Exhibit 10.1

 

LOAN AND SECURITY AGREEMENT

 

dated as of March 24, 2005

 

by and among

 

K-SEA OPERATING PARTNERSHIP L.P.,

as Borrower,

 

the Lenders party hereto,

 

LASALLE BANK NATIONAL ASSOCIATION,

as Syndication Agent

 

and

 

KEYBANK NATIONAL ASSOCIATION,

as Administrative Agent and Collateral Trustee for the Lenders

 

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

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

 

 

 

 

Section 1.01

Defined Terms

 

 

 

 

Section 1.02 [a05-5954_1ex10d1.htm#Section1_02_061849]

Terms Generally [a05-5954_1ex10d1.htm#Section1_02_061849]

 

 

 

 

Section 1.03 [a05-5954_1ex10d1.htm#Section1_03_061853]

Accounting Terms; GAAP [a05-5954_1ex10d1.htm#Section1_03_061853]

 

 

 

 

ARTICLE II THE LOANS [a05-5954_1ex10d1.htm#ArticleIi_070915]

 

 

 

 

Section 2.01 [a05-5954_1ex10d1.htm#Section2_01_061856]

Commitments [a05-5954_1ex10d1.htm#Section2_01_061856]

 

 

 

 

Section 2.02 [a05-5954_1ex10d1.htm#Section2_02_061859]

Loans [a05-5954_1ex10d1.htm#Section2_02_061859]

 

 

 

 

Section 2.03 [a05-5954_1ex10d1.htm#Section2_03_061902]

Interest [a05-5954_1ex10d1.htm#Section2_03_061902]

 

 

 

 

Section 2.04 [a05-5954_1ex10d1.htm#Section2_04_061905]

[RESERVED] [a05-5954_1ex10d1.htm#Section2_04_061905]

 

 

 

 

Section 2.05 [a05-5954_1ex10d1.htm#Section2_05_061908]

Requests for Loans [a05-5954_1ex10d1.htm#Section2_05_061908]

 

 

 

 

Section 2.06 [a05-5954_1ex10d1.htm#Section2_06_061910]

Funding of Loans [a05-5954_1ex10d1.htm#Section2_06_061910]

 

 

 

 

Section 2.07 [a05-5954_1ex10d1.htm#Section2_07_061913]

Termination and Reduction of Commitments
[a05-5954_1ex10d1.htm#Section2_07_061913]

 

 

 

 

Section 2.08 [a05-5954_1ex10d1.htm#Section2_08_061918]

Repayment of Loans; Evidence of Debt [a05-5954_1ex10d1.htm#Section2_08_061918]

 

 

 

 

Section 2.09 [a05-5954_1ex10d1.htm#Section2_09_061921]

Prepayment of Loans [a05-5954_1ex10d1.htm#Section2_09_061921]

 

 

 

 

Section 2.10 [a05-5954_1ex10d1.htm#Section2_10_061924]

Fees [a05-5954_1ex10d1.htm#Section2_10_061924]

 

 

 

 

Section 2.11 [a05-5954_1ex10d1.htm#Section2_11_061927]

Increased Costs; Illegality [a05-5954_1ex10d1.htm#Section2_11_061927]

 

 

 

 

Section 2.12 [a05-5954_1ex10d1.htm#Section2_12_061930]

Break Funding Payments [a05-5954_1ex10d1.htm#Section2_12_061930]

 

 

 

 

Section 2.13 [a05-5954_1ex10d1.htm#Section2_13_061933]

Taxes. [a05-5954_1ex10d1.htm#Section2_13_061933]

 

 

 

 

Section 2.14 [a05-5954_1ex10d1.htm#Section2_14_061935]

Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
[a05-5954_1ex10d1.htm#Section2_14_061935]

 

 

 

 

Section 2.15 [a05-5954_1ex10d1.htm#Section2_15_061937]

Letters of Credit [a05-5954_1ex10d1.htm#Section2_15_061937]

 

 

 

 

Section 2.16 [a05-5954_1ex10d1.htm#Section2_16_061940]

Cash Collateral Account [a05-5954_1ex10d1.htm#Section2_16_061940]

 

 

 

 

Section 2.17 [a05-5954_1ex10d1.htm#Section2_17_061942]

Mitigation Obligations; Replacement of Lenders
[a05-5954_1ex10d1.htm#Section2_17_061942]

 

 

 

 

Section 2.18 [a05-5954_1ex10d1.htm#Section2_18_061945]

Increase of Commitments [a05-5954_1ex10d1.htm#Section2_18_061945]

 

 

 

 

ARTICLE III GRANT OF SECURITY INTEREST [a05-5954_1ex10d1.htm#ArticleIii_070919]

 

 

 

 

Section 3.01 [a05-5954_1ex10d1.htm#Section3_01_061947]

Grant of Security Interest [a05-5954_1ex10d1.htm#Section3_01_061947]

 

 

 

 

Section 3.02 [a05-5954_1ex10d1.htm#Section3_02_061950]

Substitution of Pool Vessel [a05-5954_1ex10d1.htm#Section3_02_061950]

 

 

 

 

Section 3.03 [a05-5954_1ex10d1.htm#Section3_03_061952]

Orderly Liquidation Value [a05-5954_1ex10d1.htm#Section3_03_061952]

 

 

 

 

Section 3.04 [a05-5954_1ex10d1.htm#Section3_04_061955]

Negative Pledge [a05-5954_1ex10d1.htm#Section3_04_061955]

 

 

i

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

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES
[a05-5954_1ex10d1.htm#ArticleIv_070921]

 

 

 

 

Section 4.01 [a05-5954_1ex10d1.htm#Section4_01_061958]

Organization [a05-5954_1ex10d1.htm#Section4_01_061958]

 

 

 

 

Section 4.02 [a05-5954_1ex10d1.htm#Section4_02_062001]

Power and Authority [a05-5954_1ex10d1.htm#Section4_02_062001]

 

 

 

 

Section 4.03 [a05-5954_1ex10d1.htm#Section4_03_064023]

Governmental Approvals; No Conflicts [a05-5954_1ex10d1.htm#Section4_03_064023]

 

 

 

 

Section 4.04 [a05-5954_1ex10d1.htm#Section4_04_064027]

Financial Condition; No Material Adverse Change
[a05-5954_1ex10d1.htm#Section4_04_064027]

 

 

 

 

Section 4.05 [a05-5954_1ex10d1.htm#Section4_05_064030]

Litigation [a05-5954_1ex10d1.htm#Section4_05_064030]

 

 

 

 

Section 4.06 [a05-5954_1ex10d1.htm#Section4_06_064033]

Environmental Condition [a05-5954_1ex10d1.htm#Section4_06_064033]

 

 

 

 

Section 4.07 [a05-5954_1ex10d1.htm#Section4_07_064035]

Compliance with Laws and Agreements [a05-5954_1ex10d1.htm#Section4_07_064035]

 

 

 

 

Section 4.08 [a05-5954_1ex10d1.htm#Section4_08_064038]

Investment and Holding Company Status [a05-5954_1ex10d1.htm#Section4_08_064038]

 

 

 

 

Section 4.09 [a05-5954_1ex10d1.htm#Section4_09_064041]

Taxes [a05-5954_1ex10d1.htm#Section4_09_064041]

 

 

 

 

Section 4.10 [a05-5954_1ex10d1.htm#Section4_10_064043]

ERISA [a05-5954_1ex10d1.htm#Section4_10_064043]

 

 

 

 

Section 4.11 [a05-5954_1ex10d1.htm#Section4_11_064046]

Disclosure [a05-5954_1ex10d1.htm#Section4_11_064046]

 

 

 

 

Section 4.12 [a05-5954_1ex10d1.htm#Section4_12_064048]

No Other Name [a05-5954_1ex10d1.htm#Section4_12_064048]

 

 

 

 

Section 4.13 [a05-5954_1ex10d1.htm#Section4_13_064050]

Title [a05-5954_1ex10d1.htm#Section4_13_064050]

 

 

 

 

Section 4.14 [a05-5954_1ex10d1.htm#Section4_14_064053]

Lenders’ Security Interest [a05-5954_1ex10d1.htm#Section4_14_064053]

 

 

 

 

Section 4.15 [a05-5954_1ex10d1.htm#Section4_15_064056]

Citizenship [a05-5954_1ex10d1.htm#Section4_15_064056]

 

 

 

 

Section 4.17 [a05-5954_1ex10d1.htm#Section4_17_064101]

Government Consents for Conduct of Business
[a05-5954_1ex10d1.htm#Section4_17_064101]

 

 

 

 

Section 4.18 [a05-5954_1ex10d1.htm#Section4_18_064104]

Federal Reserve Regulations. [a05-5954_1ex10d1.htm#Section4_18_064104]

 

 

 

 

ARTICLE V CONDITIONS [a05-5954_1ex10d1.htm#ArticleV_070934]

 

 

 

 

Section 5.01 [a05-5954_1ex10d1.htm#Section5_01_064106]

Effective Date. [a05-5954_1ex10d1.htm#Section5_01_064106]

 

 

 

 

Section 5.02 [a05-5954_1ex10d1.htm#Section5_02_064108]

Each Loan and Letter of Credit [a05-5954_1ex10d1.htm#Section5_02_064108]

 

 

 

 

ARTICLE VI AFFIRMATIVE COVENANTS [a05-5954_1ex10d1.htm#ArticleVi_070937]

 

 

 

 

Section 6.01 [a05-5954_1ex10d1.htm#Section6_01_064111]

Financial Statements and Other Information
[a05-5954_1ex10d1.htm#Section6_01_064111]

 

 

 

 

Section 6.02 [a05-5954_1ex10d1.htm#Section6_02_064115]

Pool Vessel Appraisals [a05-5954_1ex10d1.htm#Section6_02_064115]

 

 

 

 

Section 6.03 [a05-5954_1ex10d1.htm#Section6_03_064140]

Fees and Expenses [a05-5954_1ex10d1.htm#Section6_03_064140]

 

 

 

 

Section 6.04 [a05-5954_1ex10d1.htm#Section6_04_064145]

Notices of Material Events [a05-5954_1ex10d1.htm#Section6_04_064145]

 

 

 

 

Section 6.05 [a05-5954_1ex10d1.htm#Section6_05_064148]

Existence; Conduct of Business [a05-5954_1ex10d1.htm#Section6_05_064148]

 

 

 

 

Section 6.06 [a05-5954_1ex10d1.htm#Section6_06_064150]

Insurance [a05-5954_1ex10d1.htm#Section6_06_064150]

 

 

 

 

Section 6.07 [a05-5954_1ex10d1.htm#Section6_07_064156]

Taxes; Use [a05-5954_1ex10d1.htm#Section6_07_064156]

 

 

 

 

Section 6.08 [a05-5954_1ex10d1.htm#Section6_08_064159]

Maintenance of Properties; Use and Operation of Pool Vessels
[a05-5954_1ex10d1.htm#Section6_08_064159]

 

 

ii

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

 

Section 6.09 [a05-5954_1ex10d1.htm#Section6_09_064202]

Books and Records; Inspection Rights [a05-5954_1ex10d1.htm#Section6_09_064202]

 

 

 

 

Section 6.10 [a05-5954_1ex10d1.htm#Section6_10_064205]

Use of Proceeds [a05-5954_1ex10d1.htm#Section6_10_064205]

 

 

 

 

Section 6.11 [a05-5954_1ex10d1.htm#Section6_11_064207]

U.S. Person [a05-5954_1ex10d1.htm#Section6_11_064207]

 

 

 

 

Section 6.12 [a05-5954_1ex10d1.htm#Section6_12_064210]

Documentation [a05-5954_1ex10d1.htm#Section6_12_064210]

 

 

 

 

Section 6.13 [a05-5954_1ex10d1.htm#Section6_13_064212]

Further Assurances [a05-5954_1ex10d1.htm#Section6_13_064212]

 

 

 

 

Section 6.14 [a05-5954_1ex10d1.htm#Section6_14_064215]

Borrower’s Title; Lenders’ Security Interest; Personal Property
[a05-5954_1ex10d1.htm#Section6_14_064215]

 

 

 

 

Section 6.15 [a05-5954_1ex10d1.htm#Section6_15_064217]

Indemnification [a05-5954_1ex10d1.htm#Section6_15_064217]

 

 

 

 

Section 6.16 [a05-5954_1ex10d1.htm#Section6_16_064220]

Performance of Contracts [a05-5954_1ex10d1.htm#Section6_16_064220]

 

 

 

 

Section 6.17 [a05-5954_1ex10d1.htm#Section6_17_064227]

Environmental Compliance [a05-5954_1ex10d1.htm#Section6_17_064227]

 

 

 

 

Section 6.18 [a05-5954_1ex10d1.htm#Section6_18_064230]

Subsidiary Guaranties [a05-5954_1ex10d1.htm#Section6_18_064230]

 

 

 

 

Section 6.19 [a05-5954_1ex10d1.htm#Section6_19_064233]

Relating to the Vessels [a05-5954_1ex10d1.htm#Section6_19_064233]

 

 

 

 

Section 6.20 [a05-5954_1ex10d1.htm#Section6_20_064235]

Working Capital Clean-Down [a05-5954_1ex10d1.htm#Section6_20_064235]

 

 

 

 

ARTICLE VII NEGATIVE COVENANTS [a05-5954_1ex10d1.htm#ArticleVii_070939]

 

 

 

 

Section 7.01 [a05-5954_1ex10d1.htm#Section7_01_064239]

Fixed Charge Coverage Ratio [a05-5954_1ex10d1.htm#Section7_01_064239]

 

 

 

 

Section 7.02 [a05-5954_1ex10d1.htm#Section7_02_064241]

Total Funded Debt to Tangible Capitalization Ratio
[a05-5954_1ex10d1.htm#Section7_02_064241]

 

 

 

 

Section 7.03 [a05-5954_1ex10d1.htm#Section7_03_064244]

Total Funded Debt to EBITDA Ratio [a05-5954_1ex10d1.htm#Section7_03_064244]

 

 

 

 

Section 7.04 [a05-5954_1ex10d1.htm#Section7_04_064250]

Asset Coverage Ratio [a05-5954_1ex10d1.htm#Section7_04_064250]

 

 

 

 

Section 7.05 [a05-5954_1ex10d1.htm#Section7_05_064252]

No Liens [a05-5954_1ex10d1.htm#Section7_05_064252]

 

 

 

 

Section 7.06 [a05-5954_1ex10d1.htm#Section7_06_064254]

No Changes in Borrower [a05-5954_1ex10d1.htm#Section7_06_064254]

 

 

 

 

Section 7.07 [a05-5954_1ex10d1.htm#Section7_07_064257]

No Disposition of Assets [a05-5954_1ex10d1.htm#Section7_07_064257]

 

 

 

 

Section 7.08 [a05-5954_1ex10d1.htm#Section7_08_064259]

Fundamental Changes [a05-5954_1ex10d1.htm#Section7_08_064259]

 

 

 

 

Section 7.09 [a05-5954_1ex10d1.htm#Section7_09_064301]

Transactions with Affiliates [a05-5954_1ex10d1.htm#Section7_09_064301]

 

 

 

 

Section 7.10 [a05-5954_1ex10d1.htm#Section7_10_064304]

Restrictive Agreements [a05-5954_1ex10d1.htm#Section7_10_064304]

 

 

 

 

Section 7.11 [a05-5954_1ex10d1.htm#Section7_11_064306]

Limitations on Advances and Distributions
[a05-5954_1ex10d1.htm#Section7_11_064306]

 

 

 

 

Section 7.12 [a05-5954_1ex10d1.htm#Section7_12_064308]

Limitations on Other Indebtedness [a05-5954_1ex10d1.htm#Section7_12_064308]

 

 

 

 

Section 7.13 [a05-5954_1ex10d1.htm#Section7_13_064310]

Limitations on Negative Pledge [a05-5954_1ex10d1.htm#Section7_13_064310]

 

 

 

 

Section 7.14 [a05-5954_1ex10d1.htm#Section7_14_064313]

Acquisitions [a05-5954_1ex10d1.htm#Section7_14_064313]

 

 

 

 

Section 7.15 [a05-5954_1ex10d1.htm#Section7_15_064315]

Partnerships, Joint Ventures [a05-5954_1ex10d1.htm#Section7_15_064315]

 

 

 

 

ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES
[a05-5954_1ex10d1.htm#ArticleViii_070941]

 

 

 

 

Section 8.01 [a05-5954_1ex10d1.htm#Section8_01_064324]

Events of Default [a05-5954_1ex10d1.htm#Section8_01_064324]

 

 

iii

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

 

Section 8.02 [a05-5954_1ex10d1.htm#Section8_02_064329]

Remedies [a05-5954_1ex10d1.htm#Section8_02_064329]

 

 

 

 

Section 8.03 [a05-5954_1ex10d1.htm#Section8_03_064331]

Lenders’ Cure of Third Party Agreement Default
[a05-5954_1ex10d1.htm#Section8_03_064331]

 

 

 

 

ARTICLE IX THE AGENTS [a05-5954_1ex10d1.htm#ArticleIx_070943]

 

 

 

 

Section 9.01 [a05-5954_1ex10d1.htm#Section9_01_064335]

Authorization and Action [a05-5954_1ex10d1.htm#Section9_01_064335]

 

 

 

 

Section 9.02 [a05-5954_1ex10d1.htm#Section9_02_064338]

Agent’s Reliance, Etc [a05-5954_1ex10d1.htm#Section9_02_064338]

 

 

 

 

Section 9.03 [a05-5954_1ex10d1.htm#Section9_03_070144]

KeyBank and Affiliates [a05-5954_1ex10d1.htm#Section9_03_070144]

 

 

 

 

Section 9.04 [a05-5954_1ex10d1.htm#Section9_04_070148]

Lender Credit Decision [a05-5954_1ex10d1.htm#Section9_04_070148]

 

 

 

 

Section 9.05 [a05-5954_1ex10d1.htm#Section9_05_070151]

Indemnification [a05-5954_1ex10d1.htm#Section9_05_070151]

 

 

 

 

Section 9.06 [a05-5954_1ex10d1.htm#Section9_06_070154]

Successor Administrative Agents [a05-5954_1ex10d1.htm#Section9_06_070154]

 

 

 

 

Section 9.07 [a05-5954_1ex10d1.htm#Section9_07_070156]

Events of Default [a05-5954_1ex10d1.htm#Section9_07_070156]

 

 

 

 

Section 9.08 [a05-5954_1ex10d1.htm#Section9_08_070158]

Payments [a05-5954_1ex10d1.htm#Section9_08_070158]

 

 

 

 

Section 9.09 [a05-5954_1ex10d1.htm#Section9_09_070159]

Administrative Agent May File Proofs of Claim
[a05-5954_1ex10d1.htm#Section9_09_070159]

 

 

 

 

Section 9.10 [a05-5954_1ex10d1.htm#Section9_10_070202]

Agents [a05-5954_1ex10d1.htm#Section9_10_070202]

 

 

 

ARTICLE X MISCELLANEOUS [a05-5954_1ex10d1.htm#ArticleX_070954]

 

 

 

 

Section 10.01 [a05-5954_1ex10d1.htm#Section10_01_070212]

Notices [a05-5954_1ex10d1.htm#Section10_01_070212]

 

 

 

 

Section 10.02 [a05-5954_1ex10d1.htm#Section10_02_070214]

Term and Termination [a05-5954_1ex10d1.htm#Section10_02_070214]

 

 

 

 

Section 10.03 [a05-5954_1ex10d1.htm#Section10_03_070217]

K-Sea as Agent for Borrower [a05-5954_1ex10d1.htm#Section10_03_070217]

 

 

 

 

Section 10.04 [a05-5954_1ex10d1.htm#Section10_04_070219]

Discharge of Borrower [a05-5954_1ex10d1.htm#Section10_04_070219]

 

 

 

 

Section 10.05 [a05-5954_1ex10d1.htm#Section10_05_070221]

Waivers; Amendments [a05-5954_1ex10d1.htm#Section10_05_070221]

 

 

 

 

Section 10.06 [a05-5954_1ex10d1.htm#Section10_06_070225]

Expenses; Indemnity; Damage Waiver [a05-5954_1ex10d1.htm#Section10_06_070225]

 

 

 

 

Section 10.07 [a05-5954_1ex10d1.htm#Section10_07_070228]

Successors and Assigns [a05-5954_1ex10d1.htm#Section10_07_070228]

 

 

 

 

Section 10.08 [a05-5954_1ex10d1.htm#Section10_08_070230]

Survival [a05-5954_1ex10d1.htm#Section10_08_070230]

 

 

 

 

Section 10.09 [a05-5954_1ex10d1.htm#Section10_09_070233]

Counterparts; Integration; Effectiveness
[a05-5954_1ex10d1.htm#Section10_09_070233]

 

 

 

 

Section 10.10 [a05-5954_1ex10d1.htm#Section10_10_070235]

Severability [a05-5954_1ex10d1.htm#Section10_10_070235]

 

 

 

 

Section 10.11 [a05-5954_1ex10d1.htm#Section10_11_070237]

Right of Set-off [a05-5954_1ex10d1.htm#Section10_11_070237]

 

 

 

 

Section 10.12 [a05-5954_1ex10d1.htm#Section10_12_070240]

Governing Law; Jurisdiction; Consent to Service of Process
[a05-5954_1ex10d1.htm#Section10_12_070240]

 

 

 

 

Section 10.13 [a05-5954_1ex10d1.htm#Section10_13_070242]

WAIVER OF JURY TRIAL [a05-5954_1ex10d1.htm#Section10_13_070242]

 

 

 

 

Section 10.14 [a05-5954_1ex10d1.htm#Section10_14_070245]

Headings [a05-5954_1ex10d1.htm#Section10_14_070245]

 

 

 

 

Section 10.15 [a05-5954_1ex10d1.htm#Section10_15_070247]

Confidentiality [a05-5954_1ex10d1.htm#Section10_15_070247]

 

 

 

 

Section 10.16 [a05-5954_1ex10d1.htm#Section10_16_070249]

Interest Rate Limitation [a05-5954_1ex10d1.htm#Section10_16_070249]

 

 

iv

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

 

Section 10.17 [a05-5954_1ex10d1.htm#Section10_17_070251]

Further Assurances [a05-5954_1ex10d1.htm#Section10_17_070251]

 

 

 

 

Section 10.18 [a05-5954_1ex10d1.htm#Section10_18_070254]

Judgment Currency [a05-5954_1ex10d1.htm#Section10_18_070254]

 

 

 

 

Section 10.19 [a05-5954_1ex10d1.htm#Section10_19_070256]

USA Patriot Act Notice [a05-5954_1ex10d1.htm#Section10_19_070256]

 

 

EXHIBITS

 

 

 

 

 

Exhibit A

-

Form of Note

Exhibit B

-

Form of Assignment and Acceptance

Exhibit C

-

Form of Opinion of Borrower’s Counsel

Exhibit D

-

Form of Standby Letter of Credit

Exhibit E

-

Form of Application for Documentary Letter of Credit

Exhibit F

-

Form of Loan Request

Exhibit G

-

Form of Credit Request

Exhibit H

-

Form of Subsidiary Guaranty

 

SCHEDULES

 

 

Schedule 1.01 [a05-5954_1ex10d1.htm#Schedule1_01_070516]

- [a05-5954_1ex10d1.htm#Schedule1_01_070516]

Pool Vessels [a05-5954_1ex10d1.htm#Schedule1_01_070516]

Schedule 2.01 [a05-5954_1ex10d1.htm#Schedule2_01_070525]

- [a05-5954_1ex10d1.htm#Schedule2_01_070525]

Commitments [a05-5954_1ex10d1.htm#Schedule2_01_070525]

Schedule 4.06

-

Environmental Compliance

Schedule 4.14

-

Charters

Schedule 5.01

-

Existing Indebtedness

 

v

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THIS LOAN AND SECURITY AGREEMENT (this “Agreement”), dated as of March 24, 2005,
among K-SEA OPERATING PARTNERSHIP L.P., a Delaware limited partnership
(“Borrower”), the Lenders party hereto (the “Lenders”), LASALLE BANK NATIONAL
ASSOCIATION, as syndication agent, and KEYBANK NATIONAL ASSOCIATION, a national
banking association (“KeyBank”), as administrative agent for the Lenders (in
such capacity, the “Administrative Agent”), and as collateral trustee for
Lenders (in such capacity, the “Collateral Trustee”).

 

RECITALS

 

WHEREAS, Borrower desires to obtain loan facilities in the initial aggregate
amount of Eighty Million Dollars ($80,000,000.00) in order to refinance certain
outstanding obligations of the Borrower and its Affiliates under current senior
credit facilities, finance the ongoing working capital and capital expenditures
of the Borrower and its affiliates, obtain the issuance of Letters of Credit and
for general corporate purposes, including acquisitions, and

 

WHEREAS, Lenders have agreed to provide Borrower with a revolving credit
facility in the amount up to Eighty Million Dollars ($80,000,000.00) (with a
Twenty Million Dollar ($20,000,000.00) sublimit for Letters of Credit) (the
“Facility”) that shall be secured by all the Collateral (as hereinafter defined)
and otherwise subject to the terms and conditions of this Agreement.

 

The parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.01                            Defined Terms.  As used in this
Agreement, the following terms have the meanings specified below:

 

“Adjusted LIBOR Rate” means, with respect to any LIBOR Loan for any Interest
Period, an interest rate per annum (rounded upwards, if necessary, to the next
1/16 of 1%) equal to (a) LIBOR for such Interest Period multiplied by (b) the
Statutory Reserve Rate.

 

“Administrative Agent” means KeyBank National Association, a national banking
association, in its capacity as administrative agent for Lenders hereunder.

 

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified, provided,
however, that with respect to Borrower and K-Sea, this term shall not be deemed
to describe any Person who is not any of Borrower, the general partner of
Borrower, K-Sea or a direct or indirect subsidiary of K-Sea.

 

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

 

“Agent” means Administrative Agent and/or Collateral Trustee, as the case may
be.

 

“Alternative Currency” means any currency freely transferable into Dollars to
the extent that such currency is approved by the Administrative Agent and the
L/C Issuer.

 

“Anniversary Date” means the date occurring one (1) year after the Effective
Date and the same date in every year thereafter.

 

“Applicable Law” means all applicable provisions of all (a) constitutions,
statutes, ordinances, rules, regulations and orders of all governmental and/or
quasi-governmental bodies, (b) Government Approvals, and (c) order, judgments
and decrees of all courts and arbitrators.

 

“Applicable Margin” means, at all times during the applicable periods set forth
below: (a) with respect to Base Rate Loans, the percentage set forth below under
the heading “Base Rate Margin” and adjacent to such period, (b) with respect to
LIBOR Loans, the percentage set forth below under the heading “LIBOR Margin” and
adjacent to such period and (c) with respect to the Commitment Fees, the
percentage set forth below under the heading “Commitment Fee Margin” and
adjacent to such period:

 

Period

 

Applicable Margin

 

When the Total
Funded Debt to
EBITDA Ratio
is greater than
or equal to

 

And less
than

 

Base Rate
Margin

 

LIBOR
Margin

 

Commitment
Fee Margin

 

3.25:1.00

 

 

 

0.250

%

2.000

%

0.375

%

2.75:1.00

 

3.25:1.00

 

0.000

%

1.750

%

0.250

%

2.25:1.00

 

2.75:1.00

 

0.000

%

1.500

%

0.225

%

1.75:1.00

 

2.25:1.00

 

0.000

%

1.250

%

0.200

%

 

 

1.75:1.00

 

0.000

%

1.000

%

0.175

%

 

Changes in the Applicable Margin resulting from a change in the Total Funded
Debt to EBITDA Ratio shall be based upon the certificate most recently delivered
under Section 6.01(b) and shall become effective on the first day of the month
immediately succeeding the date such certificate is required to be delivered to
the Administrative Agent pursuant to Section 6.01(b).  Notwithstanding anything
to the contrary in this definition, (i) if Borrower shall fail to deliver to the
Administrative Agent such a certificate on or prior to any date required by
Section 6.01(b), the Total Funded Debt to EBITDA Ratio shall be deemed to be
greater than 3.25:1.00 from and including such date to the first day of the
month immediately succeeding the date of delivery to the Administrative Agent of
such certificate and (ii) during the period commencing on the Effective Date and
ending on the first day of the month immediately succeeding the date that the
certificate to be delivered under Section 6.01(b) for the fiscal quarter ending
June 30, 2005 is to be delivered to the Administrative Agent, the Applicable
Margin shall be 0.000% for Base Rate Loans, 1.750% for LIBOR Loans and 0.250%
with respect to the Commitment Fees.

 

2

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“Applicable Percentage” means, with respect to any Lender, the percentage of the
total Commitments represented by such Lender’s Commitment.

 

“Appraisal” means any appraisal, either visual or desktop or both, as determined
by an appraiser, of the Pool Vessels, conducted from time to time by an
Appraiser acceptable to the Administrative Agent pursuant to the terms of this
Agreement and shall also include the appraisal of the Pool Vessels performed by
the Administrative Agent prior to the date hereof, or at the Administrative
Agent’s direction, by an appraiser appointed by Administrative Agent and paid
for by Borrower.

 

“Appraiser” means any one of L&R Midland, Marcon International, Inc., Merrill
Marine Services, Inc., or any other Person agreed to by Borrower and the
Administrative Agent.

 

“Asset Coverage Ratio” means, as of any date of determination, the ratio of the
Orderly Liquidation Value of all Pool Vessels that are part of the Collateral
divided by the aggregate Revolving Credit Exposure of all Lenders.

 

“Asset Disposition” means the disposition of any or all of the fixed assets of
the Borrower or any of its Subsidiaries included in the Collateral whether by
sale, lease, transfer or otherwise (but excluding damage, destruction, loss or
condemnation); provided, however, prior to the occurrence of an Event of
Default, the term “Asset Disposition” shall not include (a) any sale, lease,
transfer or other disposition of (i) inventory in the ordinary course of
business; (ii) obsolete or worn out equipment; (iii) traded-in equipment, (iv)
assets by Borrower to a Guarantor or by a Guarantor to Borrower or another
Guarantor; or (v) transfers permitted under Section 7.07, (b) sale-leaseback
transactions not otherwise prohibited hereby and (c) charters or other
employment contracts of Pool Vessels not otherwise prohibited hereby.

 

“Assignment and Acceptance” means an assignment and acceptance entered into by
any Lender and an assignee (with the consent of any party whose consent is
required by Section 10.07 hereof), and accepted by Administrative Agent, in the
form of Exhibit B or any other form approved by Administrative Agent.

 

“Assignments” means, collectively, the Earnings Assignment and the Assignment of
Insurances.

 

“Assignment of Insurances” means the first priority assignment of insurances
respecting the Pool Vessels granted by Borrower in favor of the Collateral
Trustee in form and substance satisfactory to Administrative Agent.

 

“Availability Period” means the period from and including the Effective Date to,
but excluding, the earlier of the Termination Date and the date of termination
of the Commitments.

 

“Base Rate” means, for any day, a rate per annum equal to the greater of (a) the
Prime Rate, or (b) one-half of one percent (0.50%) in excess of the Federal
Funds Effective Rate.  Any change in the Base Rate due to a change in the Prime
Rate or the Federal Funds Effective Rate shall be effective from and including
the effective date of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively.

 

3

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“Base Rate Loan” means any Loan bearing interest at the Base Rate.

 

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

 

“Borrower” means K-Sea Operating Partnership L.P., a Delaware limited
partnership.

 

“Borrowing Base” means 80% of the Orderly Liquidation Value of the Pool Vessels.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided, that when used in connection with a Loan that bears
interest at a rate per annum equal to the LIBOR Rate (including any notice in
respect thereof), the term “Business Day” shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.

 

“Capital Expenditures” means any expenditure or liability that is properly
charged to a capital account or otherwise capitalized on Borrower’s consolidated
balance sheet in accordance with GAAP.

 

“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
42 U.S.C. Section 9601 et seq. and as further amended from time to time.

 

“Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of
ownership interests representing more than 50% of the general partnership
interest in K-Sea or more than 50% of the aggregate ordinary voting power
represented by the issued and outstanding ownership interests of Borrower or any
Subsidiary Guarantor, or (b) for the period of twelve (12) consecutive calendar
months, a majority of the board of Borrower or any Guarantor shall no longer be
composed of individuals (i) who were members of said board on the first day of
such period, (ii) whose election or nomination to said board was approved by
individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of said board, or (iii) whose
election or nomination to said board was approved by individuals referred to in
clauses (i) and (ii) above constituting at the time of such election or
nomination at least a majority of said board.

 

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or

 

4

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application thereof by any Governmental Authority after the date of this
Agreement, including, without limitation, any change in any statutory,
regulatory or institutional reserve requirement, including, but not limited to,
the Statutory Reserve Rate, or (c) compliance by any Lender (or, for purposes of
Section 2.11(b) hereof, by any lending office of such Lender or by such Lender’s
holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued after
the date of this Agreement.

 

“Classification Society” means the American Bureau of Shipping or such other
classification society acceptable to Lenders.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Collateral” means the collateral described in this Agreement, including, but
not limited to, in Article III hereof, the Assignments and the Mortgage,
including, without limitation, the Pool Vessels, and the Proceeds thereof, all
insurance with respect to the Pool Vessels, any and all charters of the Pool
Vessels by Borrower and all Hire and other amounts payable from time to time
thereunder and the Proceeds thereof, all future charters of the Pool Vessels by
Borrower, including all Hire payments and Proceeds of the foregoing and all
amounts payable hereunder as more specifically described herein and in the
Assignments and the Mortgage.

 

“Collateral Trustee” means KeyBank National Association in its capacity as
collateral trustee for Lenders hereunder.

 

“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans hereunder, expressed as an amount representing one hundred percent
(100%) of the maximum aggregate amount of such Lender’s Revolving Credit
Exposure hereunder, as such commitment may be (a) reduced from time to time
pursuant to Section 2.07 hereof, and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 10.07 hereof. 
The initial amount of each Lender’s Commitment is set forth (x) on Schedule 2.01
or (y) in the Assignment and Acceptance pursuant to which such Lender shall have
assumed its Commitment, as applicable.

 

“Commitment Fee” has the meaning set forth in Section 2.10.

 

“Commitment Fee Margin” has the meaning set forth in the definition of
“Applicable Margin”.

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. 
“Controlling” and “Controlled” have meanings correlative thereto.

 

“Credit Party” means each of Borrower, each Guarantor and each of their
respective Subsidiaries; provided, however, “Credit Party” shall exclude
Inversiones Kara Sea Srl.

 

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

 

5

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

 

“Distributions” means, with respect to any Person (i) cash distributions or any
other distributions on, or in respect of, any ownership interest or any
membership or partnership interest of such Person, and (ii) any and all funds,
cash or other payments made in respect of the redemption, repurchase or
acquisition of such interest.

 

“Documentary Letter of Credit” shall have the meaning ascribed thereto in
Section 2.02(c) hereof.

 

“Dollar Equivalent” means, at any date of determination thereof, with respect to
an amount of an Alternative Currency, the amount of Dollars which could be
purchased with such amount of such Alternative Currency at the spot exchange
rate therefor as quoted by the Administrative Agent as of 11:00 a.m. (New York
City time) on the date two Business Days prior to the date of any determination
thereof for purchase on such date (or, in the case of any determination pursuant
to Section 10.18, on the date of determination).

 

“Dollars” or “$” refers to lawful money of the United States of America.

 

“Earnings Assignment” means the general assignment for security interest
purposes of all charters, charter hire, freights and earnings with respect to
the Pool Vessels granted by Borrower in favor of the Collateral Trustee, in form
and substance satisfactory to the Administrative Agent.

 

“EBITDA” means, with respect to any fiscal period of K-Sea and its consolidated
Affiliates, including, without limitation, Borrower and each Guarantor, on a
consolidated basis, the sum of:

 

(1)                                  the net income (or net loss) of Borrower
(determined in accordance with GAAP) for such fiscal period, without giving
effect to any extraordinary pre-tax gains or losses; plus:

 

(2)                                  to the extent that any of the items
referred to in any of clauses (i) through (iii) below were deducted in
calculating such net income:

 

(i)                                     Interest Expense of Borrower for such
fiscal period;

 

(ii)                                  federal and state income tax expenses of
Borrower for such fiscal period;

 

(iii)                               the amount of all depreciation and
amortization for such fiscal period; minus

 

(3)                                  to the extent added in calculating such net
income, gains from sales, exchanges and other dispositions of assets not in the
ordinary course of business.

 

“Effective Date” means the date on which the conditions specified in
Section 5.01 hereof are satisfied (or waived in accordance with Section 10.06
hereof).

 

6

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“Environmental Action” means any administrative, regulatory or judicial action,
suit, demand, demand letter, claim, notice of non-compliance or violation,
notice of liability or potential liability, investigation, proceeding, consent
order or consent agreement arising under any Environmental Law or Environmental
Permit relating to Hazardous Materials or arising from alleged injury or threat
of injury to health, safety or the environment in connection with or arising
from exposure to or the actual or potential release of Hazardous Materials,
including (a) by any Governmental Authority for enforcement, cleanup, removal,
response, remedial or other actions or damages, and (b) by any Governmental
Authority or any third party for damages, contribution, indemnification, cost
recovery, compensation or injunctive relief.

 

“Environmental Event” means (a) an environmental event that has occurred or any
environmental condition that is discovered in, on, beneath, from or involving
any of the Pool Vessels (including the presence, emission or release of
Hazardous Materials or the violation of any applicable Environmental Law) for
which a remediation or reporting could reasonably be required under applicable
Environmental Law, or (b) notification received by Borrower, any Guarantor or
any charterer of a Pool Vessel that such charterer, such Guarantor, Borrower, or
any Pool Vessel is the subject of an Environmental Action relating to such Pool
Vessel that could reasonably be expected to result in any ordered remediation or
corrective action or other material liability under applicable Environmental
Law.

 

“Environmental Law” means any and all applicable international, foreign,
federal, state, regional and local laws (as well as obligations, duties and
requirements relating thereto under common law) relating to:  (a) emissions,
discharges, spills, releases or threatened releases of pollutants, contaminants,
Hazardous Materials, materials containing Hazardous Materials, or hazardous or
toxic materials or wastes into ambient air, surface water (including, without
limitation, all inland and ocean waters), groundwater, watercourses, publicly or
privately-owned treatment works, drains, sewer systems, wetlands, septic systems
or onto land; (b) the use, treatment, storage, disposal, handling,
manufacturing, transportation, or shipment of Hazardous Materials, materials
containing Hazardous Materials or hazardous and/or toxic wastes, materials,
products or by-products (or of equipment or apparatus containing Hazardous
Materials); or (c) pollution or the protection of human health, safety or the
environment from exposure to or injury or damage caused by Hazardous Materials. 
Without limitation, “Environmental Law” includes CERCLA and OPA 90 and IMO 13(g)
(when and if the latter comes into effect).

 

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of Borrower or any Subsidiary directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of any
Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.

 

“Environmental Permit” means any permit, approval, identification number,
license or other authorization required under any Environmental Law.

 

7

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.

 

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

 

“Event of Default” has the meaning assigned to such term in Article VIII hereof.

 

“Event of Loss” means, with respect to any Pool Vessel, the actual or
constructive loss or the disappearance of such Pool Vessel or the loss of use
thereof, due to theft, destruction, damage beyond repair or damage from any
reason whatsoever, to an extent which makes repair uneconomical, or rendition
thereof unfit for normal use, or the condemnation, confiscation or seizure of,
or requisition of title to such Pool Vessel by any Governmental Authority or any
other Person, or the requisition of use of any Pool Vessel by any non-United
States Governmental Authority, in each case whether or not acting under color of
Governmental Authority.

 

“Existing Letters of Credit” means, collectively, (a) Irrevocable Standby Letter
of Credit No. S308212 dated January 14, 2004 issued by KeyBank in favor of the
United States of America, represented by the Secretary of Transportation, acting
by and through the Maritime Administrator, as beneficiary, in the aggregate
amount of $6,485,000 (the “Existing MARAD Letter of Credit”) and (b) Irrevocable
Standby Letter of Credit No. S309764 dated November 3, 2004 issued by KeyBank in
favor of New York State Department of Taxation and Finance, as beneficiary, in
the aggregate amount of $2,000.

 

“Excluded Taxes” means, with respect to the Administrative Agent, the Collateral
Trustee, any Lender or any other recipient of any payment to be made by or on
account of any obligation of Borrower hereunder, (a) income or franchise taxes
imposed on (or measured by) its

 

8

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net income by the United States of America, or by the jurisdiction under the
laws of which such recipient is organized or in which its principal office is
located or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which Administrative Agent,
such Lender or such other recipient is located, and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by Borrower under
Section 2.17(b) hereof), any withholding tax that is imposed on amounts payable
to such Foreign Lender at the time such Foreign Lender becomes a party to this
Agreement or is attributable to such Foreign Lender’s failure or inability to
comply with Section 2.13(d) hereof, except to the extent that such Foreign
Lender’s assignor (if any) was entitled, at the time of assignment, to receive
additional amounts from Borrower with respect to such withholding tax pursuant
to Section 2.13(a) hereof.

 

“Extraordinary Receipt” means any cash received by or paid to or for the account
of any Person consisting of proceeds of casualty type insurance (other than
proceeds of business interruption insurance to the extent such proceeds
constitute compensation for lost earnings), and condemnation awards (and
payments in lieu thereof) and indemnity payments relating to third party claims;
provided, however, that an Extraordinary Receipt shall not include cash receipts
received from proceeds of insurance, condemnation awards (and payments in lieu
thereof) or indemnity payments to the extent that such proceeds, awards or
payments (a) in respect of loss or damage to Pool Vessels, equipment, fixed
assets or real property are applied (or in respect of which expenditures were
previously incurred) to replace or repair the Pool Vessels, equipment, fixed
assets or real property in respect of which such proceeds, awards or payments
were received in accordance with the terms of the Loan Documents, so long as
such application, or commitment to make such application, is made within twelve
(12) months after the occurrence of such damage or loss; or (b) are received by
any Person in respect of any third party claim against such Person and applied
to pay (or to reimburse such Person for its prior payment of) such claim and the
costs and expenses of such Person with respect thereto.

 

“Facility” means the revolving facility in the aggregate amount outstanding at
any time not to exceed the Maximum Amount with a sublimit for Letters of Credit
in the amount of Twenty Million Dollars ($20,000,000.00) as described in
Section 2.02(c) hereof.

 

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by Administrative Agent from three Federal funds brokers of recognized
standing selected by it.

 

“Financial Officer” means the chief financial officer, principal accounting
officer, treasurer or controller of Borrower.

 

“Financial Statements” means the balance sheet and statement of income and cash
flows of K-Sea and its consolidated Affiliates (including, without limitation,
Borrower and all

 

9

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Guarantors), on a consolidated basis, as required from time to time to be
provided by Borrower under this Agreement.

 

“Fixed Charge Coverage Ratio” means, at any date of determination, the ratio of
(a) EBITDA less Maintenance CAPEX divided by (b) Fixed Charges, in each case for
the four fiscal quarter period ending on such date or, if such date is not the
last day of a fiscal quarter, for the immediately preceding four fiscal quarter
period.

 

“Fixed Charges” means the sum, for any period for K-Sea and its consolidated
Affiliates, including, without limitation, Borrower and any Guarantor, on a
consolidated basis, of the following:  (i) Interest Expense, plus (ii) the
current portion of capital lease payments, plus (iii) Scheduled Principal
Payments, plus (iv) cash income taxes.

 

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than the United States of America, any State thereof or the
District of Columbia.

 

“GAAP” means generally accepted accounting principles in the United States of
America, as may be determined by the Financial Accounting Standards Board.

 

“Government Approval” means an authorization, consent, non-action, approval,
license or exemption of, registration or filing with, or report to, any
governmental or quasi-governmental department, agency, body or other unit.

 

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

 

“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the “primary obligor”) in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation, or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include any endorsement
for collection or deposit in the ordinary course of business.

 

“Guarantors” means, collectively, K-Sea and any Subsidiary Guarantor from time
to time, and each, a “Guarantor.”

 

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“Hazardous Materials” means (a) hazardous materials, hazardous wastes, and
hazardous substances as those or similar terms are defined under any
Environmental Laws, including, but not limited to, the following:  the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801 et seq., as amended from
time to time, the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901
et seq., as amended from time to time, CERCLA, the Clean Water Act, 33 U.S.C.
Section 1251 et seq., as amended from time to time, the Clean Air Act, 42 U.S.C.
Section 7401 et seq., as amended from time to time, and/or the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., as amended from time to time, OPA
90; (b) petroleum and petroleum products, including crude oil and any fractions
thereof; (c) natural gas, synthetic gas, and any mixtures thereof; (d) asbestos
and/or any material which contains any hydrated mineral silicate, including, but
not limited to, chrysolite, amosite, crocidolite, tremolite, anthophylite and/or
actinolite, whether friable or non-friable; (e) polychlorinated biphenyls
(“PCBs”), or PCB-containing materials or fluids; (f) radon; (g) any other
hazardous radioactive, toxic or noxious substance, material, pollutant, or
solid, liquid or gaseous waste; and (h) any hazardous substance that, whether by
its nature or its use, is subject to regulation under any Environmental Law or
with respect to which any international, federal, state or local Environmental
Law or governmental agency requires environmental investigation, monitoring or
remediation.

 

“Hedging Agreement” means any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement (excluding
fuel surcharge) or other interest or currency exchange rate or commodity price
hedging arrangement.

 

“Hire” means all charter hire under any and all charters entered into by or on
behalf of Borrower of any Pool Vessel from time to time, together with
additional hire, supplemental hire, requisition hire, freights and any other
amounts paid to or for the account of Borrower on account of the use or
employment of such Pool Vessel.

 

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others,
(h) all Capital Lease Obligations of such Person, (i) all operating lease
obligations of such Person, (j) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit and letters of
guaranty, and (k) all obligations, contingent or otherwise, of such Person in
respect of bankers’ acceptances; provided, however, that “Indebtedness” shall
not include (x) Secured Nonrecourse Obligations and (y) nonrecourse obligations
incurred in connection with leveraged lease transactions as determined in
accordance with GAAP.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

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“Interest Expense” means, for any period, the sum, for K-Sea and its
consolidated Affiliates, including, without limitation, Borrower or any
Guarantor, on a consolidated basis, of the following:  (a) all interest in
respect of Indebtedness (including the interest component of any payments in
respect of Capital Lease Obligations) accrued or capitalized during such period
(whether or not actually paid during such period) plus (b) the net amount
payable (or minus the net amount receivable) under Hedging Agreements relating
to interest during such period (whether or not actually paid or received during
such period).

 

“Interest Payment Date” means, (i) with respect to any Base Rate Loan, the last
day of each calendar month, provided, that if any Interest Payment Date would
end on a day other than a Business Day, such Interest Payment Date shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Payment Date shall end on the next preceding Business Day, and (ii) with respect
to any LIBOR Loan, shall mean the last day of the relevant Interest Period,
provided interest on any LIBOR Loan having an Interest Period of six (6) months
shall be payable three (3) months after the first day of such Interest Period as
well as on the last day of the relevant Interest Period.  For purposes hereof,
the date of a Loan initially shall be the date on which such Loan is made.

 

“Interest Period” means with respect to a LIBOR Loan, the period commencing on
the date of the making of such LIBOR Loan and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as Borrower may elect, provided that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day, unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, (b) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of the making of a
LIBOR Loan initially shall be the date on which such LIBOR Loan is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such LIBOR Loan.

 

“Interest Rate” means the applicable interest rate as set forth in Section 2.03
hereof.

 

“KeyBank” means KeyBank National Association.

 

“K-Sea” means K-Sea Transportation Partners L.P.

 

“L/C Issuer” means KeyBank.

 

“Lender Affiliate” means, (a) with respect to any Lender, (i) an Affiliate of
such Lender that is in the business of making and/or buying loans of the type
described herein, or (ii) any entity (whether a corporation, partnership, trust
or otherwise) that is engaged in making, purchasing, holding or otherwise
investing in bank loans and similar extensions of credit in the ordinary course
of its business and is administered or managed by any Lender or an Affiliate of
such Lender, and (b) with respect to any Lender that is a fund which invests in
bank loans and

 

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similar extensions of credit, any other fund that invests in bank loans and
similar extensions of credit and is managed by the same investment advisor as
such Lender or by an Affiliate of such investment advisor.

 

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that
shall have become a party hereto pursuant to an Assignment and Acceptance, other
than any such Person that ceases to be a party hereto pursuant to an Assignment
and Acceptance.

 

“Letter of Credit” means either a Documentary Letter of Credit or a Standby
Letter of Credit.

 

“Letter of Credit Exposure” means in respect of any Lender at any time, an
amount equal to (i) the sum (without duplication) at such time of (x) the
aggregate amount available for drawing under the outstanding Letters of Credit,
(y) the aggregate amount of unpaid drafts drawn on all Letters of Credit, and
(z) the aggregate unpaid Reimbursement Obligations, multiplied by (ii) such
Lender’s Applicable Percentage at such time

 

“Letter of Credit Sublimit” means $20,000,000.

 

“LIBOR” means, with respect to the Interest Period applicable to any LIBOR Loan,
a rate of interest per annum, as determined by the Administrative Agent, equal
to the rate for deposits in Dollars for a period comparable to such Interest
Period which appears on Telerate Page 3750 as of 11:00 a.m., London time, on the
day that is two Business Days prior to the first day of such Interest Period. 
If such rate does not appear on Telerate Page 3750, the LIBO Rate shall be the
rate per annum (rounded, if necessary, to the nearest one hundred-thousandth of
a percentage point) at which deposits in Dollars are offered by four major banks
in the London interbank market at approximately 11:00 a.m., London time, on the
day that is two Business Days prior to the first day of such Interest Period to
prime banks in the London interbank market for a period of one month commencing
on the first day of such Interest Period in an amount comparable to the
principal amount of such LIBOR Loan.  The Administrative Agent will request the
principal London office of each such bank to provide a quotation of its rate. 
If at least two such quotations are provided as requested, the rate for such
Interest Period shall be the arithmetic mean of the quotations.  If fewer then
two quotations are provided as requested, the rate for such Interest Period
shall be the arithmetic mean of the rates quoted by major banks in New York
City, selected by the Administrative Agent, at approximately 11:00 a.m., New
York City time, on the date that is two Business Days prior to the first day of
such Interest Period for loans in Dollars to leading European banks for a period
of one month commencing on the first day of such Interest Period in an amount
comparable to such LIBOR Loan.

 

“LIBOR Loan” means any Loan bearing interest at the LIBOR Rate.

 

“LIBOR Rate” means the Adjusted LIBOR Rate plus the Applicable Margin.

 

“Lien” means, with respect to any asset, any interest in property securing an
obligation owed to, or a claim by, any person other than the owner of the
property, whether such interest shall be based on common law, maritime law,
statute, contract or conveyance and including, but not limited to, the security
interest lien arising from any pledge, mortgage, chattel mortgage,

 

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charge, encumbrance, conditional sale or trust receipt, or from a charter,
consignment or bailment for security purposes and any tax lien, mechanic’s lien,
materialman’s lien, workman’s lien, repairman’s lien, any financing statement or
other similar charge or encumbrance.

 

“Loan” has the meaning assigned to such term in Section 2.02(b) hereof and
includes, without limitation, all amounts debited to reimburse the L/C Issuer
for drawdowns against a Letter of Credit and related expenses provided at the
request of Borrower pursuant to Section 2.15 hereof.

 

“Loan Accounts” means one or more loan accounts maintained by the Administrative
Agent for Borrower in the ordinary course of business, including, without
limitation, any loan account in respect of the Facility, and each, a “Loan
Account.”

 

“Loan Documents” means, collectively, this Agreement, the Notes, the Mortgage,
the Parent Guaranty, any Subsidiary Guaranty, the Assignments and all consents
given with respect to any of the foregoing.

 

“Loan Request” means a request by Borrower for a Loan in accordance with
Section 2.05 hereof.

 

“Maintenance CAPEX” means all Capital Expenditures made for the purpose of
maintaining (and not increasing) the operating capacity of the Pool Vessels
during the twelve (12) calendar months immediately preceding any date of
determination thereof.

 

“Managing Person” means, with respect to any Person that is (a) a corporation,
its board of directors, (b) a limited liability company, its board of control,
managing member or members, (c) a limited partnership, its general partner, (d)
a general partnership or a limited liability partnership, its managing partner
or executive committee or (e) any other Person, the managing body thereof or
other Person analogous to the foregoing.

 

“Material Adverse Effect” means a material adverse effect on (a) the Collateral,
(b) the property, business, operations, financial condition, liabilities or
capitalization of K-Sea and its consolidated Affiliates, including, without
limitation, Borrower and each Guarantor, taken as a whole, (c) the ability of
Borrower to perform any of its obligations under this Agreement (including the
timely payment of all amounts due hereunder), (d) the rights of or benefits
available to the Administrative Agent, Collateral Trustee and the Lenders under
this Agreement, or (e) the validity or enforceability of this Agreement.

 

“Material Indebtedness” means Indebtedness (other than the Loans), or
obligations in respect of one or more Hedging Agreements, of any one or more of
K-Sea, Borrower and its Subsidiaries in an aggregate principal amount exceeding
$100,000.00.  For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of K-Sea, Borrower or any Subsidiary in respect of
any Hedging Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that K-Sea, Borrower or such Subsidiary would
be required to pay if such Hedging Agreement were terminated at such time.

 

“Maturity Date” means the Termination Date.

 

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“Maximum Amount” means, with respect to the Facility, Eighty Million Dollars
($80,000,000.00), as such amount may be increased in the aggregate in accordance
with Section 2.18 hereof.

 

“Minimum Loan Amount” means, with respect to any LIBOR Loan, a minimum amount of
Five Hundred Thousand Dollars ($500,000.00), with additional amounts in
increments of One Hundred Thousand Dollars ($100,000.00) and, with respect to
any Base Rate Loan, a minimum amount of One Hundred Thousand Dollars
($100,000.00) with additional amounts in increments of One Hundred Thousand
Dollars ($100,000.00).

 

“Mortgage” means the First Preferred Fleet Mortgage, dated the date hereof,
granted by Borrower to the Collateral Trustee over the whole of the Pool
Vessels, as the same may be amended, modified or supplemented from time to time
and from which Pool Vessels may be added or released from time to time.

 

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.

 

“Net Proceeds” means, with respect to any Asset Disposition by any Person, or
any Extraordinary Receipt received by or paid to or for the account of any
Person, the aggregate amount of cash received from time to time (whether as
initial consideration or through payment or disposition of deferred
consideration) by or on behalf of such Person in connection with such
transaction after deducting therefrom only (without duplication) (a) reasonable
and customary brokerage commissions, investment banking fees, underwriting fees
and discounts, legal fees, accounting fees, finder’s fees and other similar
out-of-pocket costs, (b) the amount of taxes paid or payable in connection with
or as a result of such transaction and (c) with respect to any asset, the amount
of any Indebtedness secured by a Lien on such asset that, by the terms of such
transaction, is repaid upon such disposition, in each case to the extent, but
only to the extent, that the amounts so deducted are, at the time of receipt of
such cash, actually paid to a Person that is not an Affiliate of such Person or
any Credit Party or any Affiliate of any Credit Party and are properly
attributable to such transaction or to the asset that is the subject thereof.

 

“Non-Qualified Pool Vessel” means any Pool Vessel that is (i) a vessel required
to be phased out at any time by OPA 90, (ii) not qualified or documented with
endorsement for the United States coastwise trade, or (iii) a vessel which is
part of an incomplete two-vessel operating unit (comprised of a specific
tug-barge combination).

 

“Notes” means collectively the Notes evidencing Loans under the Facility as
described in Section 2.08 hereof.

 

“Obligations” means (a) the due and punctual payment of (i) principal of and
premium, if any, and interest (including interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the Loans or
the Letter of Credit Exposure, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, (ii) all
other monetary obligations, including fees, commissions, costs, expenses and
indemnities, whether

 

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primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Borrower or any other Credit Party to the
Administrative Agent, the Lenders or the L/C Issuer, or that are otherwise
payable to the Administrative Agent, the Lenders or the L/C Issuer, under this
Agreement and the other Loan Documents and (iii) all obligations of Borrower,
monetary or otherwise, under each Hedging Agreement entered into with any Lender
(or any Affiliate thereof) as a counterparty and (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of
Borrower or any other Credit Party under or pursuant to this Agreement and the
other Loan Documents.  This term includes all principal, interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), fees, charges, expenses, attorneys’ fees and any
other sum chargeable to any Credit Party under this Agreement or any of the
other Loan Documents.

 

“OPA 90” means the Oil Pollution Act of 1990, P.L. 101-380, 104 Stat. 484 et
seq., as amended from time to time.

 

“Orderly Liquidation Value” means, with respect to any Pool Vessel, the net
proceeds anticipated at a sale other than a forced sale upon foreclosure, as
reasonably determined by the Administrative Agent or by independent appraisers
appointed by the Administrative Agent at the expense of Borrower.

 

“Organizational Documents” means as to any Person which is (a) a corporation,
the certificate or articles of incorporation and by-laws of such Person, (b) a
limited liability company, the limited liability company agreement or similar
agreement of such Person, (c) a partnership, the partnership agreement or
similar agreement of such Person, or (d) any other form of entity or
organization, the organizational documents analogous to the foregoing.

 

“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement.

 

“Parent Guaranty” means that certain guaranty, dated the date hereof, executed
by K-Sea in favor of Lenders in form and substance acceptable to Lenders in
their sole discretion.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

 

“Permitted Acquisition” means the purchase, holding or acquisition of (including
pursuant to any merger) any capital stock or other securities (including any
option, warrant or other right to acquire any of the foregoing) of any other
Person, or the purchase or acquisition of (in one transaction or a series of
transactions (including pursuant to any merger)) any assets of any other Person
constituting a business unit, provided that, (i) at the time thereof and
immediately after giving effect thereto no Default shall have occurred and be
continuing, (ii)

 

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such Person or business unit, as the case may be, is in substantially the same
business as Borrower and (iii) Borrower shall have complied with the provisions
of Section 6.18 with respect to such Person.

 

“Permitted Liens” means:

 

(a)                                  Liens imposed by law for taxes or under
ERISA in respect of contingent liabilities thereunder that are not yet due;

 

(b)                                 carriers’, warehousemen’s, mechanics’,
materialmen’s, repairmen’s and other like Liens imposed by law, including, but
not limited to, liens for current wages of the crew of any Pool Vessel,
including the master of such Pool Vessel, for current wages of stevedores when
employed directly by such Pool Vessel or for general average or salvage,
including contract salvage or liens arising in the ordinary course of business
and securing obligations that are not overdue by more than thirty (30) days and
in each such case such liens are subordinate to the Lien of the Mortgage; and

 

(c)                                  Liens arising out of bareboat charters of
Pool Vessels to K-Sea Transportation Inc. covering the Pools Vessels described
on Schedule 4.14;

 

provided, that the term “Permitted Liens” shall not include any Lien securing
Indebtedness; and, provided, further, that the aggregate amount of Permitted
Liens outstanding on all Pool Vessels at any one time shall not exceed
$1,500,000.

 

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

 

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which Borrower or any ERISA Affiliate is
(or, if such plan were terminated, would under Section 4069 of ERISA be deemed
to be) an “employer” as defined in Section 3(5) of ERISA.

 

“Pool Vessels” means those vessels identified on Schedule 1.01 hereto, together
with any vessels hereafter added to the Pool Vessels pursuant to Section 3.02 or
Section 3.03 hereof.

 

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by KeyBank National Association as its prime commercial lending rate;
each change in the Prime Rate being effective from and including the date such
change is publicly announced as being effective. The Prime Rate is not intended
to be lowest rate of interest charged by KeyBank National Association in
connection with extensions of credit to borrowers.

 

“Proceeds shall have the meaning assigned to it in the UCC and, in any event,
shall include, but not be limited to, (i) any and all proceeds of any insurance,
indemnity or warranty payable to Lenders, from time to time with respect to the
Pool Vessels or other Collateral; (ii) any and all payments (in any form
whatsoever) made or due and payable from time to time in connection with any
sale, requisition, confiscation, condemnation, seizure or forfeiture of all and

 

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any part of the Pool Vessels by any governmental body, authority, bureau or
agency of any other Person (whether or not acting under color of governmental
body); and (iii) accounts arising out of, any charter or chattel paper
evidencing, any lease, contract for use or lease of, any and all other rents,
hire or profits or other amounts from time to time paid or payable to Lenders in
connection with, the Pool Vessels.

 

“Prohibited Jurisdiction” means any country or jurisdiction, from time to time,
(a) that is subject of a prohibition order (or any similar order or directive),
sanctions or restrictions promulgated or administered by the Office of Foreign
Assets Control of the United States Treasury Department, or (b) in which, or for
which, any Lender, which is a Lender on the Effective Date, is otherwise
prohibited or restricted, under laws, regulations, sanctions or restrictions
applicable to it or its business, from extending credit, transferring property
or assets, engaging in or facilitating trade or other economic activity, or
otherwise doing business.

 

“Prohibited Person” means any Person appearing on the Specially Designated
Nationals List compiled and disseminated by the Office of Foreign Assets Control
of the United States Treasury Department, as the same may be amended from time
to time.

 

“Proposed Increased Commitment” has the meaning assigned to such term in
Section 2.18 hereof.

 

“Qualified Pool Vessels” means Pool Vessels that are documented, coastwise
eligible tugs, AT/Bs and double-hulled barges and are acceptable in age,
construction, condition and trade employment to the Administrative Agent;
provided, that during the period from the Effective Date to the third
Anniversary Date, “Qualified Pool Vessels” may also include single-hulled barges
having an Orderly Liquidation Value not in excess of five percent (5%) of the
aggregate Orderly Liquidation Value of all Pool Vessels.

 

“Register” has the meaning assigned to such term in Section 10.07(c) hereof.

 

“Reimbursement Obligation” means, collectively, the obligation of Borrower to
the L/C Issuer with respect to each Letter of Credit and all documents,
instruments and other agreements related thereto, including the obligation of
Borrower to reimburse the L/C Issuer for amounts drawn under such Letter of
Credit.

 

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.

 

“Required Lenders” means, at any time, Lenders having Revolving Credit Exposures
and unused Commitments representing a percentage equal to or greater than
sixty-six and two third percent (66.67%) (or in the case, at any time, that the
number of Lenders equals two or less, then one hundred percent (100%)) of the
sum of the total Revolving Credit Exposure and unused Commitments at such time.

 

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“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum as of such time of (i) the outstanding principal balance of such Lender’s
Loans, plus (ii) such Lender’s Letter of Credit Exposure.

 

“Scheduled Principal Payments” means, with respect to any Person as of any date,
all scheduled payments of principal on Indebtedness paid by such Person during
the twelve (12) calendar month period immediately preceding such date; provided
that any Indebtedness repaid in full or in part from proceeds of Loans shall be
excluded (entirely, in the case of Indebtedness repaid in full and partially to
the extent of such repayment, in the case of Indebtedness repaid in part) in the
determination of Scheduled Principal Payments.

 

“Secured Nonrecourse Obligations” means (i) secured obligations of Borrower
taken on a consolidated basis where recourse of the payee of such obligations is
expressly limited to an assigned lease or loan receivable and the property
related thereto, (ii) debt of Single Transaction Subsidiaries, or
(iii) liabilities of Borrower taken on a consolidated basis to any manufacturer
of leased equipment where such liabilities are payable solely out of revenues
derived from the leasing or sale of such equipment; excluding, however,
nonrecourse obligations incurred in connection with leveraged lease transactions
as determined in accordance with GAAP.

 

“Standby Letter of Credit” shall have the meaning ascribed thereto in
Section 2.02(c) hereof.

 

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board).  Such reserve percentages shall include those
imposed pursuant to such Regulation D.  LIBOR Loans shall be deemed to
constitute eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation.  The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.

 

“Subordinated Indebtedness” means all Indebtedness which is subordinated to the
Obligations by its terms or pursuant to a subordination agreement, in each case,
reasonably acceptable to the Administrative Agent.

 

“Subsidiary” means, with respect to any Person (the “Parent”) at any date, any
other Person the accounts of which would be consolidated with those of the
Parent in the Parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other Person (a) of which securities or other ownership interests representing
more than 50% of the equity or more than 50% of the ordinary voting power or, in
the case of a partnership, more than 50% of the general partnership interests
are, as of such date, owned, Controlled or held by the Parent, or (b) the
financial statements of which

 

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shall be (or should be) consolidated with the financial statements of such
Person in accordance with GAAP.

 

“Subsidiary Guarantor” means any Subsidiary that executes and delivers a
Subsidiary Guaranty; provided, however, “Subsidiary Guarantor” shall exclude
Inversiones Kara Sea Srl.

 

“Subsidiary Guaranty” means any guaranty executed by any Subsidiary of Borrower
in favor of Lenders pursuant to Section 6.18 hereof.

 

“Tangible Capitalization” means, as of any date, the sum of Tangible Net Worth
at such date plus Total Funded Debt at such date.

 

“Tangible Net Worth” means the excess of total assets over total liabilities,
total assets and total liabilities each to be determined in accordance with GAAP
consistent with those applied in the preparation of the Financial Statements
referred to in Section 6.01 hereof, excluding, however, from the determination
of total assets all assets which would be classified as intangible assets under
GAAP, including, without limitation, capitalized organizational costs, goodwill,
licenses, patents, trademarks, trade names, copyrights and franchises.

 

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

 

“Telerate Page 3750” means the display page so designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that service),
or such other service as may be nominated as the information vendor for purposes
of displaying rates or prices comparable to LIBOR.

 

“Termination Date” means the fifth anniversary of the Effective Date.

 

“Title XI Guaranties” means United States government guaranties of debt
instruments issued to fund the acquisition of one or more vessels, which
guaranties are secured by preferred mortgages over the whole of such financed
vessels, as provided in 46 U.S.C. Appendix Section 1271 et seq. and the
regulations promulgated by the Secretary of Transportation thereunder.

 

“Total Funded Debt” means, as of any date, all Indebtedness of K-Sea and its
consolidated Affiliates, including, without limitation, Borrower and any
Guarantor, on a consolidated basis, of the kinds and types (without duplication)
described in clauses (a), (b), (c), (d), (e), (f), (g), (h), (j) (excluding
obligations in respect of letters of credit issued as credit support of
obligations for borrowed money of the Borrower or any Guarantor included in the
determination of Total Funded Debt) and (k) of the definition of Indebtedness.

 

“Total Funded Debt to EBITDA Ratio” means, at any date of determination, the
ratio of Total Funded Debt divided by EBITDA for the four fiscal quarter period
ending on such date or, if such date is not the last day of a fiscal quarter,
for the immediately preceding four fiscal quarter period.

 

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“Total Funded Debt to Tangible Capitalization Ratio” means, at any date of
determination, the ratio of Total Funded Debt divided by Tangible
Capitalization.

 

“Transactions” means the execution, delivery and performance by Borrower and
Guarantors of this Agreement and the other Loan Documents, the making of Loans
and the use of the Proceeds thereof.

 

“UCC” means the Uniform Commercial Code as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that to the extent
that the UCC is used to define any term herein or in any Loan Document and such
term is defined differently  in different Articles or Divisions of the UCC, the
definition of such term contained in Article or Division 9 shall govern;
provided, further, that in the event that, by reason or mandatory provisions of
law, any or all of the attachment, perfection or priority of, or remedies with
respect to Administrative Agent’s or any Lender’s Lien on any Collateral is
governed by the Uniform Commercial Code as enacted and in effect in a
jurisdiction other than the State of New York, the term “UCC” shall mean the
Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions.

 

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

 

Section 1.02                            Terms Generally.  The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined.  Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.  The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be construed to have the same meaning and
effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person’s successors and assigns, (c) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits, Schedules and
Annexes to, this Agreement, and (e) the words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

 

Section 1.03                            Accounting Terms; GAAP.  Except as
otherwise expressly provided herein, all terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect from time to
time; provided, that, if Borrower notifies the Administrative Agent that
Borrower requests an amendment to any provision hereof to eliminate the effect
of any change occurring after the date hereof in GAAP or in the application
thereof on the operation

 

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of such provision (or if the Administrative Agent notifies Borrower that the
Required Lenders request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such change in
GAAP or in the application thereof, then such provision shall be interpreted on
the basis of GAAP as in effect and applied immediately before such change shall
have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.

 

ARTICLE II

THE LOANS

 

Section 2.01                            Commitments.  Subject to the terms and
conditions set forth herein, each Lender agrees to make Loans to Borrower from
time to time during the Availability Period in an aggregate principal amount
that will not result in such Lender’s Revolving Credit Exposure exceeding such
Lender’s Commitment.  Within the foregoing limits and subject to the terms and
conditions set forth herein, Borrower may borrow, prepay and reborrow Loans.

 

SECTION 2.02                            LOANS.

 

(a)                                  Each Loan shall be made by the Lenders
ratably in accordance with their respective Commitments.  The failure of any
Lender to make any Loan required to be made by it shall not relieve any other
Lender of its obligations hereunder; provided, that the Commitments of Lenders
are several and no Lender shall be responsible for any other Lender’s failure to
make any Loan as required.

 

(b)                                 Subject to the terms and conditions
contained herein and until the Termination Date, the Lenders shall make loans to
Borrower on a revolving basis in amounts requested by Borrower from time to time
(the “Loans” and each, a “Loan”) in an aggregate amount outstanding at any time
not to exceed the amount permitted by this Section 2.02.  Each Loan shall be in
an aggregate principal amount of not less than the Minimum Loan Amount or an
integral multiple of $100,000.00 in excess thereof.

 

(c)                                  Subject to availability, Borrower may
request the L/C Issuer to issue trade, commercial documentary letters of credit
(each, a “Documentary Letter of Credit”) and standby letters of credit (“Standby
Letters of Credit”, and each, a “Standby Letter of Credit”, collectively with
Documentary Letters of Credit, “Letters of Credit”), in Dollars or any
Alternative Currency, during the period from the Effective Date to the thirtieth
Business Day prior to the Maturity Date; provided that immediately after giving
effect to the issuance of each Letter of Credit (i) the Letter of Credit
Exposure of all Lenders would not exceed the Letter of Credit Sublimit and (ii)
the Revolving Credit Exposure of all Lenders would not exceed the aggregate
Commitments of all Lenders.

 

(d)                                 The sum of the aggregate principal amount of
all Loans and the aggregate Letters of Credit Exposure shall at no time exceed
the lesser of (i) the Maximum Amount and (ii) the Borrowing Base.  The Lenders
shall have no obligation to make any Loan and the L/C Issuer shall have no
obligation to issue any Letter of Credit if, after giving effect to the making
of such

 

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Loan or the issuance of such Letter of Credit, the Revolving Credit Exposure
would exceed the lesser of (i) the Maximum Amount and (ii) the Borrowing Base.

 

(e)                                  Notwithstanding any other provision of this
Agreement, Borrower shall not be entitled to request, or to elect to convert or
continue, any Loan if the Interest Period requested with respect thereto would
end after the Termination Date, and Borrower shall not be entitled to request
the issuance of any Letter of Credit or any renewal thereof which would expire
after the Termination Date or provides for a drawing thereunder after the
Termination Date.

 

SECTION 2.03                            INTEREST.

 

(a)                                  Base Rate Loans shall, in each case, bear
interest at the Base Rate plus the Applicable Margin.

 

(b)                                 LIBOR Loans shall, in each case, bear
interest at the Adjusted LIBOR Rate for the Interest Period in effect for such
LIBOR Loan plus the Applicable Margin.

 

(c)                                  Notwithstanding the foregoing, if an Event
of Default has occurred and is continuing, then, so long as such Event of
Default is continuing, all principal of each Loan and each fee and other amount
then due and  payable by Borrower hereunder shall bear interest, after as well
as before judgment, at a rate per annum equal to (i) in the case of principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the
preceding paragraphs of this Section or (ii) in the case of any other amount, 2%
plus the Base Rate plus the Applicable Margin for Base Rate Loans.

 

(d)                                 Accrued interest on each Loan shall be
payable in arrears on each Interest Payment Date for such Loan, provided that
(i) interest accrued pursuant to paragraph (c) of this Section 2.03 shall be
payable on demand, (ii) in the event of any repayment or prepayment of any Loan,
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment and (iii) in the event of any
conversion of any LIBOR Loan prior to the end of the current Interest Period
therefor, accrued interest on such LIBOR Loan shall be payable on the effective
date of such conversion.

 

(e)                                  All interest hereunder shall be computed on
the basis of a year of 360 days for the actual number of days elapsed (including
the first day but excluding the last day).  The applicable Base Rate, Adjusted
LIBOR Rate or LIBOR shall be determined by the Administrative Agent, and such
determination shall be conclusive absent clearly demonstrable error.

 

(f)                                    Each Loan initially shall be of the type
specified in the applicable Loan Request and, in the case of a LIBOR Loan, shall
have an initial Interest Period as specified in such Loan Request.  Thereafter,
Borrower may elect to convert such Loan to a different type or to continue such
Loan and, in the case of a LIBOR Loan, may elect Interest Periods therefor, all
as provided in this Section 2.03.  Borrower may elect different options with
respect to different portions of the affected Loan, in which case each such
portion shall be allocated ratably among the Lenders.

 

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(g)                                 To make an election pursuant to this Section
2.03, Borrower shall notify the Administrative Agent of such election by
telephone by the time that a Loan Request would be required under Section 2.05
if Borrower were requesting a Loan of the type resulting from such election to
be made on the effective date of such election.  Each such interest rate
election made telephonically shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
interest rate election in a form approved by the Administrative Agent and signed
by Borrower.

 

(h)                                 Each telephonic and written interest rate
election shall specify (i) the Loan to which such interest rate election applies
and, if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Loans (in which
case the information to be specified pursuant to clauses (iii) and (iv) of this
paragraph shall be specified for each resulting Loan); (ii) the effective date
of the election made pursuant to such interest rate election, which shall be a
Business Day; (iii) whether the resulting Loan is to be a Base Rate Loan or a
LIBOR Loan; and (iv) if the resulting Loan is a LIBOR Loan, the Interest Period
to be applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period”.  If any
such interest rate election requests a LIBOR Loan but does not specify an
Interest Period, then Borrower shall be deemed to have selected an Interest
Period of one month’s duration.

 

(i)                                     Promptly following receipt of an
interest rate election, the Administrative Agent shall advise each Lender of the
details thereof and of such Lender’s portion of each resulting Loan.

 

(j)                                     If Borrower fails to deliver a timely
interest rate election with respect to any LIBOR Loan prior to the end of the
Interest Period applicable thereto, then, unless such LIBOR Loan is repaid as
provided herein at the end of such Interest Period, such LIBOR Loan shall be
converted to a Base Rate Loan at the end of such Interest Period. 
Notwithstanding any contrary provision hereof, if an Event of Default has
occurred and is continuing and the Administrative Agent, at the request of the
Required Lenders, so notifies Borrower, then, so long as an Event of Default is
continuing, (i) no outstanding Loan may be converted to or continued as a LIBOR
Loan and (ii) unless repaid, each LIBOR Loan shall be converted to a Base Rate
Loan at the end of the Interest Period applicable thereto.

 

SECTION 2.04                            [RESERVED.]

 

Section 2.05                            Requests for Loans.  To request a Loan,
Borrower shall notify the Administrative Agent of such request by telephone (a)
in the case of any Base Rate Loan, not later than 11:30 a.m., New York City
time, on the same day of such proposed Loan, (b) in the case of any LIBOR Loan,
not later than 11:30 a.m., New York City time, three (3) Business Days before
the date of such proposed Loan.  Each such telephonic Loan Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a Loan Request in the form attached hereto as Exhibit F
and signed by Borrower.  Each such telephonic and written Loan Request shall
specify the following information in compliance with Section 2.02 hereof:

 

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(i)                                     the aggregate amount of the requested
Loan;

 

(ii)                                  the date of such Loan, which shall be a
Business Day;

 

(iii)                               whether such Loan is to be a Base Rate Loan
or a LIBOR Loan;

 

(iv)                              the location and number of Borrower’s account
to which funds are to be disbursed, which shall comply with the requirements of
Section 2.06 hereof; and

 

(v)                                 whether the proceeds of such Loan shall be
used for (x) working capital purposes or (y) vessel acquisition or capacity
expansion purposes.

 

If no election as to the type of Loan is specified, then the requested Loan
shall be a Base Rate Loan.  If no Interest Period is specified with respect to
any requested LIBOR Loan, then Borrower shall be deemed to have selected an
Interest Period of one month’s duration.  Promptly following receipt of a Loan
Request in accordance with this Section, the Administrative Agent shall advise
each Lender of the details thereof and of the amount of such Lender’s Loan to be
made in connection with such Loan Request.

 

Section 2.06                            Funding of Loans.

 

(a)                                  Each Lender shall make each Loan to be made
by it hereunder on the proposed date thereof by wire transfer of immediately
available funds by 1:00 p.m., New York City time, to the account of the
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders.  The Administrative Agent will make such Loans available to
Borrower by promptly crediting or otherwise transferring the amounts so
received, in like funds, to an account of Borrower maintained with the
Administrative Agent and designated by Borrower in the applicable Loan Request.

 

(b)                                 Unless the Administrative Agent shall have
received notice from a Lender prior to the proposed date of any Loan that such
Lender will not make available to the Administrative Agent such Lender’s share
of such Loan, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with Section 2.06(a) and may, in
reliance upon such assumption, make available to Borrower a corresponding
amount.  In such event, if a Lender has not in fact made its share of the
applicable Loan available to the Administrative Agent, then the applicable
Lender and Borrower severally agree to pay to the Administrative Agent forthwith
on demand such corresponding amount with interest thereon, for each day from and
including the date such amount is made available to Borrower to but excluding
the date of payment to the Administrative Agent, at (i) in the case of such
Lender, the greater of the Federal Funds Effective Rate and a rate determined by
the Administrative Agent in accordance with banking industry rules on interbank
compensation or (ii) in the case of Borrower, the interest rate that would be
otherwise applicable to such Loan.  If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such Lender’s Loan.

 

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SECTION 2.07                            TERMINATION AND REDUCTION OF
COMMITMENTS.

 

(a)                                  Unless previously terminated, the
Commitments shall terminate on the Termination Date.

 

(b)                                 Borrower may at any time terminate, or from
time to time reduce, the Commitments, provided that (i) Borrower shall not
terminate or reduce the Commitments if, after giving effect to any concurrent
prepayment of the Loans in accordance with Section 2.09, the sum of the
Revolving Credit Exposures would exceed the total Commitments and (ii) each such
reduction shall be in an amount that is an integral multiple of $1,000,000 and
not less than $5,000,000.

 

(c)                                  Each reduction of the Commitments hereunder
shall be made ratably among the Lenders in accordance with their respective
Commitments.  Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Commitments under Section 2.07(b) at least three (3)
Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof.  Promptly following
receipt of any notice, the Administrative Agent shall advise the Lenders of the
contents thereof.  Each notice delivered by Borrower pursuant to this Section
2.07 shall be irrevocable, provided that a notice of termination of the
Commitments delivered by Borrower may state that such notice is conditioned upon
the effectiveness of other credit facilities, in which case such notice may be
revoked by Borrower (by notice to the Administrative Agent on or prior to the
specified effective date) if such condition is not satisfied.  Any termination
or reduction of the Commitments hereunder shall be permanent.

 

SECTION 2.08                            REPAYMENT OF LOANS; EVIDENCE OF DEBT.

 

(a)                                  Borrower hereby unconditionally promises to
pay to the Administrative Agent for account of each Lender the then unpaid
principal amount of each Loan on the Termination Date.

 

(b)                                 Each Lender shall maintain in accordance
with its usual practice an account or accounts evidencing the debt of the
Borrower to such Lender resulting from each Loan made by such Lender, including
the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.

 

(c)                                  The Administrative Agent shall maintain
accounts in which it shall record (i) the amount of each Loan made hereunder,
whether such Loan is a Base Rate Loan or a LIBOR Loan and the Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from Borrower to each Lender hereunder and (iii)
the amount of any sum received by the Administrative Agent hereunder for the
account of the Lenders and each Lender’s share thereof.

 

(d)                                 The entries made in the accounts maintained
pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence
of the existence and amounts of the obligations recorded therein; provided, that
the failure of any Lender or the Administrative Agent to maintain such accounts
or any error therein shall not in any manner affect the obligation of

 

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Borrower to repay the Loans and other Obligations in accordance with the terms
of this Agreement.

 

(e)                                  The Loans made by any Lender may, upon
request of such Lender, be evidenced by a Note in the form attached hereto as
Exhibit A.  In such event, Borrower shall execute and deliver to such Lender a
Note payable to the order of such Lender (or, if requested by such Lender, to
such Lender and its registered assigns) substantially in the form as attached
hereto as Exhibit A and otherwise in form and substance acceptable such Lender. 
Thereafter, the Loans evidenced by such Note and interest thereon shall at all
times (including after assignment pursuant to Section 10.07 hereof) be
represented by one or more Notes in such form payable to the order of the payee
named therein.  Each such Lender may enter Loans and repayment made on any Note;
provided, however, that failure to do so shall not affect Borrower’s obligations
to repay all Loans made.

 

(f)                                    Together with any repayment of Loans,
Borrower shall advise the Administrative Agent of the amount of such repayment
(if any) to be allocated to Loans the proceeds of which were used for working
capital purposes by Borrower.

 

SECTION 2.09                            PREPAYMENT OF LOANS.

 

(a)                                  Borrower shall have the right at any time
and from time to time to prepay any Loan in whole or in part, subject to the
requirements of this Agreement, including, without limitation, Section 2.11.

 

(b)                                 If as of any date the aggregate Revolving
Credit Exposure of all Lenders as of such date exceeds the aggregate
Commitments, then in such event Borrower shall immediately prepay the Loans by
an amount necessary to eliminate any such excess (or if the Loans have been paid
in full and the Letter of Credit Exposure of all Lenders is greater than zero,
deposit into the Cash Collateral Account an amount equal to 105% of such
excess).

 

(c)                                  If as of any date the aggregate Revolving
Credit Exposure of all Lenders as of such date exceeds the Borrowing Base, then
in such event Borrower shall immediately prepay the Loans by an amount necessary
to eliminate any such excess (or if the Loans have been paid in full and the
Letter of Credit Exposure of all Lenders is greater than zero, deposit into the
Cash Collateral Account an amount equal to 105% of such excess).

 

(d)                                 Within fifteen (15) days after receipt by
any Credit Party of Net Proceeds from any Asset Disposition (other than
Extraordinary Receipts the disposition of which shall be governed by the terms
of Section 2.09(e)), Borrower shall prepay the then outstanding Loans in an
amount equal to the lesser of (i) one-hundred percent (100%) of such Net
Proceeds and (ii) the Orderly Liquidation Value of the Pool Vessel which is the
subject of such Asset Disposition (provided that after the occurrence of an
Event of Default, Borrower shall prepay the then outstanding Loans in an amount
equal to one-hundred percent (100%) of such Net Proceeds); provided, that, so
long as no Event of Default shall exist, no prepayment of the then outstanding
Loans will be required under this Section 2.09(d) with respect to Net Proceeds
from Asset Dispositions, not exceeding $3,000,000 in any Fiscal Year, to the
extent that such Net Proceeds

 

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are reinvested (or are committed, pursuant to a binding written commitment, to
be reinvested) in new or used vessels within twelve (12) months after receipt
thereof; provided further, however, that Borrower shall prepay the then
outstanding Loans in an amount equal to (x) all Net Proceeds from Asset
Dispositions received in any Fiscal Year in excess of $3,000,000, plus, without
duplication, (y) all Net Proceeds not so reinvested (or committed to be
reinvested) within twelve (12) months after receipt thereof (which amounts shall
be repaid not later than the date that is twelve (12) months after the date of
receipt thereof).

 

(e)                                  Within fifteen (15) days after receipt of
Net Proceeds by any Credit Party from any Extraordinary Receipt received by or
paid to or for the account of any Credit Party and not otherwise included in
Section 2.09(d), Borrower shall prepay the then outstanding Loans in an amount
equal to the lesser of (i) one-hundred percent (100%) of such Net Proceeds and
(ii) the Orderly Liquidation Value of the Pool Vessel which is the subject of
such Asset Disposition (provided that after the occurrence of an Event of
Default, Borrower shall prepay the then outstanding Loans in an amount equal to
one-hundred percent (100%) of such Net Proceeds).

 

(f)                                    In the event of any partial reduction or
termination of the Commitments, then (i) at or prior to the date of such
reduction or termination, the Administrative Agent shall notify Borrower and the
Lenders of the sum of the Revolving Credit Exposures after giving effect thereto
and (ii) if such sum would exceed the total Commitments after giving effect to
such reduction or termination, then Borrower shall, on the date of such
reduction or termination, prepay the Loans in an amount sufficient to eliminate
such excess; provided, that if on the date of such a reduction of the
Commitments, the aggregate Revolving Credit Exposure of all of the Lenders
exceeds the aggregate Commitments of all of the Lenders after giving effect to
such reduction and, if the Loans have been paid in full and the Letter of Credit
Exposure of all Lenders is greater than zero, Borrower shall deposit into the
Cash Collateral Account an amount in cash which would cause the balance on
deposit in the Cash Collateral Account to equal the sum of the Letter of Credit
Exposure of all Lenders.

 

(g)                                 Borrower shall notify the Administrative
Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in
the case of prepayment of a LIBOR Loan, not later than 11:00 a.m., New York City
time, three Business Days before the date of prepayment or (ii) in the case of
prepayment of Base Rate Loan, not later than 11:00 a.m., New York City time, one
Business Day before the date of prepayment.  Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of
each Loan or portion thereof to be prepaid, provided that, if a notice of
prepayment is given in connection with a conditional notice of termination of
the Commitments as contemplated by Section 2.07(c), then such notice of
prepayment may be revoked if such notice of termination is revoked in accordance
with Section 2.07(c).  Promptly following receipt of any such notice relating to
a Loan, the Administrative Agent shall advise the Lenders of the contents
thereof.  Each partial prepayment of any Loan shall be in an integral multiple
of $100,000 and not less than $500,000.  Each prepayment shall be applied
ratably to the Loans included in such prepayment notice.  Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.03.

 

(h)                                 The provisions of Section 2.08(f) shall
apply to any prepayment made under this Section 2.09.

 

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SECTION 2.10                            FEES.

 

(a)                                  Borrower shall pay to the Administrative
Agent, for the account of the Lenders in accordance with each Lender’s
Applicable Percentage, a commitment fee (the “Commitment Fee”), during the
period from the Effective Date through the Termination Date at a rate per annum
equal to the Commitment Fee Margin on the average daily amount of the unused
Commitment of such Lender.  The Commitment Fee shall be payable quarterly in
arrears on the last day of each March, June, September and December, commencing
on the first such day to occur following the Effective Date, on the date of any
reduction in the Commitments (to the extent of such reduction) and on the
Termination Date

 

 (b)                              Borrower shall pay to the Administrative
Agent, for the account of the Lenders in accordance with each Lender’s
Applicable Percentage, commissions (the “Letter of Credit Fees”) with respect to
Letters of Credit for the period from and including the date of issuance of each
Letter of Credit through the expiration date of such Letter of Credit, at a rate
per annum equal to the LIBOR Margin, in each case on the average daily maximum
amount available under any contingency to be drawn under such Letter of Credit. 
The Letter of Credit Fees shall be payable quarterly in arrears on the last day
of each March, June, September and December, commencing on the first such day to
occur following the Effective Date, and on the date that the Commitments shall
expire.  In addition to the Letter of Credit Fees, Borrower shall pay to the L/C
Issuer, for its own account, the L/C Issuer’s standard fees and charges
customarily charged to customers similar to Borrower with respect to any Letter
of Credit.

 

(c)                                  Borrower shall pay to the L/C Issuer, for
its own account, a fronting fee in respect of each Letter of Credit issued by
the L/C Issuer hereunder (the “Fronting Fee”), computed at the rate of 0.125%
per annum on the maximum daily amount available for drawing under such Letter of
Credit.  Accrued Fronting Fees shall be payable quarterly in arrears on the last
day of each March, June, September and December, commencing on the first such
day to occur following the Effective Date, and on the first day on or after the
date that the Commitments shall expire upon which no Letters of Credit remain
outstanding.

 

(d)                                 Borrower shall pay to each Lender, the
Administrative Agent, the Collateral Trustee and the L/C Issuer, for its own
account, fees and other amounts payable in the amounts and at the times set
forth in the letter agreement dated February 24, 2005 between K-Sea and KeyBank
and as may otherwise be separately agreed upon between the Borrower and such
Person.

 

(e)                                  Fees and other amounts paid shall not be
refundable under any circumstances.  All fees shall be computed on the basis of
a 360-day year for the actual number of days elapsed (including the first day
but excluding the last day).

 

(f)                                    KeyBank agrees to pay Borrower, upon the
Effective Date, a reimbursement of the pro-rata fee paid on the Existing MARAD
Letter of Credit.

 

SECTION 2.11                            INCREASED COSTS; ILLEGALITY.

 

(a)                                  If any Change in Law shall:

 

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(i)                                     impose, modify or deem applicable any
reserve, special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, any Lender, the Administrative
Agent, the Collateral Trustee or the L/C Issuer (except any such reserve
requirement reflected in the Adjusted LIBOR Rate); or

 

(ii)                                  impose on any Lender, the Administrative
Agent, the Collateral Trustee or the L/C Issuer or the London interbank market
any other condition affecting this Agreement, any LIBOR Loans made by Lender,
the Administrative Agent, the Collateral Trustee or the L/C Issuer or any
participation therein,

 

and the result of any of the foregoing shall be to increase the cost to such
Person of making or maintaining any LIBOR Loan hereunder (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Person or to
reduce the amount of any sum received or receivable by such Person hereunder
(whether of principal, interest or otherwise), then Borrower will pay to such
Person such additional amount or amounts as will compensate such Person for such
additional costs incurred or reduction suffered.  Failure to demand compensation
pursuant to this Section shall not constitute a waiver of such Person’s right to
demand such compensation.

 

(b)                                 If any Lender, the Administrative Agent, the
Collateral Trustee or the L/C Issuer determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of return
on such Person’s capital or on the capital of such Person’s holding company, if
any, as a consequence of this Agreement or the Loans made, Letters of Credit
issued or commitments held available by such Person to a level below that which
such Person or such Person’s holding company could have achieved but for such
Change in Law (taking into consideration such Person’s policies and the policies
of such Person’s holding company with respect to capital adequacy), then from
time to time Borrower will pay to such Lender, the Administrative Agent, the
Collateral Trustee or the L/C Issuer such additional amount or amounts as will
compensate such Person or such Person’s holding company for any such reduction
suffered.

 

(c)                                  A certificate of any Lender, the
Administrative Agent, the Collateral Trustee or the L/C Issuer calculating and
setting forth the amount or amounts necessary to compensate such Person or its
holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section shall be delivered to Borrower and shall be conclusive absent
manifest error.  Borrower shall pay such Lender, the Administrative Agent, the
Collateral Trustee or the L/C Issuer, as the case may be, the amount shown as
due on any such certificate within 10 days after receipt thereof.

 

(d)                                 Failure or delay on the part of any Lender,
the Administrative Agent, the Collateral Trustee or the L/C Issuer to demand
compensation pursuant to this Section shall not constitute a waiver of such
Person right to demand such compensation; provided, that Borrower shall not be
required to compensate any Lender, the Administrative Agent, the Collateral
Trustee or the L/C Issuer pursuant to this Section for any increased costs or
reductions incurred more than nine months prior to the date that such Person
notifies Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Person’s intention to claim compensation therefor;
provided, further, that, if the Change in Law giving rise to such increased

 

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costs or reductions is retroactive, then the nine-month period referred to above
shall be extended to include the period of retroactive effect thereof.

 

(e)                                  Notwithstanding any other provision of this
Agreement, if, after the date of this Agreement, any Change in Law shall make it
unlawful for any Lender to make or maintain any LIBOR Loan or to give effect to
its obligations as contemplated hereby with respect to any LIBOR Loan, then, by
written notice to Borrower and to the Administrative Agent:

 

(i)                                     such Lender may declare that LIBOR Loans
will not thereafter (for the duration of such unlawfulness) be made by such
Lender hereunder (or be continued for additional Interest Periods and Base Rate
Loans will not thereafter (for such duration) be converted into LIBOR Loans),
whereupon any request for a LIBOR Loan or to convert a Base Rate Loan to a LIBOR
Loan or to continue a LIBOR Loan, as applicable, for an additional Interest
Period shall, as to such Lender only, be deemed a request for a Base Rate Loan
(or a request to continue a Base Rate Loan as such for an additional Interest
Period or to convert a LIBOR Loan into a Base Rate Loan, as applicable), unless
such declaration shall be subsequently withdrawn; and

 

(ii)                                  such Lender may require that all
outstanding LIBOR Loans made by it be converted to Base Rate Loans, in which
event all such LIBOR Loans shall be automatically converted to Base Loans, as of
the effective date of such notice as provided in the last sentence of this
paragraph.

 

In the event any Lender shall exercise its rights under clauses (i) or (ii) of
this Section 2.11(e), all payments and prepayments of principal that would
otherwise have been applied to repay the LIBOR Loans that would have been made
by such Lender or the converted LIBOR Loans of such Lender shall instead be
applied to repay the Base Rate Loans made by such Lender in lieu of, or
resulting from the conversion of, such LIBOR Loans, as applicable.  For purposes
of this Section 2.11(e), a notice to Borrower by any Lender shall be effective
as to each LIBOR Loan made by such Lender, if lawful, on the last day of the
Interest Period currently applicable to such LIBOR Loan; in all other cases such
notice shall be effective on the date of receipt by Borrower.

 

Section 2.12                            Break Funding Payments.  In the event of
(a) the payment or prepayment (voluntary or otherwise) of any principal of any
LIBOR Loan other than on the last day of an Interest Period applicable thereto
(including as a result of an Event of Default), (b) the conversion of any LIBOR
Loan other than on the last day of the Interest Period applicable thereto or (c)
the failure to borrow, convert, continue or prepay any LIBOR Loan on the date
specified in any Loan Request or other notice delivered pursuant Section 2.03 or
2.05 (regardless of whether such notice may be revoked under Section 2.07(c) and
is revoked in accordance therewith), then, in any such event, Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event.  If such Loan Request or other notice relates to a LIBOR Loan, such loss,
cost or expense to any Lender shall be deemed to include an amount reasonably
determined by such Lender to be the excess, if any, of (i) the amount of
interest that would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBOR Rate that would have been applicable
to such Loan, for the period from the date of such

 

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event to the last day of the then current Interest Period therefor (or, in the
case of a failure to borrow, convert or continue, for the period that would have
been the Interest Period for such Loan), over (ii) the amount of interest that
would accrue on such principal amount for such period at the interest rate that
such Lender would in good faith bid were it to bid, at the commencement of such
period, for dollar deposits of a comparable amount and period from other banks
in the eurodollar market.  A certificate of any Lender setting forth any amount
or amounts that such Lender is entitled to receive pursuant to this Section 2.12
shall be delivered to Borrower and shall be conclusive absent manifest error. 
Borrower shall pay such Lender the amount shown as due on any such certificate
within 15 days after receipt thereof.

 

Section 2.13                            Taxes.

 

(a)                                  Any and all payments by or on account of
any Obligation of any Credit Party hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided, that if
such Credit Party shall be required to deduct any Indemnified Taxes or Other
Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent, the Collateral Trustee, each Lender or L/C Issuer (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Credit Party shall make such deductions, and
(iii) such Credit Party shall pay the full amount deducted to the relevant
Governmental Authority in accordance with Applicable Law.

 

(b)                                 In addition, the Credit Parties shall pay
any Other Taxes to the relevant Governmental Authority in accordance with
Applicable Law.

 

(c)                                  Each Loan Party shall indemnify the
Administrative Agent, the Collateral Trustee, the L/C Issuer and each Lender,
within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
paid by the Administrative Agent, the Collateral Trustee, the L/C Issuer or such
Lender, as the case may be, and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes
or Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority.  A certificate as to the amount of such payment or
liability, together with copies of available documentation reflecting the
imposition and amount of such Indemnified Taxes or Other Taxes delivered to
Borrower by a Lender, the Collateral Trustee, the L/C Issuer or by the
Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.

 

(c)                                  As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by Borrower to a Governmental Authority,
Borrower shall deliver to the Administrative Agent the original or a certified
copy of a receipt issued by such Governmental Authority evidencing such payment,
a copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.

 

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(d)                                 Any Foreign Lender that is entitled to an
exemption from or reduction of withholding tax under the law of the jurisdiction
in which Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement shall deliver to Borrower
(with a copy to the Administrative Agent), at the time or times prescribed by
Applicable Law or reasonably requested by Borrower, such properly completed and
executed documentation prescribed by Applicable Law as will permit such payments
to be made without withholding or at a reduced rate.

 

SECTION 2.14                            PAYMENTS GENERALLY; PRO RATA TREATMENT;
SHARING OF SET-OFFS.

 

(a)                                  Each Credit Party shall make each payment
required to be made by it hereunder or under any other Loan Document (whether of
principal, interest or fees, or under Section 2.11, 2.12, 2.13 or 10.06 hereof,
or otherwise) prior to 12:00 noon, New York City time, on the date when due, in
immediately available funds, without set-off or counterclaim.  Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon.  All such payments
shall be made to the Administrative Agent at its offices at 127 Public Square,
Cleveland, Ohio 44114, Attn. KCIB Loan Services, except that payments pursuant
to Sections 2.11, 2.12, 2.13 and 10.06 hereof shall be made directly to the
Persons entitled thereto.  The Administrative Agent shall distribute any such
payments received by it for account of any other Person to the appropriate
recipient promptly following receipt thereof.  If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension. 
All payments hereunder shall be made in Dollars.

 

(b)                                 (i)                                     So
long as (x) no Default with respect to any payments due hereunder or under any
of the Obligations or (y) Event of Default shall have occurred and be
continuing, each payment made by Borrower received by the Administrative Agent
pursuant to paragraph (a) of this Section shall be applied, first, to any costs,
expenses, fees or other amounts due under this Agreement or under the other Loan
Documents not constituting principal and interest due under the Loans, second,
to default interest at the rate provided for Section 2.03(c) hereof, third, to
interest due on the unpaid principal balance of each Loan, fourth, to the
payment in full of principal and all other Obligations which are then due and
payable.  If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, interest and fees
then due on any Loans, such funds shall be applied, first, to pay interest and
fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties,
second, to pay principal then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of principal then due to such parties,
and third, all remaining amounts, if any, shall be applied as provided in the
first sentence of this Section 2.14(b)(i).

 

(ii)                                  So long as no (x) Default with respect to
any payments due hereunder or under any of the Obligations or (y) Event of
Default shall have occurred and be continuing, any amounts received by
Collateral Trustee, the Administrative Agent or any Lender as a result of an
Event of Loss with respect to any Pool Vessel (including, without limitation,
any payment of prepayment amounts under Section 2.09 hereof or insurance or
condemnation

 

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proceeds) shall be retained by the Lenders as cash collateral to the extent the
aggregate Orderly Liquidation Value of the remaining Pool Vessels is less than
the greater of (A) $50,000,000.00 and (B) an amount such that the Asset Coverage
Ratio after giving effect to such Event of Loss is not less than 1.25:1.00,
until such time as Borrower pledges another Qualified Pool Vessel or Qualified
Pool Vessels to increase the aggregate Orderly Liquidation Value of the Pool
Vessels to not less than the greater of (A) $50,000,000.00 and (B) an amount
such that the Asset Coverage Ratio after giving effect to such pledge is not
less than 1.25:1.00, at which time such amounts shall be applied, first, for
application against Loans at the end of any then current Interest Period or
Periods, second, to the payment in full of all the Obligations which are then
due and payable, and, third, the balance, if any, after payment of the foregoing
amounts, shall be paid by the Lenders to Borrower.

 

(iii)                               So long as no (x) Default with respect to
any payments due hereunder or under any of the Obligations or (y) Event of
Default shall have occurred and be continuing, all Proceeds from time to time
received by the Collateral Trustee, the Administrative Agent or any Lender shall
be applied, first, to any costs, expenses, fees or other amounts due under this
Agreement and the other Loan Documents not constituting principal and interest
due under the Loans, second, to the payment in full of all the other Obligations
which are then due and payable, third, if provision as to the application of
such amounts is made in this Agreement or any other Loan Document, the
Collateral Trustee, the Administrative Agent or such Lender shall, in its sole
discretion, either apply such payment to the purpose for which it was made or
pay it to Borrower, which shall so apply it and, fourth, if due to Borrower, the
Collateral Trustee, the Administrative Agent or such Lender shall pay such
amounts to Borrower.

 

(iv)                              All payments received and amounts realized by
the Lenders after a Default shall have occurred and be continuing, but prior to
the occurrence of an Event of Default or any acceleration of any Loan or Note,
all Proceeds or other amounts received in repayment of the Collateral shall be
held by the Collateral Trustee, the Administrative Agent or any Lender as part
of the Collateral until such time as no Defaults or Events of Default shall be
continuing hereunder (at which time such funds shall be paid to Borrower) or
until such funds are applied pursuant to Section 8.02 hereof.  The Collateral
Trustee, the Administrative Agent or any Lender shall apply the cash proceeds of
Collateral actually received by it from any sale, lease, foreclosure or other
disposition of the Collateral to payment pro rata of the Obligations, in whole
or in part (including reasonable attorneys’ fees and legal expenses incurred by
the Collateral Trustee, the Administrative Agent or the Lenders with respect
thereto or otherwise chargeable to Borrower).  The Lenders shall apply all such
receipts ratably against Obligations under the Facility.  Borrower shall remain
liable to the Lenders for the payment of any deficiency together with interest
at the highest rate provided for herein and all costs and expenses of collection
or enforcement, including reasonable attorneys’ fees and legal expenses.

 

(v)                                 After an Event of Default shall have
occurred and be continuing and after Lenders have either, (i) as assignee from
Borrower of any charter of any of the Pool Vessels, declared such charter to be
in default or terminated in accordance with the terms thereof, or (ii) declared
all amounts outstanding hereunder to be due and payable pursuant to Section 8.02
hereof, or done both (i) and (ii), all payments received and amounts realized by
any Lender, as well as all payments or amounts then held by the Lenders as part
of the Collateral,

 

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shall be applied against the Obligations in such order and such manner as the
Lenders, in their sole discretion, may determine and as otherwise provided in
the other Loan Documents and the documents evidencing the other Obligations, and
the balance, if any, shall be paid by the Lenders to Borrower.

 

(c)                                  If any Lender shall, by exercising any
right of setoff or counterclaim or otherwise, obtain payment in respect of any
principal of, or interest on, any of its Loans resulting in such Lender
receiving payment of a greater proportion of the aggregate amount of its Loans
and accrued interest thereon than the proportion received by any other
applicable Lender, then the applicable Lender receiving such greater proportion
shall purchase (for cash at face value) participations in the Loans of other
applicable Lenders to the extent necessary so that the benefit of all such
payments shall be shared by the applicable Lenders ratably in accordance with
the aggregate amount of principal of, and accrued interest on, their respective
Loans, provided that (i) if any such participations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations
shall be rescinded and the purchase price restored to the extent of such
recovery, without interest, and (ii) the provisions of this paragraph shall not
be construed to apply to any payment made by Borrower pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by a
Lender as consideration for the assignment of or sale of a participation in any
of its Loans to any assignee or participant, other than to the Borrower or any
Subsidiary or Affiliate thereof (as to which the provisions of this paragraph
shall apply).  Each Credit Party consents to the foregoing and agrees, to the
extent it may effectively do so under applicable law, that any Lender acquiring
a participation pursuant to the foregoing arrangements may exercise against such
Credit Party rights of setoff and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of such Credit
Party in the amount of such participation.

 

(d)                                 Unless the Administrative Agent shall have
received notice from a Credit Party prior to the date on which any payment is
due to the Administrative Agent for the account of Lenders, the Administrative
Agent, the L/C Issuer or the Collateral Trustee hereunder that Borrower will not
make such payment, the Administrative Agent may assume that Borrower has made
such payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to Persons the amount due.  In such event, if Borrower
has not in fact made such payment, then each such Person severally agrees to
repay to the Administrative Agent forthwith on demand the amount so distributed
to such Person with interest thereon, for each day from and including the date
such amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.

 

(e)                                  If any Lender shall fail to make any
payment required to be made by it pursuant to Section 2.06, 2.14(d) or 2.15
hereof, then the Administrative Agent may, in its discretion (notwithstanding
any contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for account of such Lender to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are fully
paid.

 

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SECTION 2.15                            LETTERS OF CREDIT.

 

(a)                                  The Borrower may request the L/C Issuer to
issue letters of credit during the period from the Effective Date to the
thirtieth Business Day prior to the Maturity Date, provided that immediately
after the issuance of each Letter of Credit (i) the Letter of Credit Exposure of
all Lenders would not exceed the Letter of Credit Sublimit and (ii) the
aggregate Revolving Credit Exposure of all Lenders would not exceed the
aggregate Commitments of all Lenders.  To request the issuance of a Letter of
Credit, the Borrower shall notify the Administrative Agent and the L/C Issuer by
the delivery of a Credit Request in the form of Exhibit G, which shall be sent
by facsimile and shall be irrevocable (confirmed promptly, and in any event
within five Business Days, by the delivery to the Administrative Agent of a
Credit Request manually signed by the Borrower), at least three Business Days
prior to the requested date of issuance, specifying (x) in the case of a Standby
Letter of Credit, (A) to the extent not previously delivered to the
Administrative Agent, copies of all agreements between Borrower and the
beneficiary of such Standby Letter of Credit pertaining to the issuance of such
Standby Letter of Credit and (B) a copy of the form of a Standby Letter of
Credit which is attached hereto as Exhibit D, and (y) in the case of a
Documentary Letter of Credit, a copy of the form of the application for a
documentary letter of credit which is attached hereto as Exhibit E and which may
be amended by the L/C Issuer from time to time, and in the case of each Letter
of Credit, to the extent not included in the foregoing:  (I) the beneficiary of
such Letter of Credit, (II) Borrower’s proposal as to the conditions under which
a drawing may be made under such Letter of Credit and the documentation to be
required in respect thereof, (III) the maximum amount to be available under such
Letter of Credit, (IV) the currency such Letter of Credit shall be denominated
in (which shall be Dollars or an Alternative Currency then made available by the
Administrative Agent and the L/C Issuer) and (V) the requested dates of issuance
and expiration.  Such Credit Request shall be accompanied by such other
certificates, documents (including a reimbursement agreement) and other
information as may be required by the L/C Issuer in accordance with its
customary procedures (all of the instruments documents, certificate,
applications and information described in the immediately preceding two
sentences, collectively, the “Letter of Credit Documentation”).  Upon receipt of
such Credit Request from the Borrower, the Administrative Agent shall promptly
notify each Lender thereof.  Subject to the satisfaction of the terms and
conditions of this Agreement, the L/C Issuer shall issue each requested Letter
of Credit.  In the event of any conflict between the provisions of this
Agreement and any Letter of Credit Documentation, the provisions of this
Agreement shall control.  Each of the Credit Parties hereby acknowledges and
agrees that the Existing Letters of Credit are Letters of Credit hereunder and
the Lenders hereby assume and are jointly and severally obligated with respect
to all Reimbursement Obligations related thereto.  Each of the Existing Letters
of Credit shall be deemed to be a “Letter of Credit” for all purposes of this
Agreement and the other Loan Documents.

 

(b)                                 Each Letter of Credit shall be issued for
the account of the Borrower and in support of obligations, contingent or
otherwise, of the Borrower or any Subsidiary arising in the ordinary course of
business.  Each Documentary Letter of Credit shall expire no later than 180 days
from its date of issuance.  Each Standby Letter of Credit shall either (A) have
an expiration date which shall be not later than the earlier of (x) 364 days
after the date of issuance thereof or (y) fifteen (15) Business Days before the
Maturity Date or (B) contain “evergreen”

 

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provisions under which the such Standby Letter of Credit shall have an initial
expiration date of not more than one year from issuance, which expiration date
shall be deemed extended on an annual basis for successive periods of not more
than one year unless notice of termination is given by the L/C Issuer, provided,
however, no such Standby Letter of Credit shall have an expiration date
extending or be so extendable beyond the Maturity Date.  Any renewal, or any
extension of any expiry date, of a Letter of Credit shall constitute the
issuance of such Letter of Credit for all purposes of this Agreement.  In no
event shall any Letter of Credit expire later than fifteen (15) Business Days
prior to the Maturity Date.

 

(c)                                  Immediately upon the issuance of a Letter
of Credit, the L/C Issuer shall be deemed to have sold and transferred to each
Lender, and each Lender shall be deemed to have irrevocably and unconditionally
purchased and received from the L/C Issuer, without recourse or warranty, an
undivided interest and participation, to the extent of such Lender’s Applicable
Percentage thereof, in such Letter of Credit and the obligations of Borrower
with respect thereto and any security therefor and any guaranty pertaining
thereto at any time existing.  Each Lender, with respect to each Existing Letter
of Credit, hereby purchases, without recourse or warranty, an undivided interest
and participation, to the extent of such Lender’s Applicable Percentage thereof,
in each such Existing Letter of Credit and the obligations of Borrower with
respect thereto and any such security therefor and guaranty pertaining thereto
at any time existing.

 

(d)                                 The L/C Issuer shall promptly notify (i)
each Lender of the L/C Issuer’s receipt of a drawing request under any Letter of
Credit, stating the amount of such Lender’s Applicable Percentage of such
drawing request and the date on which such request will be honored (the “Honor
Date”) and (ii) the Administrative Agent and Borrower of the amount of such
drawing request and the Honor Date.  Any failure of the L/C Issuer to give or
any delay in the L/C Issuer’s giving any such notice shall not release or
diminish the obligations of Borrower or any Lender hereunder.  In determining
whether to pay under any Letter of Credit, the L/C Issuer shall have no
obligation to any Lender or Borrower other than to confirm that any documents
required to be delivered under such Letter of Credit have been delivered and
that they appear to comply on their face with the requirements of such Letter of
Credit.  In the absence of gross negligence or willful misconduct on the part of
the L/C Issuer, the L/C Issuer shall have no liability to any Lender or Borrower
for any action taken or omitted to be taken by it under or in connection with
any Letter of Credit, including any such action negligently taken or negligently
omitted to be taken by it.

 

(e)                                  Not later than 11:00 a.m., New York City
time, on the Honor Date with respect to any drawing under any Letter of Credit,
Borrower shall reimburse the L/C Issuer through the Administrative Agent in an
amount equal to the amount of such drawing and in the applicable currency.  If
Borrower fails to so reimburse the L/C Issuer by such time, the Administrative
Agent shall promptly notify each Lender of such failure, the amount of the
unreimbursed drawing (the “Unreimbursed Amount”), and such Lender’s Applicable
Percentage thereof.  In the case of any Letter of Credit denominated in an
Alternative Currency, the Unreimbursed Amount shall be redenominated into
Dollars and equal the Dollar Equivalent thereof, and the Administrative Agent
shall so notify the Lenders in the notice described in the preceding sentence.
In such event, Borrower shall be deemed to have requested a Base Rate Loan to be
disbursed on the Honor Date in an amount equal to the Unreimbursed Amount (or
the

 

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Dollar Equivalent thereof, if applicable), without regard to the Minimum Loan
Amount for the principal amount of Base Rate Loans, but subject to the amount of
the unutilized portion of the aggregate Commitments of the Lenders and the
conditions set forth in Section 5.02 (other than the delivery of a Loan
Request).  Any notice given by the L/C Issuer or the Administrative Agent
pursuant to this Section may be given by telephone if immediately confirmed in
writing; provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.  Each Lender shall
promptly and unconditionally pay to the Administrative Agent, for the account of
the L/C Issuer, the amount of such Lender’s Applicable Percentage of such
Unreimbursed Amount in Dollars in immediately available funds on the Business
Day the L/C Issuer so notifies such Lender if such notice is given prior to
12:00 Noon or, if such notice is given after 12:00 Noon, such Lender shall make
its Applicable Percentage of such Unreimbursed Amount available to the L/C
Issuer prior to 12:00 Noon on the next succeeding Business Day.

 

(f)                                    If and to the extent any Lender shall not
make such Lender’s Applicable Percentage of any Reimbursement Obligations
available to the L/C Issuer when due in accordance with Section 2.15(e), such
Lender shall pay interest to the L/C Issuer on such unpaid amount for each day
from the date such payment is due until the date such amount is paid in full to
the L/C Issuer at the Federal Funds Effective Rate until (and including) the
third Business Day after the date due and thereafter at the Base Rate.  The
obligations of the Lenders under this Section 2.15(f) are several and not joint
or joint and several, and the failure of any Lender to make available to the L/C
Issuer its Applicable Percentage of any Reimbursement Obligations when due in
accordance with Section 2.15(e) shall not relieve any other Lender of its
obligation hereunder to make its Applicable Percentage of such Reimbursement
Obligations so available when so due, but no Lender shall be responsible for the
failure of any other Lender to make such other Lender’s Applicable Percentage of
such Reimbursement Obligations so available when so due.

 

(g)                                 Whenever the L/C Issuer receives a payment
of a Reimbursement Obligation from or on behalf of Borrower as to which the L/C
Issuer has received any payment from a Lender pursuant to Section 2.15(e), the
L/C Issuer shall promptly pay to such Lender an amount equal to such Lender’s
Applicable Percentage of such payment from or on behalf of Borrower.  If any
payment by or on behalf of Borrower and received by the L/C Issuer with respect
to any Letter of Credit is rescinded or must otherwise be returned by the L/C
Issuer for any reason and the L/C Issuer has paid to any Lender any portion
thereof, each such Lender shall forthwith pay over to the L/C Issuer an amount
equal to such Lender’s Applicable Percentage of the amount which must be so
returned by the L/C/Issuer.

 

(h)                                 Each Lender, upon the demand of the L/C
Issuer, shall reimburse the L/C Issuer, to the extent the L/C Issuer has not
been reimbursed by Borrower after demand therefor, for the reasonable costs and
expenses (including reasonable attorneys’ fees) incurred by the L/C Issuer in
connection with the collection of amounts due under, and the preservation and
enforcement of any rights conferred by, any Letter of Credit or the performance
of the L/C Issuer’s obligations as issuer of the Letters of Credit under this
Agreement in respect thereof, to the extent of such Lender’s Applicable
Percentage of the amount of such costs and expenses provided, however, that no
Lender shall be liable for the payment of any portion of such

 

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liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent the same result solely from the
gross negligence or willful misconduct of the L/C Issuer.  The L/C Issuer shall
refund any costs and expenses reimbursed by such Lender that are subsequently
recovered from Borrower in an amount equal to such Lender’s Applicable
Percentage thereof.

 

(i)                                     The obligation of Borrower to reimburse
the L/C Issuer pursuant to this Section 2.15, and the obligation of each Lender
to make available to the L/C Issuer the amounts set forth in this Section 2.15
shall be absolute, unconditional and irrevocable under any and all
circumstances, shall be made without reduction for any set-off, counterclaim or
other deduction of any nature whatsoever, may not be terminated, suspended or
delayed for any reason whatsoever, shall not be subject to any qualification or
exception and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including any of the following circumstances:
(1) any lack of validity or enforceability of this Agreement or any of the other
Loan Documents, (2) the existence of any claim, setoff, defense or other right
which Borrower may have at any time against a beneficiary named in a Letter of
Credit, any transferee of any Letter of Credit (or any Person for whom any such
transferee may be acting), the L/C Issuer, any Lender or any other Person,
whether in connection with this Agreement, any other Loan Document, any Letter
of Credit, the transactions contemplated in the Loan Documents or any unrelated
transactions (including any underlying transaction between Borrower and the
beneficiary named in any such Letter of Credit), (3) any draft, certificate or
any other document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect, (4) the surrender or impairment of
any collateral for the performance or observance of any of the terms of any of
the Loan Documents, (5) the occurrence of any Default or Event of Default or (6)
any other event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section, constitute a
legal or equitable discharge of, or provide a right of setoff against,
Borrower’s or such Lender’s obligations hereunder. The L/C Issuer shall not have
any liability or responsibility by reason of or in connection with the issuance
or transfer of any Letter of Credit or any payment or failure to make any
payment thereunder (irrespective of any of the circumstances referred to in the
preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of the L/C Issuer. The
parties hereto expressly agree that, in the absence of gross negligence or
willful misconduct on the part of the L/C Issuer (as finally determined by a
court of competent jurisdiction), the L/C Issuer shall be deemed to have
exercised care in each such determination.  In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the L/C Issuer may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

 

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SECTION 2.16                            CASH COLLATERAL ACCOUNT

 

At, or at any time before, the time Borrower shall be required to make a deposit
into the Cash Collateral Account, the Administrative Agent shall establish and
maintain at its offices at 575 Fifth Avenue, New York, New York, or such other
office as the Administrative Agent shall determine in its discretion, in the
name of Borrower but under the sole dominion and control of the Administrative
Agent, a cash collateral account (the “Cash Collateral Account”).  Borrower may
from time to time make one or more deposits into the Cash Collateral Account and
shall from time to time make such deposits as are required by this Agreement. 
Borrower hereby pledges to the Administrative Agent for the benefit of the
Lenders, the Administrative Agent, the L/C Issuer and the Collateral Trustee, a
Lien on and security interest in the Cash Collateral Account and all sums at any
time and from time to time on deposit therein (the Cash Collateral Account,
together with all sums on deposit therein, being sometimes hereinafter
collectively referred to as the “Cash Collateral”), as collateral security for
the prompt payment in full when due, whether at stated maturity, by acceleration
or otherwise, of the Obligations.  Borrower shall, at any time and from time to
time at its expense, promptly execute and deliver to the Administrative Agent
any further instruments and documents, and take any further actions, that may be
necessary or that the Administrative Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Administrative Agent to exercise and enforce its rights
and remedies hereunder with respect to any Cash Collateral.  Borrower shall not
(i) sell or otherwise dispose of any of the Cash Collateral, or (ii) create or
permit to exist any Lien upon any of the Cash Collateral.  Borrower hereby
authorizes the Administrative Agent, promptly after each drawing under any
Letter of Credit shall become due and payable, to apply any and all cash on
deposit in the Cash Collateral Account towards the reimbursement of the L/C
Issuer for all sums paid in respect of such drawing, and all other Obligations
which shall then be due and owing.

 

SECTION 2.17                            MITIGATION OBLIGATIONS; REPLACEMENT OF
LENDERS.

 

(a)                                  If any Lender requests compensation under
Section 2.11 hereof, or if Borrower is required to pay any additional amount to
any Lender or any Governmental Authority for account of any Lender pursuant to
Section 2.13 hereof, then such Lender shall use reasonable efforts to designate
a different lending office for funding or booking its Loans hereunder or to
assign its rights and obligations hereunder to another of its offices, branches
or Affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to
Section 2.11 or 2.13 hereof, as the case may be, in the future, and (ii) would
not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender.  Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

 

(b)                                 If any Lender requests compensation under
Section 2.11 hereof, or if Borrower is required to pay any additional amount to
any Lender or any Governmental Authority for account of any Lender pursuant to
Section 2.13 hereof, or if any Lender defaults in its obligation to fund Loans
hereunder, then Borrower may, at its sole expense and effort, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 10.07

 

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hereof), all its interests, rights and obligations under this Agreement to an
assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided, that (i) Borrower shall
have received the prior written consent of the Administrative Agent and the L/C
Issuer, which consent shall not unreasonably be withheld, (ii) such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or Borrower (in the case of all other amounts), and
(iii) in the case of any such assignment resulting from a claim for compensation
under Section 2.11 hereof or payments required to be made pursuant to
Section 2.13 hereof, such assignment will result in a reduction in such
compensation or payments.  A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling Borrower to require such
assignment and delegation cease to apply.

 

SECTION 2.18                            INCREASE OF COMMITMENTS.

 

(a)                                  Provided that no Default or Event of
Default has occurred and is continuing, Borrower may, at any time and from time
to time, provide a written request to the Administrative Agent to increase the
Commitments of the Facility by up to an aggregate maximum amount of Twenty
Million Dollars ($20,000,000.00) so that the aggregate Maximum Amount is One
Hundred Million Dollars ($100,000,000).   Subject to the terms hereof, Borrower
may request to obtain such increase in Commitments (“Proposed Increased
Commitment”) from Lenders or banks, financial institutions or other entities
other than the Lenders.  Borrower may offer the opportunity to provide all or a
portion of the Proposed Increased Commitment to (i) other Lenders and/or (ii)
other banks, financial institutions or other entities with the consent of the
Administrative Agent and the L/C Issuer (which consents of the Administrative
Agent and the L/C Issuer shall not be unreasonably withheld or delayed).  If
offered by Borrower, each Lender shall have the right, but not the obligation to
commit to all or a portion of its pro rata amount of the Proposed Increased
Commitment based on the then existing allocation of Commitments.  As a
precondition to such Proposed Increased Commitment becoming effective, the Asset
Coverage Ratio covenant shall be met respecting such new Maximum Amount.  Any
additional bank, financial institution or other entity which Borrower selects to
offer a portion of the increased aggregate Commitments in accordance with the
terms hereof and which elects to become a party to this Agreement and obtain a
Commitment in an amount so offered and accepted by it pursuant to this
Section shall execute such instruments, documents and agreements as the
Administrative Agent shall determine to cause such bank, financial institution
or other entity to become a Lender hereunder, whereupon such bank, financial
institution or other entity shall become a Lender for all purposes and to the
same extent as if originally a party hereto and shall be bound by and entitled
to the benefits of this Agreement, provided that the Commitment of any such
bank, financial institution or other entity shall be in an amount of not less
than $5,000,000.

 

(b)                                 Upon any increase in the aggregate
Commitments pursuant to Section 2.18(a), within five Business Days, in the case
of any Base Rate Loans then outstanding, and at the end of the then current
Interest Period with respect thereto, in the case of any LIBOR Loans then
outstanding, Borrower shall prepay such Loans in their entirety and, to the
extent the

 

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Borrower elects to do so and subject to the conditions specified in Section
5.02, Borrower shall reborrow Loans from the Lenders in proportion to their
respective Commitments after giving effect to such increase, until such time as
all outstanding Loans are held by the Lenders in such proportion.  Effective
upon such increase, the amount of the participations held by each Lender in each
Letter of Credit then outstanding shall be adjusted such that, after giving
effective to such adjustments, the Lenders shall hold participations in each
such Letter of Credit in the proportion its respective Commitment bears to the
aggregate Commitments of all of the Lenders after giving effect to such
increase.  The Collateral Trustee and Borrower shall execute and deliver such
documents and instruments deemed reasonably necessary by either of them to
maintain the perfection and priority of the Liens on the Collateral with respect
to such increase in the aggregate Commitments.

 

ARTICLE III

GRANT OF SECURITY INTEREST

 

Section 3.01                            Grant of Security Interest.

 

(a)                                  To secure the payment and performance in
full of all Obligations, Borrower hereby grants to the Collateral Trustee for
the ratable benefit of the Lenders a continuing security interest in and Lien
upon, and a right of set-off against, and Borrower hereby assigns and pledges to
the Collateral Trustee for the ratable benefit of the Lenders, all of the
Collateral owned by it or a Subsidiary Guarantor or in which such party has an
interest.

 

(b)                                 Collateral means:

 

(i)                                     each of the Pool Vessels identified in
Schedule 1.01, together with all of its machinery, anchors, cables, chains,
rigging, tackle, fittings, tools, pumps, pumping equipment, gear, apparel,
furniture, appliances, equipment, spare and replacement parts and all other
appurtenances thereunto appertaining or belonging, whether now owned or
hereafter acquired by its respective owner and whether on board or not, and also
any and all additions, improvements and replacements made in or to such Pool
Vessels or any part thereof or in or to any equipment and appurtenances
thereunder appertaining or belonging and any and all the charter hire,
subcharter hire, freights, subfreights, earnings, charters (including, without
limitation, any rights of termination thereof), to the extent set forth in the
Earnings Assignment, insurance proceeds and all other Proceeds paid or payable
to Borrower on account of the use or employment of any Pool Vessel, being
secured by the Mortgage or any other mortgage to be executed and delivered by
Borrower in favor of Lenders (each, a “Mortgage”); and

 

(ii)                                  all records, computer tapes, discs, and
other data however stored, ledger sheets, correspondence, invoices, delivery
receipts, documents and instruments related to any of the foregoing.

 

It is understood and agreed that all of the Collateral which the Collateral
Trustee, the Administrative Agent, the Lenders or any of them may at any time
acquire from Borrower, the

 

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Subsidiary Guarantors or from any other source in connection with the
Obligations of the Credit Parties to Lenders, shall constitute Collateral for
each and every Obligation, without apportionment or designation as to particular
Obligations, and that all Obligations howsoever and whensoever incurred, shall
be secured by all Collateral howsoever and whensoever acquired, and the
Collateral Trustee, the Administrative Agent and the Lenders shall have the
right, in their sole discretion, to determine the order in which the Collateral
Trustee’s, the Administrative Agent’s and the Lenders’ rights in or remedies
against any Collateral are to be exercised and which type of Collateral and
which portions of Collateral are to be proceeded against and the order of
application of proceeds of Collateral as against particular Obligations.

 

Section 3.02                            Substitution of Pool Vessel.  On
reasonable notice from Borrower, the Administrative Agent and the Lenders will
permit the substitution of a Pool Vessel with another vessel, provided, that
such substitute vessel is subject to an Appraisal and that the Orderly
Liquidation Value of the Pool Vessels after such substitution remains equal to
or greater than the greater of (i) $50,000,000.00 and (ii) an Orderly
Liquidation Value such that an Asset Coverage Ratio of not less than 1.25 to
1.00 is maintained.  Each substitute vessel shall be first made subject to the
Mortgage and the Assignments.  The costs of any such substitution, including,
without limitation, counsel fees, will be for Borrower’s account, payable on
demand.  No Pool Vessel shall be valued as a constituent part of an integrated
tug/barge unit unless all components of such unit are subject, or upon
acceptance by Lenders would be subject, to the Mortgage.

 

Section 3.03                            Orderly Liquidation Value.

 

(a)                                  Based on the most recently completed
Appraisal of the Pool Vessels delivered to the Administrative Agent, the
aggregate Orderly Liquidation Value of the Pool Vessels shall at all times be
not less than the greater of (i) $50,000,000.00 and (ii) an Orderly Liquidation
Value such that an Asset Coverage Ratio of not less than 1.25 to 1.00 is
maintained, provided, that in no event through the third anniversary of the
Effective Date shall more than five percent (5%) of the aggregate Orderly
Liquidation Value of the Pool Vessels be attributable to Non-Qualified Pool
Vessels and thereafter Non-Qualified Pool Vessels shall not be included in Pool
Vessels.

 

(b)                                 In the event any Appraisal delivered to the
Administrative Agent performed at any time after the Effective Date demonstrates
that the aggregate Orderly Liquidation Value of the Pool Vessels is less than
the greater of (i) $50,000,000.00 and (ii) an Orderly Liquidation Value such
that an Asset Coverage Ratio of not less than 1.25 to 1.00 is maintained,
Borrower shall promptly, and in any event within 10 Business Days, pledge
additional vessels acceptable to the Administrative Agent, and the Proceeds
thereof, so that, after giving effect to such pledge of additional vessels, the
aggregate Orderly Liquidation Value of the Pool Vessels is equal to the greater
of (i) $50,000,000.00 and (ii) an Orderly Liquidation Value such that an Asset
Coverage Ratio of not less than 1.25 to 1.00 is maintained.

 

(c)                                  In the event any Appraisal delivered to the
Administrative Agent performed at any time after the Effective Date demonstrates
that that the aggregate Orderly Liquidation Value of the Pool Vessels exceeds
the greater of (i) $50,000,000.00, and (ii) an Orderly Liquidation Value such
that an Asset Coverage Ratio of not less than 1.25 to 1.00 is

 

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maintained, Borrower may, upon the delivery of a written request therefor
delivered to the Administrative Agent, request the consent of the Lenders (which
shall not be unreasonably withheld) to the release by the Collateral Trustee, at
Borrower’s expense, of its Lien on one or more Pool Vessels (and related
Assignments) described in such request, commencing with Non-Qualified Pool
Vessels; provided that both before and after giving effect to such release, (i)
no Default or Event of Default shall have occurred and be continuing or result
therefrom, (ii) the aggregate Orderly Liquidation Value of the Pool Vessels
shall be not less than the greater of (i) $50,000,000.00 and (ii) an Orderly
Liquidation Value such that the Asset Coverage Ratio shall not be less than 1.25
to 1.00, and (iii) Borrower shall be in compliance with the financial covenants
under Sections 7.01, 7.02, 7.03 and 7.04, and Borrower shall deliver to the
Administrative Agent a certificate in reasonable detail evidencing compliance by
Borrower with the foregoing conditions.  Notwithstanding the foregoing, the
value of any vessel acquired, retrofitted or rebuilt with any Loan shall not be
included for purposes of determining the aggregate Orderly Liquidation Value of
the Pool Vessels as collateral while such vessel is under construction but may
be included upon completion of work and redelivery to Borrower.

 

Section 3.04                            Negative Pledge.  Promptly after the
termination of any restrictions prohibiting Borrower from granting a Lien on its
account receivables, including, without limitation, those restrictions in
connection with any obligations secured by Title XI Guaranties, Borrower agrees
that it will execute and deliver a negative pledge on the Borrower’s accounts
receivable arising out of the Collateral.  At such time and thereafter and at
Borrower’s option, Borrower may secure the Facility with a first perfected
security interest on Borrower’s accounts receivable.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

 

Borrower hereby represents and warrants to the Administrative Agent, the Lenders
and the Collateral Trustee that:

 

Section 4.01                            Organization.  Each of Borrower, K-Sea
and each Subsidiary Guarantor is a limited partnership duly organized, validly
existing and in good standing under the laws of Delaware, and has the necessary
right, power and authority to own its respective assets and to transact the
business in which it is engaged, and is duly qualified to do business in each
jurisdiction where such qualification is legally required and in each
jurisdiction where the failure to qualify would affect the enforceability of the
Loan Documents or otherwise adversely affect the Collateral or Borrower’s or
K-Sea’s or any Subsidiary Guarantor’s ability to perform its respective
obligations under any of the Loan Documents.

 

Section 4.02                            Power and Authority.  Each of Borrower,
K-Sea and each Subsidiary Guarantor has full power, authority and legal right to
execute and deliver this Agreement, Mortgage, the Assignments and each other
Loan Document to which it is a party, and to perform its obligations hereunder
and thereunder.  Borrower has full power, authority and legal right to make and
deliver the Notes, to borrow hereunder and Borrower and each Subsidiary
Guarantor has full power, authority and legal right to grant the security
interests created by this Agreement

 

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and the Mortgage.  This Agreement and the other Loan Documents have been duly
executed and delivered by the Credit Parties party thereto and each constitutes
a legal, valid and binding obligation of such Credit Party, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.

 

Section 4.03                            Governmental Approvals; No Conflicts.
The transactions contemplated by this Agreement and the Loan Documents (a) do
not require any consent or approval of, registration or filing with, or any
other action by, any Governmental Authority, except such as have been obtained
or made and are in full force and effect, (b) do not require the consent of any
other Person (including, without limitation, any stockholder, trustee or holder
of Indebtedness), (c) will not violate any Applicable Law or regulation or the
charter, by-laws or other organizational documents of Borrower or any other
Credit Party or any order of any Governmental Authority, (d) will not violate or
result in a default under any indenture, agreement or other instrument binding
upon Borrower or any other Credit Party or their respective assets, or give rise
to a right thereunder to require any payment to be made by Borrower or any other
Credit Party, and (e) except for the Lien in favor of the Administrative Agent
or the Collateral Agent granted hereby or pursuant to any other Loan Document,
will not result in the creation or imposition of any Lien on any asset of
Borrower or any other Credit Party.

 

Section 4.04                            Financial Condition; No Material Adverse
Change.

 

(a)                                  Borrower was formed on July 14, 2003, and
has conducted no business other than the acquisition, ownership and chartering
of its vessels, including the Pool Vessels.

 

(b)                                 Borrower has heretofore furnished to the
Administrative Agent and the Lenders Financial Statements (i) as of and for the
year ended June 30, 2004, reported on by PriceWaterhouseCoopers, independent
public accountants, and (ii) as of and for the succeeding fiscal quarters ended
September 30, 2004 and December 31, 2004 certified by the applicable Financial
Officer, which Financial Statements present fairly, in all material respects the
financial position and results of operations and cash flows as of such dates and
for such periods in accordance with GAAP, consistently applied, subject to
year-end audit adjustments and the absence of footnotes in the case of Financial
Statements referred to in clause (b)(ii) above.

 

Section 4.05                            Litigation.  There are no actions,
suits, investigations or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of Borrower, threatened against
or affecting Borrower or any other Credit Party or any of the Collateral
(i) which, if adversely determined, could reasonably be expected, individually
or in the aggregate, to result in a Material Adverse Effect, or (ii) that
involve this Agreement or the transactions contemplated hereby.

 

Section 4.06                            Environmental Condition.  Except as
identified on Schedule 4.06 hereto, none of Borrower’s nor any of its
Subsidiaries’ properties or assets has ever been designated or identified in any
manner pursuant to any Environmental Law (including, without limitation, OPA

 

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90) as a Hazardous Waste disposal site, or a candidate for closure pursuant to
any Environmental Law, which designation or identification could reasonably be
expected to have a Material Adverse Effect.  No Lien arising under any
Environmental Law has attached to any revenues or to any of the Pool Vessels or
any real or personal property owned by Borrower or any of its Subsidiaries. 
Neither Borrower nor any of its Subsidiaries has received a summons, citation,
notice, or directive from the United States Environmental Protection Agency, the
United States Coast Guard or any other federal or state governmental agency
regarding any action or omission by Borrower or any of its Subsidiaries
resulting in the releasing, or otherwise exposing of Hazardous Waste into the
environment, which notice could reasonably be expected to have a Material
Adverse Effect.  Borrower and its Subsidiaries (a) are in compliance (in all
material respects) with all Environmental Laws, including, but not limited to,
all statutes, regulations, ordinances and other legal requirements pertaining to
the production, storage, handling, treatment, release, transportation or
disposal of any Hazardous Waste, and (b) will obtain, maintain and/or comply
with any permit, license or other approval required under any Environmental Law.

 

Section 4.07                            Compliance with Laws and Agreements. 
Each of Borrower and its Subsidiaries is in compliance with all laws,
regulations and orders of any Governmental Authority applicable to it or its
property and all indentures, agreements and other instruments binding upon it or
its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.  No Default has occurred and is continuing.

 

Section 4.08                            Investment and Holding Company Status. 
Neither Borrower nor any of its Subsidiaries is (a) an “investment company” as
defined in, or subject to regulation under, the Investment Company Act of 1940,
or (b) a “holding company” as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.

 

Section 4.09                            Taxes.  Each Credit Party has timely
filed or caused to be filed all Tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which such Credit Party has set aside on its books adequate
reserves, or (b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.  The charges, accruals and
reserves on the books of Borrower in respect of Taxes for all open years, and
for the current fiscal year, make adequate provision for all unpaid Tax
liabilities for such periods.

 

Section 4.10                            ERISA.  No ERISA Event has occurred or
is reasonably expected to occur that, when taken together with all other such
ERISA Events for which liability is reasonably expected to occur, could
reasonably be expected to result in a Material Adverse Effect.  The present
value of all accumulated benefit obligations under each Plan (based on the
assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent Financial Statements
reflecting such amounts, exceed the fair market value of the assets of such
Plan.

 

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Section 4.11                            Disclosure.  None of the reports,
Financial Statements, certificates or other information furnished by or on
behalf of Borrower to the Administrative Agent or any Lender in connection with
the negotiation of this Agreement or the other Loan Documents or delivered
hereunder or thereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, that, with
respect to projected financial information, Borrower represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.  There is no fact known to Borrower that could have a
Material Adverse Effect that has not been disclosed herein or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Administrative Agent or the Lenders for use in connection with
the transactions contemplated hereby.

 

Section 4.12                            No Other Name.  Borrower has not changed
its name nor has done business in any name other than that set forth in the
introductory paragraph of this Agreement.

 

Section 4.13                            Title.  Borrower and the Subsidiary
Guarantors have and at all times will defend and continue to have good and
marketable title to all of the Collateral, free and clear of all Liens, security
interests, claims or encumbrances of any kind whatsoever subject only to
Permitted Liens.  The Pool Vessels are documented in the name of Borrower with
the United States Coast Guard National Vessel Documentation Center in Falling
Waters, West Virginia.

 

Section 4.14                            Lenders’ Security Interest.  As of the
Effective Date, the Collateral Trustee shall have a legal, valid and continuing
first preferred ship mortgage (as amended, supplemented or otherwise modified
from time to time) over the whole of, and a perfected first lien on and security
interest in, the Pool Vessels, and the Administrative Agent shall have a
perfected first lien on and security interest in the remaining Collateral
subject only to Permitted Liens and all taxes, fees and other charges in
connection therewith shall have been duly paid.  There are no demise charters in
effect on any Pool Vessels other than the charters identified on Schedule 4.14
hereto.

 

Section 4.15                            Citizenship.  Borrower and each
Subsidiary Guarantor is a citizen of the United States as defined in section 2
of the Shipping Act, 1916, as amended, duly qualified to engage in the coastwise
trade and in foreign commerce of the United States, and shall remain such a
citizen while any Loan remains outstanding and during the life of the Mortgage.

 

Section 4.16                            Vessels.

 

(a)                                  Set forth on Schedule 1.01 is a complete
and accurate list, as of the date hereof, of all Pool Vessels, showing as of the
Effective Date with respect to each such Pool Vessels the following:  (i) the
name of each Pool Vessel; (ii) the name of the Registered Owner of the Pool
Vessels; (iii) to the extent applicable, the American Bureau of Shipping
certification number; (iv) the date of the most recent United States Coast Guard
inspection and/or ABS Survey; and (v) to the extent applicable, the next
scheduled inspection date.

 

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(b)                                 Each such Pool Vessel identified on Schedule
1.01 is:  (i) to the extent required in order to operate in the service in which
such Pool Vessel is operating, classified in the highest classification for
vessels of the same age and type in the American Bureau of Shipping required to
be maintained in order to operate in such service and is in class without
recommendation (except for recommendations which, when aggregated with
recommendations for all Pool Vessels, could not reasonably be expected to have a
Material Adverse Effect); (ii) documented under the laws of the United States to
permit such Pool Vessel to operate in the coastwise trade; (iii) covered by hull
and machinery and protection and indemnity insurance in accordance with the
requirements of the Mortgage, if any, covering such Pool Vessel, and otherwise
reasonably satisfactory to the Administrative Agent; and (iv) to the extent
applicable, subject to a valid certificate of inspection issued by the United
States Coast Guard, each such certificate of inspection is in full force and
effect without recommendation (except for recommendations which, when aggregated
with recommendations for all Pool Vessels, could not reasonably be expected to
have a Material Adverse Effect).

 

(c)                                  The information listed on each certificate
of the American Bureau of Shipping required to be delivered pursuant to Section
5.01(e)(iii)(G) hereof with respect to each Pool Vessel confirming that such
Pool Vessel is in such class without material recommendation, as well as the
information listed on each ABS Database Printout is true, correct and complete,
in all material respects, as of the date hereof.

 

SECTION 4.17                            GOVERNMENT CONSENTS FOR CONDUCT OF
BUSINESS.  EACH CREDIT PARTY HAS, AND IS IN GOOD STANDING WITH RESPECT TO, ALL
APPROVALS, PERMITS, LICENSES, CONSENTS, AUTHORIZATIONS, FRANCHISES,
CERTIFICATES, AND INSPECTIONS OF ALL GOVERNMENTAL AUTHORITY, THAT ARE NECESSARY
FOR A CREDIT PARTY TO CONTINUE TO CONDUCT BUSINESS AND OWN, USE, OPERATE, AND
MAINTAIN ITS PROPERTY AND ASSETS AS HERETOFORE CONDUCTED, OWNED, USED, OPERATED,
AND MAINTAINED WHICH, IF NOT OBTAINED (WHETHER DIRECTLY OR BY LAWFUL AND
EFFECTIVE ASSIGNMENT) OR NOT MAINTAINED IN GOOD STANDING, COULD REASONABLY BE
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.  NO SUCH APPROVAL, PERMIT, LICENSE,
CONSENT, AUTHORIZATION, FRANCHISE, OR CERTIFICATE IS CONDITIONED OR LIMITED ANY
MORE SO THAN AS IS GENERALLY THE CASE WITH RESPECT TO PERSONS ENGAGED IN THE
SAME OR SIMILAR LINES OF BUSINESS.  EACH SUCH APPROVAL, PERMIT, LICENSE,
CONSENT, AUTHORIZATION, FRANCHISE, OR CERTIFICATE WAS DULY AND VALIDLY GRANTED
OR ISSUED, IS IN FULL FORCE AND EFFECT, AND, AS OF THE EFFECTIVE DATE, NEITHER
HAS BEEN, NOR HAS BEEN THREATENED TO BE, AMENDED, MODIFIED, SUSPENDED,
RESCINDED, REVOKED, FORFEITED, OR ASSIGNED.  FURTHER, AS OF THE EFFECTIVE DATE,
NO CONDITION(S) EXIST(S) OR EVENT(S) HAS (HAVE) OCCURRED THAT, WITH THE GIVING
OF NOTICE OR LAPSE OF TIME OR BOTH, COULD RESULT IN THE AMENDMENT, MODIFICATION,
SUSPENSION, RESCISSION, REVOCATION, FORFEITURE, OR NON-RENEWAL OF ANY SUCH
APPROVAL, PERMIT, LICENSE, CONSENT, AUTHORIZATION, FRANCHISE, OR CERTIFICATE.

 

SECTION 4.18                            FEDERAL RESERVE REGULATIONS.

 

(a)                                  Neither Borrower nor any of the
Subsidiaries are engaged principally, or as one of their important activities,
in the business of extending credit for the purpose of buying or carrying margin
stock (as defined in Regulation U of the Board as from time to time in effect).

 

(b)                                 No part of the proceeds of any Loan will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, to purchase, acquire or carry any

 

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Margin Stock or for any purpose that entails a violation of, or that is
inconsistent with, the provisions of the regulations of the Board, including
Regulation T, U or X.

 

ARTICLE V

CONDITIONS

 

Section 5.01                            Effective Date.  The obligations of the
Lenders to make the Loans hereunder, and the obligation of the L/C Issuer to
issue Letters of Credit hereunder shall not become effective until the date on
which each of the following conditions is satisfied (or waived in accordance
with Section 10.06 hereof):

 

(a)                                  The Administrative Agent shall have
received a certificate from the secretary of the Borrower and each Guarantor
attaching (i) a true and complete copy of the resolutions of its Managing Person
and of all documents evidencing all necessary partnership or corporate action
(in form and substance satisfactory to the Administrative Agent) taken by it to
authorize the Loan Documents to which it is a party and the transactions
contemplated thereby, (ii) attaching a true and complete copy of its
Organizational Documents, (iii) setting forth the incumbency of its officer or
officers or other analogous counterpart who may sign the Loan Documents,
including therein a signature specimen of such officer or officers and (iv)
attaching a certificate of good standing of the Secretary of State of the
jurisdiction of its formation and of each other jurisdiction in which it is
qualified to do business.

 

(b)                                 Administrative Agent (or its counsel) shall
have received from each party hereto either (x) a counterpart of this Agreement
signed on behalf of such party or (y) written evidence satisfactory to
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart of
this Agreement.

 

(c)                                  The Administrative Agent shall have
received Notes for each Lender requesting the same duly signed on behalf of the
Borrower.

 

(d)                                 The Administrative Agent shall have received
the Parent Guaranty and the Subsidiary Guaranty signed on behalf of each
Guarantor party thereto.

 

(e)                                  The Administrative Agent shall have
received the following, each dated the date of the initial Loan hereunder
(unless otherwise specified), in form and substance satisfactory to the
Administrative, and in sufficient copies:

 

(i)                                     proper Form UCC-1 financing statements
under the Uniform Commercial Code for all jurisdictions that the Administrative
Agent may deem necessary or desirable in order to perfect and protect the first
and only priority Liens and security interests created hereunder, covering the
Collateral;

 

(ii)                                  evidence of the completion of all other
recordings and filings of or with respect to the Lien created hereby that the
Administrative Agent may deem necessary or desirable in order to perfect and
protect the Liens created hereby;

 

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(iii)                               with respect to each Pool Vessel described
in Schedule 1.01, the following:

 

(A)                              a Mortgage covering such Pool Vessel duly
executed by the Credit Party that is the owner of such Pool Vessel and, in
connection therewith, such Pool Vessel shall have been duly documented in the
name of the Credit Party holding title thereto under the laws of the United
States, such Mortgage shall have been duly filed for recording with the United
States Coast Guard, and Mortgage shall constitute a preferred ship mortgage on
such Pool Vessel;

 

(B)                                an assignment covering the earnings and
requisition compensation, if any, of such Pool Vessel, in form and substance
satisfactory to the Administrative Agent, duly executed by the Credit Party that
is the owner of such Pool Vessel and, in connection therewith, such Credit Party
shall have executed and delivered to the Administrative Agent notices of
assignment and authorizations to collect insurance claims and to collect general
average contributions, in such form and in such number of counterparts as may be
reasonably requested by the Administrative Agent;

 

(C)                                an assignment covering the insurances of such
Pool Vessel, in form and substance satisfactory to the Administrative Agent,
duly executed by the Credit Party that is the owner of such Pool Vessel;

 

(D)                               copies of cover notes and certificates of
entry evidencing the insurance covered by such Pool Vessel;

 

(E)                                 authorizations to inspect class records of
such Pool Vessel owned by the Credit Party that is the owner thereof, in such
form and such number of counterparts as may be reasonably requested by the
Administrative Agent, duly executed by such Credit Party;

 

(F)                                 a true and complete copy of either (i) a
certificate of ownership and encumbrance issued by the United States Coast Guard
or (ii) an abstract of title issued by the United States Coast Guard, in either
case, showing such Credit Party to be the sole owner of such Pool Vessel free
and clear of all Liens of record except (x) the Mortgage covering such Pool
Vessel in favor of the Collateral Trustee for the benefit of the Lenders, and
(y) the Permitted Liens;

 

(G)                                for each Pool Vessel to the extent it is
required to be maintained in class in order to operate in the service in which
it is operating, the original current confirmation certificate of American
Bureau of Shipping for such Pool Vessel, confirming that such Pool Vessel is in
such class without material recommendation, together with an American Bureau of
Shipping SafeNet database printout dated not more than twenty (20) days prior to
the Effective Date, certified by an officer of Borrower as true and correct;

 

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(H)                               a copy of the current certificate of
inspection issued by the United States Coast Guard for such Pool Vessel, if
available, and reflecting no outstanding recommendations; and

 

(I)                                    (1)                                 
written advice from B&P International Insurance Brokerage LLC, insurance
brokers, of the placement of the insurances covering such Pool Vessel;
(2) written confirmation from such brokers, that they have received no notice of
the assignment (except from the Administrative Agent) of the insurances or any
claim covering such Pool Vessel; (3) an opinion of such brokers to the effect
that such insurance complies with the applicable provisions of this Agreement
and of the Mortgage covering such Pool Vessel, where applicable; and (4) an
agreement by such brokers, in form and substance satisfactory to the
Administrative Agent, whereunder the insurances of such Pool Vessel, and claims
thereunder, will not be affected by nonpayment of premiums on any other
insurances.

 

(f)                                    The Administrative Agent shall have
received a favorable written opinion (addressed to the Lenders, the
Administrative Agent and the Collateral Trustee and dated the Effective Date)
from Holland & Knight LLP, on behalf of the Credit Parties, substantially in the
form of Exhibit C and covering such other matters relating to the Credit
Parties, the Loan Documents or the Transactions as the Administrative Agent
shall reasonably request. Borrower hereby requests such counsel to deliver such
opinion.

 

(g)                                 The Administrative Agent shall have received
such other documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and good standing
of each Credit Party, the authorization of the Transactions and any other legal
matters relating to the Credit Parties, the Loan Documents or the Transactions,
all in form and substance satisfactory to the Administrative Agent and its
counsel.

 

(h)                                 The Administrative Agent shall have received
Uniform Commercial Code, tax and judgment lien search reports with respect to
each applicable public office where Liens are or may be filed disclosing that
there are no Liens of record in such official’s office covering any Collateral
or showing Borrower or any other Credit Party as debtor thereunder (other than
Permitted Liens) and a certificate of an officer of Borrower, dated the
Effective Date, certifying that, upon the making of the Loans there will exist
no Liens on the Collateral other than Permitted Liens.

 

(i)                                     There shall be no injunction, writ,
preliminary restraining order or other order of any nature issued by any
Governmental Authority in any respect affecting the transactions provided for in
this Agreement or the other Loan Documents and no action or proceeding by or
before any Governmental Authority has been commenced and is pending or, to the
knowledge of Borrower, threatened, seeking to prevent or delay the transactions
contemplated by the Loan Documents or challenging any other terms and provisions
hereof or thereof or seeking any damages in connection therewith, and the
Administrative Agent shall have received a certificate, in all respects
satisfactory to the Administrative Agent, of an officer of the Borrower to the
foregoing effect.

 

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(j)                                     The Administrative Agent shall have
received a certificate, dated the Effective Date and signed by an officer of
Borrower, confirming compliance with the conditions set forth in paragraphs (a)
and (b) of Section 5.02.

 

(k)                                  Prior to or simultaneously with the making
of the Loans on the Effective Date, Borrower shall have fully repaid all
Indebtedness set forth on Schedule 5.01 hereto and all agreements with respect
thereto shall have been cancelled or terminated, all Liens, if any, securing the
same shall have been terminated, and the Administrative Agent shall have
received satisfactory evidence thereof.

 

(l)                                     The Lenders shall have completed a due
diligence investigation of Borrower and the other Credit Parties in scope, and
with results, satisfactory to the Lenders; Borrower and the other Credit Parties
shall have given the Administrative Agent such access to their respective books
and records as the Administrative Agent may have requested upon reasonable
notice in order to carry out its investigations, appraisals and analyses, and
the Administrative Agent shall have received all additional financial, business
and other information regarding Borrower and the other Credit Parties and their
respective properties as the Administrative Agent shall have reasonably
requested.

 

(m)                               The Administrative Agent shall have received
all fees and other amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by Borrower hereunder.

 

(n)                                 The Administrative Agent shall have received
evidence satisfactory to it that the insurance required by Section 6.06 is in
effect.

 

(o)                                 The Administrative Agent shall have received
and accepted a desktop or visual Appraisal of all Pool Vessels, which shall be
in form and substance satisfactory to the Administrative Agent, and which shall
demonstrate that the Orderly Liquidation Value of the Pool Vessels as of the
Effective Date is not less than the greater of (i) $50,000,000.00 and (ii) an
Orderly Liquidation Value such that the Asset Coverage Ratio shall not be less
than 1.25 to 1.00.

 

(p)                                 The Administrative Agent shall have received
satisfactory evidence that the Pool Vessels are operationally suitable for the
trades in which such Pool Vessels are expected to be engaged and can be operated
by Borrower and/or a Subsidiary Guarantor in their intended trades without
impediment.

 

(q)                                 The Lenders shall be reasonably satisfied
(i) that there shall be no litigation or administrative proceeding, or
regulatory development, that would reasonably be expected to have a Material
Adverse Effect on (a) the business, assets, operations, prospects, condition
(financial or otherwise) or material agreements of Borrower and its
Subsidiaries, (b) the ability of any Credit Party to perform any of its
obligations under any Loan Document or (c) the rights of or benefits available
to the Administrative Agent, the Collateral Trustee or any Lender under any Loan
Document and (ii) with the current status of, and the terms of any

 

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settlement or other resolution of, any litigation or other proceedings brought
against Borrower or any Subsidiary.

 

(r)                                    The Lenders shall be reasonably satisfied
that no material adverse change or material adverse condition in the business,
assets, operations, properties, condition (financial or otherwise), liabilities
(including contingent liabilities), prospects or material agreements of Borrower
and its Subsidiaries has occurred since December 31, 2004.

 

(s)                                  No Event of Loss shall have occurred with
respect to any of the Pool Vessels.

 

(t)                                    All legal matters with respect to and all
legal documents (including, but not limited to, the Loan Documents) executed in
connection with the transactions contemplated by this Agreement shall be
satisfactory to counsel for the Administrative Agent.

 

(u)                                 The Administrative Agent and the Lenders
shall have reviewed and be satisfied with Borrower’s, K-Sea’s and K-Sea’s
predecessor’s (i) financial statements dated July 1, 2004 and comparable
financial statements for the fiscal year 2003 and (ii) audited financial
statements for the years 2001, 2002 and 2003, if applicable.  The Administrative
Agent shall have reviewed and be satisfied with all management letters, reports
and written materials, if any, that are prepared by the independent auditor of
Borrower, K-Sea and K-Sea’s predecessor during the years 2001, 2002, 2003 and
2004 to the Effective Date.

 

(v)                                 KeyBank shall have paid to Borrower a
reimbursement of the pro-rata fee paid on the Existing MARAD Letter of Credit.

 

The Administrative Agent (acting itself or through its counsel) shall notify
Borrower, the Lenders, the L/C Issuer and the Collateral Trustee of the
Effective Date, and such notice shall be conclusive and binding. 
Notwithstanding the foregoing, the obligations of Lenders to make Loans and the
obligation of the L/C Issuer to issue Letters of Credit shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 10.06 hereof) at or prior to 3:00 p.m., New York City time,
on April 30, 2005 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).

 

Section 5.02                            Each Loan and Letter of Credit.  The
obligation of each Lender to make a Loan (other than a Loan made by a Lender
pursuant to Section 2.15(e)), and the obligation of the L/C Issuer to issue a
Letter of Credit (including the initial issuance thereof) or renew a Letter of
Credit and the right of Borrower to request the issuance or renewal of a Letter
of Credit, shall each be subject to the further conditions precedent that on the
date of the making of each Loan, issuance or renewal:

 

(a)                                  The representations and warranties of each
Credit Party set forth in each Loan Document shall be true and correct in all
material respects on and as of the date of such Loan, issuance or renewal,
except to the extent such representations and warranties relate to an earlier
date.

 

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(b)                                 At the time of and immediately after giving
effect to such Loan or issuance, no Default shall have occurred and be
continuing and the aggregate Revolving Credit Exposure of all Lenders shall not
exceed the Borrowing Base.

 

(c)                                  The Administrative Agent shall have
received a Loan Request meeting the requirements of Section 2.05 or a Credit
Request meeting the requirements of Section 2.15.

 

(d)                                 The Administrative Agent shall have received
such other documentation and assurances as shall be reasonably required by it in
connection with the making of such Loan or the issuance or renewal of such
Letter of Credit.

 

The making of each Loan and the issuance and renewal of each Letter of Credit
shall be deemed to constitute a representation and warranty by Borrower on the
date thereof as to the matters specified in paragraphs (a) and (b) of this
Section 5.02.

 

ARTICLE VI

AFFIRMATIVE COVENANTS

 

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan, all Reimbursement Obligations and all fees and other
amounts (other than contingent indemnity obligations) payable under the Loan
Documents shall have been paid in full, Borrower covenants and agrees with the
Lenders that:

 

SECTION 6.01                            FINANCIAL STATEMENTS AND OTHER
INFORMATION.

 

(a)                                  Borrower shall deliver to the
Administrative Agent and the Lenders, at Borrower’s sole expense:  (i) as soon
as available but no later than forty-five (45) days after the end of each fiscal
quarter, the unaudited consolidated Financial Statements of Borrower and K-Sea
for such interim fiscal period, prepared in accordance with GAAP and certified
by the Financial Officer of Borrower and K-Sea, respectively, (ii) as soon as
available after the end of each fiscal year, annual financial projections of
Borrower prepared in accordance with GAAP by the Financial Officer of Borrower,
using monthly data, and (iii) as soon as available but no later than one hundred
twenty (120) days after the end of each fiscal year or as required under any
regulations to which Borrower or K-Sea is subject, the audited consolidated
Financial Statements (with an unqualified opinion) of Borrower and K-Sea for
such fiscal year, prepared and certified by independent certified public
accountants acceptable to Lenders.  All of the foregoing shall be in such form
and together with such information with respect to the business of Borrower, as
Lenders may in each case request as reasonably calculated by Lenders to enable
them to confirm and prove elements of the Financial Statements.  Borrower shall
keep and maintain its books and records in accordance with GAAP, consistently
applied.

 

(b)                                 Concurrently with any delivery of Financial
Statements under clause (a)(i) above, Borrower shall deliver to Lenders a
certificate of a Financial Officer of K-Sea (i) certifying as to whether a
Default has occurred since the delivery of the previous such certificate or to
the date hereof and, if such a Default has occurred, specifying the details
thereof and any action taken or proposed to be taken with respect thereto,
(ii) setting forth reasonably

 

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detailed calculations demonstrating compliance with Sections 7.01, 7.02, 7.03
and 7.04 hereof (which calculations with respect to Section 7.04 shall be based
on the then most recent Appraisals of the Pool Vessels and the aggregate
Revolving Credit Exposure of all Lenders as of the last day of the fiscal
quarter covered by such Financial Statements), (iii) stating whether any change
in GAAP or in the application thereof has occurred since the date of the audited
Financial Statements referred to in Section 4.04 or Section 6.01 hereof, as
applicable, has materially and adversely effected the Financial Statements
accompanying such certificate and, if so, the estimated dollar amount thereof
and (iv) certifying as to whether any default or event of default shall have
occurred under any Title XI Guaranty (or any Indebtedness guaranteed thereby)
and setting forth in reasonable detail calculations demonstrating compliance
with any financial covenants contained in any such Title XI Guaranty or related
Indebtedness.

 

(c)                                  Promptly after the same become publicly
available, Borrower shall make available (including through electronic
availability) to the Administrative Agent and the Lenders copies of all periodic
and other reports, proxy statements and other materials filed by Borrower or any
Subsidiary with the Securities and Exchange Commission, or any Governmental
Authority succeeding to any or all of the functions of said Commission, or with
any national securities exchange, as the case may be; and

 

(e)                                  Promptly following any request therefor,
Borrower shall deliver to the Administrative Agent and the Lenders such other
information regarding the operations, business affairs and financial condition
of K-Sea or any Subsidiary, or compliance with the terms of this Agreement, as
the Administrative Agent or any Lender may reasonably request.

 

Section 6.02                            Pool Vessel Appraisals.  The
Administrative Agent may conduct, and Borrower shall cooperate in the conduct
of, a visual Appraisal of any or all of the Pool Vessels at Borrower’s expense,
over every twelve (12) month period of this Agreement in the absence of an Event
of Default and at any time during the continuance of an Event of Default.  The
first twelve-month period will begin on the Effective Date; provided, however,
that Borrower will allow access to any Appraiser selected by the Administrative
Agent to attend and appraise any Pool Vessel in drydock at any time on
reasonable notice.  Each fiscal year, Borrower shall provide the Administrative
Agent with a drydock schedule and location of drydock.  As soon as available
after each Anniversary Date, Borrower shall provide the Administrative Agent
with desktop Appraisals on all Pool Vessels in the Collateral.

 

Section 6.03                            Fees and Expenses.  Borrower shall pay,
on demand of the Administrative Agent and delivery to Borrower of invoices
therefor, all actual out-of-pocket costs, expenses, filing fees and taxes
payable in connection with the negotiation, preparation, execution, delivery,
recording, administration, collection, liquidation, enforcement and defense of
the Obligations, the Lenders’ rights in the Collateral, this Agreement and all
other existing and future agreements or documents contemplated herein or related
hereto, including any amendments, waivers, supplements or consents which may
hereafter be made or entered into in respect hereof, or in any way involving
claims or defense asserted by the Lenders or claims or defenses against the
Lenders asserted by Borrower or any guarantor, including, without limitation,
the Guarantors, or any third party directly or indirectly arising out of or
related to the relationship between Borrower and the Lenders, including, but not
limited to, the following,

 

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whether incurred before, during or after the initial or any renewal term or
after the commencement of any case with respect to Borrower under the United
States Bankruptcy Code or any similar statute: (a) all costs and expenses of
filing or recording (including the UCC financing statement and any Mortgage
filing taxes and fees, abstract fees relating to the Pool Vessels, documentary
taxes, intangibles taxes, etc., if applicable); (b) all insurance premiums,
appraisal fees, fees incurred in connection with any environmental report, audit
or survey and search fees; (c) all fees as then in effect relating to the wire
transfer of loan proceeds and other funds and fees then in effect for returned
checks and credit reports; (d) with respect to periodic field examinations of
the Collateral and Borrower’s operations, a per diem charge at the rate of
$1,000.00 per person per day for Lenders’ internal examiners in the field and
office in excess of three (3) days per visit; and (e) the reasonable, documented
costs, fees and disbursements of outside counsel to Lenders, including, but not
limited to, such fees and disbursements incurred as a result of litigation
between the parties hereto, any third party and in any appeals arising
therefrom.  Any of the foregoing amounts that are paid by Lenders shall, until
reimbursed by or on behalf of Borrower, constitute Obligations of Borrower
secured by the Collateral.

 

Section 6.04                            Notices of Material Events.  Borrower
will furnish to the Administrative Agent and each Lender prompt written notice
of the following:

 

(a)                                  the occurrence of any Default or Event of
Default;

 

(b)                                 the filing, commencement or written threat
of any action, suit or proceeding by or before any arbitrator or Governmental
Authority against Borrower or any other Person or affecting Borrower or any
Affiliate thereof that, if adversely determined, could reasonably be expected to
result in a Material Adverse Effect;

 

(c)                                  the occurrence of any ERISA Event that
could reasonably be expected to result in a Material Adverse Effect; and

 

(d)                                 any other development that results in, or
could reasonably be expected to result in, a Material Adverse Effect.

 

Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.

 

Section 6.05                            Existence; Conduct of Business. 
Borrower will, and will cause each of its Subsidiaries to, do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits, privileges and franchises
material to the conduct of its business.

 

Section 6.06                            Insurance.  (a)  With respect to the
Collateral and other assets, Borrower shall maintain insurance at all times,
with financially sound and reputable insurers that are reasonably acceptable to
the Administrative Agent.  With respect to insurance on all Collateral, all such
insurance policies shall be in such form, substance, amounts and coverage as may
be satisfactory to the Administrative Agent, including, without limitation,
insurance on hull and

 

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machinery, protection and indemnity, loss or damage to vessels, damage to
property of third parties (including customers), loss or contamination of cargo,
personal injuries to employees or third parties, and pollution and other related
environmental damage.

 

(b)                                 Such insurance shall provide for thirty (30)
days’ prior written notice to the Administrative Agent of any reduction or
cancellation of coverage on account of default in the payment of any premium and
shall provide Lenders with the opportunity to cure nonpayment.  Borrower hereby
irrevocably appoints the Administrative Agent with full right of delegation by
the Administrative Agent as attorney-in-fact for Borrower to obtain, at
Borrower’s expense, any such insurance should Borrower fail to do so and, after
an Event of Default, to adjust or settle any claim or other matter under or
arising pursuant to such insurance or to amend or cancel such insurance. 
Borrower shall deliver to the Administrative Agent evidence of such insurance
and a lender’s loss payable endorsement satisfactory to the Administrative Agent
as to all existing and future insurance policies with respect to the
Collateral.  Borrower shall deliver to the Administrative Agent, in kind, all
instruments representing proceeds of insurance received by Borrower.  Except as
otherwise specifically provided herein or in the Mortgage as to any Pool Vessel,
the Administrative Agent may apply any insurance proceeds received by the
Administrative Agent or the Collateral Trustee at any time to the cost of
repairs to or replacement of any portion of the Collateral and/or, at the
Administrative Agent’s option, to payment of or as security for any of the
Obligations, whether or not due, in any order or manner as the Administrative
Agent may determine.  Borrower will insure each Pool Vessel in accordance with
Section 1.18 of the Mortgage.  Nothing in this Agreement shall be construed to
limit or restrict the provisions of Section 1.18 of the Mortgage, but shall be
in addition thereto.

 

Section 6.07                            Taxes; Use.  Borrower agrees that it
will, and will cause each of its Subsidiaries to, pay and discharge all taxes,
assessments, licensing obligations and governmental charges or levies imposed on
the income, profits, sale, business or properties of Borrower and its
Subsidiaries prior to the date upon which penalties attach for non-payment
thereof, and promptly discharge any liens, encumbrances or other claims which
may be levied or claimed against any of the Collateral, provided, that (i) any
such tax, assessment, charge or levy need not be paid if the payment thereof is
being contested in good faith and by appropriate proceedings, (ii) for which
adequate book reserves, determined in accordance with GAAP, shall be set aside,
and (iii) the failure to make payment pending such contest could not reasonably
be expected to result in a Material Adverse Effect, and provided, further, that
if any such tax, assessment, charge or levy lawfully imposed shall remain unpaid
after the date upon which a Lien on any Collateral arises or may be imposed as a
result of such non-payment, or if any Lien is claimed for any other reason
against any of the Collateral, which if foreclosed would in the opinion of the
Administrative Agent adversely affect the value of the Lenders’ security
interest in any of the Collateral, the Lenders may pay and discharge such taxes,
assessments, charges, levies and Liens, and the amount so paid by the Lenders
shall be payable on demand and if not paid promptly, will be charged to the
appropriate Loan Account and shall be secured by the Collateral.  Borrower will,
and will cause each of its Subsidiaries, to comply with all laws and all acts,
rules, regulations and orders of any legislative, administrative or judicial
body or official, applicable to the Collateral or to the operation of the
business of Borrower.

 

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Section 6.08                            Maintenance of Properties; Use and
Operation of Pool Vessels.  Borrower will, and will cause each of its
Subsidiaries to, keep and maintain all property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted. 
Borrower shall require at all times that any demise charterer or operator of any
of the Pool Vessels shall use its due diligence to operate, maintain, repair,
insure, man and supply the Pool Vessels or any of them in a careful and proper
manner, comply in all material respects with and conform to all governmental
laws, rules and regulations and insurance restrictions relating thereto, and
operate any such Pool Vessels with competent and duly qualified personnel. 
Borrower shall ensure that none of the Pool Vessels is traded, located, operated
or used, directly or indirectly, in a Prohibited Jurisdiction or by a Prohibited
Person, and no charterer nor any subcharterer or shipper shall be a Prohibited
Person or organized in a Prohibited Jurisdiction.

 

Section 6.09                            Books and Records; Inspection Rights. 
Borrower will, and will cause each of its Subsidiaries to, keep proper books of
record and account in which full, true and correct entries in accordance with
GAAP are made of all dealings and transactions in relation to its business and
activities.  Borrower will, and will cause each of its Subsidiaries to, permit
any representatives designated by the Administrative Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, including, without
limitation, the Collateral, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.  Borrower shall provide to the Administrative Agent
advance notice of all surveys and regulatory inspections in order that the
Administrative Agent or its agent may observe and participate.  All records,
computer tapes, discs and other data storage devices, ledger sheets,
correspondence, invoices, delivery receipts, documents and instruments relating
to the Collateral shall also constitute Collateral and, unless and until
delivered to the Administrative Agent or the Lenders, shall be kept by Borrower,
without cost to Lenders, in appropriate containers and in safe places, and if
the Administrative Agent or the Lenders should so request, shall bear suitable
legends identifying them as being under any Administrative Agent’s dominion and
control.  The Administrative Agent and the Lenders shall at all reasonable times
have full access to and the right to audit any and all of Borrower’s books,
computer tapes, discs and other data storage devices and records, including, but
not limited to, books and records pertaining to the Collateral and including all
files and correspondence with creditors and customers, and to confirm and verify
the value and collectibility of the Collateral and to do whatever else the
Administrative Agent or the Lenders reasonably may deem necessary to protect its
interests.

 

Section 6.10                            Use of Proceeds.  The proceeds of the
Loans can be used for any purpose in the ordinary course of business, including
minimum quarterly distributions to partners in K-Sea, acquisition of entities or
specific vessels from unaffiliated third parties, or, if from an Affiliate, an
acquisition which is made on terms equivalent to an arm’s-length basis, or
financing other rebuilding, retrofitting, upgrading or capital improvements on
Pool Vessels or other Vessels owned by the Borrower or any Subsidiary Guarantor,
provided that no part of the proceeds of any Loan will be used, whether directly
or indirectly, and whether immediately, incidentally or ultimately, to purchase,
acquire or carry any margin stock (as defined under Regulation U of the Board)
or for any purpose that entails a violation of any of the regulations of the
Board, including Regulations T, U and X.  Borrower shall not invest, lend or
otherwise distribute the proceeds of any Loan made under this Agreement in or to
any Person other than

 

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Borrower, K-Sea or any Subsidiary Guarantor, except as set forth in the first
sentence of this Section 6.10.

 

Section 6.11                            U.S. Person.  Borrower and each
Subsidiary Guarantor shall at all times until the Lien of the Mortgage shall be
discharged and there are no Loans outstanding hereunder be a limited partnership
organized under the laws of Delaware or another state within the United States.

 

Section 6.12                            Documentation.  Borrower will comply
with and satisfy all provisions of the laws and regulations of the United States
now or hereafter from time to time in effect in order that the Pool Vessels
shall continue to be documented vessels pursuant to the laws of the United
States as vessels of the United States under the United States flag with such
endorsements as shall qualify the Pool Vessels for participation in the
coastwise trade and such other trades and services to which they may be
dedicated from time to time.

 

Section 6.13                            Further Assurances.  Borrower will,
promptly at any time and from time to time, at its sole expense, execute and
deliver, and cause its Subsidiaries to execute and deliver, to the
Administrative Agent such further instruments and documents, and take such
further action, as the Administrative Agent may from time to time request in
order to further carry out the intent and purpose of the Loan Documents and to
establish and protect the rights, interests and remedies created, or intended to
be created, in favor of the Administrative Agent and the Lenders hereby and
thereby, including, without limitation, the execution, delivery, recordation and
filing of financing statements and continuation statements.  Borrower hereby
authorizes the Administrative Agent, in such jurisdictions where such action is
authorized by law, to effect any such recordation or filing of financing
statements and continuation statements without the signature of Borrower thereon
and to file as valid financing statements in the applicable financing statement
records, photocopies hereof and of any other financing statement executed in
connection herewith.  The Administrative Agent agrees to provide Borrower with
copies of UCC filings, but shall have no liability for failure to do so and such
failure shall not serve as a defense to the performance by any party of its
obligations under the Loan Documents.

 

Section 6.14                            Borrower’s Title; Lenders’ Security
Interest; Personal Property.  Borrower shall warrant and defend its good and
marketable title in and to the Pool Vessels, and the Administrative Agent’s and
the Collateral Trustee’s perfected first priority security interest in the
Collateral, against all claims and demands whatsoever.  Borrower agrees that the
Pool Vessels shall be, and at all times and remain, separately identifiable
personal property.  Borrower shall, at its sole expense, take such action
(including the obtaining and recording of waivers) as may be necessary to
prevent any Person from acquiring any right to or interest in the Pool Vessels
by virtue of the Pool Vessels being deemed to be real property or a part of real
property or a part of other personal property, and if at any time any Person
shall claim any such right or interest, Borrower shall, at its expense, cause
such claim to be waived in writing or otherwise eliminated by bonding or
substitution of security to the Administrative Agent’s satisfaction within
thirty (30) days after such claim shall have first become known to Borrower.

 

Section 6.15                            Indemnification.  Without limiting the
generality of any other provision hereof, Borrower shall indemnify, protect,
save and keep harmless the Administrative Agent, the

 

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L/C Issuer, the Collateral Trustee and each Lender from and against any
reduction in the amount payable out of the Collateral to such Person with
respect to the Obligations, or any other loss, cost or expense (including
reasonable legal fees) incurred by such Person, as the result of any breach of
the provisions of this Article VI.

 

Section 6.16                            Performance of Contracts.  Borrower will
duly observe and perform in all material respects all covenants and obligations
to be performed by it under any charter or any other contract for use of the
Pool Vessels or any of them and will promptly take any and all action as may be
reasonably necessary to enforce its rights under any such charter or contract or
to secure the performance by such charterer or operator of such party’s
obligations under any such charter or contract.  Borrower shall not amend,
terminate or otherwise modify the terms of any such charter or contract without
the prior written consent of the Lenders, which shall not be unreasonably
withheld or delayed, but to which reasonable conditions may be attached;
provided, however, the Lenders shall have no obligation to consent to any
termination or to any amendment or modification, if in the Lenders’ judgment
such amendment or modification would materially increase the Lenders’ risks in
the transaction, reduce its returns or otherwise disadvantage the Lenders.

 

Section 6.17                            Environmental Compliance.  (a)  Borrower
shall, and it shall require that any and all subcharterers, managers, employees,
contractors, subcontractors, agents, representatives, Affiliates, consultants,
occupants and any and all other Persons, (i) comply in all material respects
with all applicable Environmental Laws, (ii) use, employ, process, emit,
generate, store, handle, transport, dispose of and/or arrange for the disposal
of any and all Hazardous Materials in, on, or, directly or indirectly, related
to or in connection with any of the Pool Vessels or any portion thereof in a
manner consistent with prudent industry practice and in compliance in all
material respects with all applicable Environmental Laws, and in a manner which
does not pose a significant risk to human health, safety (including occupational
health and safety) or the environment, and (iii) obtain, maintain, and have on
board each of the Pool Vessels any required Certificate of Financial
Responsibility; (b) Borrower shall, and it shall require that any charterer of
any of the Pool Vessels or any of them or any other Person that may have custody
of any of the Pool Vessels shall, upon the occurrence or discovery of an
Environmental Event with respect to such Pool Vessel, promptly carry out, using
Borrower’s or such other Person’s own funds or proceeds of insurance with
respect thereto, such actions as may be necessary to remediate or cure such
Environmental Event in compliance in all material respects with all Applicable
Laws, to comply in all material respects with all applicable Environmental Laws
and to alleviate any significant risk to human health or the environment if the
same arises from a condition on or in respect of the Pool Vessel, whether
existing prior to or during the term of this Agreement or the term of any such
the charter.  Once Borrower or such other Person commences such actions,
Borrower shall, and shall cause such other Person to, thereafter diligently and
expeditiously proceed to comply in all material respects in a timely manner with
all Environmental Laws and to eliminate any significant risk to human health or
the environment arising from such Environmental Event and shall, at the request
of the Administrative Agent, give periodic progress reports to the
Administrative Agent and the Lenders on its compliance efforts and actions. 
Nothing contained herein will relieve or discharge or in any way affect the
obligation of Borrower to cure promptly any violations of Applicable Law or to
pay and discharge any Liens against any of the Pool Vessels.

 

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Section 6.18                            Subsidiary Guaranties.  Upon the
formation or acquisition of any Subsidiary of Borrower, Borrower shall cause
each such Subsidiary to provide a Subsidiary Guaranty to the Administrative
Agent substantially in the form attached hereto as Exhibit H.  In the event any
Subsidiary of Borrower is an entity other than a corporation, the form of
Subsidiary Guaranty shall be modified to reflect the nature of such entity.

 

SECTION 6.19                            RELATING TO THE VESSELS.

 

(a)                                  Borrower shall maintain and cause each of
its Subsidiaries to maintain, a certified copy of each Mortgage, together with a
notice thereof, aboard each of the Pool Vessels owned by it.

 

(b)                                 Borrower shall maintain and cause each of
its Subsidiaries to maintain the Pool Vessels (which are required to be classed
in order to operate in the service in which they are operating) in the highest
classification required to be maintained in order to operate in such service for
vessels of like age and type by the American Bureau of Shipping or any other
classification society reasonably satisfactory to the Administrative Agent.

 

(c)                                  Borrower shall permit the Administrative
Agent to have the Pool Vessels surveyed by marine engineers or other surveyors
selected by the Administrative Agent, in its sole discretion, at such times and
with such frequency as the Administrative Agent may reasonably request.  The
costs of such surveys and inspections shall be allocated as follows: (i) so long
as no Event of Default has occurred and is then continuing, the cost of one such
survey and inspection every three years shall be borne by Borrower, and
(ii) whenever an Event of Default exists hereunder, the costs of all surveys
(including, without limitation, Visual Surveys) and inspections shall be borne
by Borrower.

 

Section 6.20                            Working Capital Clean-Down.  Borrower
will cause Loans the proceeds of which were used for working capital purposes
(as identified in accordance with Section 2.05(v) hereof) and not for vessel
acquisitions or expansion capacity, to be reduced to zero for fifteen (15)
consecutive days during each twelve (12) month period beginning with the
Effective Date.

 

ARTICLE VII

NEGATIVE COVENANTS

 

Until the Commitments have expired or terminated and the principal of and
interest on each Loan, all Reimbursement Obligations and all fees and other
amounts (other than contingent liability obligations) payable hereunder have
been paid in full Borrower covenants and agrees with Lenders that:

 

Section 7.01                            Fixed Charge Coverage Ratio.  Borrower
shall not permit the Fixed Charge Coverage Ratio as of the end of any fiscal
quarter to be less than 2.50 to 1.00.

 

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SECTION 7.02                            TOTAL FUNDED DEBT TO TANGIBLE
CAPITALIZATION RATIO.  BORROWER SHALL NOT PERMIT THE TOTAL FUNDED DEBT TO
TANGIBLE CAPITALIZATION RATIO AS OF THE END OF ANY FISCAL QUARTER TO BE GREATER
THAN 0.60 TO 1.00.

 

Section 7.03                            Total Funded Debt to EBITDA Ratio.
 Borrower shall not permit the Total Funded Debt to EBITDA Ratio at any time
during each period set forth below to be greater than the ratio set forth below
with respect to such period:

 

Period

 

Ratio

 

Effective Date to and including December 31, 2006

 

3.75 to 1.00

 

January 1, 2007 and thereafter

 

3.50 to 1.00

 

 

Section 7.04                            Asset Coverage Ratio.  Borrower shall
not permit the Asset Coverage Ratio as of the last day of each fiscal quarter to
be less than 1.25 to 1.00.

 

Section 7.05                            No Liens.  Borrower will not and will
not permit any Subsidiary Guarantor or any charterer of the Pool Vessels or any
of them to create, assume or suffer to exist any Lien of any kind upon the
Collateral except for Liens in favor of the Administrative Agent and the
Collateral Trustee and Permitted Liens.

 

Section 7.06                            No Changes in Borrower.  Borrower shall
not (a) materially change its business; (b) change the form of organization of
its business; or (c) without thirty (30) days’ prior written notice to the
Administrative Agent, change its name or jurisdiction or organization.

 

Section 7.07                            No Disposition of Assets.  Without the
prior written consent of Lenders (which shall not be unreasonably withheld),
Borrower shall not directly or indirectly sell, lease (other than a charter of a
Pool Vessel permitted under the Mortgage), transfer, assign, abandon, exchange
or otherwise relinquish possession or dispose of any part of the Collateral or
any material portion of its other assets (other than Collateral or other assets
that are obsolete or worn out, or equipment disposed of, if worn out, and
replaced with equipment of the same or better quality and value, in the ordinary
course of business).

 

SECTION 7.08                            FUNDAMENTAL CHANGES.

 

(a)                                  Borrower will not, and will not permit any
Subsidiary Guarantor to, merge into or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or sell, transfer,
lease or otherwise dispose of (in one transaction or in a series of
transactions) all or substantially all of its assets, or all or substantially
all of the stock of any of its Subsidiaries (in each case, whether now owned or
hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing; provided (i) any Person may merge into Borrower in a
transaction in which Borrower is the surviving corporation, (ii) any Person may
merge into  any Subsidiary in a transaction in which the surviving entity is a
Subsidiary, (iii) any Subsidiary Guarantor may sell, transfer, lease or
otherwise dispose of its assets to Borrower or to another Subsidiary Guarantor,
and (iv) any Subsidiary Guarantor may liquidate or dissolve if Borrower

 

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determines in good faith that such liquidation or dissolution is in the best
interests of Borrower and is not materially disadvantageous to Lenders.

 

(b)                                 Borrower will not, and will not permit any
of its Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by Borrower, or related to its Subsidiaries on
the date of execution of this Agreement.

 

Section 7.09                            Transactions with Affiliates.  Borrower
will not, and will not permit any of its Subsidiaries to, sell, lease or
otherwise transfer any property or assets to, or purchase, lease or otherwise
acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except (a) in the ordinary course of
business at prices and on terms and conditions not less favorable to Borrower or
such Subsidiary than could be obtained on an arm’s-length basis from unrelated
third parties, (b) transactions between or among Borrower and its Subsidiaries
not involving any other Affiliate and (c)  any transaction permitted by
Section 7.08 hereof; provided, that the foregoing provisions of this
Section 7.09 shall not prohibit any such Person from declaring or paying any
lawful Distributions so long as, after giving effect thereto, no Default shall
have occurred and be continuing.  No funds provided by Lenders to Borrower
hereunder shall be employed for purposes other than corporate purposes of
Borrower and for use in Borrower’s business.

 

Section 7.10                            Restrictive Agreements.  Borrower will
not, and will not permit any Subsidiary Guarantor to, directly or indirectly,
enter into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of Borrower
or any Subsidiary Guarantor to create, incur or permit to exist any Lien upon
any of its property or assets, which restriction (or condition) is more
restrictive, in substance, than the restrictions in Section 7.05 hereof, or
(b) the ability of any Subsidiary Guarantor to pay Distributions or other
distributions with respect to any shares of its capital stock or to make or
repay loans or advances to Borrower or any other Subsidiary or to guaranty
Indebtedness of Borrower or any other Subsidiary; provided, that (i) the
foregoing shall not apply to restrictions and conditions imposed by law or by
this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided, that such restrictions and conditions
apply only to the Subsidiary that is to be sold and such sale is permitted
hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or
conditions imposed by any agreement relating to secured Indebtedness permitted
by this Agreement if such restrictions or conditions apply only to the property
or assets securing such Indebtedness and (v) clause (a) of the foregoing shall
not apply to customary provisions in leases and other contracts restricting the
assignment thereof.

 

Section 7.11                            Limitations on Advances and
Distributions  Borrower shall not make distributions to any limited or general
partner of the Borrower during the continuance of an Event of Default if,
following the occurrence of such Event of Default, Lenders send a notice to
Borrower asserting or confirming such Event of Default (regardless of whether
any notice shall have been required to create such Event of Default in any
case).  Borrower shall not make any

 

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loans or advances to any Affiliate or related Persons of Borrower, except K-Sea
and any Subsidiary Guarantor.

 

Section 7.12                            Limitations on Other Indebtedness. 
Borrower shall not, at any time after the occurrence and during the continuance
of an Event of Default, prepay unscheduled principal or interest on any other
Indebtedness.

 

Section 7.13                            Limitations on Negative Pledge.
 Borrower shall not suffer to exist in favor of any Person other than
Administrative Agent, the Collateral Trustee and the Lenders any agreement
prohibiting Borrower or any Subsidiary from entering into or suffering to exist
any agreement that prohibits or conditions the creation or assumption of any
Lien upon any of its property or assets except those in favor of such Person
(any such agreement, a “Negative Pledge”).  The forgoing shall not apply to (i)
customary restrictions and conditions contained in agreements relating the sale
of a Subsidiary pending such sale, provided such restrictions and conditions
apply only to the Subsidiary that is to be sold and such sale is permitted
hereunder, (ii) customary restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted to be incurred hereunder if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness or (iii) customary provisions in leases and other contracts
restricting the assignment thereof.

 

SECTION 7.14                            ACQUISITIONS.  BORROWER SHALL NOT, AND
SHALL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, PURCHASE, HOLD OR ACQUIRE
(INCLUDING PURSUANT TO ANY MERGER) ANY CAPITAL STOCK OR OTHER SECURITIES
(INCLUDING ANY OPTION, WARRANT OR OTHER RIGHT TO ACQUIRE ANY OF THE FOREGOING)
OF, OR MAKE OR PERMIT TO EXIST ANY INVESTMENT OR ANY OTHER INTEREST IN, ANY
OTHER PERSON, OR PURCHASE OR OTHERWISE ACQUIRE (IN ONE TRANSACTION OR A SERIES
OF TRANSACTIONS (INCLUDING PURSUANT TO ANY MERGER)) ANY ASSETS OF ANY OTHER
PERSON CONSTITUTING A BUSINESS UNIT, EXCEPT (A) AS PERMITTED BY SECTION 7.15 AND
(B) PERMITTED ACQUISITIONS BY BORROWER OR ANY SUBSIDIARY; PROVIDED THAT BORROWER
SHALL HAVE DELIVERED TO THE ADMINISTRATIVE AGENT AND THE LENDERS NOT LESS THAN
15 BUSINESS DAYS PRIOR TO THE CONSUMMATION OF ANY SUCH PERMITTED ACQUISITION A
CERTIFICATE OF A FINANCIAL OFFICER OF BORROWER IN FORM AND SUBSTANCE
SATISFACTORY TO THE ADMINISTRATIVE AGENT EVIDENCING PROJECTED PRO FORMA
COMPLIANCE WITH SECTIONS 7.01, 7.02, 7.03 AND 7.04 AFTER GIVING EFFECT TO SUCH
PERMITTED ACQUISITION FOR THE PERIOD FROM THE DATE OF SUCH PERMITTED ACQUISITION
TO THE MATURITY DATE.

 

SECTION 7.15                            PARTNERSHIPS, JOINT VENTURES. 
  BORROWER SHALL NOT, AND SHALL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, BECOME A
GENERAL PARTNER IN ANY GENERAL OR LIMITED PARTNERSHIP OR JOINT VENTURE, EXCEPT
WITH RESPECT TO ANY PURCHASE OR OTHER ACQUISITION OF ANY CAPITAL STOCK OR OTHER
OWNERSHIP OR PROFIT INTEREST, WARRANTS, RIGHTS, OPTIONS, OBLIGATIONS OR OTHER
SECURITIES OF ANY PERSON, ANY CAPITAL CONTRIBUTION TO SUCH PERSON OR ANY OTHER
INVESTMENT IN SUCH PERSON WHICH INDIVIDUALLY OR IN THE AGGREGATE WITH ALL SUCH
OTHER INVESTMENTS DURING THE TERM HEREOF SHALL NOT EXCEED $20,000,000.

 

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ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

 

Section 8.01                            Events of Default.  Each of the
following events shall constitute “Events of Default”:

 

(a)                                  Borrower shall fail to pay any principal of
or interest on any Loan or any fee, expenses or any other amount payable under
this Agreement, when and as the same shall become due and payable, and such
failure shall continue unremedied for a period of two (2) Business Days;

 

(b)                                 any representation or warranty made or
deemed made by or on behalf of Borrower or any Subsidiary (i) in this Agreement
or any amendment or modification hereof, shall prove to have been incorrect when
made or incorrect in any material respect when deemed made or (ii) in any
report, certificate, financial statement or other document furnished pursuant to
or in connection with this Agreement or any amendment or modification thereof,
shall prove to have been incorrect in any material respect when made or deemed
made;

 

(c)                                  Borrower shall fail to observe or perform
any covenant, condition or agreement contained in Sections 6.04, 6.05, 6.06(a),
6.08, 6.10, 6.11, 6.12, 6.14, 7.01, 7.02, 7.03, 7.04 or 7.09 hereof;

 

(d)                                 Borrower shall fail to observe or perform
any covenant, condition or agreement contained in this Agreement (other than
those specified in clause (a) or (c) of this Section 8.01), and such failure
shall continue unremedied for a period of thirty (30) days after notice thereof
from the Administrative Agent to Borrower;

 

(e)                                  any Credit Party shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable
and after any applicable grace and/or notice period;

 

(f)                                    any event or condition occurs that
results in any Material Indebtedness becoming due prior to its scheduled
maturity or that enables or permits (after giving effect to any applicable grace
period and/or notice period) the holder or holders of any Material Indebtedness
or any trustee or agent on its or their behalf to cause any Material
Indebtedness to become due, or to require the prepayment, repurchase, redemption
or defeasance thereof, prior to its scheduled maturity; provided, that this
clause (f) shall not apply to secured Indebtedness that becomes due as a result
of the voluntary sale, transfer or total loss of the property or assets securing
such Indebtedness or, with respect to any Title XI debt, the United States has
waived such event or condition prior to the commencement by the Administrative
Agent, the Collateral Trustee or the Lenders of any foreclosure actions or
non-judicial remedies;

 

(g)                                 an involuntary proceeding shall be commenced
or an involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of any Credit Party or its debts, or
of a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect
or (ii) the appointment of a

 

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receiver, trustee, custodian, sequestrator, conservator or similar official for
any Credit Party or for a substantial part of its assets, and, in any such case,
such proceeding or petition shall continue undismissed for sixty (60) days or an
order or decree approving or ordering any of the foregoing shall be entered;

 

(h)                                 any Credit Party shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (g) of this Section 8.01, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for Borrower or any Subsidiary or
for a substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;

 

(i)                                     any Credit Party shall become unable,
admit in writing or fail generally to pay its debts as they become due;

 

(j)                                     one or more judgments (excluding only
the covered amounts of insured claims, exclusive of deductibles and excess
liability beyond coverage limits and provided that underwriters have not raised
defenses to coverage) for the payment of money in an aggregate amount in excess
of $1,000,000.00 shall be rendered against any Credit Party or any combination
thereof and the same shall remain undischarged for a period of thirty (30)
consecutive days during which execution shall not be effectively stayed, or any
action shall be legally taken by a judgment creditor to attach or levy upon any
assets of such Credit Party to enforce any such judgment and either
(i) enforcement proceedings shall have been commenced by any creditor upon any
such judgment or order, or (ii) there shall be a period of ten (10) consecutive
days after entry thereof during which a stay of enforcement of any such judgment
or order, by reason of a pending appeal, or otherwise, shall not be in effect;
provided, however, that any such judgment or order shall not give rise to an
Event of Default under this subsection (j) if and for so long as and to the
extent of (A) the amount of such judgment or order is covered by a valid and
binding policy of insurance between the defendant and the insurer covering full
payment thereof, and (B) such insurer has been notified, and has not disputed
the claim for payment, of the amount of such judgment or order;

 

(k)                                  an ERISA Event shall have occurred that, in
the opinion of Required Lenders, when taken together with all other ERISA Events
that have occurred, could reasonably be expected to result in a Material Adverse
Effect;

 

(l)                                     a Change in Control shall have occurred;

 

(m)                               Borrower, K-Sea or any Subsidiary Guarantor is
dissolved or otherwise fails to maintain its existence in good standing, or the
usual business of Borrower ceases or is suspended;

 

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(n)                                 except for specific matters disclosed in
writing to the Lenders prior to the Effective Date, any indictment occurring
after the Effective Date, of Borrower under any criminal statute, including OPA
or any similar Environmental Law, or commencement of criminal proceedings
against Borrower, pursuant to which statute or proceeding the penalties or
remedies sought or available include forfeiture of any of the property of
Borrower and such proceedings shall continue for more than 30 days.  For issues
relating to OPA or similar Environmental Laws, the Lenders agree that an Event
of Default shall not bee deemed to have occurred prior to the date on which
Borrower receives notice thereof from the Administrative Agent;

 

(o)                                 a Mortgage Event of Default shall have
occurred and be continuing under and as defined in the Mortgage;

 

(p)                                 receipt by the Lenders of their first notice
of an oil spill or discharge or a hazardous discharge or an Environmental
Action, in each case of a material nature, from a source other than Borrower,
where the Lenders do not receive notice (which may be given in oral form,
provided that such oral notice is followed with all due dispatch by written
notice given by certified mail, return receipt requested) of such hazardous
discharge or environmental complaint from Borrow within two (2) Business Days of
the time the Lenders first receive said notice from a source other than
Borrower, or action by any federal, state, or local agency to foreclose a lien
upon any or all of the assets, equipment, property, leaseholds or other
facilities of Borrower (including, but not limited to, the Pool Vessels or the
other Collateral) by reason of the occurrence of a hazardous discharge or
environmental complaint;

 

(q)                                 a change occurs in the financial condition
of Borrower or K-Sea which is likely to have a Material Adverse Effect on the
Collateral or Borrower’s ability to perform its obligations hereunder;

 

(r)                                    breach by K-Sea of the Parent Guaranty;

 

(s)                                  breach by any Subsidiary of Borrower of its
Subsidiary Guaranty;

 

(t)                                    any material provision of any Loan
Document after delivery thereof shall for any reason cease to be valid and
binding on or enforceable against any Credit Party which is party to it, or any
such Credit Party shall so state in writing;

 

(u)                                 Borrower grants any security interest in any
of the outstanding Collateral under this Agreement to any Person other than a
Lender, the Administrative Agent or the Collateral Trustee;

 

(v)                                 any Organizational Document of Borrower or
any Guarantor shall be amended, revoked or rescinded in any material way without
the prior written consent of Lenders;

 

(w)                               a proceeding shall have been commenced on
behalf of the United States to effect the forfeiture of any of the Pool Vessels
or any notice shall have been issued on behalf of the United States of the
seizure of any of the Pool Vessels and such forfeiture could reasonably be
expected to have a Material Adverse Effect;

 

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(x)                                   any Credit Party which owns a Pool Vessel
shall lose its status as a citizen of the United States for the purpose of
operating vessels in the coastwise trade in accordance with Section 2 of the
Shipping Act of 1916, as amended; or

 

(y)                                 K-Sea shall at any time fail to maintain its
status as an exempt partnership under section 7704(c) of the Code.

 

Section 8.02                            Remedies.  Upon the occurrence of an
Event of Default, or at any time thereafter during the continuance thereof, the
Administrative Agent (i) shall at the request, or may with the consent, of the
Required Lenders, by notice to Borrower, declare all of the Commitments of each
Lender and of the L/C Issuer to issue Letters of Credit, to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Required Lenders, (A) by notice to Borrower,
declare the Notes, all interest thereon and all other amounts payable under this
Agreement and the other Loan Documents to be forthwith due and payable,
whereupon the Notes, all such interest and all such other amounts shall become
and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by Borrower
and (B) by notice to each party required under the terms of any agreement in
support of which a Standby Letter of Credit is issued, request that all
Obligations under such agreement be declared to be due and payable; provided,
however, in the case of an Event of Default specified in Section 8.01(g) or
8.01(h), (x) the obligation of each Lender to make Loans and of the L/C Issuer
to issue Letters of Credit shall automatically be terminated and (y) the Notes,
all such interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower.

 

In the event that the Loans, all accrued and unpaid interest thereon and all
other amounts owing under the Loan Documents shall have been declared due and
payable pursuant to the provisions of this Section 8.02, (i) the Administrative
Agent and the Collateral Trustee (A) upon the direction of the Required Lenders,
shall proceed to enforce the rights of the holders of the Notes and the
Reimbursement Obligations by suit in equity, action at law and/or other
appropriate proceedings, whether for payment or the specific performance of any
covenant or agreement contained in the Loan Documents and (B) may exercise any
and all rights and remedies provided to the Administrative Agent or the
Collateral Trustee by the Loan Documents and (ii) Borrower shall deposit in the
Cash Collateral Account Cash Collateral in an amount equal to the Letter of
Credit Exposure.  Except as otherwise expressly provided in the Loan Documents,
Borrower expressly waives presentment, demand, protest and all other notices of
any kind in connection with the Loan Documents.  Borrower hereby further
expressly waives and covenants not to assert any appraisement, valuation, stay,
extension, redemption or similar laws, now or at any time hereafter in force
which might delay, prevent or otherwise impede the performance or enforcement of
any Loan Document.

 

Section 8.03                            Lenders’ Cure of Third Party Agreement
Default.  The Administrative Agent (at the instruction of the Lenders) or any
Lender may, at its option, cure any default by Borrower under any agreement with
a third party or pay or bond on appeal any judgment entered against Borrower,
discharge taxes, Liens, security interests or other encumbrances at any time
levied on or existing with respect to the Collateral and pay any amount, incur
any expense or

 

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perform any act which, in such Lender’s sole judgment, is necessary or
appropriate to preserve, protect, insure, maintain, or realize upon the
Collateral.  The Administrative Agent and the Lenders may charge Borrower’s Loan
Account for any amounts so expended, such amounts to be repayable by Borrower on
demand.  Neither the Administrative Agent nor the Lenders shall be under any
obligation to effect such cure, payment, bonding or discharge, and shall not, by
doing so, be deemed to have assumed any obligation or liability of Borrower.

 

ARTICLE IX

THE AGENTS

 

Section 9.01                            Authorization and Action.

 

(a)                                  Each Lender hereby appoints the
Administrative Agent as such and as “Collateral Trustee” under the Mortgages and
authorizes it to take such action as agent and as “Collateral Trustee” on its
behalf and to exercise such powers and discretion under this Agreement and the
other Loan Documents (including the Mortgages) as are delegated to it by the
terms hereof and thereof, together with such powers and discretion as are
reasonably incidental thereto.  KeyBank hereby accepts its appointment as
Administrative Agent and as Collateral Trustee.  The Administrative Agent shall
have no duties or responsibilities except those expressly set forth in this
Agreement and the other Loan Documents and shall not be a fiduciary for any
Lender.

 

(b)                                 As to any matters not expressly provided for
by the Loan Documents (including, without limitation, enforcement or collection
of the Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding upon all Lenders and all holders of Notes and any action taken or
failure to act pursuant thereto shall be binding on all the Lenders; provided,
however, that the Administrative Agent shall not be required to take any action
that exposes the Administrative Agent to personal liability or that is contrary
to this Agreement, any other Loan Document or applicable law and except for
action expressly required by the Administrative Agent hereunder or under the
Loan Documents, the Administrative Agent shall in all cases be fully justified
in failing or refusing to act hereunder or thereunder unless it shall be
indemnified to its satisfaction by the Lenders against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action.

 

Section 9.02                            Agent’s Reliance, Etc.  Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with the Loan Documents, except for its or their own gross
negligence or willful misconduct.  Without limitation of the generality of the
foregoing, the Administrative Agent: (a) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Lender that is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 10.07;
(b) may consult with legal counsel (including counsel for any Credit

 

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Party), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (c)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for recitals, any statements, warranties or representations
(whether written or oral) made in or in connection with the Loan Documents; (d)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of any Loan Document on
the part of any Credit Party or to inspect the property (including the books and
records) of any Credit Party; (e) shall not be responsible to any Lender for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of, or the perfection or priority of any lien or security interest created
or purported to be created under or in connection with, any Loan Document or any
other instrument or document furnished pursuant thereto; (f) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
telecopy or telex) believed by it to be genuine and signed or sent by or on
behalf of the proper party or parties; and (g) may employ agents and
attorneys-in-fact and shall not be answerable for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.

 

Section 9.03                            KeyBank and Affiliates.  With respect to
its Commitment, the Loans made by it and the Note issued to it, KeyBank shall
have the same rights and powers under the Loan Documents as any other Lender and
may exercise the same as though it were not the Administrative Agent; and the
term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include
KeyBank in its individual capacity.  KeyBank and its affiliates may accept
deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from and generally engage in any kind of business
with, any Credit Party, any of its Subsidiaries and any Person who may do
business with or own securities of any Credit Party or any such Subsidiary and
may accept fees and other consideration from the Borrower or its Affiliates, for
services in connection with this Agreement, the other Loan Documents or
otherwise, all as if KeyBank were not the Administrative Agent and without any
duty to account therefor to the Lenders.

 

Section 9.04                            Lender Credit Decision.  Each Lender
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender and based on the financial statements
referred to in Section 4.04 and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement.  Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.

 

Section 9.05                            Indemnification.

 

(a)                                  Each Lender severally agrees to indemnify
the Administrative Agent (to the extent not promptly reimbursed by the Borrower)
from and against such Lender’s ratable share (determined as provided below) of
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature

 

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whatsoever that may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of any of the Loan
Documents or any transaction contemplated hereby and thereby or any action taken
or omitted by the Administrative Agent under any of the Loan Documents;
provided, however, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent resulting from the Administrative
Agent’s gross negligence or willful misconduct.  Without limitation of the
foregoing, each Lender agrees to reimburse the Administrative Agent promptly
upon demand for its ratable share of any costs and expenses (including, without
limitation, fees and expenses of counsel) payable by the Borrower under Section
10.06, to the extent that the Administrative Agent is not promptly reimbursed
for such costs and expenses by the Borrower.

 

(b)                                 Each Lender severally agrees to indemnify
the L/C Issuer (to the extent not promptly reimbursed by the Borrower) from and
against such Lender’s ratable share (determined as provided below) of any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever that
may be imposed on, incurred by, or asserted against the L/C Issuer in any way
relating to or arising out of any of the Loan Documents or any action taken or
omitted by the L/C Issuer under any of the Loan Documents; provided, however,
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the L/C Issuer’s gross negligence or willful
misconduct.  Without limitation of the foregoing, each Lender agrees to
reimburse the L/C Issuer promptly upon demand for its ratable share of any costs
and expenses (including, without limitation, fees and expenses of counsel)
payable by the Borrower under Section 10.06, to the extent that the L/C Issuer
is not promptly reimbursed for such costs and expenses by the Borrower.

 

(c)                                  For purposes of Sections 9.05(a) and
9.05(b), the Lenders’ respective ratable shares of any amount shall be
determined, at any time, according to the sum of (i) the aggregate principal
amount of the Loan outstanding at such time and owing to the Lenders, (ii) their
respective Applicable Percentage of the aggregate Letter of Credit Exposure
outstanding at such time and (iii) their respective unused Commitments at such
time; provided, that the aggregate principal amount of all unreimbursed drawings
under all Letters of Credit owing to the L/C Issuer shall be considered to be
owed to the Lenders ratably in accordance with their respective Commitments.  In
the event that any Lender shall have failed at any time to make available to the
Administrative Agent or the L/C Issuer any amounts payable by such Lender under
Sections 2.06, 2.14(d) or 2.15, such Lender’s Commitment with shall be
considered to be unused for purposes of this Section 9.05 to the extent of the
amount of non-payment.  The failure of any Lender to reimburse the
Administrative Agent or the L/C Issuer, as the case may be, promptly upon demand
for its ratable share of any amount required to be paid by the Lenders to the
Administrative Agent or the L/C Issuer, as the case may be, as provided herein
shall not relieve any other Lender of its obligation hereunder to reimburse the
Administrative Agent or the L/C Issuer, as the case may be, for its ratable
share of such amount, but no Lender shall be responsible for the failure of any
other Lender to reimburse the Administrative Agent or the L/C Issuer, as the
case may be, for such other Lender’s ratable share of such amount.  Without
prejudice to the survival of any other agreements of any Lender hereunder, the
agreement and

 

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obligations of each Lender contained in this Section 9.05 shall survive the
payment in full of principal, interest and all other amounts payable hereunder
and under the other Loan Documents.

 

Section 9.06                            Successor Administrative Agents.  The
Administrative Agent may resign at any time by giving written notice thereof to
the Lenders and Borrower and may be removed at any time with or without cause by
the Required Lenders.  Upon any such resignation or removal, the Required
Lenders shall have the right (subject to the approval of Borrower, such approval
not to be unreasonably withheld or delayed; provided that Borrower shall have no
right of approval if at the applicable time of the proposed appointment any
Event of Default shall have occurred and be continuing) to appoint a successor
Administrative Agent.  If no successor Administrative Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within thirty (30) days after the retiring Administrative Agent’s giving of
notice of resignation or the Required Lenders’ removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be a Lender
which is a commercial bank organized under the laws of the United States or of
any State thereof and having a combined capital and surplus of at least
$250,000,000.  Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent and upon the execution and filing
or recording of such financing statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Required
Lenders may request, in order to continue the perfection of the Liens granted or
purported to be granted by the Loan Documents, such successor Administrative
Agent shall succeed to and become vested with all the rights, powers,
discretion, privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from all of its duties and
obligations under this Agreement and the other Loan Documents.  After any
retiring Administrative Agent’s resignation or removal hereunder as
Administrative Agent, the provisions of this Article IX shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent.  Borrower shall not be responsible for any costs or
expenses arising out of the replacement of the Administrative Agent pursuant to
this Section.

 

Anything contained in this Section 9.06 to the contrary notwithstanding, no
Person may become a successor Administrative Agent or Collateral Trustee under a
Mortgage unless it is a Coastwise Citizen.  The Administrative Agent (and each
successor Administrative Agent upon becoming Administrative Agent) hereby
represents and warrants that it is a Coastwise Citizen and covenants that it
will maintain its status as a Coastwise Citizen.

 

Section 9.07                            Events of Default.  The Administrative
Agent shall not be deemed to have knowledge of the occurrence of a Default
(other than the non-payment of principal of or interest on Loans) unless the
Administrative Agent has received notice from a Lender or Borrower specifying
such Default and stating that such notice is a “Notice of Default”.  In the
event that the Administrative Agent receives such a notice of the occurrence of
a Default, the Administrative Agent shall give notice thereof to the Lenders
(and shall give each Lender notice of each such non-payment).  The
Administrative Agent shall (subject to Section 9.01(b) hereof) take such action
with respect to such Default as shall be directed by the Required Lenders.

 

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Section 9.08                            Payments.

 

(a)                                  A payment by Borrower to the Administrative
Agent hereunder or any of the other Loan Documents for the account of any Lender
shall constitute a payment to such Lender.  The Administrative Agent agrees
promptly to distribute to each Lender such Lender’s pro rata share of payments
received by the Administrative Agent for the account of the Lenders except as
otherwise expressly provided herein or in any of the other Loan Documents.

 

(b)                                 If in the opinion of the Administrative
Agent the distribution of any amount received by it in such capacity hereunder,
under the Notes or under any of the other Loan Documents might involve it in
liability, it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent jurisdiction. 
If a court of competent jurisdiction shall adjudge that any amount received and
distributed by the Administrative Agent is to be repaid, each Person to whom any
such distribution shall have been made shall either repay to the Administrative
Agent its proportionate share of the amount so adjudged to be repaid or shall
pay over the same in such manner and to such Persons as shall be determined by
such court.

 

Section 9.09                            Administrative Agent May File Proofs of
Claim.

 

(a)                                  In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial, administrative or like proceeding or
any assignment for the benefit of creditors relative to Borrower or any of its
Subsidiaries, the Administrative Agent (irrespective of whether the principal of
the Facility or any unpaid reimbursement obligation under any outstanding
Letters of Credit shall then be due and payable as herein expressed or by
declaration or otherwise and irrespective of whether the Administrative Agent
shall have made any demand on Borrower) shall be entitled and empowered, by
intervention in such proceeding, under any such assignment or otherwise:

 

(i)                                     to file and prove a claim for the whole
amount of the principal and interest owing and unpaid in respect of the Facility
or any unpaid reimbursement obligation under any outstanding Letters of Credit
and all other Obligations of Borrower that are owing and unpaid and to file such
other documents as may be necessary or advisable in order to have the claims of
the Lenders and the Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lenders and the
Administrative Agent and their respective agents and counsel and all other
amounts due the Lenders and the Administrative Agent under Sections 2.10 and
10.06) allowed in such proceeding or under any such assignment; and

 

(ii)                                  to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same.

 

(b)                                 Any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such proceeding or
under any such assignment is hereby authorized by each Lender to make such
payments to the Administrative Agent and, in the event that the

 

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Administrative Agent shall consent to the making of such payments directly to
the Lenders, nevertheless to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Sections 2.10 and 10.06.

 

(c)                                  Nothing contained herein shall authorize
the Administrative Agent to consent to or accept or adopt on behalf of any
Lender any plan of reorganization, arrangement, adjustment or composition
affecting the Obligations of Borrower owed to such Lender or the rights of any
Lender or to authorize the Administrative Agent to vote in respect of the claim
of any Lender in any such proceeding or under any such assignment.

 

SECTION 9.10                            AGENTS.

 

None of the banks or other Persons identified on the cover page of this
Agreement or in the preamble to this Agreement as a “syndication agent” or any
similar title shall have any right, power, obligation, liability, responsibility
or duty to any Person under this Agreement, any of the other Loan Documents or
otherwise, other than KeyBank in its capacity as Administrative Agent and
Collateral Trustee under this Agreement and the other Loan Documents and each
Lender in its capacity as a Lender.  Without limiting the foregoing, none of
such banks or other Persons so identified shall have or be deemed to have any
fiduciary relationship with any other such bank or other Person but such banks
or other Persons shall have the benefit of the provisions of Section 9.03.

 

ARTICLE X

MISCELLANEOUS

 

Section 10.01                     Notices.  Except in the case of notices and
other communications expressly permitted to be given by telephone, all notices
and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:

 

(b)                                 if to Borrower, to it at:

 

K-Sea Transportation Partnership L.P.

3245 Richmond Terrace

Staten Island, New York  10303

Attention:  Chief Financial Officer

Telecopier:  (718) 720-4358

 

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with copies to:

 

Baker Botts, L.L.P.

One Shell Plaza

910 Louisiana

Houston, Texas  77002

Attention:  Sean Wheeler, Esq.

Telecopier:  (713) 229-5868

 

and:

 

Holland & Knight, LLP

195 Broadway

New York, New York  10007

Attention:  Christopher G. Kelly, Esq.

Telecopier:  (212) 385-9010

 

and:

 

Jeffries Capital Partners

520 Madison Ave.

New York, New York  10022

Attention:  Brian Friedman

Telecopier:  (212) 284-1717

 

(c)                                  if to Administrative Agent or Collateral
Trustee (including in its capacity as a Lender), to:

 

KeyBank National Association

127 Public Square

Cleveland, Ohio 44114

Attention: KCIB Loan Services

Telecopier:  (216) 689-5962

 

with copies to:

 

KeyBank National Association

575 Fifth Ave.

18th Floor

New York, New York  10017

Attention:  Steven B. Vitale

Telecopier:  (917) 368-2310

 

and

 

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Emmet, Marvin & Martin, LLP

120 Broadway

New York, New York 10271

Attention:  Richard S. Talesnick, Esq.

Telecopier:  (212) 238-3100

 

(d)                                 if to any other Lender, to it at its address
(or telecopy number) set forth in the Register.

 

Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto.  All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.

 

Section 10.02                     Term and Termination.  The initial term of
this Agreement shall be from the date hereof until the fifth Anniversary Date. 
Notwithstanding the foregoing, Administrative Agent at the request of Required
Lenders may terminate this Agreement immediately upon the occurrence of an Event
of Default.  All Obligations shall become due and payable as of any termination
hereunder and, pending a final accounting, Lenders may withhold any balances in
Borrower’s account (unless supplied with an indemnity satisfactory to such
Lender) to cover all of Borrower’s Obligations, whether absolute or contingent. 
All of Lenders’ rights, Liens and security interests shall continue after any
termination until all Obligations have been paid and satisfied in full.

 

Section 10.03                     K-Sea as Agent for Borrower  K-Sea shall be
deemed the agent of Borrower in any matter arising under this Agreement and the
Administrative Agent, the L/C Issuer and the Lenders shall be entitled to rely
on the actions and communication, or lack thereof, of K-Sea as being the actions
or communications or lack thereof of Borrower with respect to this Agreement.

 

Section 10.04                     Discharge of Borrower.  No termination of this
Agreement shall relieve or discharge Borrower of its Obligations, grants of
Collateral, duties and covenants hereunder or otherwise until such time as all
Obligations to the Administrative Agent, the L/C Issuer, the Collateral Trustee
or the Lenders have been indefeasibly paid and satisfied in full, including,
without limitation, the continuation and survival in full force and effect of
all security interests and Liens granted in favor of the Administrative Agent or
the Collateral Trustee in and upon all then existing and thereafter-arising or
acquired Collateral and all warranties and waivers of Borrower.

 

SECTION 10.05                     WAIVERS; AMENDMENTS.

 

(a)                                  No failure or delay by Administrative Agent
or any Lender in exercising any right or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other

 

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right or power.  The rights and remedies of Administrative Agent and the Lenders
hereunder are cumulative and are not exclusive of any rights or remedies that
they would otherwise have.  No waiver of any provision of this Agreement or
consent to any departure by Borrower therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) of this Section, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given.  Without limiting the generality of the foregoing,
the making of a Loan shall not be construed as a waiver of any Default or Event
of Default, regardless of whether Administrative Agent or any Lender may have
had notice or knowledge of such Default at the time.

 

(b)                                 Neither this Agreement nor any provision
hereof may be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by Borrower and the Required Lenders or by
Borrower and the Administrative Agent with the written consent of the Required
Lenders; provided, that no such agreement shall (i) increase the Commitment of
any Lender without the written consent of such Lender, (ii) reduce the principal
amount outstanding of any Loan or reduce the rate of interest (except in
connection with a waiver of the applicability of any post-default increase in
interest rates) thereon, or reduce any fees payable hereunder, without the
written consent of each Lender affected thereby, (iii) change the method of
computing interest or fees under the Loan Documents, without the written consent
of each Lender affected thereby, (iv) postpone the scheduled date of payment of
the principal amount of any Loan, or any interest thereon, or any fees payable
hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender affected thereby, (v) change Section 2.14(b) or 2.14(c)
in a manner that would alter the pro rata sharing of payments required thereby
without the written consent of each Lender, (vi) release any Collateral (except
incidental amounts at the discretion of Administrative Agent or as agreed to
pursuant to this Agreement), (vii) release any Guarantor from its Guarantee, or
limit its liability in respect of such Guarantee, without the written consent of
each Lender or (viii) change any of the provisions of this Section or the
definition of “Required Lenders” or any other provision hereof specifying the
number or percentage of Lenders required to waive, amend or modify any rights
hereunder or make any determination or grant any consent hereunder, without the
written consent of each Lender; and, provided, further, that no such agreement
shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent or the L/C Issuer hereunder without the prior written
consent of the Administrative Agent or the L/C Issuer, as the case may be.

 

SECTION 10.06                     EXPENSES; INDEMNITY; DAMAGE WAIVER.

 

(a)                                  Borrower shall pay (i) all reasonable
itemized out-of-pocket expenses incurred by the Administrative Agent and the
Collateral Trustee and their respective Affiliates, including, without
limitation, the reasonable fees, charges and disbursements of counsel for the
Administrative Agent and the Collateral Trustee, filing fees, search fees,
appraisal fees, recording fees, field examinations, syndication expenses, travel
costs and other fees and expenses in connection with any initial syndication of
the credit facilities provided for herein, the preparation and administration of
this Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), provided, that Borrower shall receive
an

 

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accounting of such fees, expenses, charges and disbursements, and (ii) all
out-of-pocket expenses incurred by the Administrative Agent, the Collateral
Trustee or any Lender, including the reasonable fees, charges and disbursements
of any counsel for the Administrative Agent, the Collateral Trustee or any
Lender (acting under common counsel), in connection with the enforcement or
protection of its rights in connection with this Agreement, including its rights
under this Section, or in connection with the Loans made hereunder, including in
connection with any workout, restructuring or negotiations in respect thereof.

 

(b)                                 Borrower shall indemnify the Administrative
Agent, the Collateral Trustee, the L/C Issuer and each Lender, and each Related
Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including the fees,
charges and disbursements of any counsel for any Indemnitee (but excluding
Taxes, it being understood and agreed that Section 2.13 hereof sets forth
Borrower’s indemnity obligations with respect to Taxes), incurred by or asserted
against any Indemnitee arising out of, in connection with, or as a result of
(i) the execution or delivery of this Agreement or any agreement or instrument
contemplated hereby, the performance by the parties hereto of their respective
obligations hereunder or the consummation of this Agreement or any other
transactions contemplated hereby, (ii) any Loan or the use of the proceeds
therefrom, (iii) the failure of the Administrative Agent or the L/C Issuer
seeking indemnification or of the L/C Issuer to honor a demand for payment under
any Letter of Credit or guaranty thereof as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or Governmental Authority, in each case other than to the extent
solely as a result of the gross negligence or willful misconduct of the
Administrative Agent or the L/C Issuer (as finally determined by a court of
competent jurisdiction), (iv) any actual or alleged presence or release of
Hazardous Materials on or from any property owned or operated by Borrower or any
of its Subsidiaries, or any Environmental Liability related in any way to
Borrower or any of its Subsidiaries, or (v) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided, that such indemnity shall not, as
to any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.

 

(c)                                  To the extent that Borrower fails to pay
any amount required to be paid by it to the Administrative Agent, the Collateral
Trustee or the L/C Issuer under paragraph (a) or (b) of this Section, each
Lender severally agrees to pay to the Administrative Agent, the Collateral
Trustee or the L/C Issuer, as the case may be, such Lender’s Applicable
Percentage (determined as of the time that the applicable unreimbursed expense
or indemnity payment is sought) of such unpaid amount; provided, that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent, the Collateral Trustee or the L/C Issuer, as the case may
be, in its capacity as such.

 

(d)                                 To the extent permitted by Applicable Law,
Borrower shall not assert, and hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect,

 

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consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the Transactions, any Loan, any
Letter of Credit or the use of the proceeds thereof.

 

(e)                                  All amounts due under this Section shall be
payable promptly after written demand therefor.  All amounts due under paragraph
(a)(i) of this Section that are not paid prior to the Effective Date shall be
due and payable in full on the Effective Date.

 

(f)                                    The indemnitees herein in this Section
10.06 set forth are in addition to the obligations of Borrower to pay
indemnification on account of Taxes and Other Taxes, as provided in Section 2.13
hereof.

 

SECTION 10.07                     SUCCESSORS AND ASSIGNS.

 

(a)                                  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that Borrower may not assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent of the Administrative Agent, the L/C Issuer and each Lender (and
any attempted assignment or transfer by Borrower without such consent shall be
null and void).  Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent,
the Collateral Trustee and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.

 

(b)                                 Any Lender may assign to one or more
assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans at the time owing to
it); provided, that (i) except in the case of an assignment to a Lender or a
Lender Affiliate, each of Borrower and the Administrative Agent must give its
prior written consent to such assignment (which consent shall not be
unreasonably withheld), (ii) except in the case of an assignment to a Lender or
a Lender Affiliate or an assignment of the entire remaining amount of the
assigning Lender’s Commitment, the amount of the Commitment of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000.00 and the amount of the
assigning Lender’s Commitment shall not be less than $5,000,000.00 after the
effectiveness of such assignments, unless each of Borrower and the
Administrative Agent otherwise consent, (iii) each partial assignment shall be
made as an assignment of a proportionate part of all the assigning Lender’s
rights and obligations under this Agreement, and (iv) the parties to each
assignment shall execute and deliver to the Administrative Agent an Assignment
and Acceptance, together with a processing and recordation fee of $3,500.00;
provided, further, that any consent of Borrower otherwise required under this
paragraph shall not be required if an Event of Default has occurred and is
continuing.  Upon acceptance and recording pursuant to paragraph (d) of this
Section, from and after the effective date specified in each Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to the extent
of the interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement, and the

 

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assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.11, 2.12, 2.13 and 10.06 hereof), provided, however, no
assignee shall be entitled to receive any greater payment under Section 2.11,
2.13 or 10.06(b) hereof than the assigning Lender would have been entitled to
receive with respect to the interest assigned to such assignee, unless the
assignment to such assignee is made with Borrower’s prior written consent, in
which Borrower expressly waives such limitation.  Any assignment or transfer by
a Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.

 

(c)                                  The Administrative Agent, acting for this
purpose as an agent of Borrower, shall maintain at one of its offices in The
City of New York a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitment of, and principal amount of the Loans owing to, each Lender pursuant
to the terms hereof from time to time (the “Register”).  The entries in the
Register shall be conclusive, and Borrower, the Administrative Agent and the
Lenders may treat each Person whose name is recorded in the Register pursuant to
the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary.

 

(d)                                 Upon its receipt of a duly completed
Assignment and Acceptance executed by an assigning Lender and an assignee, the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Acceptance
and record the information contained therein in the Register.  No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this paragraph.

 

(e)                                  Any Lender may, without the consent of
Borrower or the Administrative Agent, sell participations to one or more banks
or other entities (a “Participant”) in all or a portion of such Lender’s rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided, that (i) such Lender’s
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, and (iii) Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement.  Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided, that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to
Section 10.05(b) hereof that affects such Participant.  Subject to paragraph (f)
of this Section, Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.11, 2.12 and 2.13 hereof to the same

 

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extent as if it were a Lender and had acquired its interest by assignment
pursuant to paragraph (b) of this Section.

 

(f)                                    A Participant shall not be entitled to
receive any greater payment under Section 2.11 or 2.13 hereof than the
applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with Borrower’s prior written consent, in which
Borrower expressly waives such limitation.  A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 2.13 unless Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of Borrower, to comply
with Section 2.13(d) as though it were a Lender.  So long as a Participant
agrees, such Participant shall be bound by Section 2.17 as if it were a Lender
in each case thereunder.

 

(g)                                 Any Lender may at any time pledge or assign
a security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any such pledge or assignment to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided, that no such pledge or assignment
of a security interest shall release a Lender from any of its obligations
hereunder or substitute any such assignee for such Lender as a party hereto.

 

Section 10.08                     Survival. All covenants, agreements,
representations and warranties made by Borrower herein and in the certificates
or other instruments delivered in connection with or pursuant to this Agreement
shall be considered to have been relied upon by the other parties hereto and
shall survive the execution and delivery of this Agreement and the making of any
Loans, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Administrative Agent or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid and so long as the Commitments have not expired or terminated.  The
provisions of Sections 2.11, 2.12, 2.13 and 10.06 and Article IX hereof shall
survive and remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the repayment of the Loans, the expiration
or termination of the Commitments or the termination of this Agreement or any
provision hereof.

 

Section 10.09                     Counterparts; Integration; Effectiveness. 
This Agreement may be executed in counterparts (and by different parties hereto
on different counterparts), each of which shall constitute an original, but all
of which when taken together shall constitute a single contract.  This Agreement
and any separate letter agreements with respect to fees payable to the
Administrative Agent or any Lender constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.  Except as provided in Section 5.01 hereof, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. 

 

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Delivery of an executed counterpart of a signature page of this Agreement by
telecopy shall be effective as delivery of a manually executed counterpart of
this Agreement.

 

Section 10.10                     Severability.  Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

 

Section 10.11                     Right of Set-off.  If an Event of Default
shall have occurred and be continuing, each Lender is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender to or for the credit or the account of Borrower against any of and all
the obligations of Borrower now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured.  The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of set-off) which such Lender may have.

 

SECTION 10.12                     GOVERNING LAW; JURISDICTION; CONSENT TO
SERVICE OF PROCESS.

 

(a)                                  This Agreement shall be construed in
accordance with and governed by the law of the State of New York.

 

(b)                                 Borrower hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court.  Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this Agreement shall affect any right that the
Administrative Agent or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement against Borrower or its properties in the
courts of any jurisdiction.

 

(c)                                  Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any court referred to in paragraph (b) of this Section.  Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

 

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(d)                                 Each party to this Agreement irrevocably
consents to service of process in the manner provided for notices in
Section 10.01 hereof.  Nothing in this Agreement will affect the right of any
party to this Agreement to serve process in any other manner permitted by law.

 

Section 10.13                     WAIVER OF JURY TRIAL.  EACH PARTY HERETO
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

 

Section 10.14                     Headings.  Article and Section headings and
the Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.

 

Section 10.15                     Confidentiality.  Each of the Administrative
Agent, the Collateral Trustee and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates’ directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent  required by Applicable Laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or the enforcement of rights
hereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement (provided, that, in the case of an assignee or Participant,
or prospective assignee or Participant, which is a competitor of Borrower, the
prior written consent of Borrower shall be required, which consent shall not be
unreasonably withheld, prior to disclosing the Information thereto), (g) with
the consent of Borrower or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or
(ii) becomes available to the Administrative Agent, the Collateral Trustee or
any Lender on a nonconfidential basis from a source other than Borrower.  For
the purposes of this Section, “Information” means all information received from
Borrower relating to Borrower or its business, other than any such information
that is available to the Administrative Agent, the Collateral Trustee or any
Lender on a nonconfidential basis prior to disclosure by Borrower; provided,
that, in the case of information received from Borrower after the date hereof,
such information is clearly identified at the time of delivery as confidential. 
Any Person required to maintain the confidentiality of Information as provided
in this Section shall be considered to

 

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have complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

 

Section 10.16                     Interest Rate Limitation.  Notwithstanding
anything herein to the contrary, if at any time the Interest Rate applicable to
any Loan, together with all fees, charges and other amounts which are treated as
interest on such Loan under Applicable Law (collectively the “Charges”), shall
exceed the maximum lawful rate (the “Maximum Rate”), if any, which may be
contracted for, charged, taken, received or reserved by the Lender holding such
Loan in accordance with Applicable Law, the rate of interest payable in respect
of such Loan hereunder, together with all Charges payable in respect thereof,
shall be limited to the Maximum Rate and, to the extent lawful, the interest and
Charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section shall be cumulated and the
interest and Charges payable to such Lender in respect of other Loans or periods
shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender.

 

Section 10.17                     Further Assurances.  At the request of the
Administrative Agent or the Lenders, at any time and from time to time, at
Borrower’s sole expense, Borrower shall execute and deliver or cause to be
executed and delivered to the Administrative Agent, such agreements, documents
and instruments, including waivers, consents and subordination agreements from
mortgagees or other holders of security interests or Liens, landlords or
bailees, and do or cause to be done such further acts as the Administrative
Agent, in its reasonable discretion, deems necessary or desirable to create,
preserve, perfect or validate any security interest of the Administrative Agent
or the Collateral Trustee or the priority thereof in the Collateral and
otherwise to effectuate the provisions and purposes of this Agreement.  Borrower
hereby authorizes the Administrative Agent to file financing statements or
amendments against Borrower in favor of the Administrative Agent with respect to
the Collateral, without Borrower’s signature, and to file as financing
statements any carbon, photographic or other reproductions of this Agreement or
any financing statements, signed by Borrower.  Borrower hereby ratifies and
confirms any financing statements heretofore filed by the Administrative Agent
with respect to the Collateral.

 

SECTION 10.18                     JUDGMENT CURRENCY.     EACH CREDIT PARTY’S
OBLIGATION HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS TO MAKE PAYMENT IN
DOLLARS, OR IN THE CASE OF LETTERS OF CREDIT, THE APPLICABLE ALTERNATIVE
CURRENCY (IN EACH CASE, THE “OBLIGATION CURRENCY”) SHALL NOT BE DISCHARGED OR
SATISFIED BY TENDER OR RECOVERY PURSUANT TO ANY JUDGMENT EXPRESSED IN OR
CONVERTED INTO ANY CURRENCY OTHER THAN THE OBLIGATION CURRENCY, EXCEPT TO THE
EXTENT THAT SUCH TENDER OR RECOVERY RESULTS IN THE EFFECTIVE RECEIPT BY THE
ADMINISTRATIVE AGENT, THE L/C ISSUER OR THE RESPECTIVE LENDER OF THE FULL AMOUNT
OF THE OBLIGATION CURRENCY EXPRESSED TO BE PAYABLE TO THE ADMINISTRATIVE AGENT,
THE L/C ISSUER OR SUCH LENDER UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. 
IF FOR THE PURPOSE OF OBTAINING OR ENFORCING JUDGMENT AGAINST ANY CREDIT PARTY
IN ANY COURT IN ANY JURISDICTION, IT BECOMES NECESSARY TO CONVERT INTO OR FROM
ANY CURRENCY OTHER THAN THE OBLIGATION CURRENCY (SUCH OTHER CURRENCY BEING
HEREINAFTER REFERRED TO AS THE “JUDGMENT CURRENCY”) AN AMOUNT DUE IN THE
OBLIGATION CURRENCY, THE CONVERSION SHALL BE

 

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MADE AT THE DOLLAR EQUIVALENT.  FOR PURPOSES OF DETERMINING THE DOLLAR
EQUIVALENT FOR THIS SECTION 10.18, SUCH AMOUNTS SHALL INCLUDE ANY PREMIUM AND
COSTS PAYABLE IN CONNECTION WITH THE PURCHASE OF THE OBLIGATION CURRENCY.

 

SECTION 10.19                     USA PATRIOT ACT NOTICE.    EACH OF THE
ADMINISTRATIVE AGENT AND EACH LENDER HEREBY NOTIFIES BORROWER THAT, PURSUANT TO
THE REQUIREMENTS OF THE USA PATRIOT ACT (TITLE III OF PUB. L. 107-56 (SIGNED
INTO LAW OCTOBER 26, 2001)) (THE “PATRIOT ACT”), IT IS REQUIRED TO OBTAIN,
VERIFY AND RECORD INFORMATION THAT IDENTIFIES BORROWER, WHICH INFORMATION
INCLUDES THE NAME AND ADDRESS OF BORROWER AND OTHER INFORMATION THAT WILL ALLOW
THE ADMINISTRATIVE AGENT AND SUCH LENDER TO IDENTIFY BORROWER IN ACCORDANCE WITH
THE PATRIOT ACT.

 

[Signature page follows]

 

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

 

 

K-SEA OPERATING PARTNERSHIP

 

L.P., by its general partner K-Sea OLP

 

GP, LLC, as Borrower

 

 

 

By:

/s/ John J. Nicola

 

 

Name:

John J. Nicola

 

Title:

Chief Financial Officer

 

 

 

KEYBANK NATIONAL ASSOCIATION,

 

for itself as Lender, and as Administrative

 

Agent and as Collateral Trustee

 

 

 

By:

/s/ Steven B. Vitale

 

 

Name:

Steven B. Vitale

 

Title:

Vice President

 

 

K-Sea Loan and Security Agreement Signature Page

 

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

 

 

LASALLE BANK NATIONAL ASSOCIATION,

 

as Syndication Agent and Lender

 

 

 

 

 

By:

/s/ Kathleen L. Ross

 

 

Name: Kathleen L. Ross

 

Title: Senior Vice President

 

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

 

 

CITIZENS BANK OF PENNSYLVANIA

 

 

 

 

 

By:

/s/ Devon L. Starks

 

 

Name: Devon L. Starks

 

Title: Vice President

 

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EXHIBIT A

FORM OF NOTE

$

 

March     , 2005

 

 

New York, New York

 

FOR VALUE RECEIVED, the undersigned, K-SEA OPERATING PARTNERSHIP L.P., a
Delaware limited partnership (“Borrower”), hereby promises to pay to the order
of                                                        (the “Lender”)
                    DOLLARS ($) or if less, the unpaid principal amount of the
Loans made by the Lender to Borrower, in the amounts and at the times set forth
in the Loan and Security Agreement, dated as of March __, 2005 (as the same may
be amended, supplemented or otherwise modified from time to time, the “Loan
Agreement”), among Borrower, the Lenders party thereto, and KeyBank National
Association, as Administrative Agent and Collateral Trustee, and to pay interest
from the date hereof on the principal balance of such Loans from time to time
outstanding at the rate or rates and at the times set forth in the Loan
Agreement, in each case at the office of the Administrative Agent located at 127
Public Square, Cleveland, Ohio 44114, Attn. KCIB Loan Services, or at such other
place as the Administrative Agent may specify from time to time, in lawful money
of the United States of America in immediately available funds. Terms defined in
the Loan Agreement are used herein with the same meanings.

The Loans evidenced by this Note are prepayable in the amounts, and under the
circumstances, and their respective maturities are subject to acceleration upon
the terms, set forth in the Loan Agreement. This Note is subject to, and should
be construed in accordance with, the provisions of the Loan Agreement and is
entitled to the benefits and security set forth in the Loan Documents.

The Lender is hereby authorized to record on the schedule annexed hereto, and
any continuation sheets which the Lender may attach hereto, (a) the date of each
Loan made by the Lender, (b) whether such Loan is a Base Rate Loan or a LIBOR
Loan and amount thereof, (c) the interest rate (without regard to the Applicable
Margin) and Interest Period applicable to each LIBOR Loan and (d) the date and
amount of each conversion of, and each payment or prepayment of the principal
of, any such Loan. The entries made in such schedule shall be prima facie
evidence of the existence and amounts of the obligations recorded therein,
provided that the failure to so record or any error therein shall not in any
manner affect the obligation of Borrower to repay the Loans in accordance with
the terms of the Loan Agreement.

Except as specifically otherwise provided in the Loan Agreement, Borrower hereby
waives presentment, demand, notice of dishonor, protest, notice of protest and
all other demands, protests and notices in connection with the execution,
delivery, performance, collection and enforcement of this Note.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.

 

K-SEA OPERATING PARTNERSHIP L.P., by its general partner K-Sea OLP GP, LLC, as
Borrower

 

 

 

By:

 

 

Name:

John J. Nicola

 

Title:

Chief Financial Officer

 

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

 

SCHEDULE TO NOTE

 

Date

 

Type of Loan

 

Amount of Loan

 

Amount of principal converted, paid or prepaid

 

Interest rate on LIBOR Loans

 

Interest Period for LIBOR Loans

 

Notation made by

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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EXHIBIT B

FORM OF ASSIGNMENT AND ACCEPTANCE

Reference is made to the Loan and Security Agreement, dated as of March    ,
2005 (as amended, restated, supplemented or otherwise modified from time to time
and in effect on the date hereof, the “Loan Agreement”), among K-Sea Operating
Partnership L.P., as Borrower, the Lenders named therein and KeyBank National
Association, as Administrative Agent and Collateral Trustee. Terms defined in
the Loan Agreement are used herein with the same meanings.

The Assignor named below hereby sells and assigns, without recourse, to the
Assignee named below, and the Assignee hereby purchases and assumes, without
recourse, from the Assignor, effective as of the Assignment Date, the interests
set forth below (the “Assigned Interest”) in the Assignor’s rights and
obligations under the Loan Agreement, including, without limitation, the
interests set forth below in [the Commitment of the Assignor on the Assignment
Date and the Loans owing to the Assignor that are outstanding on the Assignment
Date](1), but excluding accrued interest and fees to and excluding the
Assignment Date. The Assignee hereby acknowledges receipt of a copy of the Loan
Agreement. From and after the Assignment Date, (a) the Assignee shall be a party
to and be bound by the provisions of the Loan Agreement and, to the extent of
the Assigned Interest, have the rights and obligations of a Lender under the
Loan Documents and (b) the Assignor shall, to the extent of the Assigned
Interest, relinquish its rights and be released from its obligations under the
Loan Documents.

This Assignment and Acceptance is being delivered to the Administrative Agent,
together with (a) if the Assignee is a Foreign Lender, any documentation
required to be delivered by the Assignee pursuant to Section 2.13(d) of the Loan
Agreement, duly completed and executed by the Assignee, and (b) if the Assignee
is not already a Lender under the Loan Agreement, an administrative
questionnaire in the form supplied by the Administrative Agent, duly completed
by the Assignee. The [Assignee/Assignor](2) shall pay the fee payable to the
Administrative Agent pursuant to Section 10.07(b) of the Loan Agreement.

THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.

Date of Assignment:

Legal Name of Assignor:

Legal Name of Assignee:

Assignee’s Address for Notices:

Effective Date of
Assignment (the “Assignment Date”):

[Commitment Assigned:

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

Delete inapplicable term(s).

Delete inapplicable term(s).

 

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

 

Principal Amount of Loans Assigned: ](3)

The terms set forth above are hereby agreed to:

 

 

[Name of Assignor], as Assignor

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

[Name of Assignee], as Assignee

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

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

Delete inapplicable term(s).

 

4

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

 

The undersigned hereby consents to the within assignment:(4)

K-SEA OPERATING PARTNERSHIP L.P., by its general partner K-Sea OLP GP, LLC, as
Borrower

 

KEYBANK NATIONAL ASSOCIATION, as Administrative Agent

 

 

 

 

 

 

By:

 

 

By:

 

Name:

John J. Nicola

Name:

 

Title:

Chief Financial Officer

Title:

 

 

 

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

Consents to be included to the extent required by Section 10.07(b) of the Loan
Agreement.

 

5

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EXHIBIT C

H&K Draft
3/21/05

 

March    , 2005

 

 

To the parties listed in Schedule A hereto

 

Re: March    , 2005

Loan and Security Agreement -
K-Sea Operating Partnership, L.P.
Our file: 074733-11

 

Ladies and Gentlemen:

We have acted as special counsel to K-Sea Operating Partnership, L.P. (the
“Borrower”), a Delaware limited partnership, K-Sea Transportation Partners L.P.
(the “Parent”), a Delaware limited partnership, and K-Sea Transportation Inc.
(the “Subsidiary Guarantor”), a Delaware corporation, in connection with the
Loan and Security Agreement, dated as of March    , 2005 (the “Loan Agreement”),
among the Borrower and KeyBank National Association, as administrative agent and
collateral trustee and Lenders named therein (the “Lenders”) pursuant to which
the Lenders have agreed to provide the Borrower with loan facilities in the
aggregate amount of $80,000,000. Terms used herein in capitalized form not
otherwise defined herein are used with the same meanings as in the Loan
Agreement.

In connection with the opinions hereinafter set forth, we have examined
originals, or copies certified or otherwise identified to our satisfaction, of
the Loan Agreement, the Note, the Parent Guaranty executed and delivered by the
Parent, the Subsidiary Guaranty executed and delivered the Subsidiary Guarantor,
the Earnings Assignment, the Assignment of Insurances, the Mortgage and the
UCC-1 financing statements, attached hereto as Exhibit A (the “Financing
Statements”) (together, the “Transaction Documents”). We have made such
independent inquiry into the law and the facts as we have deemed necessary or
appropriate for the purposes of this opinion. When in our professional opinion
we deemed it appropriate, we have relied upon affidavits and certificates of
corporate and partnership officers and government officials as to the existence
of underlying facts.

In expressing this opinion, please note that we are admitted to practice only in
the State of New York, and we do not purport to be experts on the law of any
jurisdiction other than the laws of the State of New York and the Federal laws
of the United States. We are not licensed to practice law in the State of
Delaware, and insofar as the laws of the State of Delaware are

 

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

 

concerned, we have relied on Delaware legal materials available to us. In
rendering our opinion as to the valid existence in good standing of the
Borrower, the Parent and the Subsidiary Guarantor, we have relied solely on
Certificates of Good Standing issued by the Secretary of State of the State of
Delaware, all of which have been furnished to you.

This opinion is also limited in the following respects:

(a) any opinion concerning the legality, validity and binding effect of any
agreement or instrument with respect to the Borrower, the Parent and the
Subsidiary Guarantor is based on the assumption that such agreement constitutes
or will constitute a legal, valid and binding agreement of the other parties
thereto; (b) with respect to any opinion pertaining to the enforceability of any
Transaction Document or other agreement or instrument, no opinion is expressed
as to the availability of any specific remedy in an action of an equitable
nature that any court, other governmental authority or arbitrator may grant,
impose or render; (c) we have assumed the genuineness of all signatures, except
those of the Borrower, the Parent and the Subsidiary Guarantor, and the
authenticity of all instruments submitted to us as originals and the conformity
with the originals of all instruments submitted to us as copies, facsimiles or
conformed copies; and (d) this opinion is limited, as to the enforceability of
any Transaction Document or other agreement or instrument, by applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance, or
other similar laws of general application relating to or affecting the
enforceability of creditors’ rights from time to time in effect.

Based upon and subject to the foregoing, we are of the opinion that:

1.             Each of the Borrower and the Parent is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
Delaware; the Subsidiary Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
the Borrower, the Parent and the Subsidiary Guarantor possesses all the
requisite authority and power to execute, deliver and comply with the terms of
the Transaction Documents to which it is a party. The Transaction Documents have
been duly authorized and approved by all necessary action.

2.             The Borrower has the legal power and authority to own and operate
the Pool Vessels in the respective trades in which they are proposed to be
operated.

3.             Each of the Borrower, the Parent and the Subsidiary Guarantor has
full power and authority under any New York or United States federal shipping or
admiralty statute, law or governmental regulation, to enter into and carry out
the terms of the Transaction Documents to which it is a party.

4.             The execution and delivery of, and performance of its respective
obligations under each of the Transaction Documents to which each of the
Borrower, the Parent and the Subsidiary Guarantor is a party will not conflict
with, or result in a breach of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of the Borrower, the Parent, or
the Subsidiary Guarantor pursuant to the terms of, any indenture, mortgage, deed
of trust, loan agreement or

 

2

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

 

other agreement or instrument known to us to which any is a party or by which
any is bound or to which any of the property or assets of any is subject, nor
will such action result in a violation of the provisions of the Agreement of
Limited Partnership or the Certificate of Incorporation, as the case may be, of
the Borrower, the Parent and the Subsidiary Guarantor or any New York or United
States federal shipping or admiralty statute or any order, rule or regulation of
any court or governmental agency or body of which we have knowledge having
jurisdiction over the Borrower, the Parent and the Subsidiary Guarantor or any
of the respective properties of each.

5.             Each of the Transaction Documents to which the Borrower, the
Parent or the Subsidiary Guarantor is a party has been duly authorized by the
Borrower, the Parent and the Subsidiary Guarantor, as the case may be, and each
of the Transaction Documents has been duly executed and delivered and
constitutes the legal, valid and binding obligation of the Borrower, the Parent
and the Subsidiary Guarantor, enforceable against the Borrower, the Parent and
the Subsidiary Guarantor, according to its terms.

6.             Each of the Pool Vessels listed on Schedule 1.01 of the Loan
Agreement is duly documented in the name of the Borrower as owner thereof under
the laws and flag of the United States of America, free of any liens or
encumbrances of record other than the Mortgage and with a coastwise trade
endorsement under and pursuant to the laws of the United States with the
National Vessel Documentation Office of the United States Coast Guard at Falling
Waters, West Virginia (“NVDC”).

7.             The Mortgage has been filed for recording on the date hereof at
the NVDC. Upon its recording and with effect from the date and time of filing,
the Mortgage will constitute a “preferred mortgage” within the meaning of
Section 31301 of Title 46 of the United States Code and the [Collateral Trustee]
will have a legal, valid and continuing first preferred mortgage, which
constitutes a preferred maritime lien on the Pool Vessels within the meaning of
Chapter 313 of Title 46 of the United States Code. All taxes, fees and other
charges in connection with the documentation of the Pool Vessels with vessel
documents endorsed for the coastwise trade and the filing of the Mortgage have
been duly paid. No other filing, recording, re-filing or re-recording or other
action is required to create, perfect and maintain the Mortgage as a “preferred
mortgage” within the meaning of Section 31301 of Title 46 of the United States
Code.

8.             To the best of our knowledge, after due inquiry, no consent,
approval, authorization, order, registration or qualification of or with, or
notice to, any court or any governmental agency or body, of which we have
knowledge, is required for consummation by each of the Borrower, the Parent and
the Subsidiary Guarantor of the transactions contemplated by the Transaction
Documents to which it respectively is a party, except in connection with the
recording of the Mortgage as described above.

9.             To the best of our knowledge, after due inquiry, there is no
action, suit, proceeding or investigation pending before any court,
administrative agency, arbitrator or governmental body against any of the
Borrower, the Parent or the Subsidiary Guarantor that concerns the execution,
delivery and performance of the Transaction Documents.

 

3

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

 

10.           Under the Uniform Commercial Code (“UCC”) of the State of New
York, the filing of the Financing Statements (on Form UCC 1) with the Secretary
of State of the State of Delaware, showing the Administrative Agent as secured
party and the Borrower as debtor, will be sufficient to perfect the security
interest in charter hire, freight and earnings with respect to the Pool Vessels
created by the Earnings Assignments to the extent that a security interest in
charter hire, freight and earnings created thereby may be perfected by means of
the filing of financing statements in the State of Delaware, and the filing of
such appropriate financing statements has been made. No other filing or periodic
re-filing or re-recording of financing statements is currently required under
the UCC as in effect in the State of New York in order to continue the
perfection of such security interest, except that continuation statements must
be filed with the Secretary of State of the State of Delaware within six months
prior to the expiration of the five year period following the date of the filing
of the original financing statements, and subsequent continuation statements
must be filed within six months prior to the expiration of each subsequent five
year period, if any.

We assume no obligation to supplement this opinion if any applicable law changes
after the date hereof or if we become aware after the date hereof of any facts
that might change the opinions expressed herein.

This opinion is issued solely for the benefit of the addressees hereof and may
not be relied upon or used for any other purposes by any person or entity
without our prior written consent, except that Emmet, Marvin & Martin may rely
on the opinions contained herein in issuing their legal opinion to the Lenders.

 

 

 

Very truly yours,

 

 

 

4

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SCHEDULE A

 

 

KeyBank National Association

  as Lender, Administrative Agent

  and Collateral Trustee

575 Fifth Avenue, 18th Floor

New York, NY 10017

 

 

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

 

EXHIBIT D

[Form of Standby Letter of Credit]

 

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

 

EXHIBIT E

[Form of Application for Documentary Letter of Credit]

 

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EXHIBIT F

FORM OF LOAN REQUEST

 

                              , 200

KeyBank National Association,

 as Administrative Agent

127 Public Square

Cleveland, Ohio 44114

Attention: KCIB Loan Services

Ladies and Gentlemen:

Reference is made to the Loan and Security Agreement, dated as of March    ,
2005 (as the same may be amended, supplemented or otherwise modified from time
to time, the “Loan Agreement”), by and among K-SEA OPERATING PARTNERSHIP L.P., a
Delaware limited partnership (“Borrower”), the Lenders from time to time party
thereto and KEYBANK NATIONAL ASSOCIATION, as Administrative Agent (in such
capacity, the “Administrative Agent”) and Collateral Trustee. Capitalized terms
used herein which are not defined herein are used as defined in the Loan
Agreement.

1.             Pursuant to Section 2.05 of the Loan Agreement, Borrower hereby
gives notice of its intention to borrow Loans in an aggregate principal amount
of $                    on                            , 200   (the “Borrowing
Date”), which borrowing shall consist of the following Loans:

Type of Loan (LIBOR Or Base Rate Loan)

 

Amount

 

Initial Interest
Period for LIBOR
Loans

 

                 Loan

 

$

 

 

    months

 

                 Loan

 

$

 

 

    months

 

                 Loan

 

$

 

 

    months

 

 

2.             The location and account to which funds are to be disbursed is
the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

3.             Such Loans shall be used for [working capital]/[vessel
acquisition or capacity expansion] purposes.

4.             Borrower hereby certifies that on the date hereof and on the
Borrowing Date set forth above, and after giving effect to the Loans requested
hereby, (i) no Default has or shall have occurred and be continuing; (ii) the
representations and warranties contained in the Loan Documents are and shall be
true and correct in all material respects, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall have been true and correct in all
material respects on and as of such earlier date and (iii) the aggregate
Revolving Credit Exposure of all Lenders has and shall not exceed the lesser of
the Borrowing Base and the aggregate Commitments of all Lenders.

IN WITNESS WHEREOF, Borrower has duly executed this Loan Request as of the date
and year first written above.

 

K-SEA OPERATING PARTNERSHIP L.P., by its general partner K-Sea OLP GP, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

2

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EXHIBIT G

FORM OF CREDIT REQUEST

 

                             , 200 

KeyBank National Association,

  as Administrative Agent

127 Public Square

Cleveland, Ohio 44114

Attention: KCIB Loan Services

Ladies and Gentlemen:

Reference is made to the Loan and Security Agreement, dated as of March     ,
2005 (as the same may be amended, supplemented or otherwise modified from time
to time, the “Loan Agreement”), by and among K-SEA OPERATING PARTNERSHIP L.P., a
Delaware limited partnership (“Borrower”), the Lenders from time to time party
thereto and KEYBANK NATIONAL ASSOCIATION, as Administrative Agent (in such
capacity, the “Administrative Agent”) and Collateral Trustee. Capitalized terms
used herein which are not defined herein are used as defined in the Loan
Agreement.

5.             Pursuant to Section 2.15 of the Loan Agreement, Borrower hereby
gives notice of its request for L/C Issuer to issue on                         ,
200   (the “Issuance Date”) for Borrower’s account a Letter of Credit described
below:

(A)           THE BENEFICIARY OF SUCH LETTER OF CREDIT SHALL BE
                     ;

(B)           THE PROPOSED CONDITIONS UNDER WHICH A DRAWING UNDER SUCH LETTER OF
CREDIT MAY BE MADE ARE                  ;

(C)           THE MAXIMUM AMOUNT AVAILABLE FOR DRAWING UNDER SUCH LETTER OF
CREDIT SHALL BE                                ;

(D)           SUCH LETTER OF CREDIT SHALL BE DENOMINATED IN
                                           (5); AND

(E)           THE EXPIRATION DATE OF SUCH LETTER OF CREDIT SHALL BE
                       .

6.             Attached hereto [are (a) to the extent not previously delivered
to the Administrative Agent, copies of all agreements between Borrower and the
beneficiary of such Standby Letter of

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

(5)          Dollars or an Alternative Currency then made available by the
Administrative Agent and the L/C Issuer.

 

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

 

Credit pertaining to the issuance of such Standby Letter of Credit and (b) a
copy of the form of a Standby Letter of Credit](6)/[is a copy of the form of the
application for a documentary letter of credit of the L/C Issuer].(7)

7.             Borrower hereby certifies that on the date hereof and on the
Issuance Date set forth above, and after giving effect to the issuance of the
Letter of Credit requested hereby, (i) no Default has or shall have occurred and
be continuing; (ii) the representations and warranties contained in the Loan
Documents are and shall be true and correct in all material respects, except to
the extent such representations and warranties specifically relate to an earlier
date, in which case such representations and warranties shall have been true and
correct in all material respects on and as of such earlier date and (iii) the
Letter of Credit Obligations has not and shall not exceed the Letter of Credit
Sublimit and the aggregate Revolving Credit Exposure of all Lenders has and
shall not exceed the lesser of the Borrowing Base and the aggregate Commitments
of all Lenders.

IN WITNESS WHEREOF, Borrower has duly executed this Credit Request as of the
date and year first written above.

 

K-SEA OPERATING PARTNERSHIP L.P., by its general partner K-Sea OLP GP, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

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

(6)          If requested Letter of Credit is a Standby Letter of Credit.

(7)          If requested Letter of Credit is a Documentary Letter of Credit.

 

2

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EXHIBIT H

[FORM OF] SUBSIDIARY GUARANTY

THIS GUARANTY is made as of the           day of               , 200  , by
                            , a                         with an office and
principal place of business at                             ,
                                              (the “Guarantor”), to KEYBANK
NATIONAL ASSOCIATION, a national banking association with an office at 575 Fifth
Avenue, New York, New York 10017 (“KeyBank”), as administrative agent for the
Lenders from time to time party to the Loan Agreement defined below (in such
capacity, the “Beneficiary”).

W I T N E S S E T H:

WHEREAS, K-SEA OPERATING PARTNERSHIP L.P. (“Borrower”), as borrower, is a party
to the Loan and Security Agreement, dated as of March    , 2005 (as the same may
be amended, supplemented or otherwise modified from time to time, being herein
called “Loan Agreement”), among Borrower, the Lenders party thereto (the
“Lenders”) and the Beneficiary, pursuant to which the Lenders have agreed to
make loans (the “Loans”) to Borrower in order to provide funds for refinancing
certain outstanding obligations of Borrower under its existing senior credit
facilities, to finance the ongoing working capital and capital expenditures of
Borrower, to provide for the issuance of Letters of Credit and for general
corporate purposes;

WHEREAS, it is a condition precedent under the Loan Agreement, inter alia, that
the Guarantor deliver to Beneficiary a guaranty in favor of Beneficiary with
respect to the faithful performance by Borrower of the Loan Agreement and due
and punctual payment of all amounts payable from time to time by Borrower to
Beneficiary and the Lenders under the terms of the Loan Agreement, any Notes,
and the other Loan Documents (as defined in the Loan Agreement); and

WHEREAS, the Guarantor is a Subsidiary (as defined in the Loan Agreement) of
Borrower and has determined that it is in the corporate interests of the
Guarantor that this Guaranty be given.

NOW, THEREFORE, in consideration of the premises, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, and to
induce Beneficiary to enter into the Loan Agreement and other Loan Documents,
the Guarantor agrees as follows:

1.             All capitalized terms defined in or by reference to the Loan
Agreement shall have the meaning ascribed thereto in the Loan Agreement.

 

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

 

2.             The Guarantor hereby absolutely, irrevocably and unconditionally
guaranties to Beneficiary, its successors and assigns, as primary obligor and
not merely as surety, the due and faithful payment and performance by Borrower
of all the terms, covenants and conditions of the Loan Agreement, any Notes, and
the other Loan Documents, as the same may hereafter be amended and supplemented.
Without prejudice to the generality of the foregoing, the following are hereby
guaranteed by the Guarantor:

(i)            the prompt payment when due (whether at the stated maturity or by
acceleration or otherwise) of all sums, indebtedness, obligations and
liabilities of Borrower to the Lenders or Beneficiary, whether now existing or
hereafter incurred, arising out of or in connection with any Note or the Loan
Agreement, including the Obligations set forth therein;

(ii)           any and all expenses which may be paid or incurred by the Lenders
or Beneficiary in collecting any or all of the obligations and/or in enforcing
any of its rights hereunder; and

(iii)          the due and punctual performance and observance, strictly in
accordance with the terms of the Loan Agreement, of each of the terms,
conditions, covenants, agreements and indemnities of Borrower under the Loan
Agreement.

It is understood that while the amount of the Obligations guaranteed hereby is
not limited, if, in any action or proceeding involving any state or federal
bankruptcy, insolvency or other law affecting the rights of creditors generally,
this Guaranty would be held or determined to be void, invalid or unenforceable
on account of the amount of the aggregate liability of the Guarantor under this
Guaranty, then, notwithstanding any other provision of this Guaranty to the
contrary, the aggregate amount of such liability shall, without any further
action of Beneficiary, be automatically limited and reduced to the highest
amount which is valid and enforceable as determined in such action or
proceeding.

3.             If Borrower defaults in the payment of any or all sums when due
to Beneficiary or the Lenders, the Guarantor as primary obligor shall forthwith
pay to Beneficiary or its order the full amount due and payable (by acceleration
or otherwise) in the manner required of Borrower by the Loan Agreement. All such
payments shall be made without deductions, withholdings, or set-off, and shall
be final and free from any claims or counterclaim of any Guarantor or Borrower
against Beneficiary or any Lender.

4.             The obligations of the Guarantor under this Guaranty shall be
continuing, absolute and unconditional under any and all circumstances and shall
be paid by the Guarantor regardless of (a) validity, regularity, legality or
enforceability of the Loan Agreement, any Notes, any of the Obligations or any
collateral security or other guaranty therefor at any time or from time to time
held by Beneficiary; (b) any defense, offset or counterclaim which may at any
time be available to or be asserted by Borrower or any Guarantor against
Beneficiary or any Lender; or (c) any other event or circumstance whatsoever
which may constitute, or might be construed to constitute, an equitable or legal
discharge of a surety or a guarantor, it being the purpose and intent of the
Guarantor that this Guaranty and the Guarantor’s obligations hereunder shall
remain

 

2

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

 

in full force and effect and be binding upon the Guarantor and its successors
until the obligations shall have been satisfied by payment in full.

5.             The Guarantor further agrees that its guarantee hereunder
constitutes a guarantee of payment when due and not of collection, and waives
any right to require that any resort be had by Beneficiary or any Lender to any
of the security held for payment of the Obligations or to any balance of any
deposit account or credit on the books of Beneficiary or any Lender in favor of
Borrower or any other person.

6.             The Guarantor waives diligence, presentment, protest, demand for
payment and/or notice of default or nonpayment to or upon Borrower or any
Guarantor with respect to the Obligations. The Guarantor waives any right to
require Beneficiary to marshal assets in favor of Borrower or Guarantor or any
other Person.

7.             The Guarantor consents that, without the necessity of any
reservation of rights against it and without notice to or further assent by it
(a) the obligations and liabilities of Borrower and any other party or parties
for or upon any of the Obligations, or any collateral security or guaranty
therefor or right of off-set with respect thereto, may, from time to time in
whole or in part, be rescinded, renewed, extended, settled, surrendered,
modified, accelerated, subordinated, waived, compromised, supplemented,
terminated, sold, exchanged or released; (b) any and all collateral security at
any time held by Beneficiary for payment of the Obligations may be sold,
exchanged or released, all without notice to or further assent by the Guarantor,
who will remain bound hereunder, notwithstanding any such rescission, renewal,
extension, settlement, surrender, modification, acceleration, subordination,
waiver, compromise, supplement, termination, sale or exchange or release; and
(c) the covenants and agreements of Borrower contained in the Loan Agreement may
at any time be amended, modified, supplemented or terminated in whole or in
part; all as Beneficiary may deem advisable from time to time without impairing,
abridging, releasing or affecting the obligations of the Guarantor hereunder.

8.             No change in the name of, capital stock or interests in, or
constitution of Borrower shall in any way affect the liability of the Guarantor
under this Guaranty, and all the indebtedness owed by Borrower pursuant to the
terms of the Loan Agreement and any Notes, shall be guarantied by this Guaranty
notwithstanding that the incurring of such indebtedness shall be in excess of
the power of Borrower or shall be in any way irregular, defective, or informal.

9.             The Guarantor shall not be entitled to prorate its obligations
herein set forth or to be subrogated to any of the rights of the Beneficiary or
any Lender against any other guarantor or Borrower or any collateral security
held by Beneficiary for the payment of the Obligations until the elapse of one
year and one day following the payment in full of all amounts owing by Borrower
to Beneficiary and the Lenders and the absence as of such anniversary plus one
day of any assertion by any person of a right to reversal or setting aside of
any such payment or part thereof. The Guarantor expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution and
any other claim which it may now or hereafter have against Borrower or any other
Person directly or contingently liable for the obligations guarantied hereunder,
or against or with respect to Borrower’s property (including, without
limitation,

 

3

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property collateralizing the Obligations), arising from the existence or
performance of this Guaranty.

10.           All rights and remedies of Beneficiary hereunder and under the
Loan Agreement shall be cumulative and may be exercised singly or concurrently.

11.           The Guarantor hereby irrevocably and unconditionally waives:
(a) any and all notice of the acceptance of this Guaranty; (b) any and all
notice of the creation, renewal, extension or accrual of any of the Obligations
and notice of or proof of the reliance by Beneficiary or any Lender upon this
Guaranty; (c) all notices which may be required by statute, rule of law or
otherwise to preserve any rights against the Guarantor; (d) any requirement of
diligence; (e) presentment, demand, protest, notice of default or non-payment;
and (f) any and all defenses to payment hereunder, except the defense of payment
already made.

12.           The Guarantor hereby waives and relinquishes any duty on the part
of Beneficiary or any Lender (should any such duty exist) to disclose to the
Guarantor any matter, fact or thing related to the business, operations or
condition (financial or otherwise) of Borrower or its Affiliates or subsidiaries
or their properties, whether now known or hereafter known by Beneficiary or any
Lender during the life of this Guaranty.

13.           When making any demand hereunder against the Guarantor,
Beneficiary may, but shall be under no obligation to, make a similar demand on
any other guarantor, and any failure by Beneficiary to make such demand or to
collect any payments from any such other guarantor or any release of such other
guarantor shall not relieve Guarantor of its obligations and liabilities
hereunder, and shall not impair or affect the rights and remedies, express or
implied, or as a matter of law, of Beneficiary against the Guarantor. For the
purposes hereof “demand” shall include the commencement and continuance of any
legal proceedings.

14.           The Guarantor agrees to pay all expenses in connection with the
execution and delivery of this Guaranty and its enforcement, including without
limitation the payment of any stamp or similar duties, reasonable attorney fees,
and other costs of collection.

15.           This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time payment, or any part thereof, of any of the
Obligations is rescinded or must be restored or returned by Beneficiary or any
Lender upon the insolvency, bankruptcy, liquidation or reorganization of
Borrower, or otherwise, all as though payment had not been made.

16.           The Beneficiary shall not have any duty to protect, secure,
perfect or insure any collateral security at any time securing the payment of
the Obligations. This is a guaranty of performance and payment and not merely of
collection. The Guarantor hereby waives any requirement that Beneficiary make
any demand, commence suit or exercise any other right or remedy under the Loan
Agreement prior to enforcing its rights against the Guarantor hereunder.

The Obligations, and each of them, shall conclusively be deemed to have been
created, contracted or incurred in reliance upon this Guaranty, and all dealings
between Borrower or the Guarantor and Beneficiary and the Lenders shall likewise
be conclusively presumed to have been

 

4

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had or consummated in reliance upon this Guaranty. The Guarantor acknowledges
receipt of a copy of the Loan Agreement and the Loan Documents therein
described.

17.           No Changes in Guarantor. The Guarantor covenants and agrees that
from and after the date hereof and so long as any of the Obligations remain
outstanding, it will not (a) enter into any transaction of merger or
consolidation unless it is the surviving corporation and after giving effect to
such merger or consolidation its tangible net worth equals or exceeds that which
existed prior to such merger or consolidation; or (b) liquidate or dissolve; or
(c) sell or otherwise dispose of all or any substantial part of its assets; or
(d) without limiting the generality of clause (c), sell, transfer or otherwise
dispose of any interest in Borrower held by it as of the date hereof; or
(e) without thirty (30) days’ prior written notice to Beneficiary, change its
name or chief executive office.

18.           The Guarantor hereby represents, warrants and covenants that:

(a)           the Guarantor is duly organized, existing, and in good standing
under and by virtue of the laws of the State of                       ;

(b)           the Guarantor will maintain its corporate existence and good
standing under the laws of the State of                  until the principal,
interest or any other sums payable by Borrower to Beneficiary under the Loan
Agreement or any other document or instrument the execution of which is provided
for in the Loan Agreement and the other Loan Documents have been fully and
indefeasibly paid by Borrower;

(c)           the Guarantor has the necessary power and authority to give this
Guaranty and to perform and observe the obligations contained herein and that
this Guaranty has been validly authorized by the appropriate corporate or other
action of the Guarantor and constitutes a legal, valid, and binding obligation
of the Guarantor enforceable in accordance with its terms;

(d)           the giving of this Guaranty and the observance of its terms does
not contravene any law, regulation, or similar enactment binding on the
Guarantor, nor does the giving of this Guaranty and the observance of its terms
contravene any existing mortgage, contract, or agreement binding on the
Guarantor or any of its assets;

(e)           The Guarantor is not in default under any agreement or guaranty to
which it is a party or by which it may be bound;

(f)            The obligations of the Guarantor under this Guaranty are
unconditional and irrevocable and shall rank pari passu with all other
liabilities of the Guarantor for borrowed money or for obligations that have
become the direct obligations of the Guarantor; and

(g)           There are no actions, suits or proceedings before any court,
tribunal or governmental body pending or threatened (i) with respect to any of
the transactions contemplated by this Guaranty or (ii) against or affecting the
Guarantor or any of its assets which would adversely affect Guarantor’s ability
to perform hereunder. The Guarantor has not been charged with any violation of
or default under any statute, decree, rule, regulations, writ or order of any
court or any administrative order.

 

5

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19.           No course of prior dealings between the parties, no usage of the
trade, and no parole or extrinsic evidence of any nature, shall be used or be
relevant to supplement or explain or modify any term used in this Guaranty. This
Guaranty and all obligations of the Guarantor hereunder shall be binding upon
the successors and assigns of the Guarantor, and shall, together with the rights
and remedies of Beneficiary hereunder, inure to the benefit of Beneficiary and
its successors and assigns, and of the Lenders and their respective successors
and assigns. The invalidity, illegality or unenforceability of any provision of
this Guaranty shall not affect the validity, legality or enforceability of any
other provision of this Guaranty.

20.           The Guarantor agrees that this Guaranty covers all Obligations of
Borrower to Beneficiary and the Lenders, including, but not limited to, any
Obligation, which arises due to the performance or exercise of rights by
Beneficiary acting in a capacity as administrative agent [or collateral trustee]
or collateral agent or otherwise.

21.           This Guaranty inures to the benefit of the Beneficiary, its
successors and assigns, and of the Lenders and their respective successors and
assigns. The Beneficiary may assign its rights hereunder to any other Person who
becomes a Beneficiary by amendment or assignment by the Beneficiary, of the Loan
Agreement or an interest therein.

THIS WRITING CONTAINS THE COMPLETE, FINAL AND EXCLUSIVE STATEMENT OF THE TERMS
OF THE AGREEMENT BETWEEN THE GUARANTOR AND BENEFICIARY RELATING TO THIS
GUARANTY.

THIS GUARANTY SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF VALIDITY,
CONSTRUCTION AND ENFORCEMENT.

THE GUARANTOR HEREBY IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION,
SUIT, OR PROCEEDING ARISING OUT OF OR IN ANY WAY IN CONNECTION WITH THIS
GUARANTY MAY BE INSTITUTED OR BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, IN
THE COUNTY OF NEW YORK, OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, AS BENEFICIARY MAY ELECT, AND BY EXECUTION AND DELIVERY OF
THIS GUARANTY, THE GUARANTOR HEREBY IRREVOCABLY ACCEPTS AND SUBMITS TO, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH
COURTS. THE GUARANTOR IRREVOCABLY CONSENTS TO SERVICE OF ANY SUMMONS AND/OR
LEGAL PROCESS BY REGISTERED OR CERTIFIED UNITED STATES AIR MAIL, POSTAGE
PREPAID, TO THE GUARANTOR AT THE ADDRESS SET FORTH ABOVE, SUCH METHOD OF SERVICE
TO CONSTITUTE, IN EVERY RESPECT, SUFFICIENT AND EFFECTIVE SERVICE OF PROCESS IN
ANY SUCH LEGAL ACTION OR PROCEEDING. NOTHING IN THIS GUARANTY SHALL AFFECT THE
RIGHT OF BENEFICIARY TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR LIMIT THE RIGHT OF BENEFICIARY TO BRING ACTIONS, SUITS OR PROCEEDINGS
IN THE COURTS OF ANY OTHER JURISDICTION. THE GUARANTOR FURTHER AGREES

 

6

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THAT FINAL JUDGMENT AGAINST IT IN ANY SUCH LEGAL ACTION, SUIT OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION WITHIN OR
OUTSIDE THE UNITED STATES OF AMERICA, BY SUIT ON THE JUDGMENT, A CERTIFIED OR
EXEMPLIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND THE
AMOUNT OF THE LIABILITY.

BY ITS SIGNATURE WRITTEN BELOW, THE GUARANTOR HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS GUARANTY, THE LOAN DOCUMENTS OR THE TRANSACTION
CONTEMPLATED HEREBY OR THEREBY.

* * *

 

7

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IN WITNESS WHEREOF the Guarantor has caused this Guaranty to be executed by its
duly authorized officer as of the day and year first above written.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

Accepted:

 

 

 

KEYBANK NATIONAL ASSOCIATION as Administrative Agent

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

K-Sea Subsidiary Guaranty Signature Page

 

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SCHEDULE 1.01

 

Pool Vessels

 

NO.

 

VESSEL NAME

 

OFFICIAL NO.

 

 

 

 

 

 

 

Double Hull Barges

 

 

 

 

 

 

 

1.

 

DBL 151

 

641082

2.

 

DBL 152

 

644380

3.

 

DBL 155

 

556673

4.

 

DBL 140

 

1090503

5.

 

DBL 70

 

540401

6.

 

DBL 31

 

1079242

7.

 

DBL 32

 

1087118

8.

 

DBL 17

 

1065655

9.

 

DBL 18

 

1065657

10.

 

DBL 19

 

1065658

11.

 

DBL 53

 

500121

 

 

 

 

 

 

 

Single Hull Barges

 

 

 

 

 

 

 

12.

 

KTC 80

 

643281

13.

 

KTC 71

 

563364

14.

 

KTC 60

 

630272

 

 

 

 

 

 

 

Tugs

 

 

 

 

 

 

 

15.

 

Rebel

 

570047

16.

 

Yankee

 

571215

17.

 

Irish Sea

 

520685

18.

 

Viking

 

541711

19.

 

Lincoln Sea

 

1084513

20.

 

Beaufort Sea

 

536836

21.

 

Tasman Sea

 

578207

22.

 

Adriatic Sea

 

590232

23.

 

Coral Sea

 

550670

24.

 

Java Sea

 

636105

25.

 

Baltic Sea

 

551908

26.

 

Bering Sea

 

569665

 

1

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SCHEDULE 2.01

 

Commitments

 

Bank

 

Commitment

 

KeyBank National Association

 

$

40,000,000.00

 

LaSalle Bank National Association

 

$

20,000,000.00

 

Citizens Bank of Pennsylvania

 

$

20,000,000.00

 

 

 

 

 

Aggregate Commitments

 

$

80,000,000.00

 

 

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Schedule 4.06

 

Environmental Compliance

 

None

 

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Schedule 4.14

 

Charters

 

                Bareboat Charter, dated January 14, 2004, between the Borrower
and K-Sea Transportation Inc., covering vessels including the following vessels:

 

DBL 17, Official No. 1065655

DBL 18, Official No. 1065657

DBL 31, Official No. 1079242

DBL 32, Official No. 1087118

 

 

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Schedule 5.01

 

Existing Indebtedness

 

                1.      Participation and Loan and Security Agreement dated as
of January 14, 2004, as amended, modified or supplemented, among the Borrower,
The CIT Group/Equipment Financing, Inc. ("CIT") and KeyBank, N.A. as Lenders.

 

                2.      Loan and Security Agreement, dated as of January 29,
2004, as amended, modified or supplemented, between the Borrower and CIT.

 

                3.      Loan Agreement, dated as of May 28, 2004, as amended,
modified or supplemented, between the Borrower and Citizens Leasing Corporation,
a Rhode Island corporation.

 

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