favor of core carriers.

The Company believes that the open structure of the internet will replace
many of the traditional EDI functions and intends to expand its website
(www.trailerbridge.com) to accommodate such technology.

PROPERTIES

Trailer Bridge is headquartered in Jacksonville, Florida, where it is
completing construction of a 16,000 square foot office building adjacent to its
owned truck operations center. Upon completion in mid-1997, this facility will
centralize 75 Jacksonville personnel in one location. The new office building
has also been designed so that additions can be constructed to serve the
Company's future needs. The truck operations center property was purchased in
1996 and consists of 17.8 acres near Interstate 95, approximately 2 miles from
the Company's marine terminal on Blount Island. In addition to the new office
building, the property includes a 11,400 square foot tractor maintenance shop
where oil changes and light preventative maintenance are performed, a trailer
washing facility, a drivers lounge and parking space for tractors and trailers.
The Company believes that additional acreage contiguous to its truck operations
center will be available to accommodate future expansion.

The Company maintains small sales office facilities in Georgia, North
Carolina, Illinois, Ohio and New Jersey which are utilized by sales personnel.
The Company also rents a 2,600 square foot office in San Juan where 11 Puerto
Rico administrative and sales personnel are based.

PORT FACILITIES

The Company utilizes port facilities in Jacksonville and San Juan where its
vessels are loaded and freight is stored awaiting further movement by either
vessel or truck. Trailer Bridge's terminal in Jacksonville is located on Blount
Island and consists of a berthing area and 17 acres leased from the

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<PAGE> 36

Jacksonville Port Authority. The lease, which expires in 2002, allows the
Company to use the berthing area on a preferential, although non-exclusive,
basis and the land area on an exclusive basis. The Company pays the Jacksonville
Port Authority a monthly rental payment plus a wharfage payment based upon total
cargo volume. The Company's marine terminal in San Juan consists of a berthing
area and 31 acres that the Company utilizes on a preferential basis under a
stevedoring services agreement with the contractor who provides cargo handing
services. This agreement, which expires in 2006, calls for the Company to make
fixed payments as well as payments based upon total cargo volume and the
prevailing wharfage rates of the Puerto Rico Ports Authority.

Both of the present port facilities have been improved with triple-deck
floating ramp structures. These ramp facilities were built by the present vessel
owner and are included in the charter payments Trailer Bridge makes to such
affiliated owner. The new Triplestack Box Carriers(TM) will not need to utilize
the existing ramps but will instead be accessed from simple, movable ramps which
will be substantially smaller than the existing ramps used by the Company.
Trailer Bridge believes that its present marine terminals in Jacksonville and
Puerto Rico are sufficient to accommodate the expected growth from the
introduction of the two new vessels.

The Company's expansion into coastwise traffic lanes will require new port
facilities. Due to their shallow draft, relatively small overall size and
ability to load without significant shore-side ramp facilities or cranes,
Triplestack Box Carriers(TM) can be utilized at port facilities that would not
be appropriate for the Company's present vessels or for other similar-sized
vessels. These facilities include private sites that have not previously been
utilized for cargo operations. Trailer Bridge believes that it will be able to
find sufficient marine sites that lend themselves to the low-cost unloading and
loading operation it envisions for the Triplestack Box Carriers(TM) to be
deployed in the coastwise traffic lanes. The Company has identified several
suitable sites but has not reached any agreements or understandings regarding
their use.

COMPETITION

The Company currently competes with four carriers for freight moving
between the U.S. and Puerto Rico. The current operators in the Puerto Rico trade
are Navieras de Puerto Rico ("NPR"), Sea-Land Service, Inc., Crowley American
Transport, Sea-Barge Marine and Trailer Bridge. Based on available industry data
for the first quarter of 1997, NPR, which was purchased from the Puerto Rico
government in a leveraged buyout in 1995, has approximately 32% of the market
and operates five container vessels configured to carry primarily 40' marine
containers. Sea-Land Service, Inc., a subsidiary of CSX Corporation, has
approximately 24% of the market and operates five container vessels that also
carry mainly 40' containers. Crowley American Transport, a subsidiary of
privately held Crowley Maritime Corp., has approximately 30% of the market and
operates nine roll-on/roll-off barges in various services between the U.S. and
Puerto Rico. Although Crowley now uses some 48' trailers, its main equipment
size is 45' by 96" wide trailers. Sea Barge Marine has approximately 7% of the
market with four container barges that primarily carry 40' marine containers.

Puerto Rico shippers select carriers based primarily upon price. To a
lesser extent, criteria such as frequency, transit time, consistency, billing
accuracy and claims experience are considered. The Company faces vigorous price
competition from competitors in the Puerto Rico market, two of which are part of
larger transportation organizations that possess greater financial resources
than the Company. While the Company believes it is the lowest cost per unit
operator in the Puerto Rico traffic lane, it does not always offer the lowest
effective price as certain operators at times engage in a practice of freight
rate discounting.

The Company's planned coastwise service is expected to compete primarily
with large railroads that move intermodal freight and, to a lesser extent,
trucking companies. Intermodal freight service competes primarily on the basis
of price. Although trucking companies serving the same routes as the Company's
contemplated coastwise service typically target a customer base that requires
faster delivery times, such trucking companies also compete primarily on the
basis of price. Many of the

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Company's potential competitors are significantly larger and possess
substantially greater financial resources than the Company. The Company intends
to compete by offering customers value-based pricing derived from its lower
linehaul cost per unit. The Company will target customers with less time
sensitive-freight whose priority is reducing freight costs rather than obtaining
the shortest possible transit times.

The truckload segment of the trucking industry is highly competitive and
fragmented, and no carrier or group of carriers dominates the market. The
Company's non-Puerto Rico domestic truckload operations, which are used
primarily to balance its core Puerto Rico service, compete with a number of
trucking companies as well as private truck fleets used by shippers to transport
their own products. Truckload carriers compete primarily on the basis of price.
The Company's truck freight service also competes to a limited extent with rail
and rail-truck intermodal service, but the Company attempts to limit this
competition by seeking more time and service-sensitive freight. There are other
trucking companies, including diversified carriers with larger fleets,
possessing substantially greater financial resources and operating more
equipment than the Company.

REGULATION

As a common and contract motor carrier, the Company is regulated by the
Surface Transportation Board (the successor federal agency to the Interstate
Commerce Commission) and various state agencies. The Company's drivers,
including owner-operators, also must comply with the safety and fitness
regulations promulgated by the Department of Transportation, including those
relating to drug testing and hours of service. For routes in Canadian provinces,
the Company must comply with certain customs and border crossing requirements
and other Canadian regulations, none of which have a material effect on the
Company.

The Company's operations are subject to various federal, state and local
environmental laws and regulations, implemented principally by the Environmental
Protection Agency and similar state regulatory agencies. These regulations
govern the management of hazardous wastes, discharge of pollutants into the air,
surface and underground waters, and the disposal of certain substances.
Management is not aware of any water or land fuel spills or hazardous substance
contamination on its properties and believes that its operations are in material
compliance with current environmental laws and regulations.

The Company's marine operations are conducted in the U.S. domestic trade. A
set of federal laws known as the Jones Act requires that only U.S. built, owned
and crewed vessels move freight between ports in the U.S., including the
noncontiguous areas of Puerto Rico, Alaska, Hawaii and Guam. These marine
operations are subject to regulation by various federal agencies, including the
Surface Transportation Board, the U.S. Maritime Administration and the U.S.
Coast Guard. These regulatory authorities have broad powers governing activities
such as operational safety, tariff filings of freight rates, certain mergers,
contraband, environmental contamination and financial reporting. Management
believes that its operations are in material compliance with current marine laws
and regulations, but there can be no assurance that current regulatory
requirements will not change. See "Risk Factors -- Potential Loss of Jones Act
Protection."

EMPLOYEES

At March 31, 1997, Trailer Bridge had 244 employees, 140 of whom were
drivers. Management believes that its computerized operation and efficient work
force will permit significant fleet expansion without a corresponding increase
in the number of non-driver employees. Management believes it has a good
relationship with the Company's employees.

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LEGAL PROCEEDINGS

The Company from time to time is a party to litigation arising in the
ordinary course of its business, substantially all of which involves claims for
personal injury and property damage incurred in the transportation of freight.
The Company presently is not a party to any legal proceeding other than
litigation arising from vehicle accidents or cargo damage, and management is not
aware of any claims or threatened claims that reasonably would be expected to
exceed insurance limits or have a material adverse effect upon the Company's
operations or financial position.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The table below sets forth information concerning the Company's executive
officers and directors:

<TABLE>
<CAPTION>
NAME AGE POSITION(1)
---- --- -----------
<S> <C> <C>
Malcom P. McLean................................ 83 Director
John D. McCown(2)............................... 42 Chairman of the Board and Chief Executive
Officer
Ralph W. Heim................................... 51 President and Chief Operating Officer
Wayne Hodges.................................... 47 Vice President of Sales
J. Edward Morley................................ 49 Vice President of Operations
Mark A. Tanner.................................. 45 Vice President of Administration and Chief
Financial Officer
Robert van Dijk................................. 51 Vice President of Pricing
William G. Gotimer, Jr.......................... 38 Secretary and General Counsel
</TABLE>

- ---------------

(1) Directors are elected annually. Executive officers serve at the pleasure of
the Board of Directors.
(2) Will become a member of the Audit Committee upon the closing of the
offering.

Mr. McLean, a director since April 1991, is the founder and principal
stockholder of Trailer Bridge. His principal business activity during the past
five years has related to developing Trailer Bridge. He served as President from
June 1991 to July 1992 and from January 1995 to November 1995. Mr. McLean is a
pioneer in transportation who is responsible for a number of innovations in both
trucking and shipping and who is best known as the founder of container
shipping. He built McLean Trucking Company into one of the largest and most
profitable trucking companies in the U.S., where it was the first major user of
diesel engines in its tractors. In the mid-1950's, he purchased two steamship
companies which were combined to form Sea-Land Service, Inc. ("Sea-Land") which
introduced and developed container shipping. Following the sale of Sea-Land in
1968, Mr. McLean went on to found McLean Industries whose principal subsidiary,
U.S. Lines, became the largest container shipping company in the world. His
business accomplishments led to his induction in the Fortune Magazine Business
Hall of Fame, and he was referred to by a leading business magazine as "one of
the few men who changed the world."

Mr. McCown, a director since April 1991, has served as the Chairman of the
Board and non-employee Chief Executive Officer since November 1995. From July
1992 to November 1995, Mr. McCown was Vice President of the Company. In addition
to his role at Trailer Bridge, he is President and Chief Executive Officer of
Kadampanattu Corp., an affiliate of Trailer Bridge that owns the two vessels now
utilized by Trailer Bridge in its present Puerto Rico service. Mr. McCown has
worked for Malcom P. McLean in various capacities since 1980. Mr. McCown is a
graduate of Harvard Business School (MBA, 1980) and Louisiana State University
(BBA, 1975). Prior to joining McLean Industries in 1980, Mr. McCown worked at
U.S. Lines, a subsidiary of McLean Industries, and at National Bank of North
America as a corporate loan officer. Commencing with this offering, Mr. McCown
will become an employee of the Company and is expected to devote substantially
all of his working time to the Company. See "Risk Factors -- Dependence on Key
Personnel" and "Certain Transactions."

Mr. Heim has served as President since November 1995 and Chief Operating
Officer since January 1992. From May 1991 until November 1995, Mr. Heim served
as Vice President of the Company. Prior to joining Trailer Bridge in 1991, Mr.
Heim worked at Crowley Maritime Corporation for five years in various operating
capacities primarily related to its Puerto Rico service. His other
transportation experience includes more than 15 years with Sea-Land, Puerto Rico
Marine Manage-

38
<PAGE> 40

ment and U.S. Lines in diverse domestic and international assignments. Mr. Heim
graduated from Jacksonville University with a B.S. in Business Management.

Mr. Hodges has served as Vice President of Sales since November 1995. Prior
to joining Trailer Bridge in September 1995, he served as General Sales Manager
for M.S. Carriers, a major nationwide truckload carrier based in Memphis. Mr.
Hodges was that company's first salesman, beginning in 1982. Prior to his
association with M.S. Carriers, Mr. Hodges' trucking experience included
terminal manager positions at Mistletoe Express and United Parcel Service as
well as a branch manager position at a trailer sales dealer.

Mr. Morley has served as Vice President of Operations since July 1992 and
is responsible for marine and terminal operations. Prior to joining Trailer
Bridge in 1991, Mr. Morley was with Sea-Land where he was responsible for
operations in Puerto Rico from 1990 to 1991. Mr. Morley's overall transportation
experience with major container transportation companies spans over 25 years.

Mr. Tanner, a CPA, has served as Vice President of Administration and Chief
Financial Officer since January 1992. Mr. Tanner joined Trailer Bridge in 1991
from Crowley Maritime where he was Manager of Analysis and Statistics for four
years. His prior experience includes three years as Manager of Corporate
Planning for The Charter Company, which was a Jacksonville based $5 billion
publicly-held company, and five years in public accounting.

Mr. van Dijk has served as Vice President of Pricing since July 1992 and
directs all pricing related activities. Prior to joining Trailer Bridge in 1991,
Mr. van Dijk worked for Crowley Maritime, where he directed pricing for the
Puerto Rico service. Mr. van Dijk's pricing related experience includes over 30
years with American Transport, U.S. Lines, Weyerhauser Shipping, Sea-Land and
Holland America Lines.

Mr. Gotimer has served as non-employee General Counsel since 1991. Mr.
Gotimer also acts as legal counsel for Malcom P. McLean, including General
Counsel for Kadampanattu Corp. His previous experience includes legal counsel
with British Airways, Plc., Pan American World Airways and McLean Industries.
Mr. Gotimer has an LL.M. degree in Taxation from New York University School of
Law and both a JD and BS degree in accounting from St. John's University.
Commencing with this offering, Mr. Gotimer will become a part-time employee of
the Company. See "Certain Transactions."

Following completion of the offering, the Company intends to add two
independent directors to its Board. The Company has not yet chosen such
directors.

COMMITTEES

Following completion of the offering, the Board of Directors intends to
establish an Audit Committee comprised initially of John D. McCown and the
Company's two independent directors and a Compensation Committee comprised of
the Company's two independent directors. The Audit Committee will have
responsibility for reviewing audit plans and discussing audit work, internal
controls and related matters with the Company's independent public accountants,
reviewing the audit report and any accompanying recommendations, and nominating
independent public accountants to perform the annual audit. The Compensation
Committee will have responsibility for reviewing the compensation of the
Company's executive officers, making recommendations to the Board of Directors
and administering the Company's Incentive Stock Plan. See "Management --
Incentive Stock Plan."

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<PAGE> 41

EXECUTIVE COMPENSATION

The following table summarizes the compensation paid or accrued by the
Company, for services rendered during 1996, to the Company's Chief Executive
Officer and its other five most highly compensated executive officers:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
--------------------------- ---- -------- ------- ---------------
<S> <C> <C> <C> <C>
John D. McCown................................. 1996 $235,864(2) $37,311 $ --
Chairman and Chief Executive Officer
Ralph W. Heim.................................. 1996 154,904 64,446 7,625
President and Chief Operating Officer
J. Edward Morley............................... 1996 112,070 37,311 6,459
Vice President of Operations
Robert van Dijk................................ 1996 108,724 37,311 6,923
Vice President of Pricing
Mark A. Tanner................................. 1996 104,635 37,311 3,523
Vice President of Administration
and Chief Financial Officer
Wayne Hodges................................... 1996 104,183 37,311 3,707
Vice President of Sales
</TABLE>

- ---------------

(1) Consists of amounts contributed by the Company for the account of the named
executive under the Company's 401(k) plan and excess group term life
insurance premiums, respectively, as follows: Mr. Heim, $4,500 and $1,613;
Mr. Morley, $3,344 and $606; Mr. van Dijk, $3,523 and $965; Mr. Tanner,
$3,400 and $578; and Mr. Hodges, $3,125 and $582.
(2) In 1996 and prior years, Mr. McCown provided services to the Company in
connection with the Company's vessel charter from its affiliate,
Kadampanattu Corp. The amount shown as salary on the above table was paid by
the affiliate. Commencing with the closing of the offering, all of Mr.
McCown's compensation will be paid directly by the Company, and the
Company's charter payments will be reduced. See "Certain Transactions."

CASH BONUS PLAN

The Company has historically paid bonuses to employees from an overall
bonus pool equivalent to 10% of pretax income. Partial bonuses equal to one-half
of the expected amount are distributed on a cumulative quarterly basis, with the
final payment made based on audited annual results. The distribution to
individual employees is determined based on a point system which includes
approximately one-half of the Company's non-driver employees.

INCENTIVE STOCK PLAN

The Company's Board of Directors and stockholders have adopted an Incentive
Stock Plan designed to attract and retain employees and outside directors and
motivate them through incentives that are aligned with the Company's goals of
increased profitability and stockholder value. The Incentive Stock Plan, the
material terms of which are described below, is intended to afford the Company
wide discretion in making awards. Awards under the Incentive Stock Plan will be
made by the Compensation Committee of the Board of Directors, which will be
formed upon consummation of the offering and will be comprised solely of persons
who qualify as (i) "non-employee directors," as such term is used in Rule 16b-3
under the Securities Exchange Act of 1934, as amended, and (ii) "outside
directors" as defined under Section 162(m) of the Internal Revenue Code (the
"Code"). Awards may be in the form of incentive options or non-qualified
options. An employee who exercises an incentive option will not be required to
recognize taxable income (and the

40
<PAGE> 42

Company will not be entitled to a tax deduction) if the employee holds the
shares issued on exercise for the requisite holding period. By contrast, an
employee who exercises a non-qualified option will be required to recognize
taxable income on the date of exercise equal to the spread between the fair
market value of the underlying shares on the date of exercise and the exercise
price, and the Company will be entitled to a corresponding tax deduction.
Incentive options will be designed to comply with applicable provisions of the
Code, including a requirement that exercise prices be equal to at least 100% of
the fair market value of the Common Stock on the date of grant and a ten-year
restriction on the option term. Options for more than 235,500 shares may not be
awarded to any individual during any 12-month period.

The Company has reserved 785,000 shares of Common Stock for issuance
pursuant to the Incentive Stock Plan, and has awarded non-qualified options to
executives covering an aggregate of 392,500 shares at an exercise price equal to
the initial public offering price of the Common Stock, as follows: Mr. Heim,
137,375 shares; and Messrs. Hodges, Morley, Tanner, van Dijk and Gotimer, 51,025
shares each. Such options become exercisable at the rate of 20% per year
beginning on the first anniversary date of the offering. The Board of Directors
has granted nonqualified options to purchase 78,500 additional shares to 48
other employees at an exercise price equal to the initial public offering price.
Options that expire unexercised or are forfeited become available again for
issuance under the Incentive Stock Plan. Unvested options will become
exercisable in full upon a "change of control," as defined in the award
agreements. The Compensation Committee to be established after the offering may
determine when and in what amounts future awards vest and options become
exercisable. Terms of awards need not be the same for all participants. The
price payable upon exercise of an option may be satisfied in cash or, in the
Committee's discretion, with previously acquired shares of Common Stock.

401(K) PROFIT SHARING PLAN

The Company maintains a defined contribution plan (the "401(k) Plan"),
which is intended to satisfy the tax qualification requirements of the Code. All
Company personnel age 18 or older are eligible to participate in the 401(k) Plan
after one year of service with the Company. The 401(k) Plan permits participants
to contribute up to 15% of their annual compensation from the Company, subject
to the limit imposed by the Code. All amounts deferred under the 401(k) Plan by
a participant fully vest immediately. The 401(k) Plan provides for matching
contributions by the Company at a rate not in excess of 3.0% of compensation and
also permits discretionary contributions. The Company contributed $142,994 to
the 401(k) Plan in 1996. Amounts contributed by the Company vest 20% each year
from the second through the sixth year after contribution. The Company has no
defined benefit or actuarial plans.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Compensation Committee to be established following the
completion of the offering will be comprised of the Company's two independent
directors. Prior to the offering, Malcom P. McLean and John D. McCown made all
decisions concerning executive officer compensation. Mr. McLean is the sole
stockholder and Mr. McCown is the President and Chief Executive Officer of
Kadampanattu Corp., which charters the two vessels currently used by the
Company. See "Certain Transactions."

DIRECTORS' COMPENSATION

After this offering, each non-employee director will receive an annual
retainer of $5,000 and $1,000 for each meeting of the Board of Directors or
committee of the Board of Directors attended by such director (if such committee
meeting is held other than on the day of a Board meeting), plus reimbursement of
expenses incurred in attending such meetings.

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<PAGE> 43

CERTAIN TRANSACTIONS

The Company charters two roll-on/roll-off barge vessels and the right to
use related ramp structures in Jacksonville, Florida and San Juan, Puerto Rico
from Kadampanattu Corp. ("K Corp"), which is wholly owned by Malcom P. McLean,
the Company's founder, controlling stockholder and a director. The charters
currently provide for a per vessel payment to K Corp of $10,500 per day and also
require the Company to maintain and repair the vessels and ramps. The charters
expire at the later of September 1, 2010 or the repayment of all obligations
under K Corp's construction loan for the 1996 mid-body expansion program. Such
obligations are scheduled to be repaid in quarterly installments ending June 30,
2003. Upon the expiration of the charters, the Company has the option to extend
the charters for an additional eight years at $11,000 per day per vessel, or may
purchase the vessels at their then fair market value. Total expense under these
charters from K Corp was $3.6 million, $3.6 million and $5.9 million in 1994,
1995 and 1996, respectively. The charter payments were increased from $5,000 per
day per vessel in 1996 following completion of the mid-body expansion. In the
opinion of the Board of Directors, the terms of the charters are at least as
favorable as those that could be obtained from unaffiliated third parties.

K Corp has also provided the Company with the services of Messrs. McCown
and Gotimer pursuant to the charter arrangements and, accordingly, K Corp has
borne the entire salary expense attributable to such officers' services. See
"Management -- Executive Compensation." Effective with the offering, Mr. McCown
will become an employee of the Company, and the daily charter fee payable by the
Company will be reduced from $10,500 to $10,050 per vessel. In addition, the
Company has agreed to pay Mr. Gotimer an annual salary of $50,000 for his legal
services. The reduction in charter fees offsets the Company's compensation
expense for Messrs. McCown and Gotimer after the offering. Accordingly, giving
retroactive effect to these arrangements would not result in a pro forma
increase in the Company's expenses.

During 1991, 1992 and early 1993, K Corp advanced funds to the Company. K
Corp also agreed to defer receipt of certain charter payments due for 1992. The
advances were used by the Company to fund various construction projects and
general and administration expenses. The advances are represented by a
promissory note, which bears interest at 8% and is due on December 31, 1997 (the
"Note"). The highest outstanding principal balance on the Note during 1994, 1995
and 1996 was $15.4 million, $12.4 million and $7.8 million, respectively, and
the total outstanding principal balance at December 31, 1994, 1995 and 1996 was
$12.4 million, $7.8 million and $4.6 million, respectively. The 1996 amount also
reflects a credit of $1.7 million for substitute vessel costs paid by the
Company while the K Corp vessels were undergoing renovations as part of the
mid-body insertion project. In 1997, the Note was increased by $1.5 million to
reflect an advance made by K Corp to fund the Company's down payment on the two
Triplestack Box Carriers(TM). Approximately $6.2 million of the net proceeds of
the offering will be used to repay the Note in full, including accrued interest.
See "Use of Proceeds."

The Company has guaranteed the $26.5 million term loan obtained by K Corp
for the 1996 mid-body expansion of the vessels chartered to the Company. The
lender has agreed to release the Company from this guarantee and to subordinate
its rights to the Company's charter, contingent upon the Company increasing its
stockholders' equity by at least $20.0 million as a result of the offering. Such
loan is scheduled to be repaid in quarterly installments ending June 30, 2003
(currently $750,000 per quarter, increasing to $1,250,000 per quarter on June
30, 2001). The outstanding amount of the loan at March 31, 1997 was $24.2
million. The loan is also secured by a mortgage on K Corp's vessels and a lien
on the related ramp structures. The aggregate of the latest appraised values of
the vessels and related ramps that secure this indebtedness is $63 million.

The Company has long term debt arrangements and lease obligations which are
guaranteed by K Corp and which contain financial covenants that require the
Company and K Corp, on a combined basis, to maintain certain financial ratios
which are calculated as of the end of each fiscal quarter. The Company and K
Corp were in compliance with such covenants at March 31, 1997. The aggregate

42
<PAGE> 44

amount of such obligations guaranteed by K Corp at December 31, 1996 was $9.2
million. See Note 7 to the Financial Statements. The Company intends to seek
release of such guaranties contingent upon this offering.

The Company will continue a policy that any transactions with affiliated
persons or entities will be on terms no less favorable to the Company than those
that could have been obtained on an arms-length basis from unaffiliated third
parties. Any such future transactions must also be approved by a majority of the
disinterested directors.

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of the Common Stock as of the date of this Prospectus, and as adjusted
to reflect the sale of the shares of Common Stock offered hereby, by each person
known by the Company to beneficially own more than 5% of the outstanding shares
of Common Stock; each of the Company's directors and executive officers
identified in the Summary Compensation Table who beneficially owns any Common
Stock; and all directors and executive officers as a group. Unless otherwise
indicated, each of the stockholders has sole voting and investment power with
respect to the shares beneficially owned. The Company has two stockholders of
record at the date of this Prospectus.

<TABLE>
<CAPTION>
PERCENT
-----------------------
NUMBER BEFORE AFTER
NAME AND ADDRESS OF SHARES OFFERING OFFERING(1)
- ---------------- --------- -------- -----------
<S> <C> <C> <C>
Malcom P. McLean(2)..................................... 5,338,000 80.0% 56.9%
Clara L. McLean(2)...................................... 1,334,500 20.0 14.2
John D. McCown(2)....................................... 1,334,500(3) 20.0 14.2
All directors and executive officers as a group (8)
persons).............................................. 5,338,000 80.0 56.9
</TABLE>

- ---------------

(1) Excludes shares subject to options granted to executive officers under the
Company's Incentive Stock Plan which become exercisable 20% per year
beginning on the first anniversary date of the offering.
(2) The address of each of the individuals listed above is 500 Park Avenue, 5th
Floor, New York, NY 10022.
(3) Consists of shares subject to immediately exercisable options granted by
Malcom P. McLean to Mr. McCown in February 1994 and May 1997. The February
1994 options cover 392,500 shares with an exercise price of $.001 per share
and the May 1997 options cover 942,000 shares with an exercise price of $.95
per share.

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<PAGE> 45

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company is authorized to issue up to 20,000,000 shares of Common Stock,
$.01 value per share, and 1,000,000 shares of preferred stock, $.01 par value
per share. At the date of this Prospectus 6,672,500 shares of Common Stock and
no shares of preferred stock were issued and outstanding. All of the outstanding
Common Stock is, and the shares of Common Stock offered by the Company hereby
when issued and paid for will be, fully paid and non-assessable.

COMMON STOCK

Voting. Holders of Common Stock are entitled to one vote per share. All
actions submitted to a vote of stockholders are voted on by holders of Common
Stock voting together as a single class. Holders of Common Stock are not
entitled to cumulative voting in the election of directors.

Dividends. Holders of Common Stock are entitled to receive dividends
payable in cash or property other than Common Stock on an equal basis, if and
when such dividends are declared by the Board of Directors from funds legally
available, subject to any preference in favor of outstanding shares of preferred
stock, if any.

Liquidation. In the event of liquidation, holders of Common Stock
participate on a ratable basis in the net assets of the Company available for
distribution after payment or provision for liabilities of the Company and
payment of the liquidation preference, if any, on any outstanding shares of
preferred stock.

Other Terms. Holders of Common Stock are not entitled to preemptive rights
and the Common Stock is not subject to redemption.

The rights, preferences, and privileges of holders of Common Stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of preferred stock which the Company may designate and
issue in the future.

PREFERRED STOCK

The Board of Directors is authorized to issue, from time to time and
without approval of the stockholders, up to 1,000,000 shares of preferred stock
in one or more series. The Board of Directors may fix for each series (i) the
distinctive serial designation and number of shares of the series; (ii) the
voting powers and the right, if any, to elect a director or directors (and the
terms of office of any such directors); (iii) the dividend rights, if any; (iv)
the terms of redemption, and the amount of and provisions regarding any sinking
fund for the purchase or redemption thereof; (v) the liquidation preferences and
the amounts payable on dissolution or liquidation; (vi) the terms and conditions
under which shares of the series may or shall be converted into any other series
or class of stock or debt of the Company; and (vii) and any other terms or
provisions which the Board of Directors is legally authorized to fix or alter.

It is not possible to state the actual effect of the authorization of the
preferred stock upon the rights of holders of the Common Stock until the Board
determines the specific rights of the holders of any series of preferred stock.
Depending upon the rights granted to any series of preferred stock, issuance
thereof could adversely affect the voting power, liquidation rights, or other
rights of the holders of Common Stock or other preferred stock. The Board's
authority to issue shares of preferred stock provides a potential vehicle for
use in possible acquisitions and other corporate purposes, including in
connection with a stockholder rights plan. Any such issuance could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, control of the Company. The Company
has no present plans to issue any shares of preferred stock.

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<PAGE> 46

FOREIGN OWNERSHIP RESTRICTIONS

The Company's Certificate of Incorporation ("Certificate") (i) contains
provisions limiting the aggregate percentage ownership by Non-Citizens of the
Company's capital stock (including the Common Stock) to 24.99% of the
outstanding shares (the "Permitted Percentage"), and no more than the Permitted
Percentage of the voting power of the Company, to ensure that such foreign
ownership will not exceed the maximum percentage permitted by applicable federal
law (presently 25.0%); (ii) requires institution of a dual stock certificate
system to help determine such ownership, and (iii) permits the Board of
Directors to make such determinations as may reasonably be necessary to
ascertain such ownership and implement such limitations. These provisions are
intended to protect the Company's ability to operate its vessels in the U.S.
domestic trade governed by the Jones Act. The ability of the Company to so
operate is necessary to avoid default under certain of the Company's financings,
may enhance the Company's ability to incur additional debt, and may have other
effects upon the Company. See "Risk Factors -- Restriction on Foreign Ownership
and Possible Required Divestiture of Stock." The Certificate permits the Board
of Directors to revoke any or all of the foreign ownership restrictions
described herein if the Board, in its discretion, determines that compliance
with the citizenship requirements of the Jones Act, or any or all of such
restrictions, are not in the best interest of the Company.

To provide a method to enable the Company reasonably to determine stock
ownership by Non-Citizens, the Certificate requires the Company to institute
(and to implement through the transfer agent for the Common Stock) a dual stock
certificate system, pursuant to which certificates representing shares of Common
Stock will bear legends that designate such certificates as either "citizen" or
"non-citizen," depending on the citizenship of the owner. The Company may also
issue non-certificated shares through depositories if the Company determines
such depositories have established procedures that allow the Company to monitor
the ownership of Common Stock by Non-Citizens.

For purposes of the dual stock certificate system, a "Non-Citizen" is
defined as any person other than a Citizen, and a "Citizen" is defined as: (i)
any individual who is a citizen of the U.S. by birth, naturalization, or as
otherwise authorized by law; (ii) any corporation (a) organized under the laws
of the U.S., or a state, territory, district, or possession thereof, (b) of
which title to not less than 75% of its stock is beneficially owned by and
vested in Citizens, free from any trust or fiduciary obligation in favor of
Non-Citizens, (c) of which not less than 75% of the voting power is vested in
Citizens, free from any contract or understanding through which it is arranged
that such voting power may be exercised directly or indirectly on behalf of
Non-Citizens, (d) of which there are no other means by which control is
conferred upon or permitted to be exercised by Non-Citizens, (e) whose president
or chief executive officer, chairman of the board of directors and all officers
authorized to act in their absence or disability are Citizens, and (f) of which
more than 50% of that number of its directors necessary to constitute a quorum
are Citizens; (iii) any partnership (a) organized under the laws of the U.S., or
a state, territory, district, or possession thereof, (b) all general partners of
which are Citizens, and (c) of which not less than a 75% interest is
beneficially owned and controlled by, and vested in, Citizens, free and clear of
any trust or fiduciary obligation in favor of Non-Citizens; (iv) any association
(a) organized under the laws of the U.S., or a state, territory, district, or
possession thereof, (b) of which 100% of the members are Citizens, (c) whose
president, chief executive officer, or equivalent position, chairman of the
board of directors, or equivalent committee or body, and all persons authorized
to act in their absence or disability are Citizens, (d) of which not less than
75% of the voting power is beneficially owned by Citizens, free and clear of any
trust or fiduciary obligation in favor of Non-Citizens, and (e) of which more
than 50% of that number of its directors or equivalent persons necessary to
constitute a quorum are Citizens; (v) any limited liability company (a)
organized under the laws of the U.S., or a state, territory, district or
possession thereof, (b) of which not less than 75% of the membership interests
are beneficially owned by and vested in Citizens, free from any trust or
fiduciary obligation in favor of Non-Citizens, and the remaining membership
interests are beneficially owned by and vested in persons meeting the

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<PAGE> 47

requirements of 46 U.S.C. Sec. 12102 (a), (c) of which not less than 75% of the
voting power is vested in Citizens, free from any contract or understanding
through which it is arranged that such voting power may be exercised directly or
indirectly on behalf of Non-Citizens, (d) of which there are no other means by
which control is conferred upon or permitted to be exercised by Non-Citizens,
(e) whose president or other chief executive officer or equivalent position,
chairman of the board of directors or equivalent committee or body, managing
members (or equivalent), if any, and all persons authorized to act in their
absence or disability are citizens, free and clear of any trust or fiduciary
obligation in favor of any Non-Citizens, and (f) of which more than 50% of that
number of its directors or equivalent persons necessary to constitute a quorum
are Citizens; (vi) any joint venture, if not an association, corporation,
partnership, or limited liability company (a) organized under the laws of the
U.S., or a state, territory, district, or possession thereof, and (b) of which
100% of the equity is beneficially owned and vested in Citizens, free and clear
of any trust or fiduciary obligation in favor of any Non-Citizens; and (vii) any
trust (a) domiciled in and existing under the laws of the U.S., or a state,
territory, district, or possession thereof, (b) the trustee of which is a
Citizen, and (c) of which not less than a 75% interest is held for the benefit
of Citizens, free and clear of any trust or fiduciary obligation in favor of any
Non-Citizens; and (viii) any other entity not specifically listed above which
the Board of Directors reasonably determines is a "Citizen" consistent with the
foregoing definitions and the Jones Act. The foregoing definition is applicable
at all tiers of ownership and in both form and substance at each tier of
ownership. The Board of Directors is specifically authorized to make reasonable
determinations and interpretations of terms used in the Certificate in defining
a "Citizen" to assure compliance with the Jones Act in accordance with
applicable law and the Certificate. The Board of Directors also may, but is not
required to, exempt any person from classification as a "Non-Citizen" if the
Board determines, based on evidence it deems appropriate, that doing so would
not cause the Company to cease being in compliance with the Jones Act and
applicable law.

Shares of Common Stock are transferable to Citizens at any time and are
transferable to Non-Citizens if, at the time of such transfer, the transfer
would not increase the aggregate ownership by Non-Citizens, or the aggregate
voting power of Non-Citizens, above the Permitted Percentage in relation to the
total outstanding shares and the total voting power of the Company. Non-Citizen
certificates may be converted to Citizen certificates upon a showing,
satisfactory to the Company, that the holder is a Citizen. Any purported
transfer to Non-Citizens of shares or of an interest in shares of the Company
represented by a Citizen certificate in excess of the Permitted Percentage will
be ineffective as against the Company for all purposes (including for purposes
of voting, dividends, and any other distribution, upon liquidation or
otherwise). In addition, the shares may not be transferred on the books of the
Company, and the Company, whether or not such stock certificate is validly
issued, may refuse to recognize the holder thereof as a stockholder of the
Company except to the extent necessary to effect any remedy available to the
Company. Subject to the foregoing limitations, upon surrender of any stock
certificate for transfer, the transferee will receive citizen certificates or
non-citizen certificates, as applicable.

The Certificate establishes procedures with respect to the transfer of
shares to enforce the limitations referred to above and authorize the Board of
Directors to implement such procedures. The Board of Directors may take other
actions or make interpretations of the Company's foreign ownership policy as it
deems necessary in order to implement the policy. Pursuant to the procedures
established in the Certificate, as a condition precedent to each issuance and/or
transfer of stock certificates representing shares of Common Stock (including
the shares of Common Stock being sold in the offering), a citizenship
certificate may be required from all transferees (and from any recipient upon
original issuance) of Common Stock and, with respect to the beneficial owner of
the Common Stock being transferred, if the transferee (or the original
recipient) is acting as a fiduciary or nominee for such beneficial owner. The
registration of the transfer (or original issuance) will be denied upon refusal
to furnish such citizenship certificate, which must provide information about
the purported transferee's or beneficial owner's citizenship. Furthermore, as
part of the dual stock certificate system, depositories holding shares of the
Company's Common Stock will be required to

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<PAGE> 48

maintain separate accounts for "Citizen" and "Non-Citizen" shares. When the
beneficial ownership of such shares is transferred, the depositories'
participants will be required to advise such depositories as to the account in
which the transferred shares should be held. In addition, to the extent
necessary to enable the Company to determine the number of shares owned by
Non-Citizens, the Company may from time to time require record holders and
beneficial owners of shares of Common Stock to confirm their citizenship status
and may, in the discretion of the Board of Directors, temporarily withhold
dividends payable to, and deny voting rights to, any such record holder or
beneficial owner until confirmation of citizenship is received.

Should the Company (or its transfer agent for the Common Stock) become
aware that the ownership by Non-Citizens of Common Stock at any time exceeds the
Permitted Percentage (the "Excess Shares"), the Board of Directors is authorized
to withhold dividends and other distributions temporarily on the Excess Shares,
pending the transfer of such shares to a Citizen or the reduction in the
percentage of shares owned by Non-Citizens to or below the Permitted Percentage,
and to deny voting rights with respect to the Excess Shares. If dividends and
distributions are to be withheld, they will be set aside for the account of the
Excess Shares. At such time as such shares are transferred to a Citizen or the
ownership of such shares by Non-Citizens will not result in aggregate ownership
by Non-Citizens in excess of the Permitted Percentage, the dividends withheld
shall be paid to the then record holders of the related shares. Excess Shares
shall, so long as the excess exists, not be deemed to be outstanding for
purposes of determining the vote required on any matter brought before the
stockholders for a vote. The Certificate provides that the Board of Directors
has the power, in its reasonable discretion and based upon the records
maintained by the Company's transfer agent, to determine those shares of Common
Stock that constitute the Excess Shares. Such determination will be made by
reference to the date or dates on which such shares were purchased by
Non-Citizens, starting with the most recent acquisition of shares by a
Non-Citizen and including, in reverse chronological order, all other
acquisitions of shares by Non-Citizens from and after the acquisition that first
caused the Permitted Percentage to be exceeded; provided that Excess Shares
resulting from a determination that a record holder or beneficial owner is no
longer a Citizen will be deemed to have been acquired as of the date of such
determination. To satisfy the Permitted Percentage described above, the
Certificate authorizes the Board of Directors, in its discretion, to redeem
(upon written notice) Excess Shares in order to reduce the aggregate ownership
by Non-Citizens to the Permitted Percentage. As long as the shares of Common
Stock offered hereby continue to be authorized for quotation on the Nasdaq
National Market, the redemption price will be the average of the closing sale
price of the shares (as reported by the Nasdaq National Market) during the 30
trading days next preceding the date of the notice of redemption. The redemption
price for Excess Shares will be payable in cash. In the event the Company is not
permitted by applicable law to make such redemption or the Board of Directors,
in its discretion, elects not to make such redemption, the Company may direct
the holder of Excess Shares to sell all such Excess Shares for cash in such
manner as the Board of Directors directs.

CERTAIN PROVISIONS OF CERTIFICATE AND BYLAWS

Provisions with Anti-Takeover Implications. Certain provisions of the
Company's Certificate and Bylaws deal with matters of corporate governance and
the rights of stockholders. Under the Company's Certificate, the Board of
Directors may issue shares of preferred stock and set the voting rights,
preferences, and other terms thereof. The Bylaws provide that a special meeting
of stockholders may be called only by the Chairman of the Board or a majority of
the directors. Such provisions could be deemed to have an anti-takeover effect
and discourage takeover attempts not first approved by the Board of Directors
(including takeovers which certain stockholders may deem to be in their best
interest). Any such discouraging effect upon takeover attempts could potentially
depress the market price of the Common Stock or inhibit temporary fluctuations
in the market price of the Common Stock that otherwise could result from actual
or rumored takeover attempts.

47
<PAGE> 49

Indemnification and Limitation of Liability. Under its Certificate, the
Company may indemnify, to the full extent permitted by Delaware law, its
directors, officers and employees who are a party, or are threatened to be made
a party, to an action or proceeding, by reason of the fact that the person
serves or served the Company as a director, officer or employee. The Company
also is authorized to purchase insurance and enter into indemnification
agreements whereby it agrees to otherwise grant broader indemnification rights.
The Company intends to enter into indemnification agreements with its executive
officers and directors and purchase directors' and officers' liability insurance
coverage on their behalf. The Certificate also eliminates the liability of
directors and officers to the Company or its stockholders for monetary damages
for breach of fiduciary duty except to the extent such exemption from liability
or limitation thereof is not permitted under applicable law. This provision does
not eliminate the duty of care or loyalty and, in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director continues to be
subject to liability for monetary damages for acts or omissions involving breach
of the duty of loyalty, acts or omissions not in good faith, intentional
misconduct, knowing violations of law, unlawful distributions and any
transaction from which the director derived an improper personal benefit. The
Company believes that these provisions of its Certificate and Bylaws are
necessary to attract and retain qualified persons as directors and officers.

DELAWARE BUSINESS COMBINATION STATUTE

Section 203 of the Delaware General Corporation Law ("Section 203")
provides that, subject to certain exceptions specified therein, an interested
stockholder of a Delaware corporation shall not engage in any business
combination with the corporation for a three-year period following the date that
such stockholder becomes an interested stockholder unless (i) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain shares), or
(iii) on or subsequent to such date, the business combination is approved by the
board of directors of the corporation and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder.
Except as otherwise specified in Section 203, an interested stockholder is
defined to include (x) any person that is the owner of 15% or more of the
outstanding voting stock of the corporation, or is an affiliate or associate of
the corporation, and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within three years immediately prior to the
relevant date, and (y) the affiliates and associates of any such person.

Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. The Certificate does not exclude the Company from the restrictions
imposed under Section 203. The provisions of Section 203 may encourage companies
interested in acquiring the Company to negotiate in advance with the Board of
Directors since the stockholder approval requirement would be avoided if a
majority of the directors then in office approve either the business combination
or the transaction which results in the stockholder becoming an interested
stockholder. Such provisions also may have the effect of preventing changes in
the management of the Company. It is possible that such provisions could make it
more difficult to accomplish transactions which stockholders may otherwise deem
to be in their best interests.

48
<PAGE> 50

TRANSFER AGENT AND REGISTRAR

BankBoston, N.A. will be the Transfer Agent and Registrar for the Common
Stock. The address of the Transfer Agent and Registrar is BankBoston, N.A., c/o
Boston EquiServe, Blue Hills Office Park, 150 Royall Street, Canton,
Massachusetts 02021, and its phone number is (617) 575-2000.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the offering, the Company will have 9,372,500 shares
outstanding. Of these shares, all 2,700,000 shares sold in the offering will be
freely transferable by persons, other than "affiliates" of the Company, without
further restriction under the Securities Act. The Company and all current
stockholders and executive officers have agreed not to offer, sell or otherwise
dispose of any shares of Common Stock owned (or in the case of the Company,
owned or issuable) by them for 180 days from the commencement of the offering
without the prior written consent of Alex. Brown & Sons Incorporated. Commencing
with the expiration of the 180-day period, the 6,672,500 shares of Common Stock
held by current stockholders of the Company will be eligible for sale without
registration in the public market, subject to Rule 144.

In general, Rule 144 provides that, subject to its provisions and other
applicable federal and state securities law requirements, any person (or persons
whose shares are aggregated), including any person who may be deemed an
"affiliate" as defined under the Securities Act, who has beneficially owned
shares for at least one year is entitled to sell, within any three-month period,
a number of shares that does not exceed the greater of (i) the average weekly
trading volume of the same class of securities during the four calendar weeks
preceding the filing of notice of the sale with the Securities and Exchange
Commission and (ii) 1% of the same class of securities then outstanding, subject
in each case to certain manner-of-sale provisions, notice requirements and the
availability of current information concerning the Company. A person who is not
deemed an "affiliate" of the Company and who has beneficially owned shares for
at least two years is entitled to sell shares under Rule 144 without regard to
the volume limitations and current public information, manner of sale and notice
requirements described above. Restricted shares will also be eligible for sale
to "qualified institutional buyers" pursuant to Rule 144A under the Securities
Act without regard to the volume limitations contained in Rule 144.

Prior to the offering, there has been no public market for the Common Stock
and no determination can be made as to the effect, if any, that the sale or
availability for sale of additional shares of the Common Stock will have on the
market price of the Common Stock prevailing from time to time. Nevertheless,
sales of substantial amounts of the shares in the public market could adversely
affect the market price of the Common Stock and could impair the Company's
ability to raise capital through sale of its equity securities.

The Company intends to file a registration statement under the Securities
Act to register shares of Common Stock reserved for issuance under its Incentive
Stock Plan, thus permitting the resale of such shares by non-affiliates in the
public market without restriction under the Securities Act. A total of 785,000
shares (including 471,000 shares subject to outstanding options) are reserved
for issuance under the Incentive Stock Plan.

49
<PAGE> 51

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representative,
Alex. Brown & Sons Incorporated, have severally agreed to purchase from the
Company the following respective numbers of shares of Common Stock at the
initial public offering price less the underwriting discounts and commissions
set forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated.............................

---------
Total....................................................... 2,700,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of the Common Stock offered hereby if any
of such shares are purchased.

The Company has been advised by the Representative of the Underwriters that
the Underwriters propose to offer the shares of Common Stock to the public at
the initial public offering price set forth on the cover page of this Prospectus
and to certain dealers at such price less a concession not in excess of
$ per share. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of $ per share to certain other dealers.
After the initial public offering, the offering price and other selling terms
may be changed by the Representative of the Underwriters.

The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to 405,000
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 405,000, and the Company will be obligated,
pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 2,700,000 shares are being offered.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.

In connection with the offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the offering than
they are committed to purchase from the Company, and in such case may purchase
Common Stock in the open market following completion of the offering to cover
all or a portion of such short position. The Underwriters may also cover all or
a portion of such short position, up to 405,000 shares, by exercising the
Underwriters' over-allotment option referred to above. The Representative, on
behalf of the Underwriters, may impose "penalty bids" under

50
<PAGE> 52

contractual arrangements with the Underwriters whereby it may reclaim from an
Underwriter (or dealer participating in the offering), for the account of the
other Underwriters, the selling concession with respect to the Common Stock that
is distributed in the offering but subsequently purchased for the account of the
Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of these
transactions described in this paragraph is required, and, if undertaken, they
may be discontinued at any time.

Stockholders and executive officers of the Company, holding in the
aggregate 6,672,500 shares of Common Stock, have agreed not to offer, sell or
otherwise dispose of any of such Common Stock for a period of 180 days after the
date of this Prospectus without the prior consent of the Representatives of the
Underwriters. See "Shares Eligible for Future Sale."

The Representative of the Underwriters has advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock will be determined by negotiation between the Company and the
Representative of the Underwriters. Among the factors to be considered in such
negotiations are prevailing market conditions, the results of operations of the
Company in recent periods, the history of and prospects for the Company's
business and the industry in which it competes, current market valuations of
publicly traded corporations that are comparable to the Company, an assessment
of the Company's management and other factors deemed relevant.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Foley & Lardner, Jacksonville, Florida. Certain legal
matters in connection with the offering are being passed upon for the
Underwriters by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., Miami,
Florida.

EXPERTS

The financial statements as of December 31, 1995 and 1996 and for each of
the three years in the period ended December 31, 1996 included in this
Prospectus and the related financial statement schedule included elsewhere in
the Registration Statement have been audited by Deloitte & Touche LLP,
independent auditors, as indicated in their reports appearing herein and
elsewhere in the Registration Statement, and have been so included herein in
reliance upon the reports of said firm given upon their authority as experts in
accounting and auditing.

51
<PAGE> 53

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which is part of the Registration Statement, does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain items of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock, reference is hereby made to the
Registration Statement and such exhibits and schedules filed as a part thereof,
which may be inspected, without charge, at the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC
20549, and at the regional offices of the Commission located at 7 World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of all or any
portion of the Registration Statement may be obtained from the Public Reference
Section of the Commission, upon payment of prescribed fees. The Commission also
maintains a Web site that contains reports, proxy and information statements and
other information regarding Registrants, including the Company, that file
electronically with the Commission. The address of such Web site is
http://www.sec.gov.

Statements contained in this Prospectus as to the content of any contract,
agreement, or other document referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract, agreement, or
document filed as an exhibit to the Registration Statement, each such statement
being qualified in its entirety by such reference.

52
<PAGE> 54

TRAILER BRIDGE, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Changes in Common Stockholders' Equity
(Deficit)................................................. F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE> 55

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Trailer Bridge, Inc.
Jacksonville, Florida

We have audited the accompanying balance sheets of Trailer Bridge, Inc. as
of December 31, 1995 and 1996, and the related statements of operations, common
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Trailer Bridge, Inc. as of December 31, 1995
and 1996, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.

Deloitte & Touche LLP

Jacksonville, Florida
February 28, 1997

(July 18, 1997 as to Note 11)

F-2
<PAGE> 56

TRAILER BRIDGE, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- MARCH 31, 1997
1995 1996 1997 PRO FORMA
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(NOTE 3)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ $ 498,328 $ 1,658,921 $ 2,246,206 $ 2,246,206
Trade receivables, less allowance for
doubtful accounts of $655,440,
$905,581 and $1,178,737........... 8,909,418 8,305,872 8,252,435 8,252,435
Prepaid expenses..................... 611,229 964,971 343,003 343,003
----------- ----------- ----------- -----------
Total current assets......... 10,018,975 10,929,764 10,841,644 10,841,644
----------- ----------- ----------- -----------
PROPERTY AND EQUIPMENT, net............ 8,851,225 12,512,130 14,348,862 14,348,862
GOODWILL, less accumulated amortization
of $170,984, $217,763 and $229,458... 997,958 951,179 939,484 939,484
OTHER ASSETS........................... 357,375 370,592 310,280 310,280
----------- ----------- ----------- -----------
TOTAL ASSETS................. $20,225,533 $24,763,665 $26,440,270 $26,440,270
=========== =========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................... $ 1,322,044 $ 1,981,421 $ 1,359,062 $ 1,359,062
Other accrued liabilities............ 2,489,555 2,635,099 3,225,631 9,225,631
Current portion of notes payable..... 2,677,870 3,117,069 2,865,326 2,865,326
Current portion of capital lease
obligations....................... 122,435 38,197 36,365 36,365
Unearned revenue..................... 278,898 223,627 299,881 299,881
Due to affiliate..................... 7,825,136 4,653,192 5,878,364 5,878,364
----------- ----------- ----------- -----------
Total current liabilities.... 14,715,938 12,648,605 13,664,629 19,664,629
NOTES PAYABLE, less current portion.... 2,836,425 5,909,072 6,312,977 6,312,977
CAPITAL LEASE OBLIGATIONS, less current
portion.............................. 161,444 149,077 149,077
----------- ----------- ----------- -----------
TOTAL LIABILITIES............ 17,552,363 18,719,121 20,126,683 26,126,683
----------- ----------- ----------- -----------
COMMITMENTS (Notes 5, 8 and 10)
STOCKHOLDERS' EQUITY (Note 11):
Preferred stock, $.01 par value,
1,000,000 shares authorized; no
shares issued or outstanding......
Common stock, $.01 par value,
20,000,000 shares authorized;
6,672,500 shares issued and
outstanding....................... 66,725 66,725 66,725 66,725
Additional paid-in capital........... (66,300) (66,300) (66,300) (66,300)
Retained earnings.................... 2,672,745 6,044,119 6,313,162 313,162
----------- ----------- ----------- -----------
Total stockholders' equity... 2,673,170 6,044,544 6,313,587 313,587
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY....... $20,225,533 $24,763,665 $26,440,270 $26,440,270
=========== =========== =========== ===========
</TABLE>

See notes to financial statements.

F-3
<PAGE> 57

TRAILER BRIDGE, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES.................. $72,192,336 $62,531,365 $63,148,218 $14,568,079 $16,446,066
OPERATING EXPENSES:
Salaries, wages and benefits...... 19,307,773 14,591,795 13,288,633 3,434,673.. 3,404,267
Rent and purchased transportation:
Related party................... 3,650,000 3,650,000 5,900,000 910,000 1,890,000
Other........................... 15,966,059 10,847,200 10,331,461 2,520,047 2,320,837
Fuel.............................. 5,426,143 5,255,979 5,883,378 1,468,256 1,557,433
Operating and maintenance
(exclusive of depreciation shown
separately below)............... 11,781,830 10,553,364 14,210,787 3,045,731 3,205,616
Taxes and licenses................ 960,781 588,565 455,407 138,263 156,237
Insurance and claims.............. 2,202,489 1,860,997 2,121,039 514,040 521,612
Communications and utilities...... 833,840 620,815 607,833 143,284 134,448
Depreciation and amortization..... 2,646,573 2,761,139 2,944,069 701,283 689,016
Other operating expenses.......... 3,241,356 3,023,161 2,981,104 726,751 818,701
----------- ----------- ----------- ----------- -----------
66,016,844 53,753,015 58,723,711 13,602,328 14,698,167
----------- ----------- ----------- ----------- -----------
OPERATING INCOME.................... 6,175,492 8,778,350 4,424,507 965,751 1,747,899
NONOPERATING INCOME (EXPENSE):
Interest expense, net:
Related party................... (1,159,702) (822,558) (457,743) (143,182) (91,400)
Other........................... (657,775) (539,554) (623,332) (103,627) (172,016)
Gain (loss) on sale of equipment,
net............................. 12,143 47,834 66,523 (9,173)
----------- ----------- ----------- ----------- -----------
(1,805,334) (1,314,278) (1,014,552) (255,982) (263,416)
----------- ----------- ----------- ----------- -----------
INCOME BEFORE PROVISION AND PRO
FORMA PROVISION FOR INCOME
TAXES............................. 4,370,158 7,464,072 3,409,955 709,769 1,484,483
PROVISION FOR INCOME TAXES.......... (11,859) (67,316) (38,581) (7,301) (29,690)
----------- ----------- ----------- ----------- -----------
NET INCOME BEFORE PRO FORMA
PROVISION FOR INCOME TAXES........ 4,358,299 7,396,756 3,371,374 702,468 1,454,793
PRO FORMA PROVISION FOR INCOME TAXES
(Note 3).......................... (2,015,594) (3,037,048) (1,298,442) (259,647) (545,530)
----------- ----------- ----------- ----------- -----------
PRO FORMA NET INCOME (Note 3)....... $ 2,342,705 $ 4,359,708 $ 2,072,932 $ 442,821 $ 909,263
=========== =========== =========== =========== ===========
PRO FORMA NET INCOME PER SHARE (Note
3)................................ $ 0.29 $ 0.13
=========== ===========
PRO FORMA WEIGHTED AVERAGE SHARES
OUTSTANDING....................... 7,172,500 7,172,500
=========== ===========
</TABLE>

See notes to financial statements.

F-4
<PAGE> 58

TRAILER BRIDGE, INC.

STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
(UNAUDITED) THREE MONTHS ENDED MARCH 31, 1997

<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS
--------------------- PAID-IN (ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT) TOTAL
---------- -------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993......... 7,850,000 $ 78,500 $(78,000) $(7,214,813) $(7,214,313)
Net income......................... 4,358,299 4,358,299
---------- -------- -------- ----------- -----------
BALANCE AT DECEMBER 31, 1994......... 7,850,000 78,500 (78,000) (2,856,514) (2,856,014)
Repurchase and retirement of
1,177,500 shares of common
stock........................... (1,177,500) (11,775) 11,700 (517,195) (517,270)
Cash dividends ($.20 per share).... (1,350,302) (1,350,302)
Net income......................... 7,396,756 7,396,756
---------- -------- -------- ----------- -----------
BALANCE AT DECEMBER 31, 1995......... 6,672,500 66,725 (66,300) 2,672,745 2,673,170
Net income......................... 3,371,374 3,371,374
---------- -------- -------- ----------- -----------
BALANCE AT DECEMBER 31, 1996......... 6,672,500 66,725 (66,300) 6,044,119 6,044,544
Cash dividends ($.18 per share)
(unaudited)..................... (1,185,750) (1,185,750)
Net income (unaudited)............. 1,454,793 1,454,793
---------- -------- -------- ----------- -----------
BALANCE AT MARCH 31, 1997
(UNAUDITED)........................ 6,672,500 $ 66,725 $(66,300) $ 6,313,162 $ 6,313,587
========== ======== ======== =========== ===========
</TABLE>

See notes to financial statements.

F-5
<PAGE> 59

TRAILER BRIDGE, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.................................... $ 4,358,299 $ 7,396,756 $ 3,371,374 $ 702,468 $ 1,454,793
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 2,646,572 2,761,139 2,944,069 701,283 689,016
Provision for uncollectible accounts........ 515,302 158,995 673,699 106,063 120,413
(Gain) loss on sale of equipment............ (12,143) (47,834) (66,523) 9,173
Change in assets and liabilities:
Decrease (increase) in trade
receivables............................. (904,486) (1,282,693) (70,153) 1,136,321 (66,976)
Decrease (increase) in prepaid expenses... 728,100 649,459 (353,742) (346,741) 621,968
Increase (decrease) in accounts payable... 284,066 (289,355) 659,377 131,411 (622,359)
Increase (decrease) in accrued
liabilities............................. 46,434 (1,125,571) 145,544 (242,844) 590,532
Increase (decrease) in unearned revenue... 137,618 (95,288) (55,271) 116,946 76,254
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities............................ 7,799,762 8,125,608 7,248,374 2,314,080 2,863,641
----------- ----------- ----------- ----------- -----------
INVESTING ACTIVITIES:
Increase (decrease) in due to affiliate....... (2,930,298) (4,617,442) (3,171,944) (1,725,996) 1,225,172
Purchases and construction of property and
equipment................................... (4,598,587) (1,430,179) (6,707,075) (43,862) (2,514,053)
Proceeds from the sale of equipment........... 320,609 1,031,000 426,462 7,150
(Increase) decrease in other assets........... (82,643) 7,080 (13,217) (25,336) 60,312
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities... (7,290,919) (5,009,541) (9,465,774) (1,788,044) (1,228,569)
----------- ----------- ----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from borrowings on notes payable..... 4,127,158 1,032,500 6,637,569 1,134,018
Payments on notes payable..................... (2,612,244) (3,410,552) (3,125,722) (626,815) (981,856)
Payments of dividends......................... (1,350,302) (1,185,750)
Payments for repurchase of stock.............. (517,270)
Payments on capital lease obligations......... (578,938) (318,484) (133,854) (24,127) (14,199)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities................................ 935,976 (4,564,108) 3,377,993 (650,942) (1,047,787)
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... 1,444,819 (1,448,041) 1,160,593 (124,906) 587,285
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD........................................ 501,550 1,946,369 498,328 498,328 1,658,921
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD........ $ 1,946,369 $ 498,328 $ 1,658,921 $ 373,422 $ 2,246,206
=========== =========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH
INVESTING AND FINANCING ACTIVITIES:
Amounts paid for state income taxes........... $ 5,154 $ 10,524 $ 68,035 $ 6,629
=========== =========== =========== ===========
Amounts paid for interest:
Related party............................... $ 1,142,955 $ 824,538 $ 457,151 $ 143,991
Other....................................... 680,646 632,549 652,554 111,851 $ 283,620
----------- ----------- ----------- ----------- -----------
$ 1,823,601 $ 1,457,087 $ 1,109,705 $ 255,842 $ 283,620
=========== =========== =========== =========== ===========
Equipment acquired under capital lease
agreements.................................. $ 211,060
===========
</TABLE>

See notes to financial statements.

F-6
<PAGE> 60

TRAILER BRIDGE, INC.

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
(UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 AND 1997

1. ORGANIZATION

Trailer Bridge, Inc. (the "Company") is a domestic trucking and marine
transportation company with contract and common carrier authority. Highway
transportation services are offered primarily in the continental United States,
while marine transportation is offered between Jacksonville, Florida and San
Juan, Puerto Rico.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents. For purposes of the statement of cash flows,
the Company considers all highly liquid securities with original maturities of
three months or less to be cash equivalents.

Fair Value of Financial Instruments. The carrying value of the Company's
financial instruments, which include capital lease obligations and notes
payable, approximate fair value based on the borrowing rates currently available
to the Company for capital leases and notes payable with similar terms and
maturities.

Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Allowance for Doubtful Accounts. The Company provides an allowance for
doubtful accounts on trade receivables based upon estimated collectibility and
collection experience.

Property and Equipment. Property and equipment are stated at cost less
accumulated depreciation. Property and equipment are depreciated on a
straight-line method based on the following estimated useful lives:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and structures.................................... 40
Office furniture and equipment.............................. 6-10
Freight equipment........................................... 4-12
Leasehold improvements...................................... 2-5
Equipment under capital leases.............................. 5
</TABLE>

Tires on revenue equipment purchased are capitalized as part of the
equipment cost and depreciated over the life of the vehicle. Replacement tires
are expensed when placed in service.

Leasehold improvements and equipment under capital leases are amortized
over the lesser of the estimated lives of the asset or the lease terms.
Maintenance and repairs which do not materially extend useful life and minor
replacements are charged to earnings as incurred.

Goodwill. Goodwill is being amortized on a straight-line basis over
twenty-five years.

Insurance. The Company is self-insured for employee medical coverage above
deductible amounts. Reinsurance is obtained to cover losses in excess of certain
limits. Provisions for losses are determined on the basis of claims reported and
an estimate of claims incurred but not reported.

Revenue Recognition. Common carrier operations revenue is recorded on the
percentage-of-completion basis and direct costs are expensed as incurred.

F-7
<PAGE> 61

TRAILER BRIDGE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Income Taxes. The Company is organized under Subchapter S of the Internal
Revenue Code for income tax purposes and therefore, all Federal and certain
state income taxes are the responsibility of the Company's stockholders. The
Company is subject to state income taxes in those states that do not recognize
Subchapter S elections. State income tax expense for 1994, 1995 and 1996 was not
significant due to the utilization of net operating loss carryforwards.

NEW ACCOUNTING STANDARDS

Effective January 1, 1996, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS No. 121)
which requires that long-lived assets and certain intangibles to be held and
used by the Company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of SFAS No. 121 did not have a material impact on the
Company.

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
No. 123). SFAS 123 establishes a fair value based method of accounting for
stock-based employee compensation plans; however, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic value
based method of accounting prescribed by Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees". Under the fair value
based method, compensation cost is measured at the grant date based on the value
of the award and is recognized over the service period, which is usually the
vesting period. The Company has elected to account for its employee stock
compensation plan under APB Opinion No. 25 with pro forma disclosures of net
earnings and earnings per share, as if the fair value based method of accounting
defined in SFAS No. 123 has been applied.

In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share." This Statement
establishes standards for computing and presenting earnings per share ("EPS")
and applies to all entities with publicly held common stock or potential common
stock. This Statement replaces the presentation of primary EPS and fully diluted
EPS with a presentation of basic EPS and diluted EPS, respectively. Basic EPS
excludes dilution and is computed by dividing earnings available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Similar to fully diluted EPS, diluted EPS reflects the potential
dilution of securities that could share in the earnings. This Statement is not
expected to have a material effect on the Company's reported EPS amounts. This
Statement is effective for the Company's financial statements for the year ended
December 31, 1997.

3. INTERIM AND PRO FORMA INFORMATION

Unaudited Interim Information. The financial information with respect to
the three-month periods ended March 31, 1996 and 1997 is unaudited. The results
of operations for the three-month period ended March 31, 1997 are not
necessarily indicative of the results to be expected for the full year. In the
opinion of management, such information contains all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
results of such periods.

Pro Forma Adjustments. The Company is organized under Subchapter S of the
Internal Revenue Code. The Company has not been subject to Federal income taxes
and state income tax expense has not been significant due to the utilization of
net operating loss carryforwards. Prior to the closing of the proposed public
offering, the Company will terminate its status as an S Corporation. The pro
forma adjustments reflect a provision for income taxes that would have been
incurred had the Company not been organized under Subchapter S of the Internal
Revenue Code.

F-8
<PAGE> 62

TRAILER BRIDGE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The effective rate differs from the Federal statutory rate of 34% due to state
income taxes (net of Federal income tax benefits), amortization of goodwill and
other nondeductible expenses and due to the utilization of the net operating
loss carryforwards of a business acquired in 1992. The pro forma statement of
operations data do not give effect to the one-time, non-cash charge of
approximately $650,000 in recognition of deferred income taxes resulting from
the termination of the Company's S Corporation status upon the effectiveness of
the Company's proposed stock offering.

Pro Forma Balance Sheet. The Company intends to declare a dividend payable
to existing stockholders in the aggregate amount of $6 million. Such dividend
will be paid with a portion of the net proceeds of the Company's proposed stock
offering. Upon completion of the proposed stock offering, the remaining retained
earnings will be reclassified to additional paid-in capital.

Pro Forma Net Income Per Share. Pro forma net income per share reflects a
15,700-for-1 stock split that will become effective in connection with the
proposed stock offering and the issuance of 500,000 shares of common stock to
fund the payment of a $6.0 million S Corporation dividend to the Company's
existing stockholders with a portion of the net proceeds of this offering.

Supplementary Pro Forma Net Income Per Share. The Company expects to use a
portion of the proceeds from its initial public offering to repay amounts due to
affiliate. Pro forma net income per share adjusted for the interest savings and
the issuance of approximately 652,000 shares of Common Stock to fund the
repayment, assuming the issuance and repayment had occurred on January 1, 1996
would have been $0.30 and $0.12 for the year ended December 31, 1996 and the
three months ended March 31, 1997, respectively.

4. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Land........................................ $ $ 504,703 $ 504,703
Construction in progress.................... 90,512 1,601,450
Buildings and structures.................... 89,005 1,137,127 1,137,127
Office furniture and equipment.............. 1,088,937 1,058,381 1,060,269
Freight equipment........................... 12,444,515 16,726,428 16,507,080
Leasehold improvements...................... 716,347 712,798 712,799
Equipment under capital leases.............. 365,540 536,495 536,495
Less accumulated depreciation and
amortization.............................. (5,853,119) (8,254,314) (7,711,061)
----------- ----------- -----------
Property and equipment, net................. $ 8,851,225 $12,512,130 $14,348,862
=========== =========== ===========
</TABLE>

Depreciation and amortization expense on property and equipment and
equipment under capital leases was $2,599,793, $2,714,360 and $2,897,290 in
1994, 1995 and 1996, respectively, and was $689,588 and $677,321 for the three
months ended March 31, 1996 and 1997, respectively.

F-9
<PAGE> 63

TRAILER BRIDGE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. TRANSACTIONS WITH AFFILIATED COMPANY

Due to Affiliate. Amounts due to affiliate include cash advanced to the
Company from an affiliated company to fund various construction projects,
general and administrative expenses, interest payable on such cash advances and
barge rent. The advances bear interest at 8% and are due on December 31, 1997.
The affiliated company has indicated that it is willing to extend the payment
date of such notes for another term of one year in the event that the Company is
unable to pay such amounts on December 31, 1997. Management of the Company
believes that such indebtedness will be repaid through a combination of cash
flows from future operations with such debt to be refinanced on a long-term
basis and from the proceeds of equity offerings.

Lease Agreements. The Company leases two roll-on/roll-off barge vessels
and a ramp system from an affiliate under operating lease agreements. For the
period from January 1, 1994 through May 10, 1996 for one vessel and through July
19, 1996, as to the other vessel, the lease payment was $5,000 per day for each
vessel. Upon completion of the renovations to the vessels during 1996 which
extended the barges from a length of approximately 500 feet to a length of
approximately 750 feet, the lease payments were increased to $10,500 per day for
each vessel. The leases expire at the later of September 1, 2010 or the
repayment of all obligations under an affiliate's construction loan related to
the vessel renovations, which payment has been guaranteed by the Company. Such
construction loan is scheduled to be repaid in quarterly installments ending
June 30, 2003. The leases provide the Company the option to extend the leases
through September 1, 2018 for total payments of $11,000 per vessel per day or,
alternatively, the Company may purchase the vessels at their then fair market
values. Total lease expense under these leases from affiliate totaled
$3,600,000, $3,600,000 and $5,900,000 in 1994, 1995 and 1996.

While the vessels were undergoing renovations, the Company leased barges
from a third party. In recognition of the $1,160,000 of additional barge rent
and $509,000 of other transitional expenses incurred in 1996 during the
renovation period, the affiliate agreed to reduce the charter rental due from
the Company by approximately $1,669,000.

Guarantee Agreement. The Company is the guarantor on an affiliated
company's construction loan for $26.5 million, and has pledged all assets to
secure this agreement. The loan is also collateralized by a mortgage on the
vessels and a lien on the related ramp structures which are owned by the
affiliate and leased to the Company.

6. CAPITAL LEASE OBLIGATIONS

Future minimum lease payments under capital leases as of December 31, 1996
are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C>
1997........................................................ $ 55,727
1998........................................................ 50,400
1999........................................................ 50,400
2000........................................................ 50,400
2001........................................................ 45,378
--------
Total minimum lease payments................................ 252,305
Interest portion............................................ (52,664)
--------
Present value of minimum lease payments..................... 199,641
Less current portion........................................ (38,197)
--------
$161,444
========
</TABLE>

F-10
<PAGE> 64

TRAILER BRIDGE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. LONG-TERM DEBT

Following is a summary of long-term debt:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996 MARCH 31,
---------- ---------- ----------
<S> <C> <C> <C>
Notes payable to finance company totaling
$4,957,569 maturing from June to October
2001; payable in 60 monthly installments of
principal and interest; interest at fixed
rates ranging from 8.867% to 9.290%;
collateralized by trailers with a carrying
value of $4,763,490 at December 31, 1996..... $4,626,830 $4,420,979
Note payable to bank totaling $1,680,000
maturing October 2006; payable in 120 monthly
installments of principal and interest;
interest at fixed rate of 7.95%;
collateralized by land, construction in
progress and buildings and structures with a
carrying value of $1,703,900 at December 31,
1996......................................... 1,652,000 1,610,000
Notes payable to bank totaling $6,333,512,
maturing November 1997 to July 1998; payable
in 48 monthly installments of principal and
interest; interest at variable or fixed rate
selected by the Company (7.125% at December
31, 1996); collateralized by tractors with a
carrying value of $2,775,799 at December 31,
1996......................................... $3,225,131 1,641,754 1,175,482
Notes payable to finance company totaling
$1,032,500 maturing June 2000; payable in 60
monthly installments of principal and
interest; interest at a rate of 3.5% above
LIBOR (8.875% at December 31, 1996);
collateralized by trailers with a carrying
value of $917,386 at December 31, 1996....... 894,834 681,800 630,364
Notes payable to finance company totaling
$3,068,796, maturing July to November 1997;
payable in 48 monthly installments of
principal and interest; interest at a rate of
3.75% above LIBOR (9.125% at December 31,
1996); collateralized by tractors with a
carrying value of $772,975 at December 31,
1996......................................... 1,090,330 322,424 106,127
</TABLE>

F-11
<PAGE> 65

TRAILER BRIDGE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996 MARCH 31,
---------- ---------- ----------
<S> <C> <C> <C>
Unsecured notes payable due in 1997; interest
at prime plus 1% (9.25% at December 31,
1996); principal is payable in semiannual
installments................................. $ 304,000 $ 101,333 $ 101,333
Borrowings under $7.1 million line of credit
maturing April 1, 2000; payable in 35 monthly
installments of principal and interest plus a
final payment of $340,205 plus interest;
interest on outstanding borrowings at fixed
rate of 7.98%; collateralized by tractors
with a carrying value of $1,446,646 at March
31, 1997 (unaudited)......................... 1,134,018
---------- ---------- ----------
5,514,295 9,026,141 9,178,303
Less current portion........................... (2,677,870) (3,117,069) (2,865,326)
---------- ---------- ----------
$2,836,425 $5,909,072 $6,312,977
========== ========== ==========
</TABLE>

In March 1997, the Company obtained a $7.1 million line of credit from a
financial institution. At the election of the Company, interest on each
borrowing under the line of credit will accrue at (a) a variable interest rate
of the financial institution's Base Rate, (b) a variable interest rate of 1.40%
above the financial institution's Eurodollar Rate or (c) a fixed interest rate
of 1.40% above the financial institution's three year cost of funds. The line
will be used to purchase tractors which will be used as collateral.

All long-term debt agreements at 1995 and 1996 are guaranteed by an
affiliated company. The notes include financial covenants that require that the
Company and affiliate, on a combined basis, maintain certain financial ratios
which are calculated as of the end of each fiscal quarter. As of December 31,
1996, the Company and affiliate were in compliance with such covenants.

Following are maturities of long-term debt for each of the next five years:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C>
1997........................................................ $3,117,069
1998........................................................ 1,465,021
1999........................................................ 1,396,740
2000........................................................ 1,375,147
2001........................................................ 860,164
Thereafter.................................................. 812,000
----------
$9,026,141
==========
</TABLE>

F-12
<PAGE> 66

TRAILER BRIDGE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. OPERATING LEASES

The Company has various operating lease agreements, principally for its
office facilities, terminals and equipment. Certain of the leases contain
provisions calling for additional contingent rentals based on volume of
transportation activity.

Future minimum rental payments required under operating leases that have
initial or remaining noncancellable lease terms in excess of one year as of
December 31, 1996 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C>
1997........................................................ $16,095,651
1998........................................................ 8,070,107
1999........................................................ 3,051,030
2000........................................................ 1,823,277
2001........................................................ 1,789,768
Thereafter.................................................. 5,202,719
-----------
Total minimum payments required............................. $36,032,552
===========
</TABLE>

Lease expense for all operating leases, including leases with terms of less
than one year, was $10,330,913, $12,683,332 and $14,806,980 for 1994, 1995 and
1996.

9. PROFIT SHARING/401(K) PLAN

The Company has a profit sharing/401(k) Plan which covers substantially all
employees. Participants are allowed to make contributions of up to 15% of their
compensation not to exceed certain limits. The Company makes matching
contributions to the Plan at a rate not in excess of 3.0% of compensation. The
Company contributed approximately $137,640, $60,546 and $142,994 to the Plan
during 1994, 1995 and 1996. The Company made an optional contribution of $32,700
in December 1996.

10. COMMITMENT

At December 31, 1996, the Company is obligated under construction
agreements totaling approximately $1.7 million.

11. RECAPITALIZATION

In July 1997, the Company's Board of Directors and stockholders authorized
the following which will become effective in connection with the Company's
initial public offering: (i) a 15,700-for-1 stock split, (ii) an increase in the
authorized number of common shares from 2,000 to 20,000,000, (iii) a change in
the par value of common stock from $1.00 to $.01 and (iv) 1,000,000 shares of
preferred stock with a par value of $.01 per share. Stockholders' equity has
been restated to give retroactive recognition to the stock split and change in
par value in prior periods. In addition, all references in the financial
statements to the number of shares and per share amounts have been restated.

F-13
<PAGE> 67

TRAILER BRIDGE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

12. SUBSEQUENT EVENTS (UNAUDITED)

In January 1997, the Company entered into an agreement to purchase 100
tractors at an aggregate cost of approximately $7.2 million.

In March 1997, the Company entered into an agreement for the construction
of two vessels, known as Triplestack Box Carriers(TM), for a total cost of
approximately $12 million. The Company plans to finance approximately $10.5
million of the acquisition cost with the assistance of the sale of bonds with a
Title XI guaranty commitment issued by the U.S. Maritime Administration. The
Title XI bonds sold in June 1997 call for even semi-annual principal payments
over a 25 year term. In addition, the Company has contracted for the
construction of 53' containers and chassis units with an aggregate cost of
approximately $13 million.

On May 21, 1997, the majority stockholder of the Company granted to the
Company's Chairman and Chief Executive Officer, an option to purchase up to
942,000 shares of common stock (adjusted for the 15,700-for-1 stock split) owned
by him at $.95 per share or an aggregate price of $891,330 for all shares. These
options are immediately exercisable and have a term of 10 years. In connection
with this option, the Company expects to record a nonrecurring, noncash charge
for compensation expense and a credit to paid-in capital of approximately $10.4
million in the second quarter of 1997, representing the difference between the
exercise price and an assumed initial public offering price of the common stock
of $12.00 per share. This option does not involve the issuance of additional
shares of common stock by the Company and therefore, any subsequent purchase of
shares under the option will not have a dilutive effect on the Company's book
value or earnings per share amounts.

In June 1997, the Company entered into amendments to its leases of two
roll-on/roll-off barge vessels and ramp system. The amendment reduces the total
payments under the lease from $21,000 to $20,100 per day effective with this
offering.

In July 1997, the Company's Board of Directors and stockholders authorized
the establishment of an Incentive Stock Plan with a maximum of 785,000 shares
issuable under the Plan and the grant of options for 471,000 shares under the
Plan subject to consummation of the Company's initial public offering. These
options have an exercise price equal to the initial public offering price and
vest equally over a period of five years.

The Company is in the process of an initial public offering of its shares
of common stock.

F-14
<PAGE> 68

======================================================

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
S Corporation Status.................. 14
Use of Proceeds....................... 14
Dividend Policy....................... 14
Capitalization........................ 15
Dilution.............................. 16
Selected Financial and Operating
Data................................ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Industry Overview..................... 27
Business.............................. 28
Management............................ 38
Certain Transactions.................. 42
Principal Stockholders................ 43
Description of Capital Stock.......... 44
Shares Eligible for Future Sale....... 49
Underwriting.......................... 50
Legal Matters......................... 51
Experts............................... 51
Additional Information................ 52
</TABLE>

------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================

2,700,000 SHARES

Trailer Bridge Logo

TRAILER BRIDGE, INC.
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
ALEX. BROWN & SONS
INCORPORATED

, 1997
======================================================
<PAGE> 69

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............... $ 12,232
NASD filing fee............................................. 4,537
Nasdaq listing fee.......................................... 42,500*
Transfer agent expenses and fees............................ 2,500*
Printing and engraving...................................... 64,000*
Accountants' fees and expenses.............................. 100,000*
Legal fees and expenses..................................... 95,000*
Miscellaneous............................................... 11,231*
--------
Total............................................. $332,000*
========
</TABLE>

- ---------------

* Other than the SEC filing fee and NASD filing fee, all fees and expenses are
estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Delaware General Corporation Law (the "Delaware Act") permits a
Delaware corporation to indemnify a present or former director or officer of the
corporation (and certain other persons serving at the request of the corporation
in related capacities) for liabilities, including legal expenses, arising by
reason of service in such capacity if such person shall have acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and in any criminal proceeding if such person had
no reasonable cause to believe his conduct was unlawful. However, in the case of
actions brought by or in the right of the corporation, no indemnification may be
made with respect to any matter as to which such director or officer shall have
been adjudged liable, except in certain limited circumstances.

The Company's Amended and Restated Certificate of Incorporation and Amended
and Restated Bylaws provide that the Company may indemnify directors and
officers to the fullest extent now or hereafter permitted by the Delaware Act.
In addition, the Company intends to enter into Indemnification Agreements with
its directors and executive officers in which the Registrant will agree to
indemnify such persons to the fullest extent now or hereafter permitted by the
Delaware Act.

The indemnification provided by the Delaware General Corporation Law and
the Company's Amended and Restated Bylaws is not exclusive of any other rights
to which a director or officer may be entitled. The general effect of the
foregoing provisions may be to reduce the circumstances in which an officer or
director may be required to bear the economic burden of the foregoing
liabilities and expense.

The Company may obtain a liability insurance policy for its directors and
officers as permitted by the Delaware Act which may extend to, among other
things, liability arising under the Securities Act of 1933, as amended (the
"Securities Act").

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The Company was incorporated under the laws of the State of Delaware
effective April 1, 1991. The Company has not made any sales of securities during
the last three years.

II-1
<PAGE> 70

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

<TABLE>
<S> <C> <S>
**1.1 -- Form of Underwriting Agreement
**3.1 -- Form of Amended and Restated Certificate of Incorporation of
the Registrant
**3.2 -- Form of Amended and Restated Bylaws of the Registrant
**4.1 -- See Exhibits 3A and 3B for provisions of the Certificate of
Incorporation and Bylaws of the Registrant defining the
rights of holders of the Registrant's Common Stock
**5.1 -- Opinion of Foley & Lardner as to the legality of the
securities to be issued
10.1 -- Form of Indemnification Agreement with Directors and
Executive Officers
*10.2 -- Bareboat Charter Party dated February 1992
*10.2.1 -- Amendment to Bareboat Charter Party dated December 31, 1994
*10.2.2 -- Second Amendment to Bareboat Charter Party dated October
1995
*10.2.3 -- Third Amendment to Bareboat Charter Party dated March 1,
1997
10.2.4 -- Form of Fourth Amendment to Bareboat Charter Party
*10.3 -- Promissory Note dated January 1, 1997 payable to
Kadampanattu Corp. in the principal amount of $4,569,131
*10.4 -- Construction and Term Loan Agreement dated as of October 13,
1995 between the Registrant, Kadampanattu Corp. and The
First National Bank of Boston, as Agent
*10.4.1 -- First Amendment to Construction and Term Loan Agreement
dated as of May 9, 1996
*10.4.2 -- Second Amendment to Construction and Term Loan Agreement
dated as of July 10, 1996
**10.4.3 -- Third Amendment to Construction and Term Loan Agreement and
Consent and Limited Waiver dated as of January 1, 1997
*10.5 -- Chattel Mortgage Line of Credit Agreement dated as of
February 28, 1997
*10.6 -- Vessel Construction Contract dated as of December 30, 1996
between Coastal Ship, Inc. and Halter Marine, Inc.
*10.6.1 -- Assignment of Vessel Construction Contract dated March 24,
1997 between Coastal Ship, Inc. and the Registrant
*10.6.2 -- Amendment No. 1 to Vessel Construction Contract dated as of
April 1997
*10.7 -- Real Estate Promissory Note dated April 18, 1996 between the
Registrant and First Union National Bank of Florida
**10.8 -- Commitment to Guarantee Obligations
10.8.1 -- Trust Indenture
**10.8.2 -- United States Government Ship Financing Bond, 1997 Series in
the amount of $10,515,000
10.8.3 -- Title XI Reserve Fund and Financial Agreement
10.9 -- Agreement and Lease dated as of August 1, 1991 between the
Registrant and the Jacksonville Port Authority
10.9.1 -- Amendment #5 to Exhibit B, Schedule of Fees and Charges
10.11 -- Incentive Stock Plan
10.11.1 -- Form of Stock Option Award Agreement
23.1 -- Consent of Deloitte & Touche LLP
</TABLE>

II-2
<PAGE> 71
**23.2 -- Consent of Foley & Lardner (included in Opinion filed as
Exhibit 5)
*24.1 -- Powers of Attorney (included on signature page of the S-1
Registration Statement)
*27.1 -- Financial Data Schedule

- ---------------

* Filed May 30, 1997.
** Filed June 30, 1997.

(b) Financial Statement Schedules.

Report of Independent Auditors (including in Consent of Deloitte & Touche
LLP filed as Exhibit 23.1)

Schedule II -- Valuation and Qualifying Accounts.

All other financial statement schedules have been omitted either because
they are not applicable or because the information that would be included in
such schedules is included elsewhere in this Registration Statement.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 72

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amended Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, and
State of New York, on this 21st day of July 1997.

TRAILER BRIDGE, INC.

By: /s/ JOHN D. MCCOWN
------------------------------------
John D. McCown
Chairman of the Board and Chief
Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOHN D. MCCOWN Chairman of the Board and Chief
- ----------------------------------------------------- Executive Officer and Director
John D. McCown (Principal Executive Officer) July 21, 1997

/s/ MARK A. TANNER Vice President -- Administration
- ----------------------------------------------------- and Chief Financial Officer
Mark A. Tanner (Principal Financial and July 21, 1997
Accounting Officer)

/s/ MALCOM P. MCLEAN Director
- -----------------------------------------------------
Malcom P. McLean July 21, 1997
</TABLE>

II-4
<PAGE> 73

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGE
------- ----------------------- ------------
<C> <C> <S> <C>
**1.1 -- Form of Underwriting Agreement
**3.1 -- Form of Amended and Restated Certificate of Incorporation of
the Registrant
**3.2 -- Form of Amended and Restated Bylaws of the Registrant
**4.1 -- See Exhibits 3A and 3B for provisions of the Certificate of
Incorporation and Bylaws of the Registrant defining the
rights of holders of the Registrant's Common Stock
**5.1 -- Opinion of Foley & Lardner as to the legality of the
securities to be issued
10.1 -- Form of Indemnification Agreement with Directors and
Executive Officers
*10.2 -- Bareboat Charter Party dated February 1992
*10.2.1 -- Amendment to Bareboat Charter Party dated December 31, 1994
*10.2.2 -- Second Amendment to Bareboat Charter Party dated October
1995
*10.2.3 -- Third Amendment to Bareboat Charter Party dated March 1,
1997
10.2.4 -- Form of Fourth Amendment to Bareboat Charter Party
*10.3 -- Promissory Note dated January 1, 1997 payable to
Kadampanattu Corp. in the principal amount of $4,569,131
*10.4 -- Construction and Term Loan Agreement dated as of October 13,
1995 between the Registrant, Kadampanattu Corp. and The
First National Bank of Boston, as Agent
*10.4.1 -- First Amendment to Construction and Term Loan Agreement
dated as of May 9, 1996
*10.4.2 -- Second Amendment to Construction and Term Loan Agreement
dated as of July 10, 1996
**10.4.3 -- Third Amendment to Construction and Term Loan Agreement and
Consent and Limited Waiver dated as of January 1, 1997
*10.5 -- Chattel Mortgage Line of Credit Agreement dated as of
February 28, 1997
*10.6 -- Vessel Construction Contract dated as of December 30, 1996
between Coastal Ship, Inc. and Halter Marine, Inc.
*10.6.1 -- Assignment of Vessel Construction Contract dated March 24,
1997 between Coastal Ship, Inc. and the Registrant
*10.6.2 -- Amendment No. 1 to Vessel Construction Contract dated as of
April 1997
*10.7 -- Real Estate Promissory Note dated April 18, 1996 between the
Registrant and First Union National Bank of Florida
**10.8 -- Commitment to Guarantee Obligations
10.8.1 -- Trust Indenture
**10.8.2 -- United States Government Ship Financing Bond, 1997 Series in
the amount of $10,515,000
10.8.3 -- Title XI Reserve Fund and Financial Agreement
</TABLE>
S-1
<PAGE> 74
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGE
------- ----------------------- ------------
<C> <C> <S> <C>
10.9 -- Agreement and Lease dated as of August 1, 1991 between the
Registrant and the Jacksonville Port Authority
10.9.1 -- Amendment #5 to Exhibit B, Schedule of Fees and Charges
10.11 -- Incentive Stock Plan
10.11.1 -- Form of Stock Option Award Agreement
23.1 -- Consent of Deloitte & Touche LLP
**23.2 -- Consent of Foley & Lardner (included in Opinion filed as
Exhibit 5)
*24.1 -- Powers of Attorney (included on signature page of the S-1
Registration Statement)
*27.1 -- Financial Data Schedule
</TABLE>

- ---------------

* Filed May 30, 1997.
** Filed June 30, 1997.

S-2
<PAGE> 75

Sheet12

<TABLE>
<CAPTION>
TRAILER BRIDGE, INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1996

<S> <C> <C> <C> <C> <C>
BLANACE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND DEDUCTIONS END
OF YEAR EXPENSES (CHARGEOFFS) OF YEAR

Allowance 1994 $ 1,062,344 $ 515,302 $ (452,361) $ 1,125,285

1995 1,125,285 158,995 (628,840) 655,440

1996 655,440 673,699 (423,558) 905,581
</TABLE>

<PAGE> 1
EXHIBIT 10.1

DIRECTOR/OFFICER INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT is made as of the ______ day of
_________________, 1997, by and between TRAILER BRIDGE, INC., a Delaware
corporation (the "Corporation"), and ___________________ ("Director").

Background

The Corporation desires that Director serve as a member of the Board
of Directors. Director has indicated that he will be willing to serve in that
capacity set forth above, on the condition that he be indemnified as provided
in this Agreement. The Corporation also desires that Director serve as an
executive officer of the Corporation, and such service shall also be on the
condition that Director be indemnified as provided in this Agreement.

NOW, THEREFORE, in consideration of the premises and as an inducement
to Director to accept the positions described above as well as any other or
additional positions as may be mutually agreed upon by the Corporation and
Director, the Corporation hereby covenants and agrees with Director, as
follows:

1. Definitions. For purposes of this Agreement:

(a) "Delaware Act" means the Delaware General Corporation
Law, as amended.

(b) "Expenses" include all expenses actually and
reasonably incurred with respect to a Proceeding, including, without
limitation, fees, expenses and disbursements of attorneys, accountants,
financial consultants and other professionals.

(c) "Liabilities" includes obligations to pay a judgment,
settlement, penalty, fine or tax (including, without limitation, any
withholding or employment tax and any excise tax assessed with respect to the
Corporation, any Subsidiary, any employee benefit plan or any other enterprise
as to which Director is or was serving in an Official Capacity), together with
any obligation to pay interest thereon.

(d) "Proceeding" includes any threatened, asserted,
pending or completed claim, action, suit or other type of proceeding, whether
civil, criminal, administrative or investigative, whether formal or informal,
including, without limitation, any arbitration proceeding or other proceeding
for the resolution of any claim or dispute and any privately conducted
negotiations, and including, without limitation, any settlement, hearing, trial
or appeal of any of the foregoing.

(e) "Serving in an Official Capacity" includes (i)
serving as a director, officer or agent of the Corporation or any Subsidiary,
or (ii) serving at the request of the Corporation or any Subsidiary as a
director, officer or agent of another corporation, partnership, joint venture,
trust or other enterprise, including any employee benefit plan.

<PAGE> 2

(f) "Subsidiary" means any corporation or other entity
directly or indirectly controlled by the Corporation which now exists or may
hereafter be formed.

2. Statutory Indemnification. The Corporation hereby agrees to
indemnify and hold harmless Director to the fullest extent permitted or
required by the provisions of Section 145 of the Delaware Act or the laws of
the state of incorporation of any successor to the Company and to cause any
Subsidiary to indemnify and hold harmless Director to the fullest extent
permitted or required by the provisions of the laws of its jurisdiction of
incorporation against any Liability or Expense incurred by Director by reason
of the fact that Director is or was Serving in an Official Capacity. The
Corporation agrees that such obligation shall be to the fullest extent required
or permitted by any subsequent amendment to any of such provisions of the
Delaware Act or by any other applicable statutory provisions permitting or
requiring such indemnification which are adopted after the date of this
Agreement (but in the case of any amendment or subsequent statutory provisions,
only to the extent that such amendment or provisions permit or require broader
or more extensive indemnification rights than prior thereto).

3. Additional Indemnification. Subject only to the exclusions
set forth in this Section 3, the Corporation further agrees to indemnify and
hold harmless and to cause any Subsidiary to indemnify and hold harmless
Director against any and all Liabilities and Expenses incurred by Director in
connection with any Proceeding to which Director is or was a party or is
threatened to be made a party or in which Director is called to testify as a
witness or deponent by reason of the fact that Director is or was Serving in an
Official Capacity. Director shall not be entitled to any indemnification
pursuant to this Section 3 if a judgment or other final adjudication
establishes that any act or omission of Director was material to the cause of
action so adjudicated and that such act or omission constituted:

(a) A criminal violation, unless Director had reasonable
cause to believe this Director's conduct was lawful or had no reasonable cause
to believe that such conduct was unlawful;

(b) A transaction from which Director derived an improper
personal benefit;

(d) Willful misconduct or a conscious disregard for the
best interests of the Corporation (or any Subsidiary or any other enterprise as
to which Director is or was Serving in an Official Capacity).

4. Advance of Expenses. The Corporation shall advance or cause
any Subsidiary to advance Expenses incurred by Director in defending any
Proceeding for which Director may be entitled to indemnification hereunder,
provided that the Corporation or any Subsidiary shall not be required to
advance any sums for such Expenses if the Board of Directors of the Corporation
or the Board of Directors of any Subsidiary, as the case may be, makes a
preliminary good faith determination that Director ultimately will not be
entitled to

<PAGE> 3

indemnification hereunder (but no such preliminary determination by the Board
of Directors of any Subsidiary alone shall have any effect upon the obligations
of the Corporation under this Agreement). Director hereby agrees to repay any
such advances of Expenses made hereunder with respect to a matter if Director
is ultimately found not to be entitled to indemnification hereunder with
respect to such matter.

5. Obligations of Corporation and Subsidiary; Separate
Obligations. It is the intention of the parties that Director be entitled to
indemnification to the broadest possible extent allowed by law. Accordingly,
any ambiguity in this Agreement shall be construed in favor of indemnification.
Furthermore, in the event that a Liability or Expense would be indemnifiable
under the laws of more than one jurisdiction but the law of one would permit or
require broader indemnification than the other, Director shall be indemnified
pursuant to the law that will provide maximum indemnification. The obligations
of the Corporation under this Agreement are separate, independent and primary
obligations of the Corporation, and may be enforced directly against the
Corporation without any necessity for joining any Subsidiary or any other
enterprise as to which Director is or was Serving in an Official Capacity, for
recovering or seeking to enforce any judgment against any Subsidiary or such
other enterprise, or for otherwise seeking to recover from or out of the assets
of any Subsidiary or any such other enterprise, whether or not any Subsidiary
or any such other enterprise has assets sufficient for such recovery.

6. Notification of Defense of Claim. Promptly after receipt by
Director of the notice of the commencement of any Proceeding (including any
threat thereof) as to which Director may be entitled to indemnification
hereunder, Director shall notify the Corporation in writing of the commencement
thereof. Failure to so notify the Corporation shall not relieve the
Corporation from any obligation hereunder except to the extent that it may
suffer material prejudice by reason of such failure. With respect to any such
Proceeding as to which Director notifies the Corporation of the commencement
thereof:

(a) The Corporation shall be entitled to participate
therein at its own expense.

(b) Except as otherwise provided below, the Corporation
shall be entitled to assume the defense thereof on behalf of Director, with
counsel satisfactory to Director. Director shall have the right to employ
separate counsel in such Proceeding, and the fees, expenses and disbursements
of Director's own separate counsel incurred after written notice from the
Corporation to Director of its assumption of the defense thereof and after the
full assumption of such defense by counsel engaged by the Corporation and
satisfactory to Director, shall be the expense of Director except (i) if the
employment of counsel by Director has been authorized by the Corporation, or
(ii) if Director shall have reasonably concluded that there may be a conflict
of interest between Director and the Corporation with respect to the defense of
such action, or (iii) if any fees, expenses and disbursements of Director's
own separate counsel are incurred in connection with familiarizing or providing
assistance to counsel employed by the Corporation, in which case the fees,
expenses and disbursements of Director's own separate counsel shall be paid by
the Corporation. The Corporation shall not be entitled to assume the defense
of any

<PAGE> 4

Proceeding brought by or on behalf of the Corporation or as to which Director
shall have made the conclusion provided for in 6(b)(ii) above.

(c) The Corporation shall not be obligated to indemnify
Director under this Agreement for any amounts paid in settlement of any
Proceeding effected without its written consent. The Corporation shall not
settle any action or claim in any manner which would impose any penalty,
limitation, Liability or Expense on Director for which Director is not entitled
to indemnification hereunder, without Director's written consent.

7. Insurance. Nothing in this Agreement shall be deemed to
require indemnification of Director to the extent that insurance proceeds under
any policy or policies of insurance carried by the Corporation, any Subsidiary
or any affiliate of the Corporation are available to satisfy any Liability or
Expense incurred by Director by reason of the fact that Director is or was
Serving in an Official Capacity.

8. No Third Party Beneficiaries. This Agreement is not intended
for the benefit of and shall not create any rights in favor of any third
parties, it being the intent of the parties that this Agreement be solely for
the benefit of Director, Director's heirs and personal representatives, in the
event that Director incurs any Liability or Expense for which Director is
entitled to indemnification hereunder.

9. Miscellaneous. This Agreement shall continue in force during
the period that Director is Serving in an Official Capacity and shall continue
thereafter so long as Director shall be subject to any possible claim or
Proceeding by reason of the fact that Director was Serving in an Official
Capacity. Director shall be entitled to reimbursement from the Corporation for
the fees, expenses and disbursements of counsel reasonably incurred by Director
in enforcing Director's rights under this Agreement. In the event that any
provision of this Agreement is held to be void or unenforceable, the remaining
provisions shall not be affected thereby. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
personal representatives and successors. This Agreement is not assignable by
either party. No amendment or modification to this Agreement shall be
effective unless made in a writing signed by the party against whom enforcement
is sought.

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

TRAILER BRIDGE, INC.

By:
----------------------------------
Its:
------------------------------

-------------------------------------

<PAGE> 1
EXHIBIT 10.2.4

FOURTH AMENDMENT TO BAREBOAT CHARTER PARTY

THIS FOURTH AMENDMENT TO BAREBOAT CHARTER PARTY, made as of this
__ day of _______, 1997, (hereinafter referred to as the "Fourth Amendment")
by and between Kadampanattu Corp. (K Corp) and Trailer Bridge, Inc., (Trailer
Bridge).

WHEREAS, in February, 1992 K Corp and Trailer Bridge entered into two
(2) identical Bareboat Charter Party agreements for the vessels JAX-SAN JUAN
BRIDGE and SAN JUAN-JAX BRIDGE; and

WHEREAS, such Bareboat Charter Party agreements were extended each
year for an additional year; and

WHEREAS, in December, 1994 K Corp and Trailer Bridge entered into an
amendment to extend such Bareboat Charter Party agreements to March 1, 1997;
and

WHEREAS, in October, 1995 K Corp and Trailer Bridge entered into an
amendment to extend such Bareboat Charter Party agreements until the later of
March 1, 1997 and the date upon which the Construction and Term Loan Agreement
between K Corp and The First National Bank of Boston terminates and all Loans
and other obligations thereunder have been indefeasibly and irrevocably repaid
in full, in cash, and

WHEREAS, in March, 1997 K Corp and Trailer Bridge entered into an
amendment to extend such Bareboat Charter Party agreements to at least
September 1, 2010.

In consideration of the mutual covenants and agreements to be kept and
performed on the part of said parties hereto, respectively as herein stated, K
Corp and Trailer Bridge hereby agree as follows:

1. Amendment to section entitled "HIRE". The
section entitled "HIRE" of each Bareboat Charter Party is
hereby amended by deleting "at the rate of Ten Thousand Five
Hundred Dollars per day commencing on and from the day and
hour the vessel is redelivered in its modified state to the
Charterer" and replacing it with "Ten Thousand Fifty Dollars
per day".

Except, and solely to the extent that the same has been specifically
modified, amended or supplemented hereby, by this Third Amendment, all of the
terms and conditions of the Bareboat Charter Party shall continue in full force
and effect.

<PAGE> 2

IN WITNESS WHEREOF, K Corp. and Trailer Bridge have caused this Third
Amendment to be executed as of the date and year first above written.

KADAMPANATTU CORP.

------------------------------
By: John D. McCown
President

TRAILER BRIDGE, INC.

------------------------------
By: John D. McCown
Chairman

<PAGE> 1

EXHIBIT 10.8.1

_________________________________________________________

TRUST INDENTURE

Relating to United States Government Guaranteed
Ship Financing Obligations

Between

TRAILER BRIDGE, INC.

Shipowner

AND

STATE STREET BANK AND TRUST COMPANY

Indenture Trustee

Dated as of June 23, 1997

_________________________________________________________

TRUST INDENTURE

<PAGE> 2

Relating to United States Government Guaranteed
Ship Financing Obligations

Between

TRAILER BRIDGE, INC.

Shipowner

AND

STATE STREET BANK AND TRUST COMPANY

Indenture Trustee

Dated as of June 23, 1997

TABLE OF CONTENTS TO SPECIAL PROVISIONS OF THE INDENTURE 1

<TABLE>
<CAPTION>
Page
- ----
<S> <C> <C>
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE FIRST

Incorporation of General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE SECOND

The Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE THIRD

Certain Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

(a) Mandatory Sinking Fund Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) [Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Optional Redemptions of Bonds at Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
------------------
</TABLE>
1/ This Table of Contents is not a part of the Indenture and has no bearing
upon the interpretation of any of its terms and provisions.

<PAGE> 3

<TABLE>
ARTICLE FOURTH
<S> <C> <C>
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE FIFTH

Additions, Deletions and Amendments to Exhibit 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1
(a) Concerning Section 2.04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Concerning Section 2.12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Concerning Payment of the Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) Concerning Selection of Bonds to be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Concerning References to 3.09(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(f) Concerning Home Office Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(g) Concerning Section 7.02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(h) Concerning Section 10.01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(i) Concerning Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(j) Concerning Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(k) Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 and 11
</TABLE>

EXHIBITS TO TRUST INDENTURE

SCHEDULE A Schedule of Definitions to Trust Indenture

EXHIBIT 1 General Provisions of the Indenture
Incorporated by Reference

EXHIBIT 2 Forms of Bond, Guarantee and Trustee's
Authentication Certificate

EXHIBIT 3 Authorization Agreement

EXHIBIT 4 Form of Secretary Supplemental Indenture

<PAGE> 4

TRUST INDENTURE

SPECIAL PROVISIONS

THIS TRUST INDENTURE, dated as of June 23, 1997 (said Trust Indenture,
as the same may be amended, modified or supplemented from time to time as
permitted hereunder, herein called the "Indenture"), between (i)Trailer Bridge,
Inc., a Delaware corporation (herein called the "Shipowner"), and (ii) State
Street Bank and Trust Company, a Massachusetts trust company (said Bank, any
successor or assign hereunder, herein called the "Indenture Trustee").

RECITALS:

A. As provided in Article Fourth hereof, the terms defined in Schedule
A to this Indenture shall have the respective meanings stated in said Schedule;

B. The Shipowner has duly executed this Indenture, and duly authorized
the issuance hereunder of $10,515,000 aggregate principal amount of its bonds
pursuant to Section 2.03 of Exhibit 1 to this Indenture (herein together with
any bonds issued in respect thereof pursuant to Sections 2.09, 2.10, 2.12 and
3.10(b) of said Exhibit 1, called the "Bonds" or the "Obligations") designated
"United States Government Guaranteed Ship Financing Bonds, 1997 Series;" the
Obligations will bear interest at 7.07% per annum and mature on September 30,
2022;

C. The Obligations will be issued by the Shipowner to aid in the
financing of the cost of construction of two 408'9" x 100' container deck
barges;

D. Under the Authorization Agreement in the form set forth as Exhibit
3 hereto, the Secretary, on behalf of the United States, has agreed and will
agree to execute on each of the Obligations to be issued, a Guarantee of the
payment of the unpaid interest to the date of such payment on, and the unpaid
balance of the principal of, such Obligation under the provisions of Title XI
of the Act, and the Indenture Trustee is authorized to cause the Guarantees,
bearing the facsimile signature of the Secretary, and the facsimile seal of the
United States Department of Transportation, to be imprinted on the Obligations,
and to authenticate and deliver the Obligations and the Guarantees issued on
the Closing Date, such agreements and authorizations being subject to the
conditions set forth in the Authorization Agreement;

E. Pursuant to Section 1104(b)(5) of the Act, the Secretary has
determined that the

<PAGE> 5

interest to be borne by the Obligations (exclusive of charges for the guarantee
fee and service charges, if any) at the rate specified in the form thereof set
forth in Exhibit 2 hereto is reasonable; and

F. All actions necessary have been taken in order (1) to make the
Obligations, when executed by the Shipowner, authenticated by the Indenture
Trustee and issued under the Indenture, the valid, binding and legal
obligations of the Shipowner in accordance with their terms, (2) to make the
Guarantees to be endorsed on the Obligations, when executed by the Secretary,
authenticated by the Indenture Trustee and delivered under this Indenture, the
valid, binding and legal obligations of the United States in accordance with
their terms, and (3) to make this Indenture the valid, binding and legal
agreement of the parties hereto in accordance with its terms.

NOW THEREFORE, in consideration of the premises, of the mutual
covenants herein contained, of the purchase of the Obligations by the Holders
thereof, and of other good and valuable consideration, the receipt and adequacy
of which the parties hereby acknowledge, and for the equal and proportionate
benefit of all the present and future Holders of the Obligations, the parties
hereto agree as follows:

ARTICLE FIRST

INCORPORATION OF GENERAL PROVISIONS

This Indenture shall consist of two parts: the Special Provisions and
the General Provisions attached hereto as Exhibit 1, made a part of this
Indenture and incorporated herein by reference.

ARTICLE SECOND

THE BONDS

(a) The Bonds issued hereunder shall be designated "United States
Government Guaranteed Ship Financing Bonds, 1997 Series," and shall be in the
form of Exhibit 2 to this Indenture; and, the aggregate principal amount of
Bonds which may be issued under this Indenture shall not exceed $10,515,000
except as provided in Sections 2.09, 2.10, 2.12 and 3.10(b) of Exhibit 1
hereto.

(b) The Bonds shall be in the denominations of $1,000 or any integral
multiple thereof.

<PAGE> 6

office or agency for the purposes specified in Section 5.03 of Exhibit 1 to
this Indenture.

(d) The Indenture Trustee shall at the date of the Closing have its
Corporate Trust Office in the City of Boston, Commonwealth of Massachusetts.
(e) The Bonds shall mature on September 30, 2022.

ARTICLE THIRD

CERTAIN REDEMPTIONS

(a) Mandatory Sinking Fund Redemptions. The Bonds are subject to
redemption at a Redemption Price equal to 100% of the principal amount thereof,
together with interest accrued thereon to the applicable sinking fund
Redemption Date, through the operation of a mandatory sinking fund providing
for the semi-annual redemption on March 30 and September 30 of each year,
commencing March 30, 1998, of $210,300 principal amount of Bonds (or such
lesser principal amount of Bonds as shall then be outstanding), which amount
represents two percent (2%) of the Original Principal Amount of Obligations,
plus interest accrued thereon to the Redemption Date. On September 30, 2022
there shall become due and payable, and the Shipowner shall pay, the balance of
the unpaid principal amount of Bonds then outstanding, together with all
interest accrued thereon to such date.

Notwithstanding the foregoing provisions of this subsection (a), if
the principal amount of Outstanding Bonds shall be reduced by reason of any
redemption pursuant to Sections 3.04 or 3.05 of Exhibit 1 to this Indenture,
the principal amount of Bonds to be redeemed pursuant to this subsection (a) on
each subsequent mandatory sinking fund Redemption Date for such Bonds shall be
reduced by an amount equal to the principal amount of such Bonds retired by
reason of such redemption pursuant to Sections 3.04 or 3.05 of Exhibit 1 hereto
divided by the number of mandatory sinking fund Redemption Dates (including the
Stated Maturity of such Bonds) scheduled thereafter (subject to such increase
as shall be necessary so that the total principal amount of Bonds to be
redeemed on any such sinking fund redemption date shall be an integral multiple
of $1,000; provided that, the entire unpaid principal amount of the Outstanding
Bonds shall be paid not later than September 30, 2022. The Shipowner shall, in
accordance with Section 3.02(d) of Exhibit 1 hereto, promptly after each
redemption pursuant to said Section 3.04, furnish to the Secretary, the
Indenture Trustee and each Holder of an Obligation a revised table of sinking
fund payments reflecting the reductions made pursuant to this subsection (a) as
a result of such redemption.

In lieu of making all or any part of any such mandatory sinking fund
redemption of

<PAGE> 7

Bonds, the Shipowner may, at its option, with the prior written consent of the
Secretary, receive credit for Bonds not previously so credited or applied to
reduce the principal amount of Bonds Outstanding, (i) redeemed by the Shipowner
pursuant to the optional redemption provision provided for in subsection (c) of
this Article or purchased or acquired by the Shipowner (other than by
redemption) and delivered to the Indenture Trustee for cancellation pursuant to
Section 2.13 of Exhibit 1 hereto. The Bonds so credited or applied shall be
credited or applied, as the case may be, by the Indenture Trustee, at 100% of
the principal amount thereof. If the Shipowner shall elect to receive credit or
application as aforesaid in lieu of making all or part of any mandatory sinking
fund redemption, it shall deliver to the Indenture Trustee, at least 40 days
but not more than 60 days prior to the due date for such mandatory sinking fund
redemption, a Request (i) specifying the principal amount of Bonds so
optionally redeemed or otherwise acquired, and so to be credited or applied, as
the case may be, and (ii) stating that no such Bonds have theretofore been made
the basis of any such credit or application as aforesaid, and that none of such
Obligations are subject to the terms of any agreement or contract between the
Secretary, the Shipowner and/or any other person restricting the Shipowner's
right to apply any such Obligations as a credit pursuant to the terms of this
subsection (a), together with the Bonds (uncancelled) for which such credit or
application is so requested (unless such Bonds shall theretofore have been
delivered to the Indenture Trustee).

(b) [Reserved]

(c) Optional Redemptions of Bonds at Premium. At its option, the
Shipowner may redeem the Bonds, in whole at any time, at the redemption prices
as specified in the Bonds, together with interest accrued thereon to the date
fixed for redemption; provided that, no such redemption shall be made prior to
March 30, 2008, directly or indirectly with the proceeds of, or in anticipation
of, borrowing by or for the account of the Shipowner if such borrowing has an
effective interest cost (calculated in accordance with generally accepted
financial practice) of less than the rate of interest borne by the Bonds. If
the Shipowner shall elect to make any such optional redemption, the Shipowner
shall, at least 30 days but not more than 60 days prior to the date fixed for
redemption, deliver to the Indenture Trustee a Request stating that the
Shipowner intends to exercise its rights as above set forth to make such
optional redemption and specifying the Redemption Date, and the principal
amount of Bonds which the Shipowner intends to redeem on such date (which shall
not be less than all the Bonds outstanding). In the case of any redemption
pursuant to this subsection (c) prior to March 30, 2008, the Shipowner shall
deliver to the Indenture Trustee, at the time of delivery of said Request, an
Officer's Certificate stating that such redemption shall comply with the

<PAGE> 8

proviso relating to such redemption prior to such date.

ARTICLE FOURTH
DEFINITIONS

For all purposes of this Indenture, unless otherwise expressly
provided or unless the context otherwise requires:
(1) All references herein to Articles, Sections or
other subdivisions, unless otherwise specified, refer to the
corresponding Articles, Sections and other subdivisions of
this Indenture;

(2) The terms "hereof," "herein," "hereby," "hereto,"
"hereunder" and "herewith" refer to this Indenture;

(3) The terms used herein and defined in Schedule A
to this Indenture shall have the respective meanings stated in
said Schedule.

ARTICLE FIFTH

ADDITIONS, DELETIONS AND AMENDMENTS TO EXHIBIT 1

The following additions, deletions and amendments are hereby made to
Exhibit 1 to this Indenture.

(a) Concerning Section 2.04. The Shipowner and the Indenture Trustee
shall not enter into any Supplemental Indenture, and the Indenture Trustee
shall not enter into any supplement to the Authorization Agreement, pursuant to
Section 2.04 of Exhibit 1 to this Indenture, except to provide for the issuance
of additional Obligations of any series and Stated Maturity theretofore issued,
or of one or more additional series for the purpose of aiding in financing or
refinancing the construction, reconstruction or reconditioning of one or more
of the Vessels, or to refund Obligations issued for such purpose.

(b) Concerning Section 2.12. With respect to clause (1) of the proviso
to Section 2.12 of Exhibit 1 to the Indenture, a written agreement of indemnity
which is satisfactory in form and substance to the Secretary, the Shipowner,
and the Indenture Trustee, executed and delivered by an institutional Holder
having a combined capital and surplus of at least one hundred million dollars
($100,000,000) shall be considered sufficient indemnity to the

<PAGE> 9

Secretary, the Shipowner, and the Indenture Trustee in connection with the
execution, authentication and delivery of any new Obligations or the making of
any payment as contemplated by said Section 2.12.

(c) Concerning Payment of the Obligations. Notwithstanding anything to
the contrary in Exhibit 1 hereto, the Obligations to be issued hereunder shall
be payable as to principal, premium (if any), and interest, at an office or
agency maintained by the Shipowner for such purpose at the Corporate Trust
Office of the Indenture Trustee, or at the option of the Shipowner, as to
payments of principal, premium (if any), or interest by check mailed by such
Corporate Trust Office to the addresses of the Obligees as such addresses shall
appear in the Obligation Register, subject in any event to the provisions
hereof concerning home office payment. The Indenture Trustee agrees that within
30 days from the date of any payment of principal or interest when the same
shall become due and payable by reason of maturity or redemption, a Responsible
Officer in the Corporate Trust Office of the Indenture Trustee shall ascertain
to his satisfaction that checks in payment of such amounts have been mailed by
such Corporate Trust Office to the addresses of the Obligees as provided above,
if payment is to be made by check, or if payment is to be made by wire
transfer, or by credit to an account maintained by the Obligee with the
Indenture Trustee, that such funds have been wired or credited, or if payment
is to be made at the Corporate Trust Office, that funds were held by the
Indenture Trustee for such payment on the date the payment was due. The
Indenture Trustee shall have no obligation to determine whether such checks or
payments were received by the Obligees.

(d) Concerning Selection of Bonds to be Redeemed. Notwithstanding the
provisions of Section 3.07(b) of Exhibit 1 to this Indenture, (i) if less than
all the Bonds are to be optionally redeemed under any of the provisions
contained or referred to in Article Third hereof or Article III of Exhibit 1,
the Indenture Trustee shall select for redemption Bonds of the Stated Maturity
or Stated Maturities, and (ii) if less than all the Bonds of a particular
Stated Maturity are to be redeemed under any provisions contained or referred
to in Article Third hereof or Article III of Exhibit I to this Indenture, the
Indenture Trustee shall select the particular Bonds and/or portions ($1,000 or
any integral multiple thereof) of Bonds to be redeemed on the Redemption Date
by allocating the principal amount to be redeemed among the Holders of Bonds of
such Stated Maturity in proportion to the respective principal amount of Bonds
of such Stated Maturity registered in their respective names.

(e) Concerning Section 3.08(a). Section 3.08 (a) of Exhibit 1 is
amended by adding the following after the word "Register": "provided, however,
that the requirement in this Section 3.08(a) to include the Redemption Price in
such notice may be satisfied by stating (i)

<PAGE> 10

the principal amount of Obligations being redeemed, (ii) that the Shipowner is
obligated to pay such amount, together with accrued interest at the interest
rate borne by the Obligations to the Redemption Date and the Redemption
Premium, and (iii) that the Shipowner shall calculate the Redemption Premium
and furnish such calculation, together with a reasonably detailed summary
thereof, to the Indenture Trustee and each Holder not later than the second
Business Day preceding the Redemption Date."

(f) Concerning References to Section 3.09(b). All cross-references to
Section 3.09(b) made in Exhibit 1 hereto shall be deemed to refer to Section
3.10(b) of Exhibit 1 hereto.

(g) Concerning Home Office Payment. Notwithstanding any terms of this
Indenture or the Obligations to the contrary, the Shipowner may enter into an
agreement with any Holder of an Obligation providing for payment to such Holder
by certified or official bank check, or at the request of such Holder, by
credit to an account maintained by the Holder with the Indenture Trustee, or by
wire transfer of the principal of and the premium (if any), and interest on
such Obligation or any part thereof at a place other than the place or places
specified in such Obligation as the place for such payment, and for the making
of notation (if any), of such payment on such Obligation by such Holder, or by
an agent of the Shipowner or of the Indenture Trustee without presentation of
such Obligation. The Shipowner will furnish to the Indenture Trustee a copy of
each such agreement. The Indenture Trustee hereby consents to such agreement
contained in Section 7 of the Bond Purchase Agreement dated as of the Closing
Date, between the Shipowner and the Purchasers named in Schedule 1 thereto, and
hereby acknowledges receipt of a copy thereof.

(h) Concerning Section 7.02. The amount "$3,000,000" in Section 7.02
of Exhibit 1 hereto is hereby deleted, and there is substituted therefor the
amount "$100,000,000."

(i) Concerning Section 10.01. Paragraph (2) of Section 10.01 of
Exhibit 1 to this Indenture is deleted, and the following substituted in lieu
thereof:

"(2) to evidence the succession pursuant to Article VIII of
another corporation or entity to the Shipowner or any
assumption of all or a part of the Obligations pursuant to
Article VIII;"

(j) Concerning Notices. Subject to the provisions of Section 13.01 of
Exhibit 1 to this Indenture, any notice, request, demand, direction, consent,
waiver, approval or other communication to be given to a party hereto or the
Secretary, shall be deemed to have been sufficiently given or made when
addressed to:

<PAGE> 11

The Indenture Trustee as: State Street Bank and Trust Company
Corporate Trust Department
Two International Place
Boston, Massachusetts 02110

The Shipowner as: Trailer Bridge, Inc.
9550 Regency Square Boulevard
Jacksonville, Florida 32225
Attention: John McCown

The Secretary as: SECRETARY OF TRANSPORTATION
c/o Maritime Administrator
Department of Transportation
400 Seventh Street, SW
Washington, D.C. 20590

(k) Concerning Applicable Law. This Indenture and each Obligation
shall be governed by the laws of the State of New York, and to the extent
applicable, the federal laws of the United States.

(l) Execution in Counterparts. This Indenture may be executed in any
number of counterparts. All such counterparts shall be deemed to be originals,
and shall constitute but one and the same instrument.

<PAGE> 12

IN WITNESS WHEREOF, this Trust Indenture has been duly executed by the
parties hereto as of the day and year first above written.

TRAILER BRIDGE, INC.
Shipowner

[SEAL] By: John McCown
-----------

STATE STREET BANK AND TRUST
COMPANY
Indenture Trustee

By: Gerald R. Wheeler
-----------------
Vice President
[SEAL]

<PAGE> 13

STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )

On this 20 day of June, 1997 before me personally appeared John
McCown, who being by me duly sworn, did depose and say that he resides at 40
Radcliffe Drive, Woodstock, New York 12948; that he is Chairman of TRAILER
BRIDGE, INC., that he knows the seal of said Corporation; that the seal affixed
to said instrument is such corporation's seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed his
name thereto by like authority.

In testimony whereof, I have hereunto set my hand and seal this 20 day
of June, 1997.

William G. Gotimer, Jr.
-----------------------
NOTARY PUBLIC
State of New York
02604837705
Comm. Expires 7/31/97

(Notarial Stamp and Seal)

<PAGE> 14

COMMONWEALTH OF MASSACHUSETTS)
) SS:
COUNTY OF SUFFOLK )

Be it known this 17 day of June, 1997 personally appeared
before me Gerald R. Wheeler, who after being duly sworn, deposed and said that
he is a Vice President of STATE STREET BANK AND TRUST COMPANY, the
Massachusetts Trust Company which is described in and executed within the
instrument hereto annexed, that he/she knows the seal of said trust company,
that the seal affixed to said instrument is said trust company's seal, that it
was so affixed and that he/she signed the instrument hereto annexed by order of
the Board of Directors of the said STATE STREET BANK AND TRUST COMPANY, and
that he/she signed his/her name thereto by like authority, and acknowledged the
annexed instrument to be the free act and deed of the said STATE STREET BANK
AND TRUST COMPANY.

In testimony whereof, I have hereunto set my hand and seal this 17 day
of June, 1997.

Virginia F. Brady
-----------------
NOTARY PUBLIC

Virginia F. Brady
Notary Public
My Commission Expires June 20, 1997
(Notarial Stamp and Seal)

<PAGE> 15

EXHIBIT 1
GENERAL PROVISIONS OF THE INDENTURE
INCORPORATED BY REFERENCE
TABLE OF CONTENTS
TO
EXHIBIT 1*
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS; OFFICER'S CERTIFICATE AND OPINIONS OF
COUNSEL. 1
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Officer's Certificate and Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II. THE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.01. Designation of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.02. Issue, Form, Principal Amount, Maturity,
Interest, Place of Payment, Denominations,
and Redemption of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.03. Issuance of Obligations of
Initial Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.04. Additional Obligations;
Obligations of Additional Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.05. Legends on Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.06. Dates of Obligations; Interest Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.07. Execution of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.08. Authentication of Obligations and
Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.09. Temporary Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.10. Registration, Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.11. Who Treated as Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.12. Lost, Stolen, Destroyed or
Mutilated Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.13. Reacquired Obligations, Cancellation
and Disposition of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE III. REDEMPTION OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.01. Redemptions Suspended During Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

_________________
*This Table of Contents is not a part of the Indenture and has no bearing upon the interpretation of its terms and
provisions.
</TABLE>

<PAGE> 16

<TABLE>
<S> <C> <C>
SECTION 3.02. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Redemptions with Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Redemptions without Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Sinking Fund Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Adjustment of Redemption Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.03. Terminal Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.04. Redemptions to Comply with Provisions of
1104(b)(2) of the Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.05. Redemption After Total Loss, Requisition
of Title, Seizure or Forfeiture of
Vessel or Termination of Certain
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.06. Redemption After Assumption by the
Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.07. Determination of Obligations to be
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.08. Notices of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.09. Deposit of Redemption Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.10. Payment of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE IV. CASH HELD BY INDENTURE TRUSTEE OR PAYING AGENTSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.01. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.02. Paying Agents Other Than Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.03. Unclaimed Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.04. Application of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

ARTICLE V. REPRESENTATIONS AND AGREEMENTS OF SHIPOWNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.01. Authorization, Execution and
Delivery of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.02. Payment and Procedure for Payment of
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.03. Offices or Agencies of Shipowner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ARTICLE VI. INDENTURE DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.01. What Constitutes "Indenture Defaults" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.02. Demand for Payment of Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.03. Appointment of Indenture Trustee and
Holders of Outstanding Obligations as
Attorneys-in-Fact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.04. Termination and Payment of the Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.05. Rights of Indenture Trustee After
Indenture Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>

<PAGE> 17

<TABLE>
<S> <C>
SECTION 6.06. (a) Obligees' Right to Direct Indenture
Trustee After Indenture Default . . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) Limitations on Obligees Right to Sue . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Unconditional Right of Obligees to
Sue for Principal (and Premium, if
any) and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.07. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.08. Recision of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.09. Assumption of Obligations of Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ARTICLE VII. THE INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.01. Acceptance of Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.02. Eligibility of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.03. Rights and Duties of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.04. Compensation, Expenses and Indemnification of Indenture Trustee . . . . . . . . . . . . . . . . . . . 23
SECTION 7.05. Resignation and Removal of Indenture
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 7.06. Appointment of Successor Indenture
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 7.07. Effect of Appointment of Successor
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 7.08. Merger, Consolidation and Sale
of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

ARTICLE VIII. CONSOLIDATION, MERGER AND SALE BY SHIPOWNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 8.01. Consolidation, Merger or Sale
by Shipowner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 8.02. Sale of Vessel by the Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

ARTICLE IX. ACTS OF OBLIGEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 9.01. Acts of Obligees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

ARTICLE X. SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 10.01. Permissible Without Action by Obligees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 10.02. Protection of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 10.03. Reference in Obligations
to Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 10.04. Waivers and Supplemental Indentures
with Consent of Obligees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 10.05. Consent of Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 10.06. Continued Validity of the Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

ARTICLE XI. PERFORMANCE OF OBLIGATIONS TO SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 11.01. Performance of Obligations to Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>

<PAGE> 18

<TABLE>
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ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..30
SECTION 12.01. Satisfaction and Discharge
of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

ARTICLE XIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..30
SECTION 13.01. Notices and Demands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 13.02. Waivers of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 13.03. Benefit of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 13.04. Execution of Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 13.05. Table of Contents; Titles and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 13.06. Integration with Special Provisions of
the Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 13.07. Immunity of Incorporators, Stockholders,
Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 13.08 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

</TABLE>

<PAGE> 19

EXHIBIT 1

GENERAL PROVISIONS OF THE INDENTURE
INCORPORATED BY REFERENCE

ARTICLE I

DEFINITIONS; OFFICER'S CERTIFICATES
AND OPINIONS OF COUNSEL

SECTION 1.01. Definitions. For all purposes of this Indenture, the
terms used herein shall have the meanings specified in the Special Provisions
hereof, including without limitation Schedule A to this Indenture.

SECTION 1.02. Officer's Certificates and Opinions of Counsel. (a)
Each Officer's Certificate or Opinion of Counsel with respect to compliance
with a covenant or condition provided for herein (or waiver thereof) shall
include:

(1) A statement that the Person or Persons making such
certificate or rendering such opinion has or have read such covenant
or condition;

(2) A brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;

(3) A statement that, in the opinion of such Person or
Persons, he or they have made or caused to be made such examination or
investigation as is necessary to enable him or them to express an
informed opinion as to whether or not such covenant or condition has
been complied with (or compliance therewith has been waived); and

(4) A statement as to whether or not, in the opinion of
such Person or Persons, such condition or covenant has been complied
with (or such compliance has been waived).

(b) An Opinion of Counsel may be based (insofar as it relates to
factual matters, information with respect to which is in the possession of any
Person) upon a certificate or opinion of or representations in writing signed
by an officer or officers of such Person or by such Person, as the case may be,
and may be based upon an Opinion of Counsel signed by another counsel.

<PAGE> 20

An Opinion of Counsel may state that said opinion is subject to the
execution and delivery of designated instruments if copies of such instruments
in form approved by such counsel are delivered to the Indenture Trustee prior
to or concurrently with the delivery of said opinion.

(c) A certificate or opinion of a Person or Persons other than counsel
may be based, insofar as it relates to legal matters, upon an Opinion of
Counsel, unless the Person or Persons signing such certificate or opinion
knew that such Opinion of Counsel was erroneous or, in the exercise of
reasonable care, should have known that the same was erroneous.

(d) If the Indenture requires or permits the execution of any document
by officers, counsel or other Persons, such document may be executed in
counterparts by different officers, counsel or other Persons, all of which
shall form one instrument.

(e) If the signer of any document is required to be approved by the
Indenture Trustee, the acceptance of such document by the Indenture Trustee
shall be sufficient and conclusive evidence of such approval.

(f) The fact that the delivery of any document is a condition
precedent to any action required or permitted hereby shall not preclude the
withdrawal, revocation, rescission, modification or amendment of such document
at any time prior to such action, and, in the event of any such withdrawal,
revocation or rescission, such document shall be disregarded for all purposes
of this Indenture.

ARTICLE II
THE OBLIGATIONS

SECTION 2.01. Designation of Obligations. The Obligations of each
series shall be designated as stated in the Special Provisions hereof or in the
Supplemental Indenture establishing such series.

SECTION 2.02. Issue, Form, Principal Amount, Maturity, Interest,
Place of Payment, Denominations and Redemption of Obligations. (a) Upon or
after the execution and delivery of this Indenture the aggregate principal
amount of Obligations of the series and Stated Maturity or Maturities permitted
by the Special Provisions hereof may be executed by the Shipowner,
authenticated by the Indenture Trustee, and delivered as provided herein.

(b) The Obligations of each series and Stated Maturity to be issued
hereunder, the Guarantees of the United States to be endorsed thereon and the
Indenture Trustee's authentication certificates to be endorsed thereon shall,
in the case of the initial series of Obligations, be in the form or forms set
forth in Exhibit 2 to the Special Provisions hereof or, in the case of
Obligations of any additional series, in the form or forms set forth in the

<PAGE> 21

Supplemental Indenture establishing such series, and said Obligations shall:

(1) be limited to the respective principal amounts stated in
the Special Provisions hereof or in the Supplemental Indenture
establishing such series;

(2) bear interest from the date specified in Section 2.06 at
the rate or rates per annum stated in such Obligations;

(3) Mature in the amount or amounts and at the time or time
stated therein;

(4) be payable as to principal (and any premium thereon if
premium in case of redemption prior to Stated Maturity is provided for
therein), in any coin or currency of the United States which at the
time of payment is legal tender for public and private debts, at an
office or agency maintained from time to time by the Shipowner for
such purpose as provided in Section 5.03 at the place or places stated
in the Special Provisions hereof and payable as to interest as
aforesaid or, at the option of the Shipowner, by check mailed by such
office or agency to the addresses of the Obligees as such addresses
shall appear in the Obligation Register;

(5) be issued in the denominations provided in the Special
Provisions hereof or in the Supplemental Indenture establishing such
series; and

(6) be subject to redemption to the extent and as provided in
Article III.

(c) If the Maturity of any Obligation or an Interest Payment Date for
any Obligation shall be a day other than a Business Day, then such payment may
be made on the next succeeding Business Day, with the same force and effect as
if made on the nominal date for such payment, and no interest shall accrue
thereon for the period after said nominal date (whether or not such next
succeeding Business Day occurs in a succeeding month).

SECTION 2.03. Issuance of Obligations of Initial Series. At any time
and from time to time after the execution and delivery of this Indenture, the
Shipowner may deliver to the Indenture Trustee Obligations of the initial
series issuable under this Indenture duly executed by the Shipowner as
hereinafter provided, accompanied by a Request of the Shipowner, and thereupon
the Indenture Trustee shall authenticate such Obligations, after endorsing
thereon and authenticating the Guarantees of the United States in accordance
with the Authorization Agreement, and shall deliver such Obligations and
Guarantees in accordance with such Request. Each such Request shall specify the
principal amounts, interest rates and Stated Maturities of the Obligations to
be authenticated and the names and addresses of the Persons in whose name the
Obligations are to be registered.

SECTION 2.04. Additional Obligations; Obligations of Additional
Series. At any time or from time to time, the Shipowner may, with the approval
of the Secretary, issue additional Obligations of any series and Stated
Maturity theretofore issued or of one or more

<PAGE> 22

additional series, which shall (i) be in such principal amount, and (in the
case of Obligations of any additional series) mature on such dates, bear
interest at such rate or rates, be in such form or forms and have such other
terms and provisions, as shall be set forth in a Supplemental Indenture
providing for the issue thereof and (ii) be guaranteed by the United States
under Title XI of the Act pursuant to a supplement to the Authorization
Agreement.

SECTION 2.05. Legends on Obligations. Any Obligation may have
imprinted or stamped thereon any legend, consistent herewith, which is
prescribed by the Shipowner and approved by the Indenture Trustee, and, except
for endorsements permitted by the second paragraph of Section 2.10(c), by the
Secretary.

SECTION 2.06. Dates of Obligations; Interest Rights. Each Obligation
of any series shall be dated the date of its authentication and except as
otherwise provided in this Section, shall bear interest from the Interest
Payment Date for Obligations of such series next preceding the date of such
Obligation to which interest on the Obligations of such series has been paid,
unless (i) the date of such Obligation is the date to which interest on the
Obligations of such series has been paid, in which case from the date of such
Obligation, or (ii) no interest has been paid on the Obligations of such series
since the original issue date (as defined below) of such Obligation, in which
case from such original issue date. The term "original issue date" of an
Obligation shall mean (a) in the case of an Obligation issued on original
issue, the date of such Obligation, or (b) in the case of an Obligation not
issued on original issue, the date of the Obligation (or portion thereof)
issued on original issue for which such Obligation was issued (directly or
indirectly) on registration of transfer, exchange or substitution.

SECTION 2.07. Execution of Obligations. The Obligations shall from
time to time be executed on behalf of the Shipowner by a Responsible Officer
thereof (whose signature may be a facsimile), and its corporate seal (which may
be a facsimile) shall be affixed thereto or imprinted thereon and attested by
its secretary, an assistant secretary or an assistant trust officer (whose
signature may be a facsimile).

If any officer of the Shipowner whose signature (facsimile or
otherwise) appears on any Obligation shall cease to be such officer before such
Obligation shall have been authenticated by the Indenture Trustee or delivered,
such Obligation nevertheless may be authenticated, issued and delivered with
the same force and effect as though the person or persons whose signature or
signatures (facsimile or otherwise) appear on such Obligation had not ceased to
be such officer or officers of the Shipowner.

SECTION 2.08. Authentication of Obligations and Guarantees. No
Obligation or the Guarantee of the United States thereon shall be valid unless
such Obligation shall bear thereon an authentication certificate, manually
executed by the Indenture Trustee in accordance with the terms and conditions
of the Authorization Agreement, substantially in the form or forms referred to
in Section 2.02(b). Such authentication certificate, so

<PAGE> 23

executed, on any Obligation shall be conclusive evidence, and the only
competent evidence, that such Obligation and such Guarantee have been duly
executed, authenticated and delivered hereunder.

SECTION 2.09. Temporary Obligations. There may be issued from time
to time in lieu of (or in exchange for) any definitive Obligation or
Obligations one or more temporary Obligations of like series and Stated
Maturity, with a Guarantee of the United States endorsed thereon and
authenticated by the Indenture Trustee, substantially of the same tenor as the
definitive Obligations in lieu of (or in exchange for) which they are issued,
with or without the specification of any Redemption Price or Prices. Such
temporary Obligation or Obligations may be in such authorized denomination or
denominations as shall be stated in a Request of the Shipowner delivered to the
Indenture Trustee prior to the authentication thereof, which Request shall
specify the aggregate principal amounts and the series and Stated Maturities of
such temporary Obligations.

If definitive Obligations are not ready for delivery, the Holder of
any temporary Obligation may, at the Corporate Trust Office, with the consent
of the Shipowner, exchange the same for a temporary Obligation or Obligations
of like series, tenor, interest accrual date and Stated Maturity of authorized
denominations for the same aggregate principal amount upon the surrender for
cancellation of such temporary Obligation or Obligations.

When definitive Obligations are ready for delivery, the Holder of any
temporary Obligation may, at the Corporate Trust Office, exchange the same
without charge for a definitive Obligation or Obligations of like series,
tenor, interest accrual date and Stated Maturity of authorized denominations
for the same aggregate principal amount.

SECTION 2.10. Registration, Transfer and Exchange. (a) The Shipowner
shall cause the Indenture Trustee to keep an Obligation Register for the
registration of ownership, transfers and exchanges of Obligations, at the
Corporate Trust Office.

(b) Any Obligation may be transferred at the Corporate Trust Office,
by surrender of such Obligation for cancellation, accompanied by an instrument
of transfer in form satisfactory to the Shipowner and the Indenture Trustee,
duly executed by the registered Obligee or his duly authorized attorney, and
thereupon the Shipowner shall execute, and the Indenture Trustee shall
authenticate and deliver in the name of the transferee or transferees, a new
Obligation or Obligations, and the Guarantee or Guarantees of the United States
thereon, in authorized denominations of like series, tenor, interest accrual
date and Stated Maturity and for the same aggregate principal amount.

(c) The Shipowner shall not be required to register transfers or make
exchanges of (1) Obligations for a period of 15 days immediately prior to (A)
an Interest Payment Date or (B) any selection of Obligations to be redeemed,
(2) Obligations after demand for payment of the Guarantees and prior to the
payment thereof or rescission of such demand pursuant to Section 6.02(a), or
(3) any Obligation which has been selected for redemption in whole or in part.

<PAGE> 24

If any Obligation surrendered for transfer or exchange has been selected
for redemption in whole or in part, there may be endorsed on any Obligation or
Obligations issued therefor an appropriate notation of such fact.

(d) Any Obligation shall be exchangeable for a like principal amount of
Obligations of the same series, tenor, interest accrual date and Stated Maturity
but of different authorized denominations. Obligations to be exchanged shall be
surrendered at the Corporate Trust Office, and the Shipowner shall execute, and
the Indenture Trustee shall authenticate and deliver in exchange therefor, the
Obligation or Obligations, and the Guarantee or Guarantees of the United States
thereon, requested by the Obligee in accordance with this paragraph (d).

(e) As a condition precedent to any transfer or exchange of Obligations,
the Shipowner may (except upon an exchange of temporary for definitive
Obligations) require the payment of a sum sufficient to reimburse it for any
taxes or other governmental charges that may be imposed with respect thereto and
a sum not exceeding $2.00 for each Obligation delivered upon any such transfer
or exchange.

SECTION 2.11. Who Treated as Owners. The Shipowner, the Indenture
Trustee, the Secretary, and any office or agency for the payment of principal of
(and premium, if any) or interest on the Obligations may deem and treat the
Person in whose name any Obligation is registered in the Obligation Register as
the absolute owner of such Obligation for all purposes, and neither the
Shipowner, the Indenture Trustee, the Secretary, nor any such office or agency
shall be affected by any notice to the contrary, whether such Obligation shall
be past due or not. All payments of or on account of principal (and premium, if
any) or interest, or pursuant to the Guarantee endorsed on such Obligation, to
such registered Obligee shall be valid and effectual to satisfy and discharge
the liability of the Shipowner and the Secretary to the extent of the sum or
sums so paid, except as otherwise provided in Section 6.08.

SECTION 2.12. Lost, Stolen, Destroyed or Mutilated Obligations. Upon
receipt by the Shipowner and the Indenture Trustee of evidence satisfactory to
them of the loss, theft, destruction or mutilation of any Outstanding Obligation
and the ownership thereof, the Shipowner may execute, and upon request of the
Shipowner, the Indenture Trustee shall, but subject to all limitations imposed
by the Authorization Agreement and only to the extent authorized thereby,
authenticate and deliver, a new Obligation, and the Guarantee of the United
States thereon, of like series, tenor, interest accrual date, principal amount
and Stated Maturity (which may bear such notation as may be required by the
Indenture Trustee or by usage or by the rules of any stock exchange upon which
the Obligations are then listed and which shall bear a serial number different
from the serial number of the lost, stolen, destroyed or mutilated Obligation)
in lieu of such lost, stolen, destroyed or mutilated Obligation and, similarly,
upon receipt by the Shipowner and the Indenture Trustee of evidence satisfactory
to them of the loss, theft, destruction or mutilation of any Obligation which
has or is about to become due and payable, the Indenture Trustee may deem the

<PAGE> 25

applicant with respect thereto to be the owner of said Obligation for the
purpose of receiving payment on account thereof of principal (and premium, if
any) upon maturity or interest or the payment of the Guarantee thereof;
provided that, as conditions precedent to the execution, authentication and
delivery of any new Obligation in place of said Obligation or to any payment
contemplated by this Section, (1) the Shipowner, the Indenture Trustee and the
Secretary shall receive indemnity satisfactory to the Shipowner, the Indenture
Trustee and the Secretary, (2) the Shipowner shall be reimbursed for all
reasonable expenses (including any fees or expenses of the Indenture Trustee)
incident thereto, and (3) said Obligation shall (unless the same shall have
been lost, stolen or destroyed) be surrendered.

Obligations issued pursuant to this Section and the Guarantees endorsed
thereon shall constitute original contractual obligations of the Shipowner and
the United States, respectively, whether or not the lost, stolen or destroyed
Obligations be at any time enforceable by anyone, and shall be equally and
proportionately entitled to the benefits of this Indenture with all other
Outstanding Obligations issued hereunder.

The provisions of this Section 2.12 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of lost, stolen, destroyed or mutilated Obligations.

SECTION 2.13. Reacquired Obligations; Cancellation and Disposition of
Obligations. In the event the Shipowner shall reacquire any Obligations (whether
by purchase or otherwise), such Obligations shall forthwith be delivered to the
Indenture Trustee for cancellation. Except as provided in Section 3.09(b), all
Obligations surrendered for the purpose of payment, redemption, transfer,
exchange, or substitution, or (if permitted in the Special Provisions hereof or
the Supplemental Indenture establishing any additional series of Obligations) in
discharge in whole or in part of any sinking fund payment shall, if surrendered
to the Shipowner or any Paying Agent, be delivered to the Indenture Trustee for
cancellation, or, if surrendered to the Indenture Trustee, shall be cancelled by
it. No Obligation shall be authenticated in lieu of or in exchange for any
Obligation cancelled as provided in this Section, except as may be expressly
permitted by this Indenture. Obligations cancelled by the Indenture Trustee
shall be delivered or disposed of as directed by a Request of the Shipowner.

ARTICLE III

REDEMPTION OF OBLIGATIONS

SECTION 3.01. Redemptions Suspended During Default. Notwithstanding the
following provisions of this Article III, neither the Shipowner nor the
Indenture Trustee shall redeem any Obligations, except pursuant to Section 3.04
or 3.06 during the continuance of any Indenture Default or event which with the
lapse of time could constitute a Payment Default, except that, where the mailing
of notice of redemption of any Obligations shall have

<PAGE> 26

theretofore been made, the Indenture Trustee shall redeem or cause to be
redeemed such Obligations if it shall have received a sum sufficient for such
redemption. Except as aforesaid, any moneys received by the Indenture Trustee
for the redemption of Obligations which may not be applied to the redemption
thereof shall be held as security for the payment of all the Obligations, and,
(i) in case such Indenture Default or such event shall no longer be continuing,
such moneys shall thereafter be applied to the redemption of Obligations in
accordance with the applicable provisions of the Obligations and of this
Article III, (ii) in the event the Secretary shall have assumed the Obligations
pursuant to Section 6.09 or shall have been required to pay the Guarantees,
such moneys shall be paid over by the Indenture Trustee to the Secretary or
(iii) if no Obligation shall be Outstanding, other than by payment of the
Guarantees, such moneys shall be paid to the Shipowner.

SECTION 3.02. Redemptions. (a) Redemptions With Premium. If the
Obligations of any series and Stated Maturity or the Special Provisions hereof
or the Supplemental Indenture establishing such series shall so provide, such
Obligations shall be subject to redemption at a premium in the amounts, at the
price or prices, at the time or times and subject to the conditions specified
therein.

(b) Redemptions Without Premium. The Obligations of each series shall be
subject to redemption without premium in the amounts, at the time or times and
subject to the conditions specified in Sections 3.03, 3.04, 3.05 and 3.06. If
the Obligations of any series and Stated Maturity or the Special Provisions
hereof or the Supplemental Indenture establishing such series shall so provide,
such Obligations shall also be subject to redemption without premium in the
amounts, at the time or times and subject to the conditions specified therein or
as provided in subsection (c) of this Section 3.02.

(c) Sinking Fund Redemptions. If the Obligations of any series and Stated
Maturity or the Special Provisions hereof or the Supplemental Indenture
establishing such series shall so provide, such Obligations shall be subject to
(i) mandatory redemption through the operation of a sinking fund or similar
fund, in such amounts, at such times and subject to such credits (if any) as may
be specified therein, and (ii) redemption at the option of the Shipowner, in
connection with the operation of any such fund, in such additional amounts and
subject to such conditions as may be specified therein.

(d) Adjustments of Redemption Payments. If the Obligations of any series
and Stated Maturity or the Special Provisions hereof or of the Supplemental
Indenture establishing such series provide for an adjustment in mandatory
redemption payments as a result of any redemption or cancellation of
Obligations, the Shipowner shall recompute the remaining mandatory redemption
payments pursuant to such provisions and shall, at least 60 days prior to the
next Interest Payment Date which occurs at least 60 days following any such
redemption or cancellation of Obligations of such series requiring such
recomputation, submit to the Secretary for his review of such recomputation to
ascertain compliance with the provisions of such Obligations or the Special
Provisions hereof or such Supplemental

<PAGE> 27

Indenture, a table of revised mandatory redemption payments on the Obligations
of such series reflecting the adjustments made pursuant to such provisions as a
result of such redemption or cancellation. Upon advice by the Secretary that he
finds such recomputation to comply with such provisions, the Shipowner shall
submit said table to the Indenture Trustee and the Indenture Trustee shall
promptly submit a copy thereof to each Holder of an Obligation of such series.

SECTION 3.03. Terminal Mandatory Redemption. The Shipowner shall redeem,
at the principal amount thereof and interest accrued thereon, all the
Obligations that shall be Outstanding on the date determined in accordance with
Section 1104(b)(3) of the Act and specified in the Special Provisions hereof so
that the final maturity of such Obligations shall not exceed the period
specified in said Section.

SECTION 3.04. Redemptions to Comply with Provisions of Section 1104(b)(2)
of the Act. Upon receipt by the Indenture Trustee of a written instruction
signed by the Secretary and a Responsible Officer of the Shipowner stating that
upon receipt of funds paid to the Indenture Trustee by the Shipowner or the
Secretary on behalf of the Shipowner such funds (i) shall be applied in the
manner specified in such instruction to redeem the principal amount of
Obligations specified in such instruction and (ii) are to be so applied in order
that the principal amount of Obligations that will be Outstanding after such
redemption will not exceed the principal amount thereof eligible for guarantee
by the United States under Section 1104(b)(2) of the Act, the Indenture Trustee
shall promptly give notice as provided in Section 3.08 of the redemption of such
Obligations on a date which is no more than 45 days from the date of receipt by
the Indenture Trustee of such instruction; and the Indenture Trustee shall, on
such date, redeem such Obligations at the principal amount thereof and interest
accrued thereon to such date. The Shipowner agrees to notify the Indenture
Trustee of the redemption at least 10 days prior to receipt by the Indenture
Trustee of such written instruction.

SECTION 3.05. Redemption after Total Loss, Requisition of Title, Seizure
or Forfeiture of a Vessel or Termination of Certain Contracts. Upon receipt by
the Indenture Trustee of written instructions from the Secretary and the
Shipowner stating that the principal amount of Obligations specified in such
instructions are required to be redeemed on the date specified therein (which
shall be not less than 40 nor more than 60 days from the receipt of such
instructions by the Indenture Trustee) by reason of (i) an actual, constructive,
agreed or compromised total loss of a Vessel, (ii) requisition of title to, or
seizure or forfeiture of a Vessel or (iii) termination of any contract for the
construction, reconstruction or reconditioning of a Vessel, the Indenture
Trustee shall promptly give notice as provided in Section 3.08 of the redemption
on such date of such principal amount of Obligations and the Indenture Trustee
shall, on such date, redeem such principal amount of Obligations together with
interest accrued thereon to such Redemption Date.

<PAGE> 28

SECTION 3.06. Redemption After Assumption by the Secretary. Upon receipt
by the Indenture Trustee of written instructions from the Secretary stating that
the principal amount of Obligations specified in such instructions are required
to be redeemed on the date specified therein (which shall be not less than 40
nor more than 60 days from the receipt of such instructions by the Indenture
Trustee) at the option of the Secretary at any time after the Secretary's
assumption of the Obligations pursuant to Section 6.09, the Indenture Trustee
shall promptly give notice as provided in Section 3.08 of the redemption on the
Redemption Date of the principal amount of Obligations specified in such
instructions and the Indenture Trustee shall, on such Redemption Date, redeem
such Obligations together with interest accrued thereon to such Redemption Date;
provided that, the Secretary shall redeem at the principal amount thereof and
interest accrued thereon the Proportionate Part of the Outstanding Obligations
relating to such Vessel or Vessels which have been sold pursuant to Section 8.02
to a purchaser or purchasers who have not assumed such Obligations by notice to
the Indenture Trustee in accordance with this Section 3.06 within 40 days of the
nonassumption of the Obligations by such purchaser. The principal amount of the
Proportionate Part of the Outstanding Obligations shall be determined by the
Secretary.

SECTION 3.07. Determination of Obligations to be Redeemed. (a) If less
than all the Obligations are to be redeemed pursuant to Section 3.04 or 3.05,
the Indenture Trustee shall select Obligations of each series and Stated
Maturity for redemption in proportion to the respective principal amounts of
Obligations of such series and Stated Maturity then Outstanding, except as
otherwise provided in the Special Provisions or in the Supplemental Indenture
with respect to any series, making adjustment so that the principal amount of
any Obligation to be redeemed shall be $1,000 or an integral multiple thereof.

(b) If less than all the Obligations of any series or Stated Maturity are
to be redeemed under any of the provisions contained or referred to in this
Article III, the Indenture Trustee shall select, in such manner as it shall deem
appropriate and fair, the Obligations of such series or Stated Maturity to be
redeemed, and the Indenture Trustee shall, according to such method as it shall
in its reasonable discretion deem appropriate, make adjustments so that the
principal amount of any Obligation to be redeemed shall be $l,000 or an integral
multiple thereof.

SECTION 3.08. Notices of Redemption. (a) In case of any redemption of
Obligations, whether mandatory or optional, a notice of redemption (indicating
(1) the Redemption Date, (2) the Redemption Price, (3) if a part only of such
Obligations is to be redeemed, the numbers or other identification of the
Obligations and the principal amount thereof to be redeemed, in whole or in
part, (4) the place of payment upon redemption and (5) that interest shall cease
to accrue after the Redemption Date (but only if the Indenture Trustee or any
Paying Agent shall have received the required moneys) shall be given, by the
Shipowner or any authorized agent of the Shipowner (including the Indenture
Trustee), by mailing a copy of such notice, by first class mail, postage
prepaid, at least 30 days but not more than 60 days prior to the Redemption
Date, to each Holder of an Outstanding Obligation to be redeemed in whole or in
part at his last address appearing upon the

<PAGE> 29

Obligation Register.

(b) Any notice of optional redemption of Obligations shall state that the
redemption is subject to the receipt of the redemption moneys by the Indenture
Trustee or any Paying Agent. Such notice shall be of no effect unless prior to
the opening of business on the Redemption Date the Indenture Trustee or such
Paying Agent shall receive an amount in cash sufficient for such redemption
(after taking into account any amounts then held by the Indenture Trustee or
such Paying Agent and available for such redemption).

SECTION 3.09. Deposit of Redemption Moneys. Prior to the opening of
business on any Redemption Date, the Shipowner shall, except as contemplated by
Section 3.08(b), deposit or cause to be deposited with the Indenture Trustee or
(except in the case of redemptions pursuant to Section 3.04, 3.05, or 3.06 )
with any Paying Agent an amount sufficient for such redemption (after taking
into account any amounts then held by the Indenture Trustee or such Paying Agent
and available for such redemption) with irrevocable directions to it to so apply
the same.

SECTION 3.10. Payment of Redemption Price. (a) If notice of redemption
shall have been given as provided above, the Obligations or portions thereof
specified in such notice shall, except as contemplated by Section 3.08(b),
become due and payable on the Redemption Date and at the place of payment and
the Redemption Price stated in such notice, and on and after said Redemption
Date (unless the Shipowner shall default in the payment of such Redemption
Price) interest on the Obligations or portions thereof so called for redemption
shall cease to accrue. Upon presentation and surrender of such Obligations in
accordance with such notice, such Obligations or the specified portions thereof
shall be paid and redeemed at the applicable Redemption Price.

(b) Upon presentation of any Obligation redeemed in part only, the
Shipowner shall execute and the Indenture Trustee shall authenticate and deliver
to or on the order of the Holder thereof, at the expense of the Shipowner, a new
Obligation or Obligations of like series and Stated Maturity, of authorized
denominations, having endorsed thereon a Guarantee or Guarantees executed by the
Secretary, in principal amount equal to the unredeemed portion of the Obligation
so presented, or, at the option of such Holder, there may be noted thereon by
the Indenture Trustee or, at its direction, by any Paying Agent the payment of
the portion of the principal amount of such Obligation so called for redemption.

ARTICLE IV

CASH HELD BY INDENTURE TRUSTEE OR PAYING AGENTS

SECTION 4.01. Generally. (a) All cash held by the Indenture Trustee or
any Paying Agent under this Indenture shall be held as a special deposit in
trust for the purposes for which it is held (subject to Section 4.03).

<PAGE> 30

(b) Cash held by the Indenture Trustee or any Paying Agent (other than
the Shipowner) under this Indenture:

(1) need not be segregated;

(2) shall not be invested; and

(3) shall not bear interest except to the extent the Indenture
Trustee or such Paying Agent allows interest on similar deposits or
except as the Shipowner and the Indenture Trustee (or such Paying Agent)
may agree.

SECTION 4.02. Paying Agents Other Than Indenture Trustee. (a) The
Shipowner will cause any Paying Agent (other than the Indenture Trustee) which
it may appoint by a writing delivered to such Paying Agent, with copies to the
Indenture Trustee and the Secretary, to execute and deliver to the Indenture
Trustee an instrument in which such agent shall agree with the Indenture Trustee
that, subject to paragraph (b) of this Section and Section 4.03:

(1) it will hold in trust all sums held by it as such agent
for the payment of the principal of (and premium, if any) or interest on
Obligations for the benefit of the Holders of such Obligations, or for the
benefit of the Indenture Trustee;

(2) it will forthwith give the Indenture Trustee written
notice addressed to a Responsible Officer in the Corporate Trust Office of the
Indenture Trustee signed by a Responsible Officer of the Paying Agent of (A)
any payment by the Shipowner of the principal of (and premium, if any) or
interest on Obligations, specifying the amount paid, segregated as to principal
(premium, if any) and interest, and identifying each Obligation on which any
payment was made by number, date, series, Stated Maturity and the name of the
Obligee, and/or (B) any failure of the Shipowner to make any such payment when
the same shall be due and payable; and

(3) it will promptly, and in no event later than ten days
after any payment made by it hereunder, give the Indenture Trustee written
notice addressed to a Responsible Officer in the Corporate Trust Office of the
Indenture Trustee of all payments of Obligations made by it, including and
identifying all endorsements of payment made on Obligations by it, signed and
containing the specified information as provided in subparagraph (2) above, and
deliver to the Indenture Trustee all Obligations surrendered to it, for
cancellation by the Indenture Trustee.

(b) The Shipowner may at anytime cause to be paid to the Indenture
Trustee all sums held in trust by any Paying Agent pursuant to this Section,
such sums to be held by the Indenture Trustee upon the same trusts.

<PAGE> 31

SECTION 4.03. Unclaimed Amounts. Any moneys received by the Indenture
Trustee or a Paying Agent, for the payment of Obligations or Guarantees and
remaining unclaimed by the Holders thereof for 6 years after the date of the
Maturity of said Obligations or the date of payment by the Secretary of the
Guarantees shall, upon delivery to the Indenture Trustee of a Request by the
Shipowner, be paid to the Shipowner; provided that, not less than 30 days prior
to such payment, the Shipowner shall publish notice thereof to the Obligees at
least once in the Authorized Newspapers, unless the Indenture Trustee, in its
discretion, waives the publication of such notice. In such event, such Holders
shall thereafter be entitled to look only to the Shipowner (and the settlor or
settlors of any trust for which the Shipowner is trustee, to the extent paid
over to it or them) for the payment thereof, and the Indenture Trustee or such
Paying Agent, as the case may be, shall thereupon be relieved from all
responsibility to such Holders therefor. No such Request, publication or payment
shall be construed to extend any statutory period of limitations which would
have been applicable in the absence of such Request, publication or payment.

SECTION 4.04. Application of Funds. If at any time the Indenture Trustee
shall hold funds (other than any amounts received by the Indenture Trustee
pursuant to Section 7.04), the application, distribution or payment of which is
not governed by a Request or written instruction of the Shipowner delivered
pursuant to any provision of the Indenture, the Indenture Trustee shall give
written notice thereof to the Shipowner, who shall promptly thereafter deliver
to the Indenture Trustee a Request or written instruction bearing the written
consent of the Secretary and directing the application, distribution or payment
to be made of such funds.

ARTICLE V

REPRESENTATIONS AND AGREEMENTS OF SHIPOWNER

The Shipowner hereby represents and agrees, so long as Obligations are
Outstanding, as follows:

SECTION 5.01. Authorization, Execution and Delivery of Indenture. The
Shipowner has duly authorized the execution and delivery of this Indenture.

SECTION 5.02. Payment and Procedure for Payment of Obligations. The
Shipowner will duly and punctually pay the principal of (and premium, if any)
and interest on the Obligations according to the terms thereof and of this
Indenture. The Shipowner will deposit with the Indenture Trustee or (subject to
Section 3.09) a Paying Agent prior to the opening of business on each date fixed
for each such payment an amount sufficient for such payment (after taking into
account any amounts then held by the Indenture Trustee or such Paying Agent and
available for such payment) with irrevocable directions to it to so apply the
same; provided that, payments of interest may be made as provided in Section
2.02(b)(4); and provided further, that except with the consent of the Secretary
the Shipowner shall not

<PAGE> 32

deposit any such amount more than ten days prior to the date of the payment for
which such amount is deposited.

SECTION 5.03. Offices or Agencies of Shipowner. The Shipowner shall (1)
at all times cause one or more offices or agencies to be maintained within the
United States where Obligations may be presented for payment, registration of
transfer and exchange, and where demands to or upon the Shipowner with respect
thereto may be served, and (2) from time to time give written notice to the
Indenture Trustee and to the Secretary of the location of such offices or
agencies. The Corporate Trust Office shall be deemed to be such an office or
agency for such purposes until the Shipowner shall give the Indenture Trustee
and the Secretary written notice to the contrary.

Any such office or agency for payment of the Obligations (other than the
Corporate Trust Office) shall be a Paying Agent appointed in accordance with
Section 4.02.

ARTICLE VI

INDENTURE DEFAULTS AND REMEDIES

SECTION 6.01. What Constitutes "Indenture Defaults." Each of the
following events shall constitute an "Indenture Default":

(a) Default in the payment of the whole or any part of the
interest on any of the Outstanding Obligations when the same shall become due
and payable or default in the payment of the whole or any part of the principal
of any of the Outstanding Obligations when the same shall become due and
payable, whether by reason of Maturity, redemption, acceleration or otherwise,
or any default referred to in Section 6.08, and continuation of any such
default for a period of 30 days (herein called a "Payment Default"); and

(b) The giving of a Secretary's Notice to the Indenture
Trustee.

The Indenture Trustee shall give to the Obligees, the Secretary and the
Shipowner prompt notice in writing of any default in payment referred to in
clause (a) of this Section 6.01 (unless such default shall have been remedied
prior to the giving of such notice), and of the occurrence of any Indenture
Default which shall be continuing; provided that, the Indenture Trustee shall
have no duty to give any such notice unless and until a Responsible Officer of
the Indenture Trustee, who is a Responsible Officer in its Corporate Trust
Office, has actual knowledge of such default or Indenture Default. Any such
notice of an Indenture Default to the Obligees (i) shall specify the nature of
such Indenture Default, (ii) shall state that, by reason thereof, the Indenture
Trustee is entitled under the Indenture to demand payment by the Secretary of
the Guarantees, (iii) shall set forth the provisions of Section 6.04(b)(3) and
(5), and (iv) shall advise the Obligees of the provisions of Section 6.02.

<PAGE> 33

SECTION 6.02. Demand for Payment of Guarantees. (a) If an Indenture
Default shall have occurred and be continuing, the Indenture Trustee shall not
later than 60 days from the date of such Indenture Default demand payment by the
Secretary of the unpaid interest to the date of such payment on, and the unpaid
balance of the principal of, all Outstanding Obligations, whereupon the entire
unpaid principal amount of the Outstanding Obligations and all unpaid interest
thereon shall become due and payable on the first to occur of the date which is
30 days from the date of such demand or the date on which the Secretary pays the
Guarantees; provided that, in the case of a demand made as a result of a Payment
Default, if, prior to the expiration of 30 days from the date of such demand and
prior to any payment of the Guarantees by the Secretary, the Secretary shall
find, and give written notice to the Shipowner and the Indenture Trustee to the
effect that, there was no Payment Default or that such Payment Default was
remedied prior to such demand, such demand and the consequences thereof shall be
rescinded and annulled and the Guarantees shall remain in full force and effect.
The Indenture Trustee shall give to each Obligee and to the Shipowner prompt
written notice of any demand made by the Indenture Trustee pursuant to this
paragraph (a), any such notice to Obligees to be given as provided in Section
6.04(c).

(b) If the Indenture Trustee shall not have made the demand referred to
in Section 6.02(a) on or before the 30th day following an Indenture Default
which shall have occurred and be continuing and if the Holders of all
Outstanding Obligations shall not have theretofore elected to terminate the
Guarantees as provided in Section 6.04(a)(2), any Holder of an Outstanding
Obligation, by an Act of Obligees delivered to the Secretary (with copies
thereof to the Indenture Trustee and the Shipowner), may, in place of the
Indenture Trustee and on behalf of all Holders of Outstanding Obligations, make
such demand, subject to all the provisions of, and with the effect provided in,
Section 6.02(a); provided that, the right of each Holder under this paragraph
(b) shall be without prejudice to the rights and duties of the Indenture Trustee
under Section 6.02(a) .

SECTION 6.03. Appointment of Indenture Trustee and Holders of Outstanding
Obligations as Attorneys-in-Fact. Each Holder of an Outstanding Obligation by
the purchase and acceptance of its Obligation, irrevocably appoints the
Indenture Trustee and each other Holder of an Outstanding Obligation its agent
and attorney-in-fact for the purpose of making the demand provided for in
Section 6.02 and (in the case of the Indenture Trustee) of receiving and
distributing any payment or payments by the Secretary made pursuant to any such
demand; provided that, no action or failure to act by the Indenture Trustee
shall affect the rights of any Holder of an Outstanding Obligation to take any
action whatsoever permitted by law and not in violation of the terms of the
Obligations or of the Indenture.

SECTION 6.04. Termination and Payment of the Guarantees. (a) Except as
otherwise provided in Section 6.08, the Guarantee with respect to any Obligation
shall terminate in case, and only in case, one or more of the following events
shall occur:

<PAGE> 34

(1) Such Obligation shall have been Retired or Paid;

(2) The Holders of all Outstanding Obligations shall have
elected, by Act of Obligees delivered to the Secretary, to terminate
the Guarantees;

(3) Such Guarantee shall have been paid in full in cash by the
Secretary; or

(4) The Indenture Trustee and each Obligee shall have failed
to demand payment of such Guarantee as provided herein or in such
Guarantee or in the Act.

(b) Subject to the provisions of Section 6.08, when the Secretary
shall pay the Guarantees in full in cash to the Indenture Trustee:

(1) The Indenture Trustee shall hold the entire amount thereof
in trust for the sole purpose of providing for the payments specified
in subparagraph (5) below;

(2) No Obligation or Obligations shall thereafter be issued;

(3) The Obligations (A) shall represent only the right to
receive the payments from the Indenture Trustee specified in
subparagraph (5) below and, in the event the Indenture Trustee makes
payment to the Shipowner pursuant to Section 4.03, from the Shipowner,
(B) shall otherwise no longer constitute or represent an obligation of
the Shipowner, and (C) shall not be entitled to any other rights or
benefits under this Indenture;

(4) The Indenture Trustee shall forthwith give written notice
to the Shipowner and to each of the Obligees, stating that it has
received payment of the Guarantees in full in cash from the Secretary
and that the same is available for distribution to the Obligees in
the manner specified in subparagraph (5) below (and the Indenture
Trustee shall give like notice to the Holders of the Obligations at
least annually thereafter for a period of 6 years or until all
Obligations shall have been cancelled, whichever is earlier); and

(5) Upon the surrender for cancellation of any Obligation, the
Indenture Trustee shall forthwith pay to the Holder of such Obligation
in cash an amount (less the amount, if any, required to be withheld in
respect of transfer or other taxes on payment to such Holder) equal to
the unpaid principal amount of such Obligation and the unpaid interest
accrued thereon to the date on which the Secretary shall have paid the
Guarantees in full in cash to the Indenture Trustee; provided that,
for the purposes of this subparagraph (5), the Indenture Trustee (A)
may deem any Person as the owner of an Obligation in accordance with
Section 2.11 and (B) shall not be required to make any payment in
violation of applicable law.

<PAGE> 35

(c) Each notice to Obligees required by this Section shall be given by
the Indenture Trustee by first class mail, postage prepaid, to the address of
each Obligee appearing upon the Obligation Register.

(d) If the Secretary shall not have paid the Guarantees in full in cash
to the Indenture Trustee within 30 days after any demand therefor pursuant to
Section 6.02 (whether or not because the Secretary makes either of the findings
referred to in the proviso of Section 6.02(a)), the Indenture Trustee shall give
prompt written notice of such nonpayment to each Obligee and the Shipowner. If
the Indenture Trustee shall have received notice of either of such findings,
such notice to each Obligee shall so state.

SECTION 6.05. Rights of Indenture Trustee after Indenture Default. During
the continuance of any Indenture Default, the Indenture Trustee shall have the
right to demand and to receive payment of the Guarantees and shall have, with
the consent of the Secretary as to matters other than the enforcement of the
Guarantees (unless all the Guarantees shall have terminated as provided herein):

(a) the right (in its name, as the trustee of an express
trust, or as agent and attorney-in-fact for each Holder of the Obligations as a
class) to take all action to enforce its rights and remedies (including the
institution and prosecution of all judicial and other proceedings and the
filings of proofs of claim and debt in connection therewith), and to enforce
all existing rights of the Holders of the Obligations as a class; and

(b) all other rights and remedies granted to the Indenture
Trustee by this Indenture, or the Authorization Agreement, or by law.

In addition, during the continuance of an Indenture Default and if all
the Guarantees shall have terminated as provided herein, the Indenture Trustee
shall have the right, by written notice to the Shipowner, to declare the entire
unpaid principal amount of the Outstanding Obligations and all unpaid interest
to be immediately due and payable.

SECTION 6.06. (a) Obligees' Right to Direct Indenture Trustee after
Indenture Default. During the continuance of any Indenture Default, the Holders
of a majority in principal amount of the Outstanding Obligations shall have the
right, by an Act of Obligees, to direct the Indenture Trustee:

(1) to exercise or to refrain from exercising any right or to
enforce any remedy granted to it by this Indenture; and

(2) to direct the time, method and place of the exercise of
any such right or the enforcement of any such remedy;

provided that, subject to Section 7.03, the Indenture Trustee shall have the
right not to take

<PAGE> 36

any such action if it shall determine in good faith that the action would
involve it in personal liability, would subject it to expenses against which it
had not been offered adequate security and indemnity, or would be unjustly
prejudicial to the Obligees not parties to such direction.

Anything in this Section 6.06(a) to the contrary notwithstanding, the
Indenture Trustee shall be obligated to demand payment of the Guarantees as
provided in Section 6.02(a) unless the Holders of all Outstanding Obligations
shall have elected to terminate the Guarantees as provided in Section
6.04(a)(2), in which case the Indenture Trustee shall be obligated to refrain
from making such demand.

(b) Limitations on Obligees' Right to Sue. No Obligee shall have the
right to institute any judicial or other proceedings under this Indenture
unless:

(1) the Indenture Trustee shall have been directed to institute
such proceeding by the Holders of at least 25% in aggregate principal
amount of the Obligations then Outstanding;

(2) the Indenture Trustee shall have been offered adequate
security and indemnity against the costs, expenses and liabilities to be
incurred by compliance with such direction;

(3) the Indenture Trustee shall not have instituted such
proceeding within 60 days after the receipt of both such direction and
such offer of security and indemnity;

(4) no direction inconsistent with such request shall have been
given to the Indenture Trustee during such 60-day period by the Holders
of a majority in principal amount of the Outstanding Obligations; and

(5) the institution and prosecution of such proceeding would not
result in an impairment of the rights of any other Obligee, it being
understood and intended that no one or more Obligees shall have any right
in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other
Obligees or to obtain or to seek to obtain priority or preference over
any other Obligees or to enforce any right under this Indenture, except
in the manner herein provided and for the equal and ratable benefit of
all the Obligees.

(c) Unconditional Right of Obligees to Sue for Principal (and Premium, if
any) and Interest. Nothing in paragraph (b) shall (i) affect the obligation of
the Shipowner to pay the principal of (and premium, if any) and interest on the
Obligations in accordance with their terms or affect the right of any Obligee to
institute any judicial or other proceeding to enforce the payment of his
Obligations or (ii) limit the right of any Obligee to demand payment of the
Guarantees pursuant to Section 6.02(b) or to institute any judicial or other
proceeding to enforce the payment of the Guarantee of any Obligation of which he
is the Holder.

<PAGE> 37

SECTION 6.07. Undertaking for Costs. In any proceeding for the
enforcement of any right or remedy under this Indenture, or in any proceeding
against the Indenture Trustee for any action taken or omitted by it as Indenture
Trustee, the court may in its discretion require the filing by any party
litigant of an undertaking to pay the cost of such proceeding and may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant, having due regard to the merits and good faith of
the claims or defense made by such party litigant. The provisions of this
Section 6.07 shall not apply to any proceeding instituted by the Indenture
Trustee or any proceeding instituted by any Obligee for the payment of the
principal of (and premium, if any) and interest on his Obligations.

SECTION 6.08. Rescission of Payments. Notwithstanding any other provision
of this Indenture, or of the Obligations, in the event that any payment to or on
behalf of an Obligee of the principal of or interest due under any Obligation,
or any portion of any such payment, shall at any time be repaid by such Obligee
in compliance with an order (whether or not final) of a court of competent
jurisdiction pursuant to any provision of the Bankruptcy Code (Title 11 of the
United States Code) or any Federal Law replacing or superseding such Code, or
applicable state law, and regardless of whether there has been any previous
Indenture Default and any payment pursuant thereto, or whether such Obligation
shall theretofore have been acquired by the Shipowner or cancelled, or whether
an instrument satisfying and discharging this Indenture shall have been executed
and delivered, (1) such Obligation shall not be deemed to have been Retired or
Paid and shall be deemed to be Outstanding, (2) the return of such payment in
whole or in part (but not the mere possibility that any such payment or portion
thereof may be so required to be returned, nor any prior demand, suit or
proceeding for such return) in compliance with the order of such court shall
constitute a default in payment of such Obligation within the meaning of Section
6.01(a), which default shall be deemed to have occurred on the date of such
repayment and which default, if continued for 30 days, will constitute a Payment
Default, (3) the Guarantee of such Obligation and (to the extent necessary to
enforce such Obligation and Guarantee) this Indenture shall be in full force and
effect, and (4) the Person required to return such payment or portion thereof
shall be deemed for all purposes to be a Holder of such Obligation and entitled
to enforce such Obligation and Guarantee to the extent of such repayment and, if
there shall not be any Indenture Trustee hereunder then in office, such Person
shall also be entitled to exercise on his own behalf all the rights of the
Indenture Trustee hereunder necessary for such enforcement; provided that, in
the event the Guarantee of any Obligation shall have terminated for reasons set
forth in paragraphs (2) or (4) of Section 6.04(a) of this Indenture prior to the
aforesaid date of repayment the provisions of this Section shall not apply to
such Obligation.

SECTION 6.09. Assumption of Obligations by Secretary. Notwithstanding
anything contained herein, (i) in the event the Shipowner shall fail to make any
payment of principal or interest due on the Obligations on an Interest Payment
Date and such failure to pay shall continue for a period of 25 days or (ii) in
the event of any other default under the Mortgage or the Security Agreement, the
Secretary shall have the right to and may, in his sole

<PAGE> 38

discretion, (a) by giving to the Indenture Trustee at any time pursuant to
clause (ii) above or, if pursuant to clause (i) above, on or after the 25th day
of said 25 day period of such default (but prior to the receipt by the
Secretary of any demand for payment of the Guarantees pursuant to Section 6.02)
a Secretary's Supplemental Indenture in the form of Exhibit 4 attached hereto,
which Exhibit is incorporated herein by reference, assume the rights and
obligations of the Shipowner under this Indenture and all Outstanding
Obligations as provided in said Secretary's Supplemental Indenture; and (b) if
applicable, make any payment of principal or interest which is due under the
Obligations. By the execution of this Indenture by the Indenture Trustee and
the Shipowner it is agreed hereunder that a Secretary's Supplemental Indenture
shall be effective and binding upon the Indenture Trustee and the Shipowner and
their respective successors or assigns without further act or deed of either as
of the date executed and given to the Indenture Trustee by the Secretary as
contemplated by this Section, and each of them for itself, its successors and
assigns hereby irrevocably appoints the Secretary its true and lawful
attorney-in-fact to execute and deliver said Secretary's Supplemental
Indenture. Upon any such assumption by the Secretary, the Secretary shall
succeed to and be substituted for and may exercise every right and power of the
Shipowner under this Indenture and the Obligations with the same force and
effect as if the Secretary has been named as the Shipowner herein and therein.
Upon any such assumption by the Secretary, the Indenture Trustee, upon request
of the Secretary, shall promptly notify the holders of the Outstanding
Obligations of such assumption. The Secretary may exercise its rights under
this Section 6.09 as often as it deems appropriate in its sole discretion.

ARTICLE VII

THE INDENTURE TRUSTEE

SECTION 7.01. Acceptance of Trusts. The Indenture Trustee hereby accepts
the trusts of this Indenture.

SECTION 7.02. Eligibility of Indenture Trustee. (a) The Indenture Trustee
shall at all times be a bank or trust company which (1) is organized as a
corporation and doing business under the laws of the United States or any state
thereof, (2) is authorized under such laws to exercise corporate trust powers,
(3) is subject to supervision or examination by federal or state authority, (4)
has a combined capital and surplus (as set forth in its most recent published
report of condition) of at least $3,000,000, and (5) shall not have become
incapable of acting or have been adjudged a bankrupt or an insolvent nor have
had a receiver appointed for itself or for any of its property, nor have had a
public officer take charge or control of it or its property or affairs for the
purpose of rehabilitation, conservation or liquidation.

(b) Should the Indenture Trustee at any time cease to be eligible,
pursuant to this

<PAGE> 39

Section 7.02, to act as trustee, it shall promptly notify the Obligees, the
Shipowner and the Secretary of such fact; and should the Shipowner obtain
knowledge of such ineligibility, it shall promptly advise the Indenture
Trustee, the Secretary, and the Obligees of such fact. Any such notice (i)
shall set forth all the relevant facts known to the Indenture Trustee or the
Shipowner, as the case may be, (ii) if to the Secretary or the Shipowner, shall
be registered or certified mail, postage prepaid, and (iii) if to Obligees,
shall be sent to each Obligee in the manner provided in Section 6.04(c) at his
address as it appears on the Obligation Register, or at such other address as
such Obligee may have furnished to the Indenture Trustee for such purpose.

SECTION 7.03. Rights and Duties of Indenture Trustee. (a) The Indenture
Trustee shall not be responsible for the correctness of the Recitals in the
Special Provisions hereof or in the Obligations (except the Indenture Trustee's
authentication certificate thereon), all of which Recitals are statements made
solely by the Shipowner.

(b) The Indenture Trustee shall not be responsible for the validity,
execution by other parties thereto, or sufficiency of this Indenture, the
Authorization Agreement, the Obligations or the Guarantees.

(c) During the continuance of any Indenture Default (except for an
Indenture Default resulting from those defaults in payment or Payment Defaults
referred to in paragraph (r) of this Section, concerning which the Indenture
Trustee has not received the notice referred to in said paragraph (r) and the
information relating to items (1) through (5) of said paragraph (r)), the
Indenture Trustee shall exercise such of the rights and powers vested in it by
Article VI, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.

(d) Except during the continuance of any Indenture Default (other than an
Indenture Default referred to in the parenthetical expression set forth in
paragraph (c) of this Section), the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this Indenture against
the Indenture Trustee.

(e) No provision of this Indenture shall relieve the Indenture Trustee
from liability for its own negligent action, its own negligent failure to act,
or its own willful misconduct; provided that:

(1) Except during the continuance of an Indenture Default (other
than an Indenture Default referred to in the parenthetical expression set
forth in paragraph (c) of this Section), (A) the duties of the Indenture
Trustee shall be limited as provided in paragraph (d) of this Section,
and (B) in the absence of bad faith on the part of the Indenture Trustee,
the Indenture Trustee may conclusively rely upon certificates or opinions
conforming to the requirements of this Indenture as to the truth of the

<PAGE> 40

statements and the correctness of the opinions expressed therein;

(2) The Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer or Officers of the
Indenture Trustee unless it shall be proved that the Indenture Trustee
was negligent in ascertaining the pertinent facts; and

(3) The Indenture Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with an Act of Obligees relating to the time, method and place of
conducting any proceeding for any remedy available to the Indenture
Trustee, or exercising any trust or power conferred upon the Indenture
Trustee under this Indenture.

(f) Subject to paragraph (i) of this Section, the Indenture Trustee shall
be under a duty to examine certificates and opinions required by this Indenture
to be furnished to it to determine whether or not they conform to the
requirements hereof.

(g) Subject to paragraph (c) of this Section, the Indenture Trustee may
rely and shall be protected in acting upon any resolution, certificate, opinion,
notice, request, consent, order, appraisal, report, bond, or other paper or
document believed by it to be genuine, to have been signed by the proper party
or parties and to be in conformity with the provisions of this Indenture.

(h) In all cases where this Indenture does not make express provision as
to the evidence on which the Indenture Trustee may act or refrain from acting,
the Indenture Trustee shall be protected (subject to paragraph (c) of this
Section) in acting or refraining from acting hereunder in reliance upon an
Officer's Certificate as to the existence or nonexistence of any fact.

(i) The Indenture Trustee may consult with counsel satisfactory to the
Indenture Trustee (who may be counsel to the Shipowner), and an Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
accordance with such Opinion of Counsel.

(j) Subject to paragraph (c) of this Section, the Indenture Trustee shall
not be under any responsibility for the approval or selection of any expert for
any of the purposes expressed herein; provided that the Indenture Trustee shall
exercise reasonable care with respect to the approval or selection of
independent experts whom it approves or selects to furnish opinions or
certificates to the Indenture Trustee pursuant to this Indenture.

(k) Whenever it is provided that the Indenture Trustee shall take any
action, including the giving of any notice or the making of any demand, or
refrain from taking any action upon the happening or continuation of a specified
event (including an Indenture Default) or

<PAGE> 41

upon the fulfillment of any condition or upon the Request of the Shipowner or
of Obligees or upon receipt of any notice, including a Secretary's Notice, the
Indenture Trustee (1) shall, subject to paragraph (c) of this Section, have no
liability for failure to take such action or for failure to refrain from taking
such action unless and until a Responsible Officer of the Indenture Trustee,
who is a Responsible Officer in the Corporate Trust Office, has actual
knowledge of such event or continuation thereof or the fulfillment of such
conditions or shall have received such Request, and (2) in taking or refraining
from taking such action, shall have full power to give any and all notices and
to do any and all acts and things incidental to such action.

(l) Subject to paragraph (c) of this Section, the Indenture Trustee shall
not be under any obligation to exercise any of the trusts or powers hereof at
the request, order or direction of any Obligees or the Secretary, unless such
Obligees or the Secretary shall have offered to the Indenture Trustee security
or indemnity satisfactory to it against the costs, expenses and liabilities to
be incurred thereby.

(m) The Indenture Trustee, in its individual or any other capacity, may
become the owner or pledgee of Obligations with the same rights it would have if
it were not Indenture Trustee.

(n) Notwithstanding any other provision of this Indenture, the Indenture
Trustee shall not take any action contrary to the terms of the Authorization
Agreement, and any such purported action or any attempt to take such action
shall be void and of no effect and, except as provided in Section 7.06(b), shall
not enter into any amendment to the Authorization Agreement except as expressly
authorized by a Supplemental Indenture entered into pursuant to Article X.

(o) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.

(p) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Indenture Trustee shall be subject to the provisions of this
Section.

(q) Upon the execution and delivery of an instrument satisfying and
discharging this Indenture as provided in Section 12.01 hereof, all duties and
obligations of the Indenture Trustee hereunder (except with respect to the
application of funds for the payment of Obligations then held by the Indenture
Trustee) shall cease and shall not thereafter be revived, whether or not the
Indenture shall thereafter be in full force and effect as provided in Section
6.08.

<PAGE> 42

(r) Notwithstanding any other provisions of this Indenture or the
Authorization Agreement, the Indenture Trustee shall have no duty or obligation
to exercise any of its rights or powers hereunder with respect to a default in
payment or Payment Default by reason of a repayment referred to in Section 6.08
unless and until it shall have received notice of such default and information
concerning (1) the date thereof, (2) the Obligation to which such repayment
relates, (3) the Person making such repayment and the Holder of such Obligation,
(4) the amounts of such repayment attributable to principal, premium and
interest on such Obligation, and (5) the Interest Payment Date or other date on
which the Obligee received the moneys to which the court order mentioned in
Section 6.08 relates.

SECTION 7.04. Compensation, Expenses and Indemnification of Indenture
Trustee. The Shipowner shall (1) pay reasonable compensation to the Indenture
Trustee and reimburse it for its reasonable expenses and disbursements
(including counsel fees and expenses) and (2) indemnify the Indenture Trustee
for, and hold it harmless against, any loss, liability or expense which it may
incur or suffer without negligence or bad faith in acting under this Indenture
or the Authorization Agreement. The compensation of the Indenture Trustee shall
not be limited to the compensation provided by law for a trustee acting under an
express trust.

SECTION 7.05. Resignation and Removal of Indenture Trustee. (a) The
Indenture Trustee may resign at any time by giving written notice to the
Shipowner. Within 10 days thereafter, the resigning Indenture Trustee shall give
notice of such resignation to the Obligees in the manner provided in Section
6.04(c). If the resigning Indenture Trustee fails to do so within such 10-day
period, within the next succeeding 10 days the Shipowner shall give such notice
in the same manner.

(b) The Indenture Trustee may at any time be removed by:

(1) written notice to the Indenture Trustee and the Shipowner by
the Holders of a majority in principal amount of the Outstanding
Obligations; or

(2) written notice to the Indenture Trustee by the Shipowner or
the Secretary that the Indenture Trustee has ceased to be eligible under
Section 7.02(a).

(c) Any resignation or removal of the Indenture Trustee shall be
effective only upon appointment of a successor Indenture Trustee approved by the
Secretary and the acceptance of such appointment by such successor Indenture
Trustee.

SECTION 7.06. Appointment of Successor Indenture Trustee. (a) If the
Indenture Trustee or the Shipowner shall have given notice of ineligibility of
the Indenture Trustee pursuant to Section 7.02(b), or if any notice of
resignation or of removal shall have been given pursuant to Section 7.05, then a
successor Indenture Trustee may be appointed by the Shipowner; provided that, if
such successor Indenture Trustee is not so appointed (or has not

<PAGE> 43

accepted such appointment) within 15 calendar days after the giving of any such
notice, such appointment may be made (i) by the Secretary or (ii) by a court of
competent jurisdiction upon the application of the Secretary, the Shipowner,
the retiring Indenture Trustee or any Person who then is, and has been, the
Holder of an Outstanding Obligation for at least 6 months.

(b) No successor Indenture Trustee shall be appointed without the prior
written consent of the Secretary and until such successor Indenture Trustee
shall enter into an amendment to the Authorization Agreement as set forth in the
first sentence of Section 4.04 thereof.

(c) If a successor Indenture Trustee is appointed, approved by the
Secretary and accepts such appointment, and the Shipowner shall have knowledge
thereof, the Shipowner shall give notice to the Obligees of such appointment in
the manner provided in Section 6.04(c). The failure of the Shipowner to give
such notice shall not affect the validity of any such appointment.

SECTION 7.07. Effect of Appointment of Successor Indenture Trustee. Upon
appointment and acceptance as Indenture Trustee, each successor Indenture
Trustee shall forthwith, without further act or deed, succeed to all the rights
and duties of its predecessor in trust under this Indenture and the
Authorization Agreement. Such predecessor shall promptly deliver to such
successor Indenture Trustee all sums held hereunder, together with all records
and other documents necessary or appropriate in connection with the performance
of the duties of the successor Indenture Trustee under this Indenture. Upon the
written request of the successor Indenture Trustee or the Shipowner and upon
payment of all amounts due to such predecessor under this Indenture, such
predecessor shall transfer, assign and confirm to the successor Indenture
Trustee all its rights under this Indenture by executing and delivering from
time to time to the successor Indenture Trustee such further instruments and by
taking such other action as may reasonably be deemed by such successor Indenture
Trustee or the Shipowner to be necessary or appropriate in connection therewith.

SECTION 7.08. Merger, Consolidation and Sale of Indenture Trustee. In the
event of any merger (including for the purposes of this Section, the conversion
of a state bank into a national banking association or vice versa) or
consolidation of the Indenture Trustee into any other Person or in the event of
the sale of all or substantially all the Indenture Trustee's corporate trust
business, the Person resulting from such merger (including any such conversion)
or consolidation, or the transferee in the case of any such sale, shall
forthwith notify the Shipowner and, subject to Section 7.02(a) and 7.06(b),
shall be the Indenture Trustee under this Indenture and the Authorization
Agreement without further act or deed.

Obligations and Guarantees authenticated after any such merger,
consolidation or sale may be authenticated by the successor Indenture Trustee
either in its own name or in the name of any predecessor which shall have been
the Indenture Trustee.

<PAGE> 44

ARTICLE VIII

CONSOLIDATION, MERGER OR SALE BY SHIPOWNER

SECTION 8.01. Consolidation, Merger or Sale by Shipowner. Nothing in this
Indenture shall prevent any lawful consolidation or merger of the Shipowner with
or into any other Person, or any sale of a Vessel or Vessels to any other Person
lawfully entitled to acquire and operate such Vessel or Vessels or any sale by
the Shipowner of all or substantially all of its assets to any other Person;
provided that, except where the Shipowner shall be the Person surviving a merger
or consolidation, the Person formed by or surviving such consolidation or
merger, or to which the sale of such Vessel or Vessels shall be made, shall, by
Supplemental Indenture, expressly assume the payment of the principal of and
interest (and premium, if any) on the Proportionate Part of the Outstanding
Obligations relating to such Vessel or Vessels in accordance with the terms of
the Obligations and of the Indenture and shall expressly assume the performance
of the agreements of the Shipowner in the Indenture; provided further, that to
the extent said Proportionate Part of the Outstanding Obligations is not so
assumed, the Shipowner shall redeem or cause to be redeemed the principal amount
of the Proportionate Part of the Outstanding Obligations as is required by the
Secretary, such redemption to be in accordance with the terms of the Obligations
and of the Indenture. When a Person so assumes this Indenture and such
Proportionate Part of the Outstanding Obligations, the Supplemental Indenture
shall discharge and release the Shipowner from any and all obligations
thereunder relating to such Proportionate Part of the Outstanding Obligations.
In the event of such an assumption by a Person to whom a Vessel or Vessels have
been sold (a) such Person shall succeed to, and be substituted for, and may
exercise every right and power of the original Shipowner with the same effect as
if such successor Shipowner had been named as the Shipowner herein and (b) such
Proportionate Part of the Outstanding Obligations shall be surrendered to the
Indenture Trustee for appropriate notation or for the issuance of new
Obligations in exchange for such Proportionate Part of the Outstanding
Obligations in the name of the successor Shipowner, as required by the
Secretary. The principal amount of the Proportionate Part of the Outstanding
Obligations shall be determined by the Secretary.

SECTION 8.02. Sale of the Vessel or Vessels by the Secretary. Nothing
contained in this Indenture shall prevent the sale of a Vessel or Vessels to any
other Person or Persons by the Secretary, by a court of law or by the Shipowner
following, in connection with or in lieu of a foreclosure or similar action.
Following any such sale (1) the Person to whom such Vessel or Vessels have been
sold may by Supplemental Indenture expressly assume the payment of and interest
(and premium, if any) on the Proportionate Part of the Outstanding Obligations
relating to such Vessel or Vessels in accordance with the terms of the
Obligations and the Indenture and shall expressly assume the performance of the
Shipowner in the Indenture; and (2) in the event such Person does not so assume,
the Secretary shall redeem the Proportionate Part of the Outstanding Obligations
relating to such Vessel or Vessels without premium pursuant to Section 3.06
hereof; provided that, the Secretary shall

<PAGE> 45

allow or permit the sale of a Vessel or Vessels to the original Shipowner or to
any affiliate of the of the Shipowner only if (i) the Secretary has not
redeemed such Obligations prior to such sale, and (ii) such purchaser assumes
such Proportionate Part of the Outstanding Obligations as contemplated by the
preceding clause (1). When a Person so assumes this Indenture and such
Proportionate Part of the Outstanding Obligations, the Supplemental Indenture
shall discharge and release the Secretary from any and all obligations
thereunder in the Secretary's capacity as Shipowner relating to such
Proportionate Part of the Outstanding Obligations. In the event of such an
assumption by a Person to whom a Vessel or Vessels have been sold (a) such
Person shall succeed to, and be substituted for, and may exercise every right
and power of the original Shipowner with the same effect as if such successor
Shipowner had been named as the Shipowner herein and (b) such Proportionate
Part of the Outstanding Obligations shall be surrendered to the Indenture
Trustee for appropriate notation or for the issuance of new Obligations in
exchange for such Proportionate Part of the Outstanding Obligations in the name
of the successor Shipowner, as required by the Secretary. Any such sale or the
execution of a Supplemental Indenture by any successor Shipowner shall not
discharge or in any manner affect the obligation of the United States to pay
the Guarantees pursuant to the terms thereof. The principal amount of the
Proportionate Part of the Outstanding Obligations shall be determined by the
Secretary.

ARTICLE IX

ACTS OF OBLIGEES

SECTION 9.01. Acts of Obligees. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action required or
permitted by this Indenture to be given or taken by Obligees may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such Obligees in person or by an agent or attorney duly appointed in
writing. Except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Indenture Trustee and, where it is hereby expressly required, to the Shipowner
and the Secretary. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act of
Obligees." Proof of execution of any such instrument or of a writing
appointing any such agent or attorney shall be sufficient for any purpose of
this Indenture and (subject to Section 7.03) conclusive in favor of the
Indenture Trustee and the Shipowner, if made in the manner provided in
paragraph (b) of this Section.

(b) The fact and date of the execution by any Person of any instrument
or writing referred to in paragraph (a) of this Section may be proved by the
affidavit of a witness of such execution or by the certificate or acknow-
ledgment of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such
instrument or writing acknowledged to him the execution thereof. Where such
execution is by an officer of a corporation or a

<PAGE> 46

member of a partnership, on behalf of such corporation or partnership, such
affidavit or certificate shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Indenture Trustee (or, if such instrument or
writing is addressed to the Secretary, the Secretary) deems sufficient.

(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Obligation shall bind every future
Holder of the same Obligation and the Holder of every Obligation issued upon
the transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or suffered to be done by the Indenture Trustee, any Paying Agent
or the Shipowner in reliance thereon, whether or not notation of such action is
made upon such Obligation.

ARTICLE X

SUPPLEMENTAL INDENTURES

SECTION 10.01. Permissible without Action by Obligees. The
Shipowner, the Indenture Trustee, or, where applicable, the Secretary, from
time to time and at any time, may, without the consent of or notice to any of
the Obligees, subject to Sections 10.02 and 10.05, enter into an indenture or
other instrument supplemental hereto and which thereafter shall form a part
hereof, for any one or more of the following purposes:

(1) to add to the covenants of the Shipowner, whether
applicable to one or more series of Obligations;

(2) to evidence the succession pursuant to Article VIII of
another corporation or entity to the Shipowner and the assumption by
such successor of the obligations of the Shipowner hereunder;

(3) to eliminate any right reserved to or conferred upon the
Shipowner;

(4) to make such provisions for the purpose of curing any
ambiguity or correcting or supplementing any provisions in this
Indenture as the Shipowner or the Secretary may deem necessary or
desirable, provided such provisions are not inconsistent with this
Indenture and shall not adversely affect the interests of the
Obligees;

(5) to provide for the issuance of additional Obligations of
any series and Stated Maturity theretofore issued under this Indenture
or to set forth the terms and

<PAGE> 47

provisions of any one or more additional series of Obligations in
accordance with Section 2.04; or

(6) to evidence the assumption pursuant to Section 6.09 by the
Secretary of the Shipowner's obligations under this Indenture
and the Outstanding Obligations.

SECTION 10.02. Protection of Indenture Trustee. Upon receipt of a
Request of the Shipowner that the Indenture Trustee execute any Supplemental
Indenture and upon receipt of any Act of Obligees required pursuant to Section
10.04 and the consent of the Secretary required pursuant to Section 10.05, the
Indenture Trustee shall enter into such Supplemental Indenture; provided that,
the Indenture Trustee shall not be obligated to enter into any Supplemental
Indenture which the Indenture Trustee believes adversely affects the Indenture
Trustee's own rights, duties or immunities under this Indenture.

SECTION 10.03. Reference in Obligations to Supplemental Indentures.
Obligations authenticated and delivered after the execution and delivery of any
Supplemental Indenture may, with the consent and approval of the Shipowner and
the Indenture Trustee, contain a text modified to conform to such Supplemental
Indenture or have imprinted or stamped thereon a legend with respect to such
Supplemental Indenture, but no such modification or legend shall be necessary
to make such Supplemental Indenture effective.

SECTION 10.04. Waivers and Supplemental Indentures with Consent of
Obligees. With the consent of the Holders of not less than 60% in principal
amount of the Outstanding Obligations of each series affected thereby, by Act
of Obligees delivered to the Shipowner and the Indenture Trustee, (x)
compliance by the Shipowner with any of the terms of the Indenture may be
waived or (y) the Shipowner and the Indenture Trustee may enter into any
Supplemental Indenture for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of the Obligations issued
under this Indenture; provided that, no such waiver or Supplemental Indenture
shall:

(a) Without the consent of all Obligees affected thereby (1)
change the Stated Maturity or reduce the principal of any Obligation, (2)
extend the time of payment of, or reduce the rate of, interest thereon, (3)
change the due date of or reduce the amount of any mandatory sinking fund
payment, (4) reduce any premium payable upon the redemption of any Obligation,
or (5) change the coin or currency in which any Obligation or the interest
thereon is payable; or

(b) Without the consent of all Obligees (l) terminate or
modify any of the Guarantees or the obligations of the Secretary thereunder,
(2) reduce the amount of any of the Guarantees, (3) eliminate, modify or
condition the duties of the Indenture Trustee to demand payment of the
Guarantees or otherwise to comply with the provisions of Sections 6.02 and
6.04, (4) eliminate or reduce any of the eligibility requirements for the
Indenture

<PAGE> 48

Trustee stated in Section 7.02, or (5) reduce the percentage in principal
amount of the Outstanding Obligations of any series, the consent of whose
Holders is required for any such Supplemental Indenture, or required for any
waiver provided herein or to modify any of the provisions of this Section
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent
of all Obligees affected thereby.

It shall not be necessary for any Act of Obligees under this Section
to approve the particular form of any proposed Supplemental Indenture, but it
shall be sufficient if such Act shall approve the substance thereof. Promptly
after the execution of any Supplemental Indenture pursuant to this Section, the
Shipowner shall give notice thereof to the Obligees in the manner provided in
Section 6.04(c). Any failure of the Shipowner to give such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such Supplemental Indenture.

SECTION 10.05. Consent of Secretary. Subject to the provisions of
Section 11.01, no waiver pursuant to Section 10.04 shall be effective, and
neither the Shipowner nor the Indenture Trustee shall enter into any
Supplemental Indenture, without the prior written consent of the Secretary
thereto, and any purported action or attempt to take such action forbidden to
be taken by this Section shall be void and of no effect.

SECTION 10.06. Continued Validity of the Guarantees. Notwithstanding
anything herein to the contrary, this Indenture, the Guarantees and the
Authorization Agreement shall each remain in full force and effect
notwithstanding the assumption by the Secretary of the Obligations pursuant to
the Secretary's Supplemental Indenture entered into pursuant to Section 6.09,
and pursuant to Section 1103(e) of the Act, the validity of the Guarantee of
any Obligation shall be unaffected, and such Guarantee and all
responsibilities, requirements and consents relating to the Secretary under the
terms and provisions of this Indenture shall remain in full force and effect
notwithstanding any such assumption by the Secretary as aforesaid.

ARTICLE XI

PERFORMANCE OF OBLIGATIONS TO SECRETARY

SECTION 11.01. Performance of Obligations to Secretary.
Notwithstanding any other provisions of this Indenture to the contrary, each of
the provisions hereof which requires or permits action by the Secretary, the
consent, approval or authorization of the Secretary, the furnishing of any
document, paper or information to the Secretary, or the performance of any
other obligation to the Secretary, shall not be effective and the Sections
containing such provisions shall be read as though there were no such
requirements or permissions, after termination of the Guarantees pursuant to
Section 6.04(a).

<PAGE> 49

ARTICLE XII

SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 12.01. Satisfaction and Discharge of Indenture. Whenever all
Outstanding Obligations authenticated and delivered hereunder shall have been
Retired or Paid the Indenture Trustee shall forthwith deliver to the Shipowner
and the Secretary a duly executed instrument, in form submitted to it by the
Shipowner and reasonably satisfactory to the Indenture Trustee, satisfying and
discharging this Indenture and, at the time such form of instrument is
submitted to the Indenture Trustee the Shipowner shall deliver to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each stating that
all conditions precedent herein provided relating to the satisfaction and
discharge of this Indenture have been complied with. Notwithstanding the
satisfaction and discharge of this Indenture, the Obligations of the Shipowner
to the Indenture Trustee under Section 7.04 shall survive.

ARTICLE XIII

MISCELLANEOUS

SECTION 13.01. Notices and Demands. Except as otherwise specifically
provided herein or in the Act, any notice, request, demand or direction upon,
or other communication to, the Indenture Trustee, the Shipowner or the
Secretary shall be deemed to have been sufficiently given or made by being
mailed, registered or certified mail, postage prepaid, addressed to the
Indenture Trustee, the Shipowner or the Secretary at their respective addresses
appearing in the Special Provisions of this Indenture or at such other address
as any of them may advise the others in writing from time to time. Except as
otherwise specifically provided herein or in the Act, any notice, request,
demand or direction upon, or other communication to, the Obligees shall be
deemed to have been sufficiently given or made by being mailed, registered or
certified mail, postage prepaid, to the address of each Obligee last appearing
on the Obligation Register.

SECTION 13.02. Waivers of Notice. In any case where notice by mail
or otherwise is provided herein, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be deemed the equivalent of such notice. Waivers of notice
shall be filed with the Indenture Trustee, but such filing shall not be a
condition precedent to the validity of any action taken thereon in reliance
upon any such waiver.

SECTION 13.03. Benefit of Indenture. This Indenture is for the sole
benefit of the Shipowner, the Indenture Trustee, the Holders from time to time
of the Outstanding Obligations and (until the obligations to the Secretary
shall have terminated as provided in Article XI) the Secretary.

<PAGE> 50

SECTION 13.04. Execution of Counterparts. This Indenture may be
executed in any number of counterparts. All such counterparts shall be deemed
to be original and shall together constitute but one and the same instrument.

SECTION 13.05. Table of Contents; Titles and Headings. Any table of
contents, the titles of the Articles and the headings of the Sections are not a
part of this Indenture and shall not be deemed to affect the meaning or
construction of any of its provisions.

SECTION 13.06. Integration with Special Provisions of the Indenture.
In the event of any conflict between the provisions of the Special Provisions
of the Indenture and of this Exhibit 1 thereto, the provisions of the Special
Provisions shall govern and the provisions of this Exhibit 1 to the Indenture
shall be deemed to be amended accordingly.

SECTION 13.07. Immunity of Incorporators, Stockholders, Officers and
Directors. No recourse shall be had for the payment of the principal of, or
the premium, if any, or interest on any Obligation, or for any claim based
thereon or otherwise in respect thereof or of the indebtedness represented
thereby, or upon any obligation, covenant or agreement of this Indenture,
against any incorporator, stockholder, officer or director, as such, past,
present or future, of the Shipowner or of any successor corporation, either
directly or through the Shipowner or any successor corporation, whether by
virtue of any constitutional provision, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
agreed and understood that this Indenture and the Obligations are solely
corporate obligations, and that no personal liability whatsoever shall attach
to, or be incurred by, any incorporator, stockholder, officer or director, as
such, past, present or future, of the Shipowner or of any successor
corporation, either directly or through the Shipowner or any successor
corporation, because of the incurring of the indebtedness hereby authorized or
under, or by reason of, any of the obligations, covenants, promises or
agreements contained in this Indenture or in any of the Obligations or to be
implied herefrom or therefrom, and that all liability, if any, of that
character against every such incorporator, stockholder, officer and directors
is, by the acceptance of the Obligations and as a condition of, and as part of
the consideration for, the execution of this Indenture and the issue of the
Obligations, expressly waived and released.

SECTION 13.08. Applicable Law. This Indenture and each Obligation
shall be governed by the laws referred to in the Special Provisions hereof,
except to the extent Federal law applies hereto.

<PAGE> 1

EXHIBIT 10.8.3

___________________________________________________________________________
Contract No. MA-13309

TITLE XI RESERVE FUND AND
FINANCIAL AGREEMENT

Between

TRAILER BRIDGE, INC.

and

THE UNITED STATES OF AMERICA

Dated as of June 23, 1997

________________________________________________________________

<PAGE> 2

TITLE XI RESERVE FUND
AND FINANCIAL AGREEMENT

TABLE OF CONTENTS TO
SPECIAL PROVISIONS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Granting Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE FIRST
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE SECOND

Incorporation of General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

ARTICLE THIRD

Additions, Deletions and Amendments to Exhibit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

(a) Concerning Subsection 2(a) of Exhibit 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Concerning Subsection 2(b)(2)(D) of Exhibit 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Concerning Subsection 13(a) of Exhibit 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) Concerning Subsection 13(b) of Exhibit 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Concerning Subsection 13(b)(7)of Exhibit 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(f) Concerning Subsection 13(b)(3) of Exhibit 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(g) Concerning Subsection 13(b)(9) of Exhibit 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(h) Concerning Section 15 of Exhibit 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(i) Concerning Eligible Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE FOURTH

Vessel Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>

<PAGE> 3

Contract No. MA-13309

TITLE XI RESERVE FUND
AND FINANCIAL AGREEMENT

THIS TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT, dated as of June
23, 1997 between TRAILER BRIDGE INC., a Delaware corporation (the "Company"),
and THE UNITED STATES OF AMERICA (the "United States"), represented by the
Secretary of Transportation, acting by and through the Maritime Administrator
(the "Secretary"), pursuant to the provisions of Title XI of the Merchant
Marine Act, 1936, as amended.

R E C I T A L S:

A. The Company has authorized the issuance of bonds designated "United
States Government Guaranteed Ship Financing Bonds, 1997 Series" in an aggregate
principal amount not to exceed $10,515,000 (individually, an "Obligation," and
collectively, the "Obligations") to finance the cost of construction of two
408'9" x 100' container deck barges which it expects to be named CHICAGO BRIDGE
and CHARLOTTE BRIDGE (the "Vessels");

B. Under the provisions of an Authorization Agreement (the
"Authorization Agreement"), Contract No. MA-13305, dated as of the date hereof,
entered into between the Secretary and the Indenture Trustee, the Secretary has
authorized a guarantee to be endorsed upon each of the Obligations, pursuant to
which the Secretary has guaranteed the payment in full of all of the unpaid
interest to the date of payment on, and all of the unpaid principal balance of,
each Obligation (individually, a "Guarantee," and collectively, the
"Guarantees");

C. In consideration of the execution of the Authorization Agreement
and of the Guarantees, and as security to the United States for the payment to
the United States of the principal of and the interest due or to become due on
the promissory note, dated the date hereof, to be executed and delivered by the
Company to the Secretary with respect to the Obligations (the "Secretary's
Note"), in accordance with the terms thereof, the Company has made and entered
into a Security Agreement, dated as of the date hereof, between the Company and
the Secretary (the "Security Agreement"), pursuant to which the Company has
assigned to the Secretary, among other things, all insurance policies, any
future charter hire from the Vessels, and all of the Company's right, title and
interest in and to the Construction Contract;

<PAGE> 4

D. The Company, on the respective delivery date of each of the
Vessels, will execute and deliver a first preferred fleet mortgage (the
"Mortgage") thereon in favor of the Secretary; and

E. The Company, the Secretary and State Street Bank and Trust
Company, a Massachusetts trust company ("Depository-Bailee" or the
"Depository") are entering into the Depository Agreement, Contract No.
MA-13308, dated as of the date hereof, providing, among other things, for the
creation of the Title XI Reserve Fund.

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and of other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereby agree as follows:

GRANTING CLAUSE

The Company hereby sells, grants, conveys, mortgages, assigns,
transfers, pledges, confirms and sets over unto the Secretary a continuing
security interest in all of its right, title and interest in and to (a) the
Title XI Reserve Fund, and (b) all sums, instruments, moneys, negotiable
documents, chattel paper and proceeds thereof currently on deposit, or
hereafter deposited in the Title XI Reserve Fund, all of which foregoing
collateral shall be held by the Depository-Bailee as bailee in accounts in the
name of "Trailer Bridge, Inc. entirely as collateral for the United States of
America, as represented by the Secretary of Transportation, acting by and
through the Maritime Administrator (the "Secretary") and held by the
Depository-Bailee solely and exclusively as bailee for the Secretary."

ARTICLE FIRST

DEFINITIONS

For all purposes of this Title XI Reserve Fund and Financial
Agreement, unless otherwise expressly provided or unless the context otherwise
requires:

(1) All references to Sections or other subdivisions, unless
otherwise specified, refer to the corresponding Sections and other subdivisions
of the Title XI Reserve Fund and Financial Agreement;

(2) The terms "hereof," "herein," "hereto," "hereunder" and "herewith"
refer to this Title XI Reserve Fund and Financial Agreement;

(3) The capitalized terms used herein are defined in Schedule X to the
Security Agreement; and

(4) Capitalized terms used herein which are defined in the General
Provisions attached

<PAGE> 5

hereto as Exhibit 1 shall have the respective meanings stated in said General
Provisions unless otherwise defined pursuant to subparagraph 3 of this Article
First.

ARTICLE SECOND

INCORPORATION OF GENERAL PROVISIONS

This Title XI Reserve Fund and Financial Agreement shall consist of
two parts: the Special Provisions and the General Provisions attached hereto as
Exhibit 1, made a part of the Title XI Reserve Fund and Financial Agreement,
and incorporated herein by reference. Where a provision of the General
Provisions has been modified or superseded by a provision of the Special
Provisions, all references in the General Provisions to the modified or
superseded sections shall be deemed to refer to such sections as so modified or
superseded.

ARTICLE THIRD

ADDITIONS, DELETIONS AND AMENDMENTS TO EXHIBIT 1

The following additions, deletions and amendments are hereby made to
Exhibit 1 hereto:

(a) Concerning Subsection 2(a) of Exhibit 1: Subsection 2(a) of
Exhibit 1 hereto is amended by adding the following sentence at the end
thereof:

"Wherever reference is made in this Exhibit 1 to Title XI
Reserve Fund and Financial Agreement to the Title XI Reserve
Fund special joint depository account, such reference shall be
changed to a separate depository account held by the Title XI
Reserve Fund Depository-Bailee, as bailee, in the name of
"Trailer Bridge, Inc. entirely as collateral for the United
States of America, represented by the Secretary of
Transportation, acting by and through the Maritime
Administrator (the "Secretary") and held by the Depository-
Bailee solely and exclusively as bailee for the Secretary."

(b)Concerning Subsection 2(b)(2)(D) of Exhibit 1: Subsection
2(b)(2)(D) of Exhibit 1 hereto is deleted in its entirety and the following
substituted in lieu thereof:

"(D) Irrespective of the Company's deposit requirements into the Title
XI Reserve Fund as

5
<PAGE> 6

herein stated, the Company shall not be required to make any deposits into the
Title XI Reserve Fund if (i) the Title XI Obligations and the related
Secretary's Note with respect to the Vessels shall have been satisfied and
discharged and if the Company shall have paid or caused to be paid all other
sums secured under the Security Agreement and/or the Mortgage, (ii) all of the
Guarantees on the Outstanding Obligations shall have been terminated pursuant
to the provisions of the Security Agreement, or (iii) the amount (including any
securities at current market value) in the Title XI Reserve Fund is equal to,
or in excess of 50% of the principal amount of the outstanding Title XI
obligations related to the Vessels; provided that, if at any time after the
date hereof, (w) the Company's Working Capital is equal to (i) $3,000,000 at
June 30, 1997 and (ii) at least $1 plus one-half of all annual charter hire and
lease obligations (having a term of more than six months) due and payable
within the succeeding fiscal year, other than charter hire and other lease
obligations already included as a current liability on the Company's balance
sheet for every period semi- annual thereafter, (x) the Company's Direct
Obligations are less than twice Net Worth, (y) the Company's Inclusive
Obligations are less than 3.5 times Net Worth at June 30, 1997, 3.0 times at
December 31, 1997 and June 30, 1998 and 2.0 times at December 31, 1998 and
every semi-annual period thereafter, and (z) the Company's Cash Flow is at
least 1.5 times Debt Service, the Company may by written notice to the
Secretary elect in accordance with paragraph (a) of Section 13 to be governed
by the terms and conditions set forth in paragraphs (b) and (c) of Section 13
hereof and from and after the date of such election, the Company shall not be
required to make any deposits into the Title XI Reserve Fund if the income of
the Vessels (which would cause such deposit under subparagraph (2) above) is
Non Deposit Year Income. The term "Non Deposit Year Income" as used herein
shall mean any income derived from operation of the Vessels earned during any
fiscal year of the Company at the end of which:

(w) the Company's Working Capital is equal to (i) $3,000,000 at
June 30, 1997 and (ii) at least $1 plus one-half of all annual
charter hire and lease obligations (having a term of more than
six months) due and payable within the succeeding fiscal year,
other than charter hire and other lease obligations already
included as a current liability on the Company's balance
sheet for every semi-annual period thereafter,

(x ) the Company's Direct Obligations are less than twice Net
Worth,

(y) the Company's Inclusive Obligations are less than 3.5 times
Net Worth at June 30, 1997, 3.0 times at December 31, 1997 and
June 30, 1998 and 2.0 times at December 31, 1998 and every
semi- annual period thereafter, and

(z) the Company's Cash Flow is at least 1.5 times Debt Service.

As used in this Subsection D and as used in Article THIRD subsections
(d) and (h) of this

6
<PAGE> 7

Title XI Reserve Fund and Financial Agreement, the following terms shall have
the following meanings:

"Cash Flow" for any twelve month period shall mean for such period the
sum of the Company's (a) pre-tax income, (b) interest expense, and (c)
depreciation and amortization expense less (d) any dividends paid during such
period pursuant to the authority given to the Company to pay dividends under
Article THIRD subsection (f) of this Title XI Reserve Fund and Financial
Agreement.

"Debt Service" shall mean interest on debt plus principal payment on
debt during the preceding year.

"Direct Obligations" shall mean long term debt of the Company,
provided that in calculating such long term debt or in calculating the net
worth of the Company amounts (hereinafter "Subordinated Debt") due to
affiliates which are subordinated to the repayment of the Company's Title XI
Obligations pursuant to a subordination agreement approved by the Secretary
shall be adjusted in the calculation of long term debt or net worth, as the
case may be.

"Inclusive Obligations" shall mean the Company's Direct Obligations
plus deferred lease hire, guarantees and other contingent obligations of the
Company.

"Subordinated Debt" shall have the meaning given to such term above in
the definition of Direct Obligations.

(c) Concerning Subsection 13(a) of Exhibit 1. Pursuant to Subsection
(13)(a) the Company, with the consent of the Secretary, hereby elects to be
governed by subsections 13(b) and (c) of Exhibit 1 hereto, as amended herein.
From the date hereof, the covenants set forth in Section 12 of Exhibit 1 hereto
shall not apply to the Company.

(d) Concerning Subsection 13(b) of Exhibit 1. Notwithstanding anything
contained in subsection 13(b) of Exhibit 1 hereto, the Company shall be
entitled to do or perform any acts specified in subsection 13(b), clause (1)
through (13), inclusive of Exhibit 1 hereto at any time when it shall be able
to meet all the following financial tests:

(1) Working Capital equal to (i) $3,000,000 at June 30,
1997 and (ii) at least $1 plus one-half of all annual
charter hire and lease obligations (having a term of
more than six months) due and payable within the
succeeding fiscal year, other than charter hire and
other lease obligations already included as a current
liability on the Company's balance sheet for every
semi-annual date, thereafter.

7
<PAGE> 8

(2) Direct Obligations shall be less than twice Net Worth.

(3) Inclusive Obligations shall be less than 3.5 times Net
Worth at June 30, 1997, 3.0 times at December 31,
1997 and June 30, 1998 and 2.0 times at December 31,
1998 and every semi-annual date thereafter.

(4) Cash Flow coverage of at least 1.5 times Debt Service.

(e) Concerning Subsection 13(b)(7)of Exhibit 1. Subsection 13(b)(7) of Exhibit
1 hereto is hereby amended by deleting the numbers "$75,000" and "$50,000"
wherever they appear and substituting therefor the numbers $150,000 and
$100,000," respectively.

(f) Concerning Subsection 13(b)(3) of Exhibit 1. Notwithstanding
anything contained in Subsection 13 (b)(3) of Exhibit 1 hereto, the
Company may pay dividends or distributions in an amount equal to the
Company shareholders' income tax liability attributed to the earnings of
the Company provided that the Company is not in default with respect to
its Title XI obligations. Payment of the dividends or distributions are
subject to verification by a corporate officer of the Company as to the
tax liability and the Secretary's prior written consent. This section (f)
is only applicable for periods in which the Company is treated as an S
Corporation under the Internal Revenue Code.

(g) Concerning Subsection 13(b)(9) of Exhibit 1. In connection with
Subsection 13(b)(9) of Exhibit 1 hereto aggregate annual payments of
charter hire and rent for which the Company may become liable (directly or
indirectly) under charters and leases (having a term of six months or
more), for which the prior written consent of the Secretary shall not be
required, shall not exceed $1,000,000.

(h) Concerning Section 15 of Exhibit 1. The standard qualifying
requirements of Section 15 of Exhibit 1 are hereby waived provided that
on the date of this agreement a responsible officer of the Company shall
certify that the Company meets with the following four financial covenants
established by the Secretary:

(i) Working Capital shall be no less than Three
million dollars, ($3,000,000).

(ii) The Company's Direct Obligations shall be
less than 2.00 times its Net Worth . Long-term debt
and Net Worth shall be calculated in accordance with
generally accepted accounting principals and shall be
adjusted by any amounts due to affiliates which
constitute Subordinated Debt.

8
<PAGE> 9

(iii) The Company's Inclusive Obligations
shall be less than 3.5 times the Company's Net Worth.

(iv) Cash Flow coverage of at least 1.5 times Debt
Service.

9
<PAGE> 10

(i) Concerning Eligible Investments. Notwithstanding anything in
the General Provisions hereof to the contrary, wherever herein the Company is
entitled to invest in "Eligible Investments", such investments shall be
restricted to "Securities" as such term is defined in the Depository Agreement.

ARTICLE FOURTH

VESSEL APPLICATION

This Title XI Reserve Fund and Financial Agreement shall apply to the
Vessels listed in Attachment A to Exhibit 1 attached hereto. Any allocable
financial requirements or other specific requirements relating to a particular
Vessel or Vessels shall be so indicated in Attachment A. It is the intention of
this Title XI Reserve Fund and Financial Agreement that it remain in effect so
long as the Company owns the Vessels with Title Xl guaranteed obligations
outstanding.

10
<PAGE> 11

IN WITNESS WHEREOF, this Title XI Reserve Fund and Financial Agreement
has been executed by the parties hereto as of the day and year first above
written.

TRAILER BRIDGE, INC.

(SEAL)

BY: John McCown
-----------
Chairman

Attest:

William G. Gotimer, Jr.
- -----------------------

UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION

By: MARITIME ADMINISTRATOR

By: Joel C. Richard
---------------
Secretary
Maritime Administration

Attest:

Larry Main
- -------------------
Assistant Secretary
Maritime Administration

11
<PAGE> 12

ATTACHMENT A TO EXHIBIT 1
TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT

(Contract No. MA-13309)

Section 16. The Parties.

Company: TRAILER BRIDGE, INC.
9550 Regency Square Boulevard
Jacksonville, Florida 32225

Depository: STATE STREET BANK AND TRUST COMPANY
Corporte Trust Department
Two International Place
Boston, Massachusetts 02110

ARTICLE FOURTH Requirements:

For the purpose of ARTICLE FOURTH, this Title XI Reserve Fund
and Financial Agreement shall apply to the Company's two 408'9" X 100'
container deck barges being built in the Pearlington, Mississippi
shipyard of Halter Marine, Inc. for the Company pursuant to the Vessel
Construction Contract For Two Vessels between the Company and said
Halter Marine, Inc., as amended, and designated hull numbers 287 and
288, respectively.

12
<PAGE> 13

EXHIBIT 1

GENERAL PROVISIONS OF THE TITLE XI RESERVE FUND
AND FINANCIAL AGREEMENT INCORPORATED BY REFERENCE.

This Title XI Reserve Fund and Financial Agreement shall apply to the
vessel or vessels listed in Attachment A hereto. Any allocable financial
requirements or other specific requirements relating to a particular vessel or
vessels shall be so indicated in Attachment A. It is the intention of the
parties hereto that this Title XI Reserve Fund and Financial Agreement shall be
continuously in effect so long as the Company has any vessels with Title XI
insurance or guaranteed obligations outstanding.

SECTION 1. Definitions. For all purposes of this Title XI Reserve
Fund and Financial Agreement, the terms used herein shall have the meaning
specified below or specified in the Special Provisions hereof.

(a) The term "Working Capital" shall mean the excess of current assets
over current liabilities, both determined in accordance with generally accepted
accounting principles and adjusted as follows:

(1) In determining current assets there shall be deducted:

(A) Amounts in and/or required to be set aside in any Reserve Fund
required to be maintained pursuant to any agreement covering a vessel owned or
leased by the Company and insured or guaranteed by the Secretary or in any
other similar fund under any other mortgage, indenture or agreement of the
Company;

(B) Any securities, obligations or evidences of indebtedness of an
Affiliate of the Company or of any stockholder, director, Officer or employee
(or any member of his family) of the Company or of such Affiliate, except
advances to agents required for the normal current operation of the Company's
vessels and current receivables arising out of the ordinary course of business
and not outstanding for more than 60 days;

(2) In determining current liabilities there shall be deducted any
excess of Unterminated Voyage Expenses over Unterminated Voyage Revenue.

1
<PAGE> 14

(b) The term "Net Worth" shall mean, as of any date, the total of
paid-in capital stock, paid-in surplus, earned surplus and appropriated
surplus, and all other amounts that would be included in net worth in
accordance with generally accepted accounting principles, but exclusive of (1)
any receivables from any stockholder, director, Officer, or employee of the
Company or from any Affiliate of the Company (other than current receivables
arising out of the ordinary course of business and not outstanding for more
than 60 days) and (2) any increment resulting from the reappraisal of assets.

(c) The term "Deferred Lease Hire" shall mean, as of any date, the
long term portion of obligations (Title XI and otherwise) relating to vessels,
equipment or facilities leased or chartered by the Company on a long term basis
as determined by the Secretary in his sole discretion, which determination
shall be set forth in the Special Provisions hereof.

(d) The term "Long-Term Debt" shall mean, as of any date, the total
notes, bonds, debentures, equipment obligations and other evidence of
indebtedness that would be included in long-term debt in accordance with
generally accepted accounting principles, less the balance of Escrow Fund
deposits attributable to the principal of Obligations sold, where said deposits
are required in accordance with 46 C.F.R. 298.33. There shall also be included
Deferred Lease Hire, any guarantee or other liability for the debt of any other
Person (except fees and expenses of an Indenture Trustee and endorsements for
deposits of checks and other negotiable instruments acquired in the ordinary
course of business). Deferred income taxes shall not be included in Long Term
Debt.

(e) The term "Allocable Net Worth" shall mean, as of any date, Net
Worth required to be maintained or set aside by the Company (whether by
operation of negative covenants similar to those contained herein or otherwise)
under any indenture, mortgage or agreement (including this Title XI Reserve
Fund and Financial Agreement) or law or regulation by which the Company is
bound, as determined by the Secretary.

(f) The term "Allocable Working Capital" shall mean, as of any date,
Working Capital required to be maintained or set aside by the Company (whether
by operation of negative covenants similar to those contained herein or
otherwise) under any indenture, mortgage or agreement (including this Title XI
Reserve Fund and Financial Agreement) or law or regulation by which the Company
is bound, as determined by the Secretary.

(g) The term "Unterminated Voyage Revenue" shall mean all voyage
revenues in respect of an unterminated voyage as determined in accordance with
generally accepted accounting principles.

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<PAGE> 15

(h) The term "Unterminated Voyage Expenses" shall mean all voyage
expenses incurred in respect of an unterminated voyage as determined in
accordance with generally accepted accounting principles.

(i) The term "Affiliate" shall mean any individual, corporation,
partnership, joint venture, etc. directly or indirectly controlled by or under
common control with another individual, corporation, partnership, joint
venture, etc.

(j) The term "Vessel" shall mean any vessel or vessels owned or
chartered by the Company subject to a Title XI mortgage and which are subject
to the provisions of this agreement. Each Vessel covered by this agreement is
specified in Attachment A hereto.

SECTION 2. Title XI Reserve Fund Deposits. (a) The Company agrees to
establish with the depository named in Attachment A hereto (herein called the
"Title XI Reserve Fund Depository"), at the time the first deposit is required
to be made hereunder and to maintain thereafter, in accordance with the
provisions hereof, a special joint depository account (herein called the "Title
XI Reserve Fund") pursuant to a depository agreement to be executed at or prior
to the time the first deposit is required to be made hereunder.

(b)(1) Within 105 days after the end of each fiscal year of the
Company, the Company shall compute its net income attributable to the operation
of the Vessels ("Title XI Reserve Fund Net Income"). The computation utilizes a
ratio expressed as a percentage, and applies this percentage to the Company's
total net income after taxes. The numerator of the ratio shall be the total
original capitalized cost of all Company Vessels (whether leased or owned).
The denominator shall be the total original capitalized cost of all the
Company's fixed assets. The net income after taxes, computed in accordance with
generally accepted accounting principles, shall be adjusted as follows:

(i) The depreciation expense applicable to the accounting year
shall be added back.

(ii) There shall be subtracted an amount equal to the
principal amount of debt required to be paid or redeemed, and actually paid or
redeemed by the Company during the year; and the principal amount of
Obligations Retired or Paid, prepaid or redeemed, in excess of the required
Redemptions or payments which may be used by the Company as a credit against
future required Redemptions or other required payments with respect to the
Obligations, but excluding payments from the Title XI Reserve Fund and the
Title XI Escrow Fund.

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<PAGE> 16
(2) Promptly after the computation of the Title XI Reserve
Fund Net Income by the Company:

(A) If the Vessel is owned by the Company, then from the Title
XI Reserve Fund Net Income for the Vessel there shall be deducted, on an annual
basis (or pro rated for any period less than a full fiscal year) the amount
(pro rated for a period of less than a full fiscal year) specified in
Attachment A, which is 10% of the Company's aggregate original equity
investment related to said Vessel.

(B) The Company shall, unless otherwise approved by the
Secretary in writing, deposit into the Title XI Reserve Fund an amount equal to
50 percent of the balance of the Title XI Reserve Fund Net income remaining
after the above deductions.

(C) The Company shall also deposit into the Title XI Reserve
Fund moneys required to be so deposited pursuant to the Special Provisions of
the Security Agreement and any other similar agreement to which the Company is
a party. The deposit required by this subparagraph (C) shall be made at such
time and from time to time, as funds are available pursuant to such provisions
or agreements.

(D) Irrespective of the Company's deposit requirements into
the Title XI Reserve Fund as herein stated, the Company shall not be required
to make any deposits into the Title XI Reserve Fund if (i) the Title XI
Obligations and the related Secretary's Note with respect to the Vessel shall
have been satisfied and discharged and if the Company shall have paid or caused
to be paid all other sums secured under the Security Agreement and/or the
Mortgage, (ii) all of the Guarantees on the Outstanding Obligations shall have
been terminated pursuant to the provisions of the Security Agreement or, (iii)
the amount (including any securities at current market value) in the Title XI
Reserve Fund is equal to, or in excess of 50% of the principal amount of the
outstanding Title XI obligations related to the Vessel; provided that, if at
any time after the date hereof,(x) the Company's Working Capital is equal to at
least one dollar plus one-half of all annual charter hire and other lease
obligations (having a term of more than six months) due and payable within the
succeeding fiscal year, other than charter hire and such other lease
obligations already included as a current liability on the Company's balance
sheet, (y) the Company's Long-Term Debt does not exceed two times the
Company's Net Worth and (z) the Company's Net Worth is at least the amount
specified in Attachment A hereto, the Company may by written notice to the
Secretary elect in accordance with paragraph (a) of Section 13 to be governed
by the terms and conditions set forth in paragraphs (b) and (c) of Section 13
hereof and from and after the date of such election, the Company shall not be
required to make any deposits into the Title XI Reserve Fund if the income of
the Vessel (which would cause such deposit under

<PAGE> 17

subparagraph (2) above) is Non Deposit Year Income. The term "Non Deposit Year
Income" as used herein shall mean any income derived from the operation of the
Vessel earned during any fiscal year of the Company at the end of which:

(x) the Company's Working Capital is equal to at least one dollar plus
one-half of all annual charter hire and other lease obligations (having a term
of more than six months) due and payable within the succeeding fiscal year,
other than charter hire and such other lease obligations already included as a
current liability on the Company's balance sheet,

(y) the Company's Long-Term Debt does not exceed two times the
Company's Net Worth, and

(z) the Company's Net Worth is at least equal to the amount specified
in Attachment A hereto.

(E) The Company shall deliver to the Secretary (with a copy to the
Title XI Reserve Fund Depository) at the time of each deposit into the Title XI
Reserve Fund pursuant to subparagraphs (B), (C) or (G) of paragraph (b) (2) of
this Section 2, a statement of an independent certified public accountant or
firm of accountants (who may be the regular auditors for the Company) stating
that such deposit has been computed in accordance with the provisions of said
subparagraphs (B), (C) and/or (G) and showing the pertinent calculations;
provided that, any such statement with respect to said subparagraph (G) need be
made only by the Treasurer or an Assistant Treasurer of the Company.

(F) In addition, the Company shall deliver to the Secretary (with a
copy to the Title XI Reserve Fund Depository), within 105 days after the end of
each fiscal year of the Company, a statement by such certified public
accountant or firm of accountants stating (i) the total amount of all deposits
which were required to be so deposited into the Title XI Reserve Fund in
respect of such fiscal year (and showing the pertinent calculations), or (ii)
that no such deposit was required to be made in respect of such fiscal year
(and showing the pertinent calculations) and that at the end of such fiscal
year no adjustments pursuant to subparagraph (H) of paragraph (b)(2) of this
Section 2 were required to be made (and, if such adjustments were required to
be made, stating the reasons therefor).

(G) The Company shall also redeposit into the Title XI Reserve Fund a
sum equal to that portion of any withdrawal therefrom pursuant to this Title XI
Reserve Fund and Financial Agreement representing any increment in the
Company's tax liability resulting from net capital gains realized from capital
transactions in the Title XI Reserve Fund for any tax year which, because of
subsequent tax adjustments resulting from examination by the Internal

<PAGE> 18

Revenue Service in respect of net capital gains realized from capital
transactions in the Title XI Reserve Fund for such tax year, is excessive.

(H) The computation of all deposits required by this Section 2 shall
be made on the basis of information available to the Company at the time of
each such deposit. Each such deposit shall be subject to adjustments from time
to time in the event and to the extent that the same would be required or
permitted by mistakes or omissions, additional information becoming available
to the Company, or judicial or administrative determinations made subsequent to
the making of such deposits.

SECTION 3. Withdrawals from the Title XI Reserve Fund. (a) From time
to time, moneys in the Title XI Reserve Fund shall be subject to withdrawal by
delivery by the Company to the Secretary of a Request for Payment (specifying
the Person or Persons to be paid and the amount of such payment) executed by
the Company, together with an Officer's Certificate of the Company stating the
reasons and purpose for the withdrawal.

(b) Upon approval by the Secretary of the Request for Payment
evidenced by the countersignature thereon of the Secretary, the Secretary shall
cause the Request for Payment to be delivered to the Title XI Reserve Fund
Depository, which shall promptly make payment to such Person or Persons in
accordance with the terms of such Request for Payment.

(c) The purposes for which withdrawals may be made, subject to the
prior approval of the Secretary, are the following:
(1) for application toward the redemption of Title XI Bonds or
Obligations;

(2) for payment of charter hire;

(3) for payment to the Company, as of the end of each tax year
of the Company (and thereafter as any tax adjustments of the Company may
require), in amounts equal to any increments in the Company's tax liability
resulting from net capital gains realized from capital transactions in the
Title XI Reserve Fund consummated during such tax year;

(4) for payment into the Company's general funds in an amount
equal to the interest and dividends (including realized discount on investments
bought and sold on such discount basis but excluding accrued interest paid upon
purchase and stock dividend, securities or other property received) on
investments in the Title XI Reserve Fund as earned and collected irrespective
of the current market value of the assets then held in the Title XI

6
<PAGE> 19

Reserve Fund;

(5) for payment into the Company's general funds in an amount
equal to that portion of the Title XI Reserve Fund which is in excess of 50% of
the principal amount of the Outstanding Title XI Bonds or Obligations; and

(6) for any other payment with the prior written approval of
the Secretary.

SECTION 4. Termination of the Title XI Reserve Fund. (a) The Title XI
Reserve Fund with respect to the related Vessel or Vessels shall terminate at
such time as (i) the Title XI Obligations and the related Secretary's Note
shall have been satisfied and discharged and the Company and/or the Shipowner
shall have paid or caused to be paid all other sums secured under the Security
Agreement and/or the Mortgage, or (ii) the Contract of Insurance of Mortgage
shall have been terminated or all of the Guarantees of the Outstanding
Obligations shall have terminated pursuant to paragraphs (2) or (4) of Section
3.05 of Exhibit 1 to the Security Agreement.

(b) Upon the termination of the Title XI Reserve Fund, for any reason
specified in Section 4(a), the moneys remaining in the Title XI Reserve Fund
shall be subject to withdrawal and payment into the general funds of the
Company, after deduction therefrom of any due and unpaid fees and expenses
incurred by the Title XI Reserve Fund Depository pursuant to Section 10 hereof,
in accordance with the procedures for withdrawals specified in Section 3.

(c) Upon payment by the Secretary to the Indenture Trustee of the
insurance under the Contract of Insurance of Mortgage or the Guarantees
pursuant to the Indenture and the Authorization Agreement by reason of an Event
of Default, the Title XI Reserve Fund shall, upon written instructions of the
Secretary, be terminated and the balance remaining in the Title XI Reserve Fund
shall be paid to the Secretary and the Company as determined by the Secretary.
In the event that the Secretary determines that the Title XI Reserve Fund shall
be terminated pursuant to the provisions of this Section 4(c) and the balance
thereof paid as provided herein, the Title XI Reserve Fund Depository shall
disburse the balance of the Title XI Reserve Fund in accordance with such
written instructions from the Secretary, after deduction therefrom of any due
but unpaid fees and expenses incurred by the Title XI Reserve Fund Depository
pursuant to Section 10 hereof.

(d) Any withdrawal from the Title XI Reserve Fund pursuant to the
provisions of this Section 4 shall not affect any discharge of or diminish any
obligations of the Company under any Security Agreement, Mortgage or Charter as
the case may be except to the extent that

7
<PAGE> 20

the amount withdrawn is applied to payments required to be made by the Company
under such Security Agreement, Mortgage or Charter.

SECTION 5. Title XI Reserve Fund Investments; Form of Deposits. (a)
Moneys in the Title XI Reserve Fund shall, if so directed by a Request of the
Company delivered to the Title XI Reserve Fund Depository (with a copy to the
Secretary), be invested by the Title XI Reserve Fund Depository in:

(1) time deposits, negotiable certificates of deposit, or similar
instruments of deposit with a bank or trust company organized as a corporation
under the laws of the United States or any State thereof, or of the District of
Columbia, subject to supervision or examination by Federal or State authority
or authority of the District of Columbia, and having a combined capital and
surplus of at least $3,000,000; provided that, the aggregate of all such time
deposits and certificates of deposit with any one bank or trust company shall
not exceed 10% of the combined capital and surplus of such bank or trust
company;

(2) short term commercial paper having either of the two highest
ratings for short term commercial paper assigned by any two nationally
recognized organizations regularly engaged in rating the investment quality of
such commercial paper; and

(3) securities (designated by the Company in such Request) which at
the date of such investment are:

(A) direct obligations of, or obligations (other than the
Obligations or Other Title XI Bonds or Obligations Related to Company) fully
guaranteed or insured by, the United States or any agency of the United States
or, with the prior written consent of the Secretary and subject to such
conditions as may be imposed by him, obligations or securities fully insured by
an instrumentality of the United States;

(B) bonds, not in default as to principal or interest of any
county, municipality or state of the United States and having either of the two
highest ratings for bonds assigned by any two nationally recognized
organizations regularly engaged in rating the investment quality of such bonds;

(C) bonds, not in default as to principal or interest, of
corporations organized and existing under the laws of the United States or of
the District of Columbia or of any state of the United States and having one of
the three highest ratings for bonds assigned by any two nationally recognized
organizations regularly engaged in rating the investment quality of such bonds;
provided that, no investment under this clause (C) shall be made in any
obligations of the Company or an Affiliate of the Company;

8
<PAGE> 21

(D) capital stock, but limited at the time of acquisition to
any amounts in the Title XI Reserve Fund in excess of the principal amount of
Title XI Bonds or Obligations to be paid at Maturity, or to be redeemed
pursuant to the mandatory sinking fund provisions of the Indenture, during the
next succeeding 12 months (taking Eligible Investments, as hereinafter defined,
at current market value), of (i) corporations organized and existing under the
laws of the United States or the District of Columbia or of any state of the
United States if such stock is currently fully listed and registered upon an
exchange registered with the Securities and Exchange Commission as a national
securities exchange and permitted for investment by a savings bank under the
laws of the State of New York without regard to the provisions therein limiting
such investments to a percentage of the assets or surplus of such savings bank,
(ii) banks either regulated by the Comptroller of the Currency of the United
States or subject to the Banking Law of the State of New York, or (iii)
insurance companies licensed to do business in such state; provided that, no
investment under this clause (D) shall be made in stock of the Company or an
Affiliate of the Company; or

(E) securities approved by the Secretary in writing; provided
that, if any of the securities are securities so designated in any Request made
pursuant to the provisions of subparagraph (3)(D) of this Section 5(a), such
Request shall be accompanied by an Opinion of Counsel as to the qualification
of such securities under the said subparagraph (3)(D) and provided further,
that the Company shall, unless otherwise agreed to in writing by the Secretary,
cause to be sold, within 90 days after the close of the fiscal year of the
Company, or at any time if the Secretary so directs the Company in writing, any
securities which have not qualified or have ceased to qualify under the
provisions of this Section 5(a).

The investments permitted by this Section 5(a) are herein called
"Eligible Investments".

(b) In any case where the Company is required to deposit or redeposit
a sum or sums into the Title XI Reserve Fund, the Company shall make the
required deposit in cash or, with the prior written approval of the Secretary
may in lieu thereof deposit into the Title XI Reserve Fund, negotiable
certificates of deposit, short term commercial paper or securities which are
(i) Eligible Investments under this Title XI Reserve Fund and Financial
Agreement, (ii) owned by the Company and (iii) of an equivalent current market
value (based upon the last sales price thereof on the Business Day immediately
preceding such deposit or, if there shall have been no sale thereof on such
day, the average of the last known bid and asked prices). With the prior
written approval of the Secretary, the Company may exchange cash in the Title
XI Reserve Fund for Eligible Investments owned by the Company and of an
equivalent current market value (determined as above provided). The Company may
also,

9
<PAGE> 22

without the approval of the Secretary, exchange Eligible Investments in the
Title XI Reserve Fund at current market value (determined as above provided)
for an equivalent amount of cash.

(c) Cash held in the Title XI Reserve Fund will be held in a special
joint depository account in the names of the Company and the Secretary. All
securities or short term commercial paper held in the Title XI Reserve Fund and
all securities or short term commercial paper deposited in the Title XI Reserve
Fund shall, unless in bearer form or endorsed in blank, be registered and held
in the name of the Title XI Reserve Fund Depository or any nominees of the
Title XI Reserve Fund Depository, whether or not there is an existing Event of
Default under any Security Agreement or Charter relating to any Vessel listed
in Attachment A hereto.

SECTION 6. Company's Rights with Respect to Securities Held in the
Title XI Reserve Fund. Unless there is an existing Event of Default under any
Security Agreement or Charter relating to any Vessel listed in Attachment A
hereto, the Company shall have:

(1) the right to vote securities held in the Title XI Reserve
Fund as to (A) the sale of all or any part of the assets of the issuer or
obligor thereof, (B) the increase or reduction of the capital of such issuer or
obligor, (C) the liquidation, dissolution, merger or consolidation of such
issuer or obligor, or (D) any purpose which would not then materially impair
the lien of, or the security interest granted by, the Security Agreement and/or
the Mortgage; and

(2) the right to exercise any and all rights of ownership of
such securities, including the right to consent or object to the extension,
modification or renewal of any thereof, the right to consent or object to any
plan of reorganization, or readjustment, and the right to exercise any right,
privilege or option pertaining thereto.

SECTION 7. Annual Statement of Company in Respect to the Title XI
Reserve Fund. Within 105 days after the close of each fiscal year of the
Company at the end of which there are funds in the Title XI Reserve Fund (or at
such other time or times as the Secretary may request in writing), the Company
shall submit to the Secretary (with a copy to the Title XI Reserve Fund
Depository) (i) an Opinion of Counsel as to the qualification, under the
provisions of subparagraph (3)(D) of Section 5(a), of securities acquired
pursuant to said subparagraph (3)(D) and then held in the Title XI Reserve Fund
and (ii) a list of the Eligible Investments held in the Title XI Reserve Fund
at the close of said fiscal year (or at the time or times of the Secretary's
request as aforesaid).

10
<PAGE> 23

SECTION 8. The Secretary's Security Interest in the Title XI Reserve
Fund. All amounts held by the Title XI Reserve Fund Depository, at whatever
time, pursuant to the provisions of the Depository Agreement, whether moneys,
instruments, negotiable documents, chattel paper, proceeds thereof, or
otherwise, shall constitute and be held by said Depository-Bailee (as bailee)
solely and exclusively as bailee for the Secretary as security for the payment
and performance of the Company's Secretary's Note.

SECTION 9. Fund in Lieu of Title XI Reserve Fund. In the event the
Vessel or Vessels are subject to a capital construction fund established by the
Company, as provided in Section 607 of the Act, whether interim or permanent
(herein called the "Capital Construction Fund"), at any time when deposits
would otherwise be required to be made into the Title XI Reserve Fund, and the
Company elects to deposit such funds into the Capital Construction Fund, then
the Company shall enter into an agreement satisfactory in form and substance to
the Secretary to the effect that (i) the Capital Construction Fund and all
assets so deposited therein shall be and constitute security to the United
States in lieu of the Title XI Reserve Fund and the deposit requirements of
Section 2 of this Title XI Reserve Fund and Financial Agreement shall be deemed
satisfied by deposits of equal amounts in the Capital Construction Fund and
(ii) the Company and the Secretary may execute such further agreements or
documents and take such other actions as may be deemed necessary by the
Secretary to perfect the pledge of the security of the Capital Construction
Fund.

SECTION 10.The Title XI Reserve Fund Depository's Fees, Expenses and
Responsibilities. (a) The Company agrees to pay or cause to be paid the fees,
if any, and expenses (including counsel and investigatory fees) of the Title XI
Reserve Fund Depository incurred in connection with the performance of its
duties hereunder. The duties of the Title XI Reserve Fund Depository are only
such as are specifically provided herein, being purely ministerial in nature,
and the Title XI Reserve Fund Depository shall incur no liability whatsoever,
except for willful misconduct or gross negligence.

(b) The Title XI Reserve Fund Depository shall be under no
responsibility in respect of any of the items deposited with it other than to
comply with the specific duties and responsibilities herein set forth and in
any written instructions of the Secretary, Request for Payment, Request, and
approval of the Secretary herein provided for, and, without limiting the
generality of the foregoing, the Title XI Reserve Fund Depository shall have no
obligation or responsibility to determine (i) the correctness of any Request
for Payment, Request, written instructions, approval, statement, calculation or
opinion, supplied by the Company, an independent certified public accountant or
firm of accountants, counsel, or by the Secretary, (ii) the source of any
deposit hereunder or whether any amount deposited in or withdrawn from the
Title XI Reserve Fund is proper, or (iii) the existence of an Event of

11
<PAGE> 24

Default under any Security Agreement or Charter, as the case may be, relating
to any Vessel listed in Attachment A hereto or (iv) whether the existence of an
Event of Default under any such Security Agreement or Charter, as the case may
be, shall restrict or require any action of the Title XI Reserve Fund
Depository hereunder, other than as may be provided in any written
instructions, Request for Payment, Request, or approval of the Secretary. The
Title XI Reserve Fund Depository may consult with counsel and shall be fully
protected in any action taken in accordance with such advice received from such
counsel. The Title XI Reserve Fund Depository shall not be required to defend
any legal proceedings which may be instituted against it in respect of the
subject matter of this Title XI Reserve Fund and Financial Agreement unless
requested to do so by the parties hereto and indemnified to its satisfaction
against the cost and expense of such defense (including counsel and
investigatory fees) and shall not be required to institute legal proceedings of
any kind. The Title XI Reserve Fund Depository shall have no responsibility
for the genuineness or validity of any document or other item deposited with it
and shall be fully protected in acting in accordance with any written
instructions, Requests for Payment, Request, or approval of the Secretary
received by it hereunder and believed by it to have been signed by the proper
parties. The Title XI Reserve Fund Depository shall have no duties or
responsibilities in respect of Section 12 or 13 of this Title XI Reserve Fund
and Financial Agreement.

SECTION 11. Successor Title XI Reserve Fund Depositories. (a) The
Title XI Reserve Fund Depository may resign at any time by giving written
notice to the Company and the Secretary. The Title XI Reserve Fund Depository
may at any time be removed by the Company with the prior written consent of the
Secretary or by the Secretary by notice in writing delivered to the Title XI
Reserve Fund Depository with a copy to the Company.

(b) Any resignation or removal of the Title XI Reserve Fund Depository
shall be effective only upon appointment by the Company of a successor Title XI
Reserve Fund Depository and the latter's acceptance.

(c) If any notice of resignation or of removal shall have been given
pursuant to paragraph (a) of this Section, then a successor Title XI Reserve
Fund Depository shall promptly be appointed by the Company, with the prior
written consent of the Secretary.

(d) Upon appointment and acceptance a Title XI Reserve Fund
Depository, each successor Title XI Reserve Fund Depository shall forthwith,
without further act or deed, succeed to all the rights and duties of its
predecessor under this Title XI Reserve Fund and Financial Agreement. Such
predecessor shall promptly deliver to such successor Title XI Reserve Fund
Depository all sums held hereunder, together with all records and other

<PAGE> 25
documents necessary or appropriate in connection with the performance of the
duties of the successor Title XI Reserve Fund Depository under this Title XI
Reserve Fund and Financial Agreement. Upon the written request of the
successor Title XI Reserve Fund Depository, the Secretary or the Company and
upon payment of all amounts due to such predecessor under this Title XI Reserve
Fund and Financial Agreement, such predecessor shall transfer, assign and
confirm to the successor Title XI Reserve Fund Depository all its rights under
this Title XI Reserve Fund and Financial Agreement by executing and delivering
from time to time to the successor Title XI Reserve Fund Depository such
further instruments and by taking such other action as may reasonably be deemed
by such successor Title XI Reserve Fund Depository, the Secretary or the
Company to be necessary or appropriate in connection therewith.

SECTION 12. Financial Requirements of the Company. (a) The
Company agrees that it will not, without the prior written consent of the
Secretary, take any of the actions set forth below in this paragraph (a) unless
after giving effect to such transaction or transactions during any fiscal year
of the Company (i) the Working Capital of the Company would exceed the amount
of Allocable Working Capital specified in Attachment A, plus one-half of all
charter hire and other lease obligations (having a term of more than six
months) due and payable within the succeeding fiscal year, other than charter
hire and such other lease obligations already included and reported as a
current liability on the Company's balance sheet and (ii) the Net Worth of the
Company would exceed the amount of Allocable Net Worth specified in Attachment
A and such action is based upon financial statements of the Company showing its
financial condition as of the end of its latest regular intermediate accounting
period and there shall not have occurred since the date of such financial
statement a material adverse change in such financial condition which would
prohibit such action:

(1) Withdraw any capital;

(2) Redeem any share capital or convert any of the same into debt;

(3) Pay any dividend (except dividends payable in capital stock of
the Company), provided that, if the Company is a party to an Operating
Differential Subsidy agreement with the Secretary, it may pay dividends as
permitted by the conservative dividend policy as set forth in General Order
114;

(4) Make any loan or advance (except advances to cover current
expenses of the Company), either directly or indirectly, to any stockholder,
director, officer, or employee of the Company, or to any Affiliate of the
Company;

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<PAGE> 26

(5) Make any investments in the securities of any Affiliate of the
Company;

(6) Prepay in whole or in part any indebtedness to any stockholder,
director, Officer or employee of the Company, or to any Affiliate of the
Company, which has a stated maturity of more than one year from such date;

(7) Increase any direct employee compensation (as hereinafter defined)
paid to any employee to an amount in excess of $50,000 per annum; nor increase
by more than 10% per annum any direct employee compensation paid to any
employee whose direct compensation is in excess of $35,000 per annum; nor
increase any direct employee compensation which is already in excess of $50,000
per annum; nor initially employ or re-employ any person at a direct employee
compensation rate in excess of $50,000 per annum; for the purpose of this
section the term "direct employee compensation" is the total amount of any
wage, salary, bonus, commission, or other form of direct payment to any
employee as reported to the Internal Revenue Service for any fiscal year; or

(8) Acquire any fixed assets other than those required for the
normal maintenance and operation of any vessel or vessels owned or chartered by
the Company.

(b) Additional Covenants. The Company shall not, without the prior
written consent of the Secretary:

(1) Create, assumes, permit or suffer to exist or continue any
mortgage, lien, charge or encumbrance upon, or pledge of, or subject to the
prior payment of any indebtedness, any of its property or assets, real or
personal, tangible or intangible, whether now owned or hereafter acquired, or
own or acquire, or agree to acquire title to any property of any kind subject
to or upon a chattel mortgage or conditional sales agreement or other title
retention agreement, except (i) loans, mortgages and indebtedness guaranteed or
insured by the Secretary under Title XI of the Act or related to the
construction of a vessel approved for Title XI by the Secretary and (ii) liens
incurred in the ordinary course of business as such business presently exists;

(2) Enter into any service, management or operating agreement
for the operation of the Vessel (excluding husbanding type agreements), or
appoint or designate a managing or operating agent for the operation of the
Vessel (excluding husbanding agents) unless approved by the Secretary;

(3) (i) Sell, mortgage, transfer, or demise charter the Vessel
or any assets to any non-Affiliate except as permitted in Section 12(b)(6)
below; or (ii) sell, mortgage,

14
<PAGE> 27

transfer, or demise charter the Vessel or any assets to an Affiliate unless
such transaction is (a) at a fair market value as determined by an independent
appraiser acceptable to the Secretary, and (b) a total cash transaction or, in
the case of demise charter, the charter payments are cash payments; and (iii)
for the purposes of this section, the term "Affiliate" shall also include any
officer, director, or shareholder of the Company.

(4) Guarantee, otherwise become liable for the obligations of
any other corporation, person or other entity, except in respect of any
undertakings as to the fees and expenses of the Indenture Trustee, except
endorsement for deposit of checks and other negotiable instruments acquired in
the ordinary course of business and except as otherwise permitted in this
Section 12(b);

(5) Directly or indirectly embark on any new enterprise or
business activity not directly connected with the business of shipping or other
activity in which the Company is actively engaged;

(6) Enter into any merger or consolidation or convey, sell,
demise charter, or otherwise transfer, or dispose of any substantial portion of
its properties or assets (any and all of which acts are encompassed within the
words "sale" or "sold" as used herein), provided that, the Company shall not be
deemed to have sold a substantial portion of its properties or assets if (i)
the Net Book Value (defined as the original book value of an asset less
depreciation calculated on a straight line basis over its useful life) of the
aggregate of all the assets sold by the Company during any period of 12
consecutive calendar months does not exceed 10 percent of the total Net Book
Value of all of the Company's assets (the assets which are the basis for the
calculation of the 10 percent of the Net Book Value are those indicated on the
most recent audited annual financial statement required to be submitted
pursuant to Section 14 hereof prior to the date of the sale); (ii) the Company
retains the proceeds of the sale of assets for use in accordance with the
Company's regular business activities; and (iii) the sale is not otherwise
prohibited by subsection 12(b)(3) above. Notwithstanding any other provision of
this subsection 12(b)(6), the Company cannot consummate such sale without the
prior written consent of the Secretary if the Company has not, prior to the
time of such sale, submitted to the Secretary the financial statement referred
to in (i) of this subsection, and any attempt to so consummate a sale absent
such approval shall be null and void ab initio.

(7) Create, assume, incur or in any manner become or be liable
in respect of any indebtedness, except current liabilities, or short term loans
incurred or assumed in the ordinary course of business as such business
presently exists;

(8) Make or have any investment, whether by acquisition of
stock or

15
<PAGE> 28

indebtedness, or by loan, advance, transfer of property, capital contribution,
guarantee of indebtedness or otherwise, in any person or corporation, other
than obligations of the United States Government, bank deposits or investments
in securities of the character permitted for moneys in the Title XI Reserve
Fund;

(9) Pay any subordinated indebtedness other than in accordance
with the terms of any applicable subordination agreement approved by the
Secretary. The Company shall file with the Secretary a copy of each
subordination agreement approved by the Secretary;

(10) Enter into any agreement for both (i) sale and (ii)
leaseback of the same assets so sold unless the proceeds from such sale are at
least equal to the fair market value of the property sold;

(11) Either enter into or become liable (directly or
indirectly) under charters and leases (having a term of six months or more) for
the payment of charter hire and rent on all such charters and leases which have
annual payments aggregating in excess of the amount specified in the Special
Provisions hereof.

SECTION 13. Optional Financial Requirements of the Company.

(a) If, at any time after the date hereof (i) the Company's Working
Capital is equal to at least one dollar plus one-half of all annual charter
hire and other lease obligations (having a term of more than six months) due
and payable within the succeeding fiscal year, other than charter hire and such
other lease obligations already included and reported as a current liability on
the Company's balance sheet, (ii) the Company's Long-Term Debt does not exceed
two times the Company Net Worth, and (iii) the Company's Net Worth is as
specified in Attachment A hereto, as evidenced by an audited financial
statement of the Company showing its financial condition as of the end of its
regular intermediate accounting period, then the Company may by written notice
to the Secretary elect to be governed by the covenants set forth in this
Section 13 and from and after the date of such election the covenants set forth
in Section 12 of this Agreement shall cease to apply to the Company.

(b) Unless, after giving effect to such transaction or transactions,
during any fiscal year of the Company;

(i) the Company's Working Capital is equal to at least one
dollar plus one-half of all annual charter hire and other lease obligations
(having a term of more than six months) due and payable within the succeeding
fiscal year, other than charter hire and such other lease obligations already
included and reported as a current liability on the Company's

17
<PAGE> 29

balance sheet, (ii) the Company's Long-Term Debt does not exceed two times the
Company's Net Worth and (iii) the Company's Net Worth is at least the amount
specified in Attachment A hereto, the Company shall not, without the prior
written consent of the Secretary:

(1) Withdraw any capital;

(2) Redeem any share capital or convert any of the same into debt;

(3) Pay any dividend (except dividends payable in capital stock of
the Company) provided that, if the Company is a party to an Operating
Differential Subsidy agreement with the Secretary, it may pay dividends as
permitted by the conservative dividend policy as set forth in General Order
114;

(5) Make any investments in the securities of any Affiliate of the
Company;

(6) Prepay in whole or in part any indebtedness to any stockholder,
director, officer or employee of the Company, or to any Affiliate of the
Company, which has a stated maturity of more than one year from such date;

(7) Increase any direct employee compensation (as hereinafter defined)
paid to any employee to an amount in excess of $75,000 per annum, nor increase
by more than 10% per annum any direct employee compensation paid to any
employee whose direct compensation is in excess of $50,000 per annum; nor
increases any direct employee compensation which is already in excess of $75
000 per annum; nor initially employ or re-employ any person at a direct
employee compensation rate in excess of $75,000 per annum; for the purpose
of this section the term "direct employee compensation" is the total amount of
any wage, salary, bonus, commission, or other form of direct payment to any
employee as reported to the Internal Revenue Service for any fiscal year;

(8) Acquire any fixed assets other than those required for the
maintenance of the Company's existing assets, including the normal maintenance
and operation of any vessel or vessels owned or chartered by the Company;

(9) Either enter into or become liable (directly or indirectly)
under charters and leases (having a term of six months or more) for the
payment of charter hire and rent on all

<PAGE> 30

such charters and leases which have annual payments aggregating in excess of
the amount specified in the Special Provisions hereof;

(10) Pay any indebtedness subordinated to the Obligations or to any
other Title XI obligations related to ship mortgages, trust indentures,
security agreements and charters to which the Company is a party;

(11) Create, assume, incur, or in any manner become liable for any
indebtedness, except current liabilities, or short term loans, incurred or
assumed in the ordinary course of business as such business presently exists;

(12) Make any investment, whether by acquisition of stock or
indebtedness, or by loan, advance, transfer of property, capital contribution,
guarantee of indebtedness or otherwise, in any person or corporation, other
than obligations of the United States Government, bank deposits or investments
in securities of the character permitted for moneys in the Title XI Reserve
Fund;

(13) Create, assume, permit or suffer to exist or continue any
mortgage, lien, charge or encumbrance upon, or pledge of, or subject to the
prior payment of any indebtedness, any of its property or assets, real or
personal, tangible or intangible, whether now owned or hereafter acquired, or
own or acquire, or agree to acquire, title to any property of any kind subject
to or upon a chattel mortgage or conditional sales agreement or other title
retention agreement, except (i) loans, mortgages and indebtedness guaranteed or
insured by the Secretary under Title XI of the Act or related to the
construction of a vessel approved for Title XI by the Secretary and (ii) liens
incurred in the ordinary course of business as such business presently exists.

(1) Except as hereinafter provided, make any distribution of earnings,
except as may be permitted by (A) or (B) below:

(A) From retained earnings in an amount specified in
subparagraph (C) below, provided that, in the fiscal year in which the
distribution of earnings is made there is no operating loss to the date of such
payment of such distribution of earnings, and (i) there was no operating loss
in the immediately preceding three fiscal years, or (ii) there was a one-year
operating loss during the immediately preceding three fiscal years, but (a)
such loss was not in the immediately preceding fiscal year, and (b) there was
positive net income for the three

18
<PAGE> 31

year period;

(B) If distributions of earnings may not be made under (A)
above, a distribution can be made in an amount equal to the total operating net
income for the immediately preceding three fiscal year period, provided that,
(i) there were no two successive years of operating losses, (ii) in the fiscal
year in which such distribution is made, there is no operating loss to the date
of such distribution, and (iii) the distribution or earnings made would not
exceed an amount specified in subparagraph (C) below;

(C) Distributions of earnings may be made from earnings of
prior years in an aggregate amount equal to (i) 40 percent of the Company's
total net income after tax for each of the prior years, less any distributions
that were made in such years; or (ii) the aggregate of the Company's total net
income after tax for such prior years, provided that, after making such
distribution, the Company's Long Term Debt does not exceed its Net Worth. In
computing net income for purposes of this subparagraph (C), extraordinary
gains, such as gains from the sale of assets, shall be excluded;

(2) Enter into any service, management or operating agreement for the
operation of the Vessel (excluding husbanding type agreements), or appoint or
designate a managing or operating agent for the operation of the Vessel
(excluding husbanding agents) unless approved by the Secretary;

(3) (i) Sell, mortgage, transfer, or demise charter the Vessel or any
assets to any non-Affiliate except as permitted in subsection 13(c)(7) below;
or (ii) sell, mortgage, transfer, or demise charter the Vessel or any assets to
an Affiliate, unless such transaction is (a) at a fair market value as
determined by an independent appraiser acceptable to the Secretary, and (b) a
total cash transaction or, in the case of demise charter, the charter payments
are cash payments; and (iii) for the purposes of this section, the term
"Affiliate" shall also include any officer, director, or shareholder of the
Company.

(4) Enter into any agreement for both (i) sale and (ii) leaseback of
the same assets so sold unless the proceeds from such sale are at least equal
to the fair market value of the property sold;

(5) Guarantee, or otherwise become liable for the obligations of any
other corporation, person or other entity, except in respect of any
undertakings as to the fees and expenses of the Indenture Trustee, except
endorsement for deposit of checks and other negotiable instruments acquired in
the ordinary course of business and except as otherwise permitted in this
Section 13(c);

19
<PAGE> 32

(6) Directly or indirectly embark on any new enterprise or business
activity not directly connected with the business of shipping or other activity
in which the Company is actively engaged;

(7) Enter into any merger or consolidation or convey, sell, demise
charter, or otherwise transfer, or dispose of any portion of its properties or
assets (any and all of which acts are encompassed within the words "sale" or
"sold" as used herein), provided that, the Company shall not be deemed to have
sold such properties or assets if (i) the Net Book Value (defined as the
original book value of an asset less depreciation calculated on a straight line
basis over its useful life) of the aggregate of all the assets sold by the
Company during any period of 12 consecutive calendar months does not exceed 10
percent of the total Net Book Value of all of the Company's assets (the assets
which are the basis for the calculation of the 10 percent of the Net Book Value
are those indicated on the most recent audited annual financial statement
required to be submitted pursuant to Section 14 hereof prior to the date of the
sale); (ii) the Company retains the proceeds of the sale of assets for use in
accordance with the Company's regular business activities; and (iii) the sale
is not otherwise prohibited by subsection 13(c)(3) above. Notwithstanding any
other provision of this subsection 13(c)(7), the Company cannot consummate such
sale without the prior written consent of the Secretary if the Company has not,
prior to the time of such sale, submitted to the Secretary the financial
statement referred to in (i) of this subsection. The only sales of assets or
properties authorized by this section are sales equal to the greater of fair
market value or Net Book Value.

SECTION 14. (a) Financial Statements. The accounts of the Company
shall be audited annually in accordance with generally accepted auditing
standards by independent certified public accountants or independent licensed
public accountants, certified or licensed by a regulatory authority of a state
or other political subdivision of the United States, who may be the regular
auditors for the Company, and the Company shall furnish to the Secretary, (i)
within 105 days after the end of each fiscal year of the Company commencing
with the first fiscal year ending after the date of this agreement, a balance
sheet of the Company as of the close of such fiscal year and a statement of
income and surplus of the Company for such fiscal year, all in reasonable
detail and certified by such public accountants and in the form of M.A. Form
172 or such other form as may be approved in writing by the Secretary and shall
include a certificate of such accountants as to compliance by the Company with
the provisions hereof, and (ii) within 90 days after the expiration of each
first semi-annual period of each fiscal year commencing with the first such
semi-annual period ending after the date of this Agreement, a balance sheet of
the Company as of the end of such period, and a statement of income and surplus
of the Company from the beginning of such period to the end of such period, all
in reasonable detail, in the form of M.A. Form

20
<PAGE> 33

172 or such other form as may be approved in writing by the Secretary,
unaudited but certified as correct by a Responsible Officer of the Company on
the basis of the accounting records of the Company and to the best of his
knowledge and belief.

(b) Annual No Default Certificates. Within 120 days after each
fiscal year of the Company which ends after the execution and delivery of this
agreement, the Company shall furnish to the Secretary an Officer's Certificate
dated as of the close of such fiscal year stating whether or not, to the
knowledge of the signers, the Company is in default in the performance of or
compliance with any covenant, agreement or condition contained in (i) any
Mortgage, Security Agreement or Charter relating to any Vessel listed in
Attachment A hereto or (ii) this Agreement, and, if so specifying each such
default of which the signer may have knowledge and stating the nature thereof.

SECTION 15. Qualifying Financial Requirements of the Company.
Immediately upon the execution and delivery of this Agreement, the Company
shall have Net Worth and Working Capital of not less than the cumulative
amounts specified in Attachment A; provided that, if the Company qualifies
under Section 13(a) of this Agreement and elects pursuant to Section 13(a) to
be governed by the provisions of paragraphs (b) and (c) of Section 13, then the
Company shall meet the requirements with respect to Working Capital, Net Worth
and Long Term Debt specified in Section 13(a) immediately upon the execution
and delivery of this Agreement.

SECTION 16. Notices. Except as otherwise provided in this Title XI
Reserve Fund and Financial Agreement, notices, requests, directions,
instructions, waivers, approvals or other communication may be made or
delivered in person or by registered or certified mail, postage prepaid,
addressed to the party as provided below, or to such other address as such
party may hereafter specify in a written notice to the other parties named
herein, and all notices or other communications shall be in writing so
addressed and shall be effective upon receipt by the addressee thereof:

The Secretary as: SECRETARY OF TRANSPORTATION
c/o Maritime Administrator
Maritime Administration
400 Seventh Street, S.W.
Washington, D.C. 20590

The Title XI Reserve
Fund Depository as: See Attachment A

21
<PAGE> 34

The Company as: See Attachment A

SECTION 17. Amendments and Supplements. No agreement shall be
effective to amend, supplement, or discharge in whole or in part this Title XI
Reserve Fund and Financial Agreement unless such agreement is in writing signed
by the parties hereto. In addition this Exhibit 1 to this Agreement is a
standard Maritime Administration document and may not be altered in any way.
Any amendments, additions, deletions, substitutions or other changes affecting
the provisions as expressly stated in this Exhibit 1 shall be made only in the
Special Provisions or Attachment A. Any amendments, additions, deletions,
substitutions or other changes not made in accordance with this provision shall
be invalid and of no effect.

SECTION 18. Effect of Special Provisions. In the event of any
conflict, or inconsistency between the Special Provisions of this Title XI
Reserve Fund and Financial Agreement and this Exhibit 1, said Special
Provisions shall control.

SECTION 19. Counterparts. This Title XI Reserve Fund and Financial
Agreement may be executed in any number of counterparts. All such counterparts
shall be deemed to be originals, and shall together constitute but one and the
same instrument.

SECTION 20. Applicable Regulations. None of the regulations
hereafter issued, whether or not under Title XI of the Act, is a part of or
affects this Title XI Reserve Fund and Financial Agreement in any respect, but
the provision of the regulations issued under Title XI as in effect on the date
hereof (46 C.F.R. 298) shall control the provisions of the Reserve Fund and
Financial Agreement, except to the extent modified pursuant to the provisions
of 46 C.F.R. 298.13(h).

SECTION 21. Gender. All references to "he," "him," or "his" shall
mean "he/she," "him/her," and "his/her(s)," respectively.

<PAGE> 1

EXHIBIT 10.9

AGREEMENT AND LEASE
TRAILER BRIDGE COMPANY, INC.

THIS AGREEMENT made and entered into as of this 1st day of August,
1991, by and between the JACKSONVILLE PORT AUTHORITY, a body politic and
corporate created and existing under Chapter 63-1447, Laws of Florida, as
amended, hereinafter referred to as "AUTHORITY", and TRAILER BRIDGE COMPANY,
INC., a company incorporated under the Laws of Delaware, hereinafter referred
to as "LESSEE",

W I T N E S S E T H:

WHEREAS, AUTHORITY is the owner and operator of vessel berthing, cargo
handling and storage facilities at Blount Island Terminal ("Terminal") located
in Jacksonville, Florida; and

WHEREAS, AUTHORITY and LESSEE desire to enter into an Agreement for
the lease and use by LESSEE of certain facilities, as more fully hereinafter
set forth;

NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, AUTHORITY and LESSEE do hereby mutually undertake,
promise and agree, each for itself and its successors and assigns, as follows:

SECTION 1. DESCRIPTION OF LEASED PREMISES

AUTHORITY does hereby agree to lease to LESSEE, during the term and
for the uses set forth in Sections 2 and 3 respectively hereof, and upon and
subject to the terms and conditions hereinafter specified, the facilities
located on the Terminal, hereinafter referred to as "Leased Premises", as
indicated by plat on Exhibit A hereof.
<PAGE> 2

SECTION 2. TERM OF AGREEMENT

A. This Agreement shall become effective on the date set forth on
Exhibit B ("Commencement Date"), subject to approval by the Federal Maritime
Commission ("FMC"). However, if there is (i) any ruling from the FMC
disclaiming jurisdiction over this Agreement, or (ii) any ruling by an
appropriate authority that the FMC has no jurisdiction over this Agreement,
then the Commencement Date shall be the date of such ruling. Upon the
Commencement Date, the term ("Term") of this Agreement shall be for the period
set forth on Exhibit B, subject to termination contained herein.

B. Upon mutual agreement, LESSEE may extend this Agreement for
two (2) additional terms of five (5) years each. Notice of LESSEE's desire to
exercise this option must be given to AUTHORITY in writing at least sixty (60)
days prior to the end of the then current term.

C. In the event LESSEE continues its operations on the Leased
Premises after expiration of this Agreement without any written extension
thereof, such continuation shall not be deemed to operate as a renewal or
extension of this Agreement, but such operations shall be governed by the then
applicable terms of this Agreement. Such operations may be terminated by
AUTHORITY upon sixty (60) days written notice.

SECTION 3. USE OF LEASED PREMISES

A. LESSEE shall have the right to use the Leased Premises for a
Roll/On Roll/Off, or Lift/On Lift/Off, container/trailer handling facility and
related services. LESSEE shall be prohibited from using any portion of the
Leased Premises for any other purpose without prior written approval from the
AUTHORITY, as set forth in Section 19.A. hereof.

2
<PAGE> 3

SECTION 4. BARGES

A. For the duration of the operation contemplated herein,
AUTHORITY may allocate AUTHORITY-owned lash barge Number 416 for LESSEE 5 use
in the project. All maintenance and repair of the barge shall be the
responsibility of the LESSEE. Upon termination of this Agreement, by expiration
of Term or otherwise, said barge shall be returned to the AUTHORITY in good
condition and repair, reasonable wear and tear excepted.

B. LESSEE may provide its own Floating Discharge Ramp ("Ramp")
for the operation. LESSEE shall move the Ramp, at its sole expense, upon the
AUTHORITY's request to a location indicated by AUTHORITY, in order to allow
clearance for other operations. All maintenance and repair of the Ramp shall be
the responsibility of the LESSEE.

SECTION 5. FEES AND CHARGES

A. Rental Rates: In consideration of all rights and privileges
herein granted, LESSEE shall pay to AUTHORITY the monthly rate, plus applicable
state sales tax, indicated on Exhibit B.

1. Payments: All monthly payments for the Leased
Premises shall be due on the first day of each month. Should this Agreement
commence on any day other than the first of the month, or terminate on any day
other than the last day of the month, the amount will be prorated in proportion
with the rights and privileges enjoyed during that month.

2. Adjustments:

a. The rental rate indicated on Exhibit B shall
be adjusted on the first anniversary of the Commencement Date of this
Agreement, and every year thereafter, including any renewal periods. The rental
rate for each year shall be the rental rate for the previous year, plus the
product of the percent of increase in the Consumer Price Index, U.S. Urban Wage

3
<PAGE> 4

Earners and Clerical Workers, 1967=100, ("CPI"), for the previous year, times
the rental rate during the previous year.

b. Adjustment of rental rate on Exhibit B shall
apply without necessity of formal amendment of this Agreement, provided,
however, that any amendment hereto shall be filed with the FMC, in accordance
with Section 25 hereof.

3. Delinquent and Late Fees and Charges:

a. A late fee assessment of five percent (5%)
will be imposed on all payments not made within ten (10) days after the due
date thereof, and shall become additional rent due and payable, until said
payment is received by the AUTHORITY. Said late fee assessment shall be
calculated from the first day payment was due.

b. If any rental fees required by this Agreement
are not paid within thirty (30) days of the due date, AUTHORITY reserves the
right to terminate this Agreement with fifteen (15) days written notice to
LESSEE, in accordance with the provisions set forth in Section 21, Paragraph C,
hereof. Upon such date, LESSEE shall be deemed to have no further rights
hereunder and AUTHORITY may take possession of the Leased Premises by any means
available to it by law. In such event, AUTHORITY shall have the right to
recover all expenses incurred by reason of the breach, including, but not
limited to, reasonable attorney's fees and court costs.

B. Throughput:

1. Throughput Rates: LESSEE shall pay the AUTHORITY the
throughput rates stipulated on Exhibit B.

2. Reporting and Payment: LESSEE shall submit vessel
manifest no later than three (3) days after said vessel sails. Payment of
AUTHORITY's invoice therefor, and any

4
<PAGE> 5

delinquent or late fees for throughput, shall be assessed and handled in
accordance with AUTHORITY's published tariff or its reissue.

3. Adjustments:

a. On October 1 of each year, the AUTHORITY
shall determine and calculate the overall increase, if any, of the rates and
charges in its published tariff during the preceding twelve (12) month period.
Commencing October 1, 1992, and every year thereafter, the throughput rates on
Exhibit B shall increase annually in an equal and like percentage for the
ensuing year.

b. Adjustment of throughput rates on Exhibit B
shall apply without necessity of formal amendment of this Agreement, provided,
however, that any amendment hereto shall be filed with the FMC, in accordance
with Section 25 hereof.

C. Dockage:

1. Dockage Rates: LESSEE shall pay the AUTHORITY the
dockage rates stipulated on Exhibit B.

2. Adjustments:

a. On October 1 of each year, the AUTHORITY
shall determine and calculate the increase, if any, of the rates and charges
for dockage in its published tariff during the preceding twelve (12) month
period. Commencing October 1, 1992, and every year thereafter, the dockage
rates on Exhibit B shall increase annually in an equal and like percentage for
the ensuing year.

5
<PAGE> 6

b. Adjustment of dockage rates on Exhibit B
shall apply without necessity of formal amendment of this Agreement, provided,
however, that any amendment hereto shall be filed with the FMC, in accordance
with Section 25 hereof.

3. Delinquent and Late Fees and Charges: Delinquent and
Late fees for dockage shall be assessed in accordance with AUTHORITY's
published tariff or its reissue.

D. Other Fees and Charges: LESSEE shall pay any other fees and
charges due and payable to the AUTHORITY as stipulated on Exhibit B.

SECTION 6. PREFERENTIAL BERTHING

LESSEE may use Berth No. 7 on a preferential basis on one (1)
designated day per week. Said designation shall be made by LESSEE and furnished
to the AUTHORITY in writing. Said designation may be changed by LESSEE with
thirty (30) days prior written notice to the AUTHORITY, and shall be approved
as long as said change does not conflict with other berthing agreements.

SECTION 7. UTILITIES

LESSEE shall be responsible for promptly paying those persons
furnishing or providing utility connections and services to the Leased
Premises, which shall include, but not necessarily be limited to, electricity,
gas, sewage, water, janitorial, trash removal and telephone service.

SECTION 8. TAXES AND ASSESSMENTS

LESSEE shall, at its own expense, pay all taxes and assessments levied
against its interest in the Leased Premises as well as all taxes and
assessments levied against the personal property used by it in its operations
at the Leased Premises. None of the terms, covenants or conditions of this
Agreement shall be construed as a release or waiver on the part of AUTHORITY,
as a

6
<PAGE> 7

political subdivision of the State of Florida and the City of Jacksonville of
the right to assess, levy and collect any license, personal, intangible,
occupation or other tax which shall be lawfully imposed on the business or
property of LESSEE.

SECTION 9. INDEMNIFICATION AND INSURANCE

A. LESSEE agrees to indemnify and hold AUTHORITY, its agents and
employees harmless from and against all liabilities, judgments, costs, damages
and expenses which may accrue against, be charged to or recovered from
AUTHORITY by reason of or on account of damage to the property of, injury to,
or death of any person, arising from the LESSEE's use, occupancy and operation
of the Leased Premises and use of AUTHORITY's equipment, including leakage or
spillage of any substance used or handled by LESSEE in its operation, and
including acts of its agents, employees, contractors and subcontractors, except
when caused by the negligence of AUTHORITY, its agents, employees, contractors
or subcontractors; provided that AUTHORITY shall give LESSEE prompt and timely
notice of any claim made or suit instituted which, in any way, affects LESSEE
or its insurers, and LESSEE or its insurers shall have the right to compromise
and defend the same to the extent of their own interests. Provided prompt and
timely notice of any claim or suit is given LESSEE, any final judgment rendered
against AUTHORITY for any cause for which LESSEE is liable hereunder shall be
conclusive against LESSEE as to liability and amount.

B. LESSEE shall, at its own expense, keep in force insurance of
the types and in not less than the amounts stipulated on Exhibit C, issued by a
company or companies of sound and adequate financial responsibility, acceptable
to the AUTHORITY and licensed to do business in the State of Florida, insuring
LESSEE and AUTHORITY against all liabilities for death, injuries or

7
<PAGE> 8

damages arising out of or in connection with LESSEE's use, occupancy and
operation of the Leased Premises by LESSEE, containing fire and extended
coverage on all equipment and improvements in the amount of the full insurable
value of such equipment and improvements, and shall furnish to AUTHORITY
certificates evidencing such insurance, naming AUTHORITY as an additional
insured thereunder as stipulated on Exhibit C, subject to the limitations set
forth above in respect to AUTHORITY's negligence. Certificates evidencing the
existence thereof, all in such form as the Director of Corporate Services may
require, or binder, shall be delivered to said Director upon the execution of
this Agreement. Each policy or certificate shall contain a valid provision or
endorsement that, "This policy will not be canceled or materially changed or
altered without first giving thirty (30) days written notice in advance thereof
to the Director of Corporate Services, Jacksonville Port Authority, Post Office
Box 3005, Jacksonville, Florida 32206," sent by certified mail, return receipt
requested.

1. The insurance requirements on Exhibit C shall be subject to
periodic review by the AUTHORITY and adjustment to maintain current industry
standards. Adjustment of insurance requirements on Exhibit C shall apply
without necessity of formal amendment of this Agreement, in accordance with
Section 25 hereof.

SECTION 10. RELOCATION OF LESSEE

During the Term of this Agreement, and any renewal or extension
thereof, should relocation of LESSEE be necessary, AUTHORITY reserves the right
to designate, assign or relocate LESSEE to a comparable location on AUTHORITY's
facilities, so long as LESSEE's operation is not adversely affected by such
relocation. AUTHORITY shall pay for the reasonable costs for such relocation,
unless relocation is requested by LESSEE.

8
<PAGE> 9

SECTION 11. MAINTENANCE OF LEASED PREMISES

A. During the term of this Agreement, and any extensions thereof,
LESSEE shall, at its own expense, perform normal maintenance on the Leased
Premises and shall keep the Leased Premises and any improvements thereon in a
reasonably good and clean state of repair and preservation, making all
necessary and proper replacements thereof and repairs thereto.

B. AUTHORITY and its duly authorized officers, employees, agents
or assigns shall have the right, at reasonable times, upon reasonable notice
and during normal working hours, and at any time in case of an emergency, to
enter upon any of the Leased Premises for the following purposes:

1. To inspect the Leased Premises at reasonable
intervals to determine whether the LESSEE has complied and is complying with
the terms and conditions of this Agreement with respect to the Leased Premises.
The right of inspection reserved to AUTHORITY hereunder shall impose no
obligation on AUTHORITY to make inspections to ascertain the condition of
repair or preservation of the said premises and improvements thereon and shall
impose no liability upon AUTHORITY for failure to make such inspections.

2. To perform maintenance and make repairs and
replacements in any case where LESSEE is so obligated and has failed to do so
after reasonable prior written notice, in which event LESSEE shall promptly
reimburse AUTHORITY for all reasonable costs thereof.

3. No such entry as set forth herein on behalf of the
AUTHORITY upon any of the Leased Premises shall cause or constitute a
termination of this Agreement or be deemed to constitute an interference with
the possession thereof by LESSEE.

9
<PAGE> 10

SECTION 12. ALTERATIONS AND IMPROVEMENTS

A. LESSEE shall make no improvements to the Leased Premises
without prior agreement and written consent of AUTHORITY, subject to the
provisions set forth in Section 26.

1. Should LESSEE desire to make alterations or
improvements to the Leased Premises, LESSEE shall present the request to the
AUTHORITY, along with plans and specifications for construction. LESSEE shall
not commence with any construction without AUTHORITY's written Notice to
Proceed, subject to the provisions set forth in Section 26.

2. After construction is completed, a set of as-built
drawings will be supplied to the AUTHORITY for its records.

SECTION 13. SURRENDER OF LEASED PREMISES

LESSEE covenants that, at the expiration of the Term of this Agreement
or any extension thereof, or at any earlier termination thereof, it will quit
and surrender the Leased Premises in good state and condition, reasonable wear
and tear excepted. All buildings, fixtures and other improvements to the
Leased Premises made by LESSEE shall remain on the Leased Premises and become
the exclusive property of the AUTHORITY. LESSEE shall, however, forthwith
remove all equipment, trade fixtures and personal property belonging to it, and
any damage caused by the removal of such equipment and/or property shall be
repaired by the LESSEE at its expense.

SECTION 14. ACCESS TO PREMISES

A. LESSEE, its officers, employees, and all other persons or
firms doing business with it shall have unimpeded and unobstructed right of
ingress to and egress from the Leased Premises by means designated and provided
by AUTHORITY.

10
<PAGE> 11

B. Access roads or railroads shall, without exception, be in
common with such persons (including at the option of AUTHORITY, the general
public) as AUTHORITY may authorize or permit, and shall be subject to and in
accordance with all applicable local laws and ordinances and such reasonable
rules and regulations as may be adopted by AUTHORITY for the regulation and
control of the users thereof.

C. AUTHORITY may, at any time, close, relocate, reconstruct,
change, alter or modify all such means of access, either temporarily or
permanently; provided, however, that at all times, a reasonably convenient and
adequate alternative means of access is made available to LESSEE.

SECTION 15. ASSIGNMENT AND SUBLETTING

LESSEE shall not assign or transfer any of the rights granted in this
Agreement, nor shall LESSEE subassign or otherwise transfer any interest in or
to the Leased Premises without the prior written consent of AUTHORITY, subject
to Section 26 hereof.

SECTION 16. FORCE MAJEURE

Neither AUTHORITY nor LESSEE shall be deemed to be in breach of this
Agreement by reason of failure to perform any of its obligations hereunder if,
while and to the extent that such failure is due to boycotts, shortages of
materials, labor disputes or troubles, shipwrecks or obstructions to
navigation, acts of God, acts of public enemy, acts of superior governmental
authority, floods, riots, rebellion, sabotage by third parties, or any other
similar circumstances for which they are not reasonably responsible and which
are not within their control.

11
<PAGE> 12

SECTION 17. GOVERNING LAW

This Agreement is to be read and construed in accordance with the laws
of the State of Florida.

SECTION 18. NO PERSONAL LIABILITY

No director, officer or employee of either party hereto shall be held
personally liable under the Agreement because of its execution or attempted
execution.

SECTION 19. LAWS, ORDINANCES, AND RULES AND REGULATIONS TO BE OBSERVED

A. LESSEE shall not use or permit the use of the Leased Premises
for any purpose or use other than those authorized by this Agreement, except as
may be mutually agreed upon in writing.

B. LESSEE shall not use or occupy the Leased Premises or permit
same to be used or occupied for any unlawful purpose or for any purpose that is
hazardous on account of fire, explosion, contamination or otherwise.

C. LESSEE shall comply with and shall cause its officers,
employees and any other persons over whom it has control to comply with any and
all municipal, state and federal laws, ordinances, and rules and regulations,
including but not limited to OSHA, USCG, EPA, DER, DNR, DOT and AUTHORITY's
published tariff, and will be held responsible for any violation of same. This
responsibility shall include, but not be limited to, any investigative, clean
up or restoration costs associated with any spill or leakage of any substance
used or handled by LESSEE in its operation.

12
<PAGE> 13

D. LESSEE shall be responsible for obtaining all permits and/or
licenses from any of the above entities or agencies as necessary for it to
perform the operation contemplated herein, and shall maintain said permits
and/or licenses current throughout the Term of this Agreement.

E. The AUTHORITY reserves the right to enter upon the Leased
Premises, at reasonable times and upon reasonable notice, to inspect the Leased
Premises in regards to LESSEE's compliance with applicable laws and
regulations, and the terms and conditions of this Agreement.

SECTION 20. SECURITY

AUTHORITY shall provide a twenty-four (24) hour per day, seven (7) day
per week, roving guard service. Any additional security required shall be the
responsibility of LESSEE.

SECTION 21. TERMINATION OF AGREEMENT

A. AUTHORITY, at its option, may declare this Agreement
terminated in its entirety and exercise all rights of re-entry upon the Leased
Premises upon the happening of any one or more of the following events:

1. If the fees, charges or other money payments which
LESSEE herein agrees to pay or is obligated to pay under any other agreement
with AUTHORITY, or any part thereof, shall be unpaid on the date the same shall
become due; or

2. If LESSEE shall file a voluntary petition in
bankruptcy, or make a general assignment for the benefit of creditors, or if
LESSEE is adjudicated bankrupt; or

3. If any act occurs which operates to deprive LESSEE
permanently of the rights, powers and privileges necessary for the proper
conduct and operation of its business; or

13
<PAGE> 14

4. If LESSEE abandons and ceases to use the Leased
Premises for a period of sixty (60) days at any one time, except when such
abandonment and cessation is due to fire, earthquake, strike, action of any
government, default of AUTHORITY, or other cause beyond LESSEE's control; or

5. If LESSEE shall use or permit the use of the Leased
Premises at any time for any purpose for which the use thereof at that time is
not authorized by this Agreement or by a subsequent written agreement between
the parties hereto, or shall use or permit the use thereof in violation of any
law, rules or regulations to which LESSEE has agreed in this Agreement to
conform; or

6. If LESSEE shall be in violation of any of the
provisions of the Agreement with respect to the Leased Premises.

B. LESSEE, in addition to any other remedies which it may have,
at its option, may declare this Agreement terminated in its entirety upon the
happening of any one or more of the following events:

1. If a court of competent jurisdiction issues an
injunction against AUTHORITY or any successor thereto preventing or restraining
the use of the Leased Premises in its entirety, or any part thereof, which may
be used by LESSEE for its operations, and if such injunction remains in force
for a period of ninety (90) days or more; or

2. If the Leased Premises become unusable in whole or
substantial part for the purposes herein contemplated, and the AUTHORITY does
not terminate the use thereof, pursuant to an option reserved to it in this
Agreement, and does not proceed as promptly as

14
<PAGE> 15
reasonably practicable with the repairs necessary to restore the Leased
Premises to its condition prior to the occurrence of the damage; or

3. If AUTHORITY fails to provide and maintain means for
unobstructed ingress and egress to and from the Leased Premises in accordance
with the provisions of this Agreement; or

4. If by violation of the terms and conditions contained
herein, AUTHORITY shall substantially interfere with the use by LESSEE of the
Leased Premises for the purposes for which the use thereof at this time is
authorized by this Agreement.

C. Notwithstanding anything to the contrary contained in this
Agreement, no termination declared by either party shall be effective unless
and until not less than thirty (30) days have elapsed after written notice to
the other party specifying the date upon which such termination shall take
effect and the cause for which it is being terminated, and if such termination
is by reason of a default under this Agreement for which termination is
authorized, specifying such default with reasonable certitude. No such
termination shall be effective if such cause or default shall have been cured
or obviated during such thirty (30) day period, or in the event such cause or
default, by its nature, cannot be cured within such thirty (30) day period,
such termination shall not be effective if correction of the cause or default
is commenced within said thirty (30) days and completed as promptly as
reasonably practicable. Provided, however, that if LESSEE has not paid rental
fees within the thirty (30) day period specified in Section 5, Paragraph
A.3.(b.) hereof, AUTHORITY must give LESSEE notice of its intent to terminate
this Agreement within fifteen (15) days thereafter; however, if payment is made
within said period of fifteen (15) days, said notice shall be of no force or
effect.

15
<PAGE> 16

SECTION 22. WAIVERS

No waiver by either party at any time of any of the terms, conditions,
covenants, or agreements herein shall be deemed or taken as a waiver at any
time thereafter of same or any other term, condition, covenant or agreement
herein contained, nor of the strict and prompt performance thereof. No delay,
failure or omission of AUTHORITY to re-enter the Leased Premises, and no
subsequent acceptance by AUTHORITY of fees then or thereafter accrued, and no
delay, failure or omission of either party to exercise any right, power,
privilege or option arising from any default, shall impair any such right,
power, privilege or option or be construed to be a relinquishment thereof, or a
waiver of such default or acquiescence therein; and no notice by either party
shall be required to restore or revive any option, right, power, remedy or
privilege after waiver by such party of default in one or more instances. No
option, right, power, remedy or privilege of either party shall be construed as
being exhausted or discharged by the exercise thereof in one or more instances.
Each and all of the rights, powers, options or remedies given to either party
by this Agreement shall be cumulative, and no one of them shall be exclusive of
the other or exclude any remedies provided by law, and the exercise of one
right, power, option or remedy shall not preclude the exercise of any other
right, power, option or remedy, except in those cases where it is expressly so
provided.

SECTION 23. ENTIRE AGREEMENT: MODIFICATIONS

A. This Agreement constitutes the entire present agreement
between AUTHORITY and LESSEE with respect to the Leased Premises.

16
<PAGE> 17

B. No change in, modification of or supplement to this Agreement
shall be valid or enforceable unless it is enacted in writing and signed by the
duly authorized representative of AUTHORITY and LESSEE.

SECTION 24. INVALID PROVISION

In the event any covenant, condition or provision herein contained is
held to be invalid by any court of competent jurisdiction,the invalidity of any
such covenant, condition or provision shall not materially prejudice either
party thereto in its respective rights and obligations contained in the valid
covenants conditions or provisions in this Agreement.

SECTION 25. EXHIBITS

A. All exhibits or schedules referred to herein, or which from
time to time may be referred to in any duly executed amendment hereto, are by
such reference incorporated herein and shall be deemed a part of this Agreement
as if fully set forth herein. Any exhibit or schedule incorporated herein may
be adjusted without the necessity of formal amendment of this Agreement. Upon
adjustment of any exhibit or schedule, a revised exhibit or schedule shall be
prepared by the AUTHORITY and executed by the parties hereto. Each successive
exhibit or schedule, as it supersedes the previous exhibit or schedule as to
its effective date, shall be deemed a part of this Agreement at all times.

B. Any revised exhibit or schedule, or any amendment to this
Agreement, shall not become effective until it is filed with the FMC, subject
to Section 2 hereof.

17
<PAGE> 18

SECTION 26. WITHHOLDING REQUIRED APPROVALS
Whenever approval, notice or consent by the AUTHORITY or LESSEE is
required by the terms of this Agreement, no such approval, notice or consent
shall be unreasonably requested, withheld or denied.

SECTION 27. NOTICES, CONSENTS AND APPROVALS

All notices, consents and approvals required or authorized by this
Agreement shall be validly and sufficiently served, given or made if mailed,
postage prepaid, to:

AUTHORITY: Jacksonville Port Authority
Post Office Box 3005
Jacksonville, Florida 32206

LESSEE: Trailer Bridge Company, Inc.
660 Madison Avenue, Suite 1708
New York, New York 10021

or in such other place as either party shall in writing designate in the manner
provided herein. Such notices, consents and approvals shall be deemed to be
served as of the date of mailing.

SECTION 28. PLACE OF PAYMENTS

Payments required hereunder shall be made to the Jacksonville Port
Authority, Director of Corporate Services, Post Office Box 3005, Jacksonville,
Florida 32206.

SECTION 29. HEADINGS

The headings of the sections of this Agreement are included only as a
matter of convenience and for reference and in no way define, limit or describe
the scope or intent of the provisions and shall not be construed to affect in
any manner the terms and provisions hereof or the interpretation or
construction thereof.

18
<PAGE> 19

SECTION 30. COUNTERPART

This Agreement may be signed in any number of counterparts, each of
which shall be deemed an original so long as it bears the signature of both
parties.

SECTION 31. LIENS AND ENCUMBRANCES

LESSEE agrees to keep the Leased Premises free and clear of all liens
and encumbrances arising or growing out of the use and occupancy of the Leased
Premises by LESSEE, its agents, contractors and subcontractors.

SECTION 32. WARRANTIES AND REPRESENTATIONS

A. LESSEE warrants and represents that it has corporate power to
enter into this Agreement and to perform all acts herein required to be
performed by it and that its execution and delivery hereof have been duly
authorized by all necessary corporate action.

B. AUTHORITY warrants and represents that it has corporate power
to enter into this Agreement and to perform all acts required of it hereunder,
and that its execution and delivery hereof have been duly authorized by all
necessary corporate action.

SECTION 33. INTERRUPTION OF SERVICES OR FACILITIES

AUTHORITY does not warrant that any of the utilities, services or
facilities mentioned herein will be free from interruptions caused by repairs,
renewals, improvements, alterations, strikes, lockouts, accidents, inability of
AUTHORITY to obtain utilities or supplies or other cause or causes beyond the
reasonable control of AUTHORITY. Except as otherwise provided, no such
interruption of utilities, services or facilities shall be deemed an eviction
or disturbance of the use or possession of the Leased Premises or any part
thereof by LESSEE, or render AUTHORITY

19
<PAGE> 20

liable to LESSEE for damages or relieve LESSEE from performance of its
obligations under this Agreement.

SECTION 34. INSPECTION OF RECORDS

Each party hereto, at its expense and upon reasonable notice shall
have the right to inspect the books, records and other data of the other party
relating to the provisions and requirements hereof, provided such inspection is
made during regular business hours.

SECTION 35. EMINENT DOMAIN

If all or any part of the Leased Premises shall be taken or condemned
under power of eminent domain by a higher governmental authority, either before
or during the Term of this Agreement, then, and in that event, the Term of this
Agreement shall cease and terminate from the date when the possession of the
part so taken shall be required, and LESSEE shall have no claim or interest in
or to any award of damages for such taking.

20
<PAGE> 21

IN WITNESS WHEREOF, the parties have caused these presents to
be signed by their duly authorized officers and their official or corporate
seals to be affixed hereto and attested as of this 1st day of August, 1991.

Signed, sealed and delivered JACKSONVILLE PORT AUTHORITY
in the presence of:

/s/ Maribel Hernandez By:/s/ Thomas E. Delcomyn
- -------------------------- -------------------------------
(Signature) (Signature)

Title Deputy Managing Director
-----------------------------
(Please print or type)

/s/ Aida L. Tullis Attest /s/ Susan Miller
- -------------------------- ----------------------------
(Signature) (Signature)

Title Director of Corporate Services
-------------------------------------
(Please print or type)

Signed, sealed and delivered TRAILER BRIDGE COMPANY, INC.
in the presence of:

/s/ William G. Gotimer By:/s/ P. E. Burnside
- -------------------------- -------------------------------
(Signature) (Signature)

Title President
-----------------------------
(Please print or type)

/s/ William G. Gotimer Attest /s/ John D. McCown
- -------------------------- -----------------------------------
(Signature) (Signature)

Title /s/ Secretary
---------------------------
(Please print or type)

Approved as to legality and form:

/s/ Lou Black
- --------------------------
Assistant Counsel

21
<PAGE> 22

Trailer Bridge Company, Inc.

/ / Ten (10) acres
/ / First Right of Refusal Area

Dated: August 1, 1991

Initials

PEB TED
--- ---
Lessee Authority

EXHIBIT A
MAP OF PROPERTY
<PAGE> 23

EXHIBIT B
SCHEDULE OF FEES AND CHARGES
TRAILER BRIDGE COMPANY, INC.
DATED: AUGUST 1, 1991

I. TERM: Five (5) years, commencing _________________, subject to
Section 2 hereof.

II. RENTAL RATES:

A. Leased Premises: ANNUAL RATE: MONTHLY RATE:
Ten (10) acres @
$13,000/ac/yr $13,000.00 $10,833.33

B. First Right of Refusal Area: Lessee shall have a first right of
refusal on approximately seven (7) contiguous acres located south of
the Leased Premises. Should this parcel become available, and Lessee
exercises this first right of refusal, this Exhibit B shall be revised
to reflect the inclusion of the contiguous parcel into the Leased
Premises, subject to Section 25 hereof, at the then current rental
rate of this Agreement.

III. THROUGHPUT: includes wharfage and terminal use

$28.00 per loaded container

IV. DOCKAGE:

A. Cargo Barge - $2.67 per lineal foot of the vessel, assessed and
handled in accordance with Authority's published tariff or its
reissue. Tariff charges shall also apply to idle dockage of cargo
barges.

B. Ramp Barge - $2.67 per lineal foot of the vessel, assessed during
stevedoring operations for a minimum of twenty-four (24) hours, and in
six (6) hour increments thereafter. There shall be no dockage charge
when the Ramp Barge is docked at the approved lay berth, provided
however, the stipulations of Section 4.B. are observed.

V. OTHER FEES AND CHARGES: Any other fees and charges due and payable to
the Authority by Lessee and not stipulated by this Agreement shall be
assessed
<PAGE> 24

and handled in accordance with Authority's published tariff or its
reissue, unless otherwise agreed to in writing.

TRAILER BRIDGE COMPANY, INC. JACKSONVILLE PORT AUTHORITY

/s/ P. E. Burnside /s/ Thomas E. Delcomyn
- ---------------------------------- ----------------------------------

FMC Approval Date of FMC Number
--------------------- --------------------------

EXHIBIT B
<PAGE> 25

EXHIBIT C
SCHEDULE OF INSURANCE REQUIREMENTS
TRAILER BRIDGE COMPANY, INC.
DATED:_____________________________

1. WORKERS COMPENSATION
Part I State requirement
Part II
Each Accident $ 500,000
Disease-Policy Limit $ 500,000
Disease-Each Employee $ 500,000

2. COMMERCIAL GENERAL LIABILITY-Authority shall be named an additional
insured.
Combined Single Limit of Liability
General Aggregate $1,000,000
Each Occurrence $1,000,000

3. COMPREHENSIVE AUTOMOBILE LIABILITY-Coverage shall include owned,
non-owned and hired automobiles.
Combined Single Limit
of Liability $1,000,000

TRAILER BRIDGE COMPANY, INC. JACKSONVILLE PORT AUTHORITY

/s/ P. E. Burnside /s/ Thomas E. Delcomyn
- ---------------------------- -----------------------

EXHIBIT C
<PAGE> 26

ACKNOWLEDGEMENT OF SIGNATURES

STATE OF FLORIDA )
COUNTY OF DUVAL )

The foregoing instrument was acknowledged before me this 1st day of
August, 1991, by Thomas E. Delcomyn and Susan Miller, the Deputy Managing
Director and the Director of Corporate Services, respectively, of the
JACKSONVILLE PORT AUTHORITY, a public body corporate and politic of the State
of Florida, on behalf of the AUTHORITY, and their business address is Post
Office Box 3005, Jacksonville, Florida 32206.

/s/ Deborah G. Clayton
----------------------------------
(Signature)
Notary Public
(NOTARIAL SEAL) State of Florida at Large

My Commission Expires: May 31, 1993

STATE OF NEW YORK )
COUNTY OF NEW YORK )

The foregoing instrument was acknowledged before me this 19th day of
July, 1991, by P. E. Burnside and John D. McCown, the President and the
Secretary, respectively, of TRAILER BRIDGE COMPANY, INC., a Delaware
corporation, on behalf of the corporation, and their business is Transshipment
of goods.

/s/ William G. Gotimer
----------------------------------
(Signature)
Notary Public
(NOTARIAL SEAL) State of New York at Large
No. 41-4837705
Qualified in Queens County

My Commission Expires: July 31, 1991

<PAGE> 27

C E R T I F I C A T I O N

State of Florida

County of Duval

I, the undersigned authority, hereby certify that the foregoing is a
true and correct copy of the instrument presented to me by the Jacksonville
Port Authority as the original of such instrument.

WITNESS my hand and official seal this 1st day of August, 1991.

/s/ Deborah G. Clayton
----------------------------------
NOTARIAL SEAL Notary Public
State of Florida

My Commission expires: 5/31/93

<PAGE> 1
EXHIBIT 10.9.1

AMENDMENT #5
TO EXHIBIT B
SCHEDULE OF FEES AND CHARGES
TRAILER BRIDGE, INC.

This Amendment Number 5 to Exhibit B shall replace and supersede the existing
Exhibit B as part of the Agreement and Lease between the Lessee and Authority
dated August 1, 1991, FMC Number 224-200555. This Amendment addresses annual
rate increases as provided for in Section 5 of said Agreement, initiates the
first Five (5) year renewal term and shall become effective upon filing with
the Federal Maritime Commission ("FMC").

I. Term of Agreement Pursuant to Section 2 Thereof: Five years
commencing _______________________________________________.

II. RENTAL RATES ANNUAL MONTHLY

A. Ten (10) acres @ $14,901.64 $149,016.36 $12,418.03

B. First Right of Refusal Area: Lessee shall have a first right
of refusal on approximately seven (7) contiguous acres located south of the
Leased Premises. Should this parcel become available, and Lessee exercises
this first right of refusal, this Exhibit B shall be revised to reflect the
inclusion of the contiguous parcel into the Leased Premises, subject to Section
25 hereof, at the then current rental rate of this Agreement.

III. THROUGHPUT: includes wharfage and terminal use

$ 33.98 per loaded container

IV. DOCKAGE:

A. Cargo Barge - $3.24 per linear foot of the vessel, assessed
and handled in accordance with Authority's published tariff or its
reissue. Tariff charges shall also apply to idle dockage of
cargo barges.

B. Ramp Barge - $3.24 per linear foot of the vessel, assessed
during stevedoring operations for a minimum of twenty-four (24) hours,
and in six (6) hour increments thereafter. There shall be no dockage
charge when the Ramp Barge is docked at the approved lay berth,
provided however, the stipulations of Section 4.B. are observed.
<PAGE> 2

V. OTHER FEES AND CHARGES: Any other fees and charges due and payable to
the Authority by Lessee and not stipulated by this Agreement shall be assessed
and handled in accordance with Authority's published tariff or its reissue,
unless otherwise agreed to in writing.

FMC Approval Date ______________________________ of FMC Number_________________

Review and Approval
Jacksonville Port Authority

Initials

-------- ---------
Marine Corporate
Division Services

<PAGE> 1
EXHIBIT 10.11

TRAILER BRIDGE, INC.

STOCK INCENTIVE PLAN

<PAGE> 2

TRAILER BRIDGE, INC.
STOCK INCENTIVE PLAN

Table of Contents

<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Article II Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 AFFILIATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.5 EXCHANGE ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.6 FAIR MARKET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.7 INCENTIVE STOCK OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.8 KEY EMPLOYEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.9 NON-EMPLOYEE ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.10 NON-EMPLOYEE DIRECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.11 NON-QUALIFIED STOCK OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.12 OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.13 PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.14 PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.15 RULE 16B-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.16 SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.17 TEN PERCENT SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Article III Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Article IV Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 NUMBER OF SHARES AVAILABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 SHARES SUBJECT TO TERMINATED OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.3 ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Article V Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.1 GRANT OF OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.2 COMPLIANCE WITH CODE SECTION 162(M) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Article VI Terms Applicable to All Options Granted Under the Plan . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.1 OPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

</TABLE>

<PAGE> 3

<TABLE>
<S> <C> <C>
6.2 OPTIONS MAY BE GRANTED SEPARATELY OR TOGETHER; NO LIMITATIONS ON OTHER OPTIONS . . . . . . . . . . . 5
6.3 ACCELERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.4 LIMITATIONS ON TRANSFER OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.6 RIGHTS AND STATUS OF RECIPIENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.7 OPTIONS NOT INCLUDABLE FOR BENEFIT PURPOSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.8 SHARE CERTIFICATES; REPRESENTATION BY PARTICIPANTS; REGISTRATION REQUIREMENTS . . . . . . . . . . . 7

Article VII Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.1 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.2 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Article VIII General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.1 EFFECTIVE DATE OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2 UNFUNDED STATUS OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.3 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

</TABLE>

<PAGE> 4

TRAILER BRIDGE, INC.
STOCK INCENTIVE PLAN

ARTICLE I PURPOSE

1.1 The purpose of the Trailer Bridge, Inc. Stock Incentive Plan
(the "Plan") is to assist Trailer Bridge, Inc. (the "Company") and its
Affiliates in attracting and retaining highly competent individuals to serve as
Key Employees, Non-Employee Advisors and Non-Employee Directors who will
contribute to the Company's success, and in motivating such persons to achieve
long-term objectives which will inure to the benefit of all shareholders of the
Company.

ARTICLE II DEFINITIONS

2.1 AFFILIATE means (a) any corporation that is defined as a
subsidiary corporation in Section 424(f) of the Code, or (b) any corporation
that is defined as a parent corporation in Section 424(e) of the Code.

2.2 BOARD means the Board of Directors of the Company.

2.3 CODE means the Internal Revenue Code of 1986, as amended from
time to time. Any reference to a particular section of the Code shall include
any subsequently enacted successor provision thereto.

2.4 COMMITTEE means a committee of the Board designated by the
Board to administer the Plan, which committee shall be composed of not less
than two directors, each of whom shall qualify as an "outside director," as
defined in Section 162(m) of the Code, in the event that and so long as the
Company shall be subject to such provision, and as a "non-employee director"
within the meaning of Rule 16b-3, in the event that and so long as the Company
shall have a class of securities registered under Section 12 of the Exchange
Act. The Board may serve as the Committee in the event that the Company is not
subject to either such provision.

2.5 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.

2.6 FAIR MARKET VALUE means, with respect to any property
(including, without limitation, any Shares or other securities), the fair
market value of such property determined by such methods as shall be
established from time to time by the Committee.

2.7 INCENTIVE STOCK OPTION means an Option designated as an
incentive stock option as defined in Code Section 422.

2.8 KEY EMPLOYEE means any officer or other key employee of the
Company or of any Affiliate who is in a position to make a significant
contribution to the management, growth, or profitability of the business of the
Company or any Affiliate, as determined by the Committee.

<PAGE> 5

2.9 NON-EMPLOYEE ADVISOR means any individual who provides
services to the Company who is in a position to make a significant contribution
to the management, growth, or profitability of the business of the Company or
any Affiliate, as determined by the Committee, but is not an employee of the
Company or any Affiliate.

2.10 NON-EMPLOYEE DIRECTOR means a member of the Board of Directors
of the Company who is not an employee of the Company or any Affiliate.

2.11 NON-QUALIFIED STOCK OPTION means an Option that is not an
Incentive Stock Option as defined in Code Section 422.

2.12 OPTION means any option to purchase Shares granted pursuant to
the Plan.

2.13 PARTICIPANT means any Key Employee, Non-Employee Advisor or
Non-Employee Director receiving an Option.

2.14 PLAN means the Trailer Bridge, Inc. Stock Incentive Plan as
set forth herein, and as the same may be amended from time to time.

2.15 RULE 16B-3 means Rule 16b-3 as promulgated by the Securities
and Exchange Commission under Section 16(b) of the Exchange Act, as such rule
may be amended from time to time, and any successor rule.

2.16 SHARES mean the shares of common stock of the Company.

2.17 TEN PERCENT SHAREHOLDER means a person owning common stock of
the Company or an Affiliate possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company as defined in
Section 422 of the Code.

ARTICLE III ADMINISTRATION

3.1 COMMITTEE. The Plan shall be administered by the Committee.
Subject to the terms of the Plan and applicable law, the Committee shall have
full power and authority to: (i) designate persons to be Participants; (ii)
determine the type, amount, duration, and other terms and conditions of Options
to be granted to each Participant (including whether, to what extent, and under
what circumstances Options may be settled or exercised in cash, Shares, other
securities, or other property and whether, to what extent, and under what
circumstances cash, Shares, other securities, other property, and other amounts
payable with respect to an Option shall be deferred either automatically or at
the election of the holder thereof or of the Committee); (iii) interpret and
administer the Plan and any instrument or agreement relating to, or Option
granted under, the Plan with respect to any Participant; (iv) waive any
conditions or other restrictions with respect to (including, without
limitation, conditions regarding the exercise of an Option), amend, alter,
suspend, discontinue, or terminate any Option granted to any Participant,
prospectively or retroactively, but no such action shall impair the rights of
any

<PAGE> 6

Participant without his or her consent except as provided in Section 4.3, and
correct any defect, supply any omission, or reconcile any inconsistency in any
Option or Option Agreement granted to a Participant in the manner and to the
extent it shall deem desirable to carry the Plan into effect; (v) establish,
amend, suspend, or waive such rules and regulations and appoint such agents as
it shall deem appropriate for the proper administration of the Plan with
respect to Participants; and (vi) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan,
all determinations, interpretations, and other decisions under or with respect
to the Plan or any Option shall be within the sole discretion of the Committee,
may be made at any time, and shall be final, conclusive, and binding upon all
persons. Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify any outstanding Incentive Stock Option under
Section 422 of the Code, without the consent of the affected Participant.

3.2 INDEMNIFICATION. No member or former member of the Committee
or the Board of Directors of the Company shall be liable for any action or
inaction or determination made in good faith with respect to the Plan or any
Option. To the maximum extent permitted by applicable law and by the Company's
Certificate of Incorporation and Bylaws, each such person shall be indemnified
and held harmless by the Company against any cost or expense and liability
(including any sum paid in settlement of a claim with the approval of the
Company), arising out of any act or omission to act in connection with the
Plan. Costs and expenses to be indemnified hereunder shall include reasonable
attorney's fees and expenses as incurred, provided that the person being
indemnified agrees to repay in full amounts advanced hereunder in the event of
a final determination by a court that such person is not entitled to
indemnification hereunder.

ARTICLE IV SHARES

4.1 NUMBER OF SHARES AVAILABLE. Subject to Section 4.3, the
maximum number of Shares which may be issued under the Plan is seven hundred
eighty-five thousand (785,000) Shares.

4.2 SHARES SUBJECT TO TERMINATED OPTIONS. Shares covered by any
unexercised portions of terminated Options may again be subject to new Options.
In the event the exercise price of an Option is paid in whole or in part
through the delivery of Shares, the gross number of Shares issuable in
connection with the exercise of the Option shall not again be available for the
grant of Options under the Plan.

4.3 ADJUSTMENTS. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of securities of the Company, or other
similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or

<PAGE> 7

potential benefits intended to be made available under the Plan, then the
Committee may, in such manner as it may deem equitable, adjust as to
Participants any or all of (i) the number and type of Shares subject to the
Plan and which thereafter may be made the subject of Options, including
Incentive Stock Options, (ii) the number and type of Shares subject to
outstanding Options, and (iii) the grant, purchase, or exercise price with
respect to any Option, or, if deemed appropriate, make provisions for a cash
payment to the holder of an outstanding Option. In addition, in the event the
Company or any Affiliate shall assume outstanding options or the right or
obligation to grant future options in connection with the acquisition of
another business or another corporation or business entity, the Committee may
make such adjustments, not inconsistent with the terms of the Plan, in the
terms of Options granted to Participants as it shall deem appropriate in order
to achieve reasonable comparability or other equitable relationship between the
assumed options and the Options granted to Participants. The Committee also
may make such other adjustments as it deems necessary to take into
consideration any other event (including accounting changes) if the Committee
determines that such adjustment is appropriate to avoid distortion in the
operation of the Plan. However, in each case, no adjustment with respect to
Incentive Stock Options shall be authorized hereunder to the extent that such
authority would cause such Options to cease to be treated as Incentive Stock
Options. Nothing in this Section 4.3 shall require the Committee to issue any
fractional shares and any adjustment shall be rounded to the nearest whole
share.

ARTICLE V STOCK OPTIONS

5.1 GRANT OF OPTION. The Committee is hereby authorized to grant
Options to Key Employees, Non-Employee Advisors and Non-Employee Directors with
such terms and conditions, in each case not inconsistent with the provisions of
the Plan, as the Committee shall determine, provided, however, that any
discretionary Options granted to Non-Employee Directors shall be authorized by
the Board.

(a) EXERCISE PRICE. The exercise price per Share
purchasable under an Option shall be determined at the time of grant and shall
be not less than 100% of the Fair Market Value of the Share on the date of
grant of such Option; provided, however if an Incentive Stock Option is granted
to a Ten Percent Shareholder, the exercise price per share shall be no less
than 110% of the Fair Market Value of a Share on the date of grant.

(b) EXERCISABILITY AND METHOD OF EXERCISE. An Option may
contain such performance targets and waiting periods, and shall become
exercisable in such manner and within such period or periods and in such
installments or otherwise, as shall be determined by the Committee (or in the
case of discretionary Options granted to Non-Employee Directors, the Board) at
the time of grant. The Committee (or in the case of discretionary Options
granted to Non-Employee Directors, the Board) shall also determine the method
by which, and the form (including, without limitation, cash, Shares, other
securities, or other property, or any combination thereof, having a Fair Market
Value on the exercise date equal to the relevant exercise price), in which
payment of the Option exercise price may be made (including payment in
accordance with a cashless exercise program under which, if so instructed by
the Participant,

<PAGE> 8

Shares may be issued directly to the Participant's broker or dealer upon
receipt of the purchase price in cash from the broker or dealer).

(c) INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the provisions
of Code Section 422 and any regulations promulgated thereunder. Non-Employee
Advisors and Non-Employee Directors are not eligible to be granted Incentive
Stock Options under the Plan.

(d) INCENTIVE STOCK OPTION LIMITATIONS. To the extent that the
aggregate Fair Market Value (determined as of the time of grant) of the Shares
with respect to which Incentive Stock Options are exercisable for the first
time by a Key Employee Participant during any calendar year under the Plan
and/or any other stock option plan of the Company or any Affiliate exceeds
$100,000, such Options shall be treated as Options which are not Incentive
Stock Options. Should any of the foregoing provisions not be necessary in
order for the Options to qualify as Incentive Stock Options, or should any
additional provisions be required, the Committee may amend the Plan
accordingly, without the necessity of obtaining the approval of the
stockholders of the Company, except as otherwise required by law.

5.2 COMPLIANCE WITH CODE SECTION 162(M). Notwithstanding any
other provision of the Plan, the maximum number of Shares with respect to which
Options, in the aggregate, may be awarded to any individual Key Employee
Participant during any twelve-month period is 235,500 Shares. For purposes of
this limitation, Shares subject to Options which are canceled shall be counted
against the maximum number of Shares with respect to which Options may be
awarded to any individual Key Employee under the Plan, and if the Exercise
Price of Options is changed (other than pursuant to an adjustment under Section
4.3 hereof), the transaction shall be treated as a cancellation of the Option
and a grant of a new Option. The Committee at any time may in its sole
discretion limit the number of Options that can be exercised in any taxable
year of the Company, to the extent necessary to prevent the application of
Section 162(m) of the Code (or any similar or successor provision), provided
that the Committee may not postpone the earliest date on which Options can be
exercised beyond the last day of the stated term of such Options. The
provisions of this Section 5.2 shall apply only in the event that and so long
as the Company is subject to Section 162(m) of the Code (or any similar or
successor provision).

ARTICLE VI TERMS APPLICABLE TO ALL OPTIONS GRANTED UNDER THE PLAN

6.1 OPTION AGREEMENT. No person shall have any rights under any
Option granted under the Plan unless and until the Company and the Participant
to whom such Option shall have been granted shall have executed and delivered
an Option Agreement. If there is any conflict between the provisions of an
Option Agreement and the terms of the Plan, the terms of the Plan shall
control.

6.2 OPTIONS MAY BE GRANTED SEPARATELY OR TOGETHER; NO LIMITATIONS
ON OTHER OPTIONS. Options may be granted either alone or in addition to, in
tandem with, or in substitution for any other Option or any award granted under
any other plan of the Company or

<PAGE> 9

any Affiliate, and the terms and conditions of an Option need not be the same
with respect to each Participant.

6.3 ACCELERATION. The Committee is authorized in its discretion
to accelerate the exercisability of any Option held by a Participant,
including, without limitation, upon a change of control of the Company as
determined by the Committee, the sale by the Company of all or substantially
all its assets to an unrelated party, or the liquidation and dissolution of the
Company.

6.4 LIMITATIONS ON TRANSFER OF OPTIONS. Except as determined
otherwise by the Committee, the rights and interest of a Participant under the
Plan may not be assigned, alienated, sold, or transferred other than by will or
the laws of descent and distribution; provided, however, that at the discretion
of the Committee, (i) a Participant may be entitled to designate a beneficiary
or beneficiaries to exercise his or her rights with respect to any Option upon
the death of the Participant, and (ii) a Participant (and such Participant's
permitted transferee(s)) may be entitled to transfer an Option other than an
Incentive Stock Option without consideration to such Participant's children,
grandchildren and/or spouse (or to one or more trusts or other entities for the
benefit of any such family members or to one or more partnerships, corporations
or other entities in which any such family members are the only equity owners).
Except as determined otherwise by the Committee or except to the extent that a
transfer of an Option has been permitted hereunder by the Committee, during the
lifetime of a Participant, only the Participant personally, or if permissible
under applicable law, such individual's guardian or legal representative, may
exercise rights under the Plan. No Option, and no right under any such Option,
may be pledged, alienated, attached, or otherwise encumbered, and any purported
pledge, alienation, attachment, or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.

6.5 TAXES. The Company shall be entitled to withhold (or secure
payment from the Participant in lieu of withholding) the amount of any
withholding or other tax required by law to be withheld or paid by the Company
in connection with such Participant's Option, and the Company may defer
issuance of the Shares upon the exercise of an Option unless indemnified to its
satisfaction against any liability for any such tax. The Committee may
prescribe in each Option Agreement one or more methods by which the Participant
will be permitted or required to satisfy his or her tax withholding obligation,
which methods may include, without limitation, the payment of cash by the
Participant to the Company and the withholding from the Option, at the
appropriate time, of a number of Shares sufficient, based upon the Fair Market
Value of such Shares, to satisfy such tax withholding requirements.

6.6 RIGHTS AND STATUS OF RECIPIENTS. No employee shall have any
right to be granted an Option. Neither the Plan nor any action taken hereunder
shall be construed as giving any employee any right to be retained in the
employ of the Company or any Affiliate, and the grant of an Option to a
Non-Employee Advisor or Non-Employee Director shall not confer any right on
such person to continue as a Non-Employee Advisor or Director of the Company.

<PAGE> 10

6.7 OPTIONS NOT INCLUDABLE FOR BENEFIT PURPOSES. Any income
recognized by a Participant pursuant to the Plan shall not be included in the
determination of benefits under any employee pension benefit plan (as such term
is defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended) or group insurance or other benefit plans applicable to the
Participant which are maintained by the Company or any Affiliate, except as may
be provided under the terms of such plans or determined by resolution of the
Board of Directors of the Company.

6.8 SHARE CERTIFICATES; REPRESENTATION BY PARTICIPANTS;
REGISTRATION REQUIREMENTS. All certificates for Shares delivered pursuant to
the exercise of any Option shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other requirements of the Securities and Exchange
Commission and any applicable federal or state securities laws, and legends may
be put on any such certificates to make appropriate reference to such
restrictions. The Committee may require each Participant to represent to the
Company in writing that such Participant is acquiring Shares without a view to
the distribution thereof. Each Option shall be subject to the requirement
that, if at any time (i) the listing, registration or qualification of Shares
relating to such Option on any securities exchange or under any state or
federal securities laws, or (ii) the approval of any securities exchange or
regulatory body is necessary or desirable as a precondition thereto, the Option
or the issuance of Shares in connection therewith may not be consummated unless
such listing, registration, qualification or approval shall have been effected.

ARTICLE VII AMENDMENT AND TERMINATION

7.1 AMENDMENT. The Board of Directors of the Company may amend,
alter, suspend, discontinue, or terminate the Plan at any time; provided,
however, that no amendment, alteration, suspension, discontinuation or
termination of the Plan shall in any manner (except as otherwise provided in
this Article VII) adversely affect any Option, without the consent of the
Participant. The Board is authorized to amend the Plan and to make any
modifications to Option Agreements to comply with Rule 16b-3 and Section 162(m)
of the Code, and to make any other amendments or modifications deemed necessary
or appropriate to better accomplish the purposes of the Plan in light of any
amendments made to Rule 16b-3 and Section 162(m) of the Code in the event that
and so long as the Company is subject to Section 162(m) of the Code and/or
shall have a class of securities registered under Section 12 of the Exchange
Act. To the extent permitted by applicable law, the Committee may amend the
Plan, provided that any such amendments shall be reported to the Board.

7.2 TERMINATION. The Plan shall terminate at the close of
business on the tenth anniversary of the effective date, provided, however, the
Board of Directors of the Company shall have the right and the power to
terminate the Plan at any time prior thereto. No Option shall be granted under
the Plan after such termination, but such termination shall not have any other
effect, and any Option outstanding at the time of such termination may be
exercised after termination at any time prior to the expiration date of such
Option to the same extent such Option would have been exercisable had the Plan
not terminated.

<PAGE> 11

ARTICLE VIII GENERAL PROVISIONS

8.1 EFFECTIVE DATE OF THE PLAN. The Plan shall be effective as of
the date of its adoption by the Board of Directors of the Company, subject to
approval of the Plan by the Company's stockholders within one year thereafter
by (i) a majority of the votes cast at a duly held meeting of the stockholders
of the Company at which a quorum representing a majority of all outstanding
stock is present, either in person or by proxy, or (ii) by unanimous written
consent of the Company's stockholders. In the event that the Plan is not so
approved within such one-year period, all Options granted under the Plan shall
be null and void.

8.2 UNFUNDED STATUS OF PLAN. The Plan shall be unfunded and shall
not create (or be construed to create) a trust or a separate fund or funds.
The Plan shall not establish any fiduciary relationship between the Company and
any Participant or other person. To the extent any person holds any right by
virtue of a grant under the Plan, such right shall be no greater than the right
of an unsecured general creditor of the Company.

8.3 MISCELLANEOUS. The Plan and all determinations made and
actions taken pursuant to the Plan shall be governed by the laws of the state
of Florida and applicable federal laws. Section headings are used in the Plan
for convenience only, do not constitute a part of the Plan, and shall not be
deemed in any way to be relevant to the interpretation of the Plan or any
provision thereof. Whenever possible, each provision in the Plan and every
Option shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Plan or any Option shall be held to
be prohibited by or invalid under applicable law, then (i) such provision shall
be deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (ii) all other provisions of
the Plan and every other Option shall remain in full force and effect.

<PAGE> 1
EXHIBIT 10.11.1

TRAILER BRIDGE, INC.

STOCK INCENTIVE PLAN

OPTION AWARD AGREEMENT

THIS AGREEMENT is made and entered into as of the date set forth on
the signature page hereof by and between TRAILER BRIDGE, INC., a Delaware
corporation ("Company"), and the individual whose signature is set forth on the
signature page hereof (the "Optionee").

W I T N E S S E T H

WHEREAS, the Company has adopted the Trailer Bridge, Inc. Stock
Incentive Plan ("Plan"), the terms of which, to the extent not stated herein,
are specifically incorporated by reference in this Agreement;

WHEREAS, the purpose of the Plan is to permit Options under the Plan
to be granted to Key Employees and certain other persons, and the Plan provides
for Option Agreements to further specify the terms and conditions under which
such individuals may receive such Options;

WHEREAS, the Optionee is now serving as a Key Employee of the Company
and the Company desires him or her to remain in such capacity, and to secure or
increase his or her ownership of Shares in order to increase his or her
incentive and personal interest in the success and growth of the Company; and

WHEREAS, defined terms used herein and not otherwise defined herein
shall have the meanings set forth in the Plan.

NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements herein set forth, the parties hereby mutually covenant and agree
as follows:

(1) OPTION GRANT.

(a) Subject to the terms and conditions set forth herein,
the Company hereby grants to the Optionee an option (the "Option") to purchase
from the Company all or any part of the aggregate number of Shares (hereinafter
referred to as the "Option Stock") set forth on the signature page hereof, at
the purchase price per Share set forth on the signature page hereof. Unless
provided otherwise on the signature page hereof, the Option shall not be an
Incentive Stock Option for purposes of Section 422 of the Code. The Option may
not be exercised prior to the Initial Exercise Date set forth on the signature
page hereof or after the Expiration Date set forth thereon, except that other
than as provided herein, the Option shall not be exercisable after the
termination of the Optionee's employment with the Company or any Affiliate of
the Company ("Employment").

<PAGE> 2

(b) The Option may be exercised in whole or in part by
notice in writing to the Company. The aggregate purchase price for the Shares
for which the Option is exercised shall be paid to the Company at the time of
exercise in cash, or, with the consent of the Committee, Shares registered in
the name of the Optionee, or by a combination thereof, all as provided on the
signature page hereof. If the purchase price may be paid wholly or partly in
Shares, any Shares tendered in payment thereof shall be free of all adverse
claims and duly endorsed in blank by the Optionee or accompanied by stock
powers duly endorsed in blank. Shares tendered shall be valued at Fair Market
Value on the date on which the Option is exercised.

Payment of the aggregate purchase price for the Shares for
which the option is exercised may also be made in whole or in part by delivery
(including by facsimile) to the Company of an executed irrevocable option
exercise form together with irrevocable instructions, in a form acceptable to
the Company, to a broker-dealer to sell or margin a sufficient portion of the
Option Stock and deliver the sale or loan proceeds directly to the Company to
pay for the exercise price.

2. Nontransferability of Option. Except as may be permitted
otherwise pursuant to the Plan, this Option is not transferable other than by
will or by the laws of descent and distribution. The Option may be exercised
during the life of the Optionee only by the Optionee (or his/her legal
representative).

3. Securities Law Restrictions. The Optionee agrees and
acknowledges with respect to any Option Stock that has not been registered
under the Securities Act of 1933, as amended (the "Act"), that (i) the Optionee
will not sell or otherwise dispose of such Shares except pursuant to an
effective registration statement under the Act and any applicable state
securities laws, or in a transaction which, in the opinion of counsel for the
Company, is exempt from such registration, and (ii) a legend will be placed on
the certificates for the Option Stock to such effect.

4. Exercise of Option.

(a) Except as provided herein, the Option shall be
exercisable only prior to the Expiration Date, and then only as set forth in
the following table:

<TABLE>
<CAPTION>
Cumulative Fraction
Years From of Shares Optioned
Grant Date Which Is Exercisable
---------- --------------------
<S> <C>
After 1 Year 20%
After 2 Years 40%
After 3 Years 60%
After 4 Years 80%
After 5 Years 100%
</TABLE>

<PAGE> 3

(b) If the Optionee's Employment is terminated because of
death or Total Disability (as such terms are defined below) on or after the
Initial Exercise Date set forth on the signature page hereof, the Optionee or,
in the case of his or her death, his or her Beneficiary (as defined herein)
shall be entitled to exercise the Option, in the full amount granted without
regard to any restrictions on exercise set forth in paragraph (a), above, until
the Expiration Date. If such a termination occurs prior to the Initial
Exercise Date, the Optionee, or in the case of his or her death, his or her
Beneficiary, shall be entitled to exercise the Option to the extent, if any, as
the Board of Directors or Committee may determine.

(c) If the Optionee's Employment is terminated on or
after the Initial Exercise Date for any reason other than Cause (as defined
below), death or Total Disability, the Optionee shall be entitled to exercise
the Option, to the extent exercisable pursuant to paragraph (a), above, until 3
months after such termination. If such a termination occurs prior to the
Initial Exercise Date, the Optionee shall be entitled to exercise the Option
during such 3-month period to the extent, if any, as the Board of Directors or
Committee may determine.

(d) If the Optionee's Employment is terminated for Cause,
the Optionee shall have no right to exercise any portion of any Option not yet
exercised as of the date of such termination for Cause.

(e) As used herein, (i) "Total Disability" means
permanent and total disability within the meaning of Code Section 22(e)(3), and
(ii) "Cause" means, as determined by the Board of Directors, the Optionee's
willful failure to perform his or her duties or intentional dishonest or
intentional illegal conduct in connection with his or her Employment.

5. Acceleration. In the event of a Change of Control (as defined
below) any Options shall be immediately exercisable (without regard to any
limitation imposed by the Plan or this Agreement at the time the Option was
granted, which permits all or any part of the Option to be exercised only after
the lapse of time), and will remain exercisable until the expiration of the
Option. "Change of Control" for this purpose means: (i) the adoption of a
plan of reorganization, merger, share exchange or consolidation of the Company
with one or more other corporations or other entities as a result of which the
holders of the Shares as a group would receive less than fifty percent (50%) of
the voting power of the capital stock or other interests of the surviving or
resulting corporation or entity; (ii) the adoption of a plan of liquidation or
the approval of the dissolution of the Company; (iii) the approval by the Board
of Directors of an agreement providing for the sale or transfer (other than as
security for obligations of the Company or any subsidiary) of substantially all
of the assets of the Company; (iv) the acquisition (other than by will or by
the laws of descent and distribution or from the person's parent, grandparent
or spouse (or trusts for the benefit of the transferor's children,
grandchildren and/or spouse or partnerships in which any such family members
are the only partners)) of more than thirty percent (30%) of the outstanding
Shares by any person within the meaning of Rule 13(d)(3) under the Securities
Exchange Act of 1934, as amended, if such acquisition is not preceded by a
prior expression of approval by the Board; or (v) one-third or more of the
members of the Board of Directors of the Company are not Continuing Directors
(a "Continuing

<PAGE> 4

Director" means any member of the Board of Directors of the Company who was a
director on January 1, 1997, and any director who is recommended for election,
or is elected to fill a vacancy, as a director by a majority of the Continuing
Directors then on such Board).

6. Beneficiary.

(a) The person whose name appears on the signature page
hereof after the caption "Beneficiary" or any successor designated by the
Optionee in accordance herewith (the person who is the Optionee's Beneficiary
at the time of his or her death herein referred to as the "Beneficiary") shall
be entitled to exercise the Option, to the extent it is exercisable, after the
death of the Optionee. The Optionee may from time to time revoke or change his
or her Beneficiary without the consent of any prior Beneficiary by filing a new
designation with the Committee. The last such designation received by the
Committee shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the
Committee prior to the Optionee's death, and in no event shall any designation
be effective as of a date prior to such receipt.

(b) If no such Beneficiary designation is in effect at
the time of an Optionee's death, or if no designated Beneficiary survives the
Optionee or if such designation conflicts with law, the Optionee's estate shall
be entitled to exercise the Option, to the extent it is exercisable after the
death of the Optionee. If the Board of Directors or Committee is in doubt as
to the right of any person to exercise the Option, the Company may refuse to
recognize such exercise, without liability for any interest or dividends on the
Option Stock, until the Board of Directors or Committee determines the person
entitled to exercise the Option, or the Company may apply to any court of
appropriate jurisdiction and such application shall be a complete discharge of
the liability of the Company therefor.

7. No Rights As Stockholder. The Optionee shall have no rights
as a holder of the Option Stock until the issuance of a certificate for the
Option Stock.

8. Tax Withholding.

(a) It shall be a condition of the obligation of the
Company to issue Option Stock to the Optionee or the Beneficiary, and the
Optionee agrees, that the Optionee shall pay to the Company upon its demand,
such amount as may be requested by the Company for the purpose of satisfying
any liability it may have to withhold federal, state, or local income or other
taxes incurred by reason of the exercise of the Option.

(b) If the purchase price may be paid wholly or partly in
Shares, the Optionee may elect to have the Company withhold that number of
Shares of Option Stock otherwise issuable to the Optionee upon exercise of the
Option or to deliver to the Company a number of Shares, in each case, having a
Fair Market Value on the Tax Date (as defined below) equal to the minimum
amount required to be withheld as a result of such exercise. The election must
be made in writing and must be delivered to the Company prior to the Tax Date.
If the number

<PAGE> 5

of shares so determined shall include a fractional share, the Optionee shall
deliver cash in lieu of such fractional share. As used herein, Tax Date means
the date on which the Optionee must include in his or her gross income for
federal income tax purposes the fair market value of the Option Stock over the
purchase price therefor.

9. Adjustments in Event of Change in Shares. In the event that
the Committee shall determine that any dividend or other distribution (whether
in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
securities of the Company, or other similar corporate transaction or event
affects the Shares issuable on exercise of the Option, such that an adjustment
is determined by the Committee to be appropriate in order to prevent dilution
or enlargement of the benefits or potential benefits intended to be made
available under the Plan, then the Committee shall, in such manner as it may
deem equitable, promptly adjust the number and type of Shares awarded pursuant
to this Agreement, or the terms, conditions, or restrictions of this Agreement;
provided, however, that the number of Shares subject to any Option payable or
denominated in Shares shall always be a whole number.

10. Powers of Company Not Affected. The existence of the Option
shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any combinations, subdivision or
reclassification of the Shares or any reorganization, merger, consolidation,
business combination, exchange of Shares, or other change in the Company's
capital structure or its business, or any issue of bonds, debentures or stock
having rights or preferences equal, superior or affecting the Option Stock or
the rights thereof, or dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
Nothing in this Agreement shall confer upon the Optionee any right to continued
Employment.

11. Miscellaneous.

(a) This Agreement shall be governed and construed in
accordance with the laws of the State of Florida applicable to contracts made
and to be performed therein between residents thereof.

(b) This Agreement may not be amended or modified except
by the written consent of the parties hereto.

(c) The captions of this Agreement are inserted for
convenience of reference only and shall not be taken into account in construing
this Agreement.

(d) This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns and shall be binding upon
and inure to the personal benefit of the Optionee, the Beneficiary and the
personal representative(s) and heirs of the Optionee.

<PAGE> 6

IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer and its corporate seal hereunto
affixed, and the Optionee has hereunto affixed his or her hand, all on the day
and year set forth below.

TRAILER BRIDGE, INC.

[CORPORATE SEAL] By:
------------------------------
Its:
-------------------------

---------------------------------
Optionee
Name:
----------------------------
<TABLE>
<S> <C> <C> <C>
No. of Shares of Option Stock:
-----------------
Exercise Price Per Share: $ Grant Date: _______, 1997
-----------
Payment of Purchase Price: Cash and/or, with Initial Exercise Date: _______, 1998
the consent of the
Committee, Shares

Date of Agreement: ___________, 1997 Expiration Date: _______, 2007

Beneficiary: ---------------- Address of Beneficiary:

Beneficiary Tax Identification --------------------------------------------
No.: --------------------------------------------
--------------------------
</TABLE>

<PAGE> 1
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT AND REPORT
ON SCHEDULE

To the Board of Directors and Shareholders of
Trailer Bridge, Inc.
Jacksonville, Florida

We consent to the use in this Registration Statement for 2,300,000 shares of
common stock of Trailer Bridge, Inc. on Form S-1 of our report dated February
28, 1997, July 18, 1997 as to Note 11) appearing in the Prospectus, which is a
part of this Registration Statement, and to the references to us under the
headings "Selected Financial Data" and "Experts" in such Prospectus.

Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of Trailer Bridge, Inc., listed
in Item 16. This financial statement schedule is the responsibility of the
Corporation's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

Deloitte & Touche LLP
Jacksonville, Florida
July 21, 1997