Exhibit 10.15

 

Execution Version

 

SECURITIES PURCHASE AGREEMENT

 

among

 

K-SEA TRANSPORTATION PARTNERS L.P.,

 

K-SEA GENERAL PARTNER L.P.

 

and

 

KA FIRST RESERVE, LLC

 

dated as of September 1, 2010

 

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

 

TABLE OF CONTENTS

 

 

 

Page

 

 

ARTICLE I DEFINITIONS

1

 

 

Section 1.01

Definitions

1

Section 1.02

Accounting Procedures and Interpretation

10

 

 

ARTICLE II AGREEMENT TO SELL AND PURCHASE

10

 

 

Section 2.01

Sale and Purchase

10

Section 2.02

Closings

11

Section 2.03

Conditions of the Parties’ Obligations at the First Transaction Closing

11

Section 2.04

Conditions of the Parties’ Obligations at the Second Transaction Closing

15

 

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF K-SEA

16

 

 

Section 3.01

Formation and Qualification; Citizenship

16

Section 3.02

Ownership of Subsidiaries

16

Section 3.03

No Other Subsidiaries

17

Section 3.04

Authorization; Enforceability; Valid Issuance

17

Section 3.05

No Preemptive Rights, Registration Rights or Options

18

Section 3.06

Capitalization

18

Section 3.07

No Breach

18

Section 3.08

No Approvals

19

Section 3.09

No Default

19

Section 3.10

K-Sea SEC Documents; K-Sea Financial Statements

19

Section 3.11

No Material Adverse Change

20

Section 3.12

Title to Real Property; Leases

21

Section 3.13

Insurance

21

Section 3.14

Litigation

21

Section 3.15

Employment Related Matters

21

Section 3.16

Tax Returns

22

Section 3.17

Employee Benefit Plans

23

Section 3.18

Environmental Compliance

24

Section 3.19

Compliance with Laws; Permits

24

Section 3.20

NYSE Listing

25

Section 3.21

Investment Company

25

Section 3.22

MLP Status

25

Section 3.23

Certain Fees

25

Section 3.24

Form S-3 Eligibility

26

Section 3.25

Material Agreements

26

Section 3.26

Books and Records; Sarbanes-Oxley Compliance

26

Section 3.27

Foreign Corrupt Practices Act

27

 

 

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

27

 

 

Section 4.01

Existence; Citizenship

27

 

i

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

 

TABLE OF CONTENTS
(continued)

 

 

 

Page

 

 

 

Section 4.02

Authorization; Enforceability

27

Section 4.03

No Breach

27

Section 4.04

Certain Fees

28

Section 4.05

Unregistered Securities

28

Section 4.06

Short Selling

29

Section 4.07

K-Sea Information

29

 

 

 

ARTICLE V COVENANTS

30

 

 

Section 5.01

Transfer Restrictions

30

Section 5.02

Standstill Obligation

31

Section 5.03

Further Assurances; NYSE Listing; Citizenship

32

Section 5.04

Conduct of Business

32

Section 5.05

Use of Proceeds

34

Section 5.06

Reasonable Best Efforts

34

Section 5.07

Short Sales

35

Section 5.08

Public Disclosure

35

Section 5.09

Incentive Distribution Rights Option

35

 

 

 

ARTICLE VI INDEMNIFICATION, COSTS AND EXPENSES

37

 

 

Section 6.01

Indemnification by K-Sea

37

Section 6.02

Indemnification by the Purchaser

37

Section 6.03

Indemnification Procedure

38

Section 6.04

Other Matters

39

 

 

 

ARTICLE VII TERMINATION

39

 

 

Section 7.01

Termination

39

Section 7.02

Effect of Termination

40

 

 

 

ARTICLE VIII MISCELLANEOUS

40

 

 

Section 8.01

Interpretation

40

Section 8.02

Survival of Provisions

41

Section 8.03

No Waiver; Modifications in Writing

41

Section 8.04

Binding Effect; Assignment

42

Section 8.05

Confidentiality

42

Section 8.06

Communications

42

Section 8.07

Removal of Legend

43

Section 8.08

Entire Agreement

44

Section 8.09

Governing Law; Submission to Jurisdiction

44

Section 8.10

Waiver of Jury Trial

44

Section 8.11

Execution in Counterparts

45

 

Schedule 1.01(a)

Knowledge

Schedule 1.01(b)

K-Sea Subsidiaries

Schedule 3.09

No Default

Schedule 3.10(a)

Unaudited Financial Statements

Schedule 3.12(a)

Title to Real Property

 

ii

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

 

TABLE OF CONTENTS
(continued)

 

 

 

Page

 

Schedule 3.14

Litigation

Schedule 3.15

Employment Related Matters

Schedule 3.16

Tax Returns

Schedule 3.17

Employment Benefit Plans

Schedule 3.18

Environmental Compliance

Schedule 3.19(a)

Compliance with Laws

Schedule 3.19(b)

Permits

Schedule 3.22

MLP Status

Schedule 3.25

Material Agreements

 

Exhibit A         Form of K-Sea Partnership Agreement

 

iii

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

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT, dated as of September 1, 2010 (this
“Agreement”), is entered into by and between K-SEA TRANSPORTATION PARTNERS L.P.,
a Delaware limited partnership (“K-Sea”), K-SEA GENERAL PARTNER L.P., a Delaware
limited partnership and the general partner of K-Sea (the “General Partner”) and
KA FIRST RESERVE, LLC, a Delaware limited liability company (the “Purchaser”).

 

WHEREAS, K-Sea desires to sell to the Purchaser, and the Purchaser desires to
purchase from K-Sea, 18,416,206 Series A Preferred Units (as defined below) in
two transactions in accordance with the provisions of this Agreement;

 

WHEREAS, the net proceeds received by K-Sea in respect of the sale of Series A
Preferred Units pursuant to this Agreement shall be used to repay certain
indebtedness of K-Sea and its Affiliates pursuant to the Debt Agreements (as
defined below);

 

WHEREAS, the Purchaser (or its designated Affiliate), K-Sea, the General
Partner, GP LLC and certain other holders of interests in GP LLC desire to enter
into the Director Designation Agreement to provide the Purchaser with certain
rights and obligations with respect to the management of K-Sea; and

 

WHEREAS, K-Sea has agreed to provide the Purchaser with certain registration
rights with respect to the Conversion Units (as defined below) underlying the
Series A Preferred Units acquired pursuant to this Agreement (including
Conversion Units underlying any Series A Preferred Units issued to the Purchaser
as payment in-kind distributions pursuant to the terms of the Series A Preferred
Units).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.01          Definitions.

 

As used in this Agreement, the following terms have the meanings indicated:

 

“Affiliate” means, with respect to a specified Person, any other Person, whether
now in existence or hereafter created, directly or indirectly controlling,
controlled by or under direct or indirect common control with such specified
Person.  For purposes of this definition, “control” (including, with correlative
meanings, “controlling,” “controlled by” and “under common control with”) means
the power to direct or cause the direction of the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; provided, however, that “Affiliate” shall
not be deemed to include (i) any portfolio company in which the Purchaser or any
of its investment fund Affiliates have made a debt or equity investment, or
(ii) any fund or other investment entity in which such Person serves as an
investment manager or advisor.

 

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

 

“Agreement” has the meaning set forth in the introductory paragraph of this
Agreement.

 

“Basic Documents” means, collectively, this Agreement, the Registration Rights
Agreement, the Director Designation Agreement and the K-Sea Partnership
Agreement.

 

“Board” means the Board of Directors of GP LLC.

 

“Business” means the business of the K-Sea Entities, as conducted as of the date
hereof.

 

“Business Day” means any day other than a Saturday, Sunday, any federal holiday
or day on which banking institutions in the State of New York or State of Texas
are authorized or required by Law or other governmental action to close.

 

“Closings” means the First Transaction Closing and the Second Transaction
Closing; provided that, if the Second Transaction Closing has not occurred on or
prior to the Second Transaction Outside Date, then “Closings” shall mean the
First Transaction Closing only; provided further, that (i) after the delivery of
a Second Transaction Termination Notice, then “Closings” shall mean the First
Transaction Closing only and (ii) in the event that the closing of the purchase
of the Second Transaction Purchased Units occurs after the Second Transaction
Outside Date, then “Closings” shall mean the First Transaction Closing and the
Second Transaction Closing.

 

“Closing Dates” means the First Transaction Closing Date and the Second
Transaction Closing Date; provided that, if the Second Transaction Closing has
not occurred on or prior to the Second Transaction Outside Date, then “Closing
Dates” shall mean the First Transaction Closing Date only; provided further,
that (i) after the delivery of a Second Transaction Termination Notice, then
“Closing Dates” shall mean the First Transaction Closing Date only and (ii) in
the event that the closing of the purchase of the Second Transaction Purchased
Units occurs after the Second Transaction Outside Date, then “Closing Dates”
shall mean the First Transaction Closing Date and the Second Transaction Closing
Date.

 

“Code” shall have the meaning specified in Section 3.16(c).

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Units” means common units representing limited partner interests in
K-Sea.

 

“Competitor” means any Person that directly, or indirectly through (i) the
ownership of 35% or more of any Person and (ii)(A) the right to designate a
majority of the board of directors (or similar governing body) of such Person
(or with respect to a limited partnership, its general partner) or (B) the power
to direct or control the direction of the management and policies of such
Person, whether through ownership of voting securities, by contract or
otherwise, engages in the marine transportation of petroleum products or
otherwise provides similar services or engages in a similar business as K-Sea at
any time during the twelve (12) months preceding a proposed Transfer of Series A
Preferred Units or Conversion Units.

 

“Confidentiality Agreement” means the Confidentiality Agreement, dated as of
May 26, 2010, by and between K-Sea, GP LLC and Kayne Anderson Capital Advisors,
L.P.

 

2

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

 

“Contract” means any contract, agreement, indenture, note, bond, mortgage, deed
of trust, loan, instrument, lease, license, commitment or other arrangement,
understanding, undertaking, commitment or obligation, whether written or oral.

 

“Continuing Director” means an individual whose election or nomination to the
Board of Directors of GP LLC was approved by individuals who were members of the
Board of Directors of GP LLC as of the date that is 12 months prior to the First
Transaction Closing, constituting at the time of such election or nomination at
least a majority of the Board of Directors of GP LLC, or (ii) whose election or
nomination to the Board of Directors of GP LLC was approved by individuals who
were members of the Board of Directors of GP LLC as of the date that is 12
months prior to the First Transaction Closing or individuals referred to in
clause (i) above constituting at the time of such election or nomination at
least a majority of the Board of Directors of GP LLC.

 

“Conversion Units” means the Common Units issuable upon conversion of the
Purchased Units.

 

“Debt Agreements” means (i) the Amended and Restated Loan and Security
Agreement, dated as of August 14, 2007, as amended as of August 31, 2010, among
the Operating Partnership, as borrower, Bank of America, N.A. (successor to
LaSalle Bank, National Association) and Citibank, N.A., as co-syndication
agents, Citizens Bank of Pennsylvania and HSBC Bank USA National Association, as
co-documentation agents, and KeyBank National Association as administrative
agents and collateral trustee, and the lenders party thereto and (ii) the
Secured Term Loan Credit Facility, dated June 4, 2008, as amended as of
August 31, 2010, among the Operating Partnership, as borrower, DnB NOR Bank ASA,
as mandated lead arranger, bookrunner, administrative agent and security
trustee, and the parties thereto.

 

“Delaware LP Act” shall have the meaning specified in Section 3.02.

 

“Designated Directors” means the individuals listed in Section 2(b)(i) of the
Director Designation Agreement.

 

“Director Designation Agreement” means the Director Designation Agreement to be
entered into at the First Transaction Closing, between K-Sea, the General
Partner, GP LLC, the Purchaser and the other parties thereto.

 

“Environmental Law” means any Law relating to the protection of human health or
safety (to the extent such health or safety relate to exposure to Hazardous
Materials), the environment or natural resources (including Laws relating to the
generation, manufacture, processing, use, storage, treatment, disposal, release,
threatened release, discharge, or emission of Hazardous Materials into the
environment, and any exposure to Hazardous Materials), including the federal
Clean Water Act, Clean Air Act, Comprehensive Environmental Response,
Compensation and Liability Act, Oil Pollution Act, and any similar state Laws.

 

“Environmental Permits” means all Permits required under any Environmental Law
for the operation of the business of the K-Sea Entities.

 

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

 

3

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

 

“ERISA Affiliate” shall have the meaning specified in Section 3.17(d).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time, and the rules and regulations of the Commission promulgated thereunder.

 

“First Transaction Closing” shall have the meaning specified in Section 2.02(a).

 

“First Transaction Closing Date” shall have the meaning specified in
Section 2.02(a).

 

“First Transaction Purchase Price” means $5.43 per Series A Preferred Unit
acquired at the First Transaction Closing.

 

“First Transaction Purchased Units” shall have the meaning specified in
Section 2.01(a).

 

“GAAP” means generally accepted accounting principles in the United States of
America as of the date hereof; provided, however, that for the K-Sea Financial
Statements prepared as of a certain date, GAAP referenced therein shall be GAAP
as of the date of such K-Sea Financial Statements.

 

“General Partner” has the meaning set forth in the introductory paragraph of
this Agreement.

 

“Governmental Authority” means, with respect to a particular Person, any
country, state, county, city and political subdivision in which such Person or
such Person’s Property is located or which exercises valid jurisdiction over any
such Person or such Person’s Property, and any court, agency, department,
commission, board, bureau or instrumentality of any of them and any monetary
authority that exercises valid jurisdiction over any such Person or such
Person’s Property.  Unless otherwise specified, all references to Governmental
Authority herein with respect to K-Sea means a Governmental Authority having
jurisdiction over K-Sea, its Subsidiaries or any of their respective Properties.

 

“GP LLC” means K-Sea General Partner GP LLC, a Delaware limited liability
company and the general partner of the General Partner.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

 

“Hazardous Material” means any pollutant, contaminant, waste or any hazardous,
toxic or deleterious material or substance, including any material or substance
regulated by or as to which Liability might arise under any applicable
Environmental Law including any:  (i) chemical, product, material, substance or
waste defined as “hazardous substance,” “hazardous material,” “hazardous waste,”
“restricted hazardous waste,” “extremely hazardous waste,” “solid waste,” “toxic
waste,” “extremely hazardous substance,” “toxic substance,” “toxic pollutant,”
“contaminant,” “pollutant,” or words of similar meaning or import found in any
applicable Environmental Law; (ii) petroleum hydrocarbons, petrochemical or
petroleum products, petroleum substances, natural gas and crude oil or any
components, fractions or derivatives thereof; and (iii) asbestos containing
materials, polychlorinated biphenyls, noxious odors, urea formaldehyde foam
insulation, or radon gas.

 

4

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

 

“IDR Interests” shall have the meaning specified in Section 5.09(a).

 

“Indebtedness” means any of the following:  (a) the principal of and accrued
interest or premium (if any) and premiums or penalties that would arise as a
result of prepayment of (i) any indebtedness for borrowed money, (ii) any
obligations evidenced by bonds, debentures, notes or other similar instruments,
and (iii) any obligations, contingent or otherwise, under banker’s acceptance
credit, or similar facilities; (b) any obligations to pay the deferred purchase
price of property or services, except trade accounts payable and other current
liabilities arising in the Ordinary Course of Business; (c) any obligations with
respect to hedging, swaps or similar arrangements; and (d) any guaranty of any
of the foregoing.

 

“Incentive Distribution Rights” shall have the meaning specified in
Section 3.06.

 

“Indemnified Party” shall have the meaning specified in Section 6.03(b).

 

“Indemnifying Party” shall have the meaning specified in Section 6.03(b).

 

“IRS” means the United States Internal Revenue Service.

 

“Jones Act” means Section 27 of the Merchant Marine Act of 1920, as amended,
including any implementing regulations, and related U.S. maritime citizenship
laws including section 2 of the Shipping Act, 1916, as amended.

 

“Knowledge of K-Sea” shall mean the knowledge of the individuals listed on
Schedule 1.01(a) after reasonable inquiry.

 

“K-Sea” has the meaning set forth in the introductory paragraph of this
Agreement.

 

“K-Sea Entities” means, collectively, K-Sea and the K-Sea Subsidiaries.

 

“K-Sea Entity Operating Agreements” means the certificate of incorporation,
certificate of formation, bylaws, limited liability company agreement, limited
partnership agreement or other organizational documents, as applicable, of the
K-Sea Entities (excluding K-Sea).

 

“K-Sea Financial Statements” shall have the meaning specified in
Section 3.10(a).

 

“K-Sea IDR Holdings” means K-Sea IDR Holdings LLC, a Delaware limited liability
company.

 

“K-Sea Material Adverse Effect” means any material and adverse effect on (a) the
assets, liabilities, financial condition, business, results of operations or
affairs of the K-Sea Entities taken as a whole; (b) the ability of the K-Sea
Entities, taken as a whole, to carry on their business as such business is
conducted as of the date hereof or to meet their obligations under the Basic
Documents on a timely basis; or (c) the ability of K-Sea to consummate the
transactions under any Basic Document to which it is a party; provided, however,
that a K-Sea Material Adverse Effect shall not include any material and adverse
effect on the foregoing to the extent such material and adverse effect results
from, arises out of, or is attributable to (v) a general deterioration in the
economy or changes in the general state of the industries in which the K-Sea

 

5

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

 

Entities operate, except to the extent that the K-Sea Entities, taken as a
whole, are adversely affected in a materially disproportionate manner as
compared to other industry participants, (w) any failure by K-Sea to meet any
published analyst estimates or expectations of K-Sea’s revenue, earnings or
other financial performance or results of operations for any period, in and of
itself, or any failure by K-Sea to meet its internal budgets, plans or forecasts
of its revenues, earnings or other financial performance or results of
operations, in and of itself (it being understood that the facts or occurrences
giving rise or contributing to such failure that are not otherwise excluded from
the definition of a “K-Sea Material Adverse Effect” may be taken into account),
or (x) the outbreak or escalation of hostilities involving the United States,
the declaration by the United States of a national emergency or war or the
occurrence of any other calamity or crisis affecting the national economy as a
whole, including acts of terrorism, or (y) general legal, tax, economic,
political and/or regulatory conditions (or changes therein; excluding any
amendments to, or changes in the interpretation of, the Jones Act, as in effect
as of the date hereof), except to the extent that the K-Sea Entities, taken as a
whole, are adversely affected in a materially disproportionate manner as
compared to other industry participants.

 

“K-Sea Partnership Agreement” means the Fourth Amended and Restated Agreement of
Limited Partnership of K-Sea to be entered into at the First Transaction Closing
by the General Partner.

 

“K-Sea Related Parties” shall have the meaning specified in Section 6.02.

 

“K-Sea SEC Financial Statements” shall have the meaning specified in
Section 3.10(a).

 

“K-Sea SEC Documents” shall have the meaning specified in Section 3.10(a).

 

“K-Sea Subsidiaries” means, collectively, the entities listed on Schedule
1.01(b) to this Agreement.

 

“K-Sea Vessels” means all seagoing vessels used in connection with the Business.

 

“Law” means any applicable federal, state, local or foreign order, writ,
injunction, judgment, settlement, award, decree, statute, law, rule, rule of
common law or regulation promulgated by a Governmental Authority.

 

“Liabilities” means any and all Indebtedness, liabilities, commitments, damages,
fines, fees, penalties, settlements and obligations of any kind, whether fixed,
contingent or absolute, matured or unmatured, liquidated or unliquidated,
accrued or not accrued, asserted or not asserted, known or unknown, determined,
determinable or otherwise, whenever or however arising (including, whether
arising out of any contract or tort based on negligence or strict liability).

 

“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes.

 

6

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

 

“LTIP” shall have the meaning specified in Section 3.05.

 

“Material Agreements” shall have the meaning specified in Section 3.25.

 

“Nigerian Vessel Sale Agreement” means the Vessel Purchase and Sale Agreement,
dated July 26, 2010 and in effect as of the date hereof, by and between the
Operating Partnership and Pheranzy Gas Limited, a Nigerian registered company,
pursuant to which Pheranzy Gas Limited shall purchase, and the Operating Company
shall sell, vessels DBL 70 with an official number of 540401, DBL 53 with an
official number of 500121, Baltic Sea with an official number of 551908, and
Coral Sea with an official number of 550670.

 

“NYSE” means the New York Stock Exchange.

 

“Operating Agreements” means, collectively, the K-Sea Entity Operating
Agreements, the K-Sea Partnership Agreement and the Certificate of Limited
Partnership of K-Sea, each as amended to date.

 

“Operating Partnership” means K-Sea Operating Partnership L.P., a Delaware
limited partnership and wholly-owned subsidiary of K-Sea.

 

“Option” shall have the meaning specified in Section 5.09(a).

 

“Option Period” means the period commencing on the First Transaction Closing
Date and ending on the first anniversary thereof.

 

“Ordinary Course” or “Ordinary Course of Business” means the conduct of the
business of the K-Sea Entities in accordance with such K-Sea Entity’s normal
day-to-day customs, practices and procedures, conducted in accordance with past
practice.

 

“Outside Date” shall have the meaning specified in Section 7.01(b).

 

“Permits” shall have the meaning specified in Section 3.19(b).

 

“Person” means any individual, corporation, company, voluntary association,
partnership, joint venture, trust, limited liability company, unincorporated
organization, Governmental Authority or any agency, instrumentality or political
subdivision thereof or any other form of entity.

 

“Placement Agent” means UBS, as exclusive placement agent to K-Sea.

 

“Plans” means any employee benefit plans (within the meaning of Section 3(3) of
ERISA) and all bonus, incentive, unit option, unit purchase, restricted unit,
phantom unit, or other equity-based compensation, deferred compensation, retiree
medical or life insurance, supplemental executive retirement, severance or other
benefit plans, programs, policies, agreements or arrangements, and all
employment, consulting, termination, severance, retention, change in control,
transaction bonus, compensation or other contracts or agreements (x) to which
K-Sea or any of its Affiliates is a party or which are sponsored, maintained or
contributed to by K-Sea or any of its Affiliates, in each case, for the benefit
of any current or former employee,

 

7

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

 

officer, director or independent contractor of any of the K-Sea Entities or
(y) under which any of the K-Sea Entities has had or has any present or future
liability.

 

“Property” or “Properties” means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible (including
intellectual property rights), including, for the avoidance of doubt the K-Sea
Vessels.

 

“Purchase Price” means the aggregate amount paid by the Purchaser in respect of
the First Transaction Purchased Units and the Second Transaction Purchased
Units; provided that, (i) prior to the occurrence of the Second Transaction
Closing, and (ii) in the event that the Second Transaction Closing does not
occur by the Second Transaction Outside Date, “Purchase Price” shall mean the
aggregate amount paid by the Purchaser in respect of the First Transaction
Purchased Units only; provided further, that (i) after the delivery of a Second
Transaction Termination Notice, then “Purchase Price” shall mean the amount paid
by the Purchaser in respect of the First Transaction Purchased Units only and
(ii) in the event that the closing of the purchase of the Second Transaction
Purchased Units occurs after the Second Transaction Outside Date, then “Purchase
Price” shall mean the aggregate amount paid by the Purchaser in respect of the
First Transaction Purchased Units and the Second Transaction Purchased Units.

 

“Purchased Units” shall mean the First Transaction Purchased Units and the
Second Transaction Purchased Units; provided that, if the Second Transaction
Closing has not occurred on or prior to the Second Transaction Outside Date,
then “Purchased Units” shall mean the First Transaction Purchased Units only;
provided further, that (i) after the delivery of a Second Transaction
Termination Notice, then “Purchased Units” shall mean the First Transaction
Purchased Units only and (ii) in the event that the closing of the purchase of
the Second Transaction Purchased Units occurs after the Second Transaction
Outside Date, then “Purchased Units” shall mean the First Transaction Purchased
Units and the Second Transaction Purchased Units.

 

“Purchaser” has the meaning set forth in the introductory paragraph of this
Agreement.

 

“Purchaser Related Parties” has the meaning specified in Section 6.01.

 

“Registration Rights Agreement” means the Registration Rights Agreement, to be
entered into at the First Transaction Closing, between K-Sea and the Purchaser.

 

“Representatives” means, with respect to a specified Person, the officers,
directors, managers, employees, agents, counsel, accountants, investment
bankers, and other representatives of such Person and, when used with respect to
the Purchaser, also includes the Purchaser’s direct and indirect stockholders,
partners, members, subsidiaries, parent companies and other Affiliates.

 

“Sales Transaction” shall have the meaning specified in Section 5.02(b).

 

“Second Transaction Closing” shall have the meaning specified in
Section 2.02(b).

 

“Second Transaction Closing Date” shall have the meaning specified in
Section 2.02(b).

 

8

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

 

“Second Transaction Outside Date” shall have the meaning specified in
Section 2.01(b).

 

“Second Transaction Purchase Price” means $5.43 per Series A Preferred Unit
acquired at the Second Transaction Closing.

 

“Second Transaction Purchased Units” shall have the meaning specified in
Section 2.01(b).

 

“Second Transaction Termination Notice” shall have the meaning specified in
Section 2.01(b).

 

“Securities” shall have the meaning specified in Section 5.02(a)(i).

 

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and the rules and regulations of the Commission promulgated thereunder.

 

“Series A Preferred Units” means K-Sea’s Series A Preferred Units.

 

“Short Sales” means, without limitation, all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not
against the box, and forward sale contracts, options, puts, calls, short sales,
“put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act)
and similar arrangements, and sales and other transactions through non-U.S.
broker dealers or foreign regulated brokers.

 

“Significant Event” means the entry by K-Sea into an agreement providing for a
sale of all or substantially all of K-Sea’s assets or a merger or other business
combination transaction that will result in K-Sea’s then current Unitholders
owning less than 50% of the outstanding equity securities of the combined Person
following such sale, merger or other business combination transaction.

 

“Standstill Termination Date” shall have the meaning specified in
Section 5.02(a).

 

“Subsidiary” means, as to any Person, any corporation or other entity of which:
(i) such Person or a Subsidiary of such Person is a general partner or manager;
(ii) at least a majority of the outstanding equity interest having by the terms
thereof ordinary voting power to elect a majority of the board of directors or
similar governing body of such corporation or other entity (irrespective of
whether or not at the time any equity interest of any other class or classes of
such corporation or other entity shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly owned
or controlled by such Person or one or more of its Subsidiaries; or (iii) any
corporation or other entity as to which such Person consolidates for accounting
purposes.

 

“Tax” or “Taxes” means any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add on minimum, ad valorem, transfer or excise tax,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty, imposed by
any Governmental Authority.

 

9

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

 

“Tax Return” means any return, declaration, report or similar statement required
to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.

 

“TD Equipment Finance” means TD Equipment Finance, Inc., a Maine corporation.

 

“TD Equipment Finance Agreements” means, collectively, (i) the Bareboat Charter
Agreement, dated June 30, 2009, between TD Equipment Finance and the Operating
Partnership in respect of DBL 24, and (ii) the Bareboat Charter Agreement, dated
June 30, 2009, between TD Equipment Finance and the Operating Partnership in
respect of DBL 77.

 

“Third Party Claim” shall have the meaning specified in Section 6.03(b).

 

“Transfer” shall have the meaning specified in Section 5.01(a).

 

“UBS” means UBS Securities LLC.

 

Section 1.02          Accounting Procedures and Interpretation.

 

Unless otherwise specified in this Agreement, all accounting terms used herein
shall be interpreted, all determinations with respect to accounting matters
under this Agreement shall be made, and all financial statements and
certificates and reports as to financial matters required to be furnished to the
Purchaser under this Agreement shall be prepared, in accordance with GAAP
applied on a consistent basis during the periods involved (except, in the case
of unaudited financial statements, as permitted by Form 10-Q promulgated by the
Commission) and in compliance as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the Commission with respect thereto.

 

ARTICLE II
AGREEMENT TO SELL AND PURCHASE

 

Section 2.01          Sale and Purchase.

 

(a)           Pursuant to the terms and subject to the conditions of this
Agreement, at the First Transaction Closing (i) K-Sea hereby agrees to issue and
sell to the Purchaser, and the Purchaser hereby agrees to purchase from K-Sea,
15,653,775 Series A Preferred Units (the “First Transaction Purchased Units”),
and (ii) as consideration for the issuance and sale of the First Transaction
Purchased Units to the Purchaser, the Purchaser hereby agrees to pay K-Sea the
First Transaction Purchase Price.

 

(b)           Pursuant to the terms and subject to the conditions of this
Agreement, at the Second Transaction Closing (i) K-Sea hereby agrees to issue
and sell to the Purchaser, and the Purchaser hereby agrees to purchase from
K-Sea, 2,762,431 Series A Preferred Units (the “Second Transaction Purchased
Units”), and (ii) as consideration for the issuance and sale of the Second
Transaction Purchased Units to the Purchaser, the Purchaser hereby agrees to pay
K-Sea the Second Transaction Purchase Price; provided that, if the Second
Transaction Closing has not occurred by October 31, 2010 (the “Second
Transaction Outside Date”), the Purchaser shall have no obligation to purchase,
and K-Sea shall have no obligation to issue and sell, the Second

 

10

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

 

Transaction Purchased Units; provided, however, that if the Second Transaction
Closing has not occurred by the Second Transaction Outside Date and the failure
to take any action required to fulfill any of a party’s obligations under this
Agreement has been the cause of, or resulted in, the failure of the Second
Transaction Closing to occur prior to the Second Transaction Outside Date, such
party whose action or failure to take an action caused the Second Transaction
Closing not to occur by the Second Transaction Outside Date shall continue to
have the obligation to close the transactions contemplated by the Second
Transaction Closing until such time that such other party provides written
notice that it does not intend to complete the transactions contemplated by the
Second Transaction Closing (the “Second Transaction Termination Notice”).

 

Section 2.02          Closings.

 

(a)           Pursuant to the terms and subject to the conditions of this
Agreement, the consummation of the purchase and sale of the First Transaction
Purchased Units hereunder (the “First Transaction Closing”) shall take place on
(i) the date that is 2 Business Days following the date on which the conditions
set forth in Section 2.03 (other than those conditions that by their nature are
to be satisfied at the First Transaction Closing but subject to the fulfillment
or waiver of those conditions) have been satisfied or waived, but in no event
earlier than September 10, 2010; or (ii) at such other time as the parties
hereto may mutually agree (the “First Transaction Closing Date”).

 

(b)           Pursuant to the terms and subject to the conditions of this
Agreement, the consummation of the purchase and sale of the Second Transaction
Purchased Units hereunder (the “Second Transaction Closing”) shall take place on
(i) the date that is 2 Business Days following the date on which the conditions
set forth in Section 2.04 (other than those conditions that by their nature are
to be satisfied at the Second Transaction Closing but subject to the fulfillment
or waiver of those conditions) have been satisfied or waived, or (ii) at such
other time as the parties hereto may mutually agree (the “Second Transaction
Closing Date”).

 

(c)           The Closings under this Agreement shall take place at the offices
of Latham & Watkins LLP, 717 Texas Avenue, 16th Floor, Houston, Texas 77002. 
The parties agree that the Closings may occur via delivery of facsimiles or
photocopies of this Agreement and cross-receipts; provided that the originals of
such documents are sent via overnight delivery to be received by the other party
(or designee of such other party) on the first Business Day immediately
following the Closings.

 

Section 2.03          Conditions of the Parties’ Obligations at the First
Transaction Closing.

 

(a)           Mutual Conditions.  The respective obligations of each party to
consummate the purchase and issuance and sale of the First Transaction Purchased
Units shall be subject to the satisfaction on or prior to the First Transaction
Closing Date of each of the following conditions (any or all of which may be
waived by a particular party on behalf of itself in writing, in whole or in
part, to the extent permitted by applicable Law):

 

(i)            No statute, rule, order, decree or regulation shall have been
enacted or promulgated, and no action shall have been taken, by any Governmental
Authority which temporarily, preliminarily or permanently restrains, precludes,
enjoins or otherwise

 

11

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

 

prohibits the consummation of the transactions contemplated hereby or makes the
transactions contemplated hereby illegal; and

 

(ii)           There shall not be pending any suit, action or proceeding by any
Governmental Authority seeking to restrain, preclude, enjoin or prohibit the
transactions contemplated by this Agreement.

 

(b)           Conditions to the Purchaser’s Obligations at the First Transaction
Closing.  The obligation of the Purchaser to consummate the purchase of the
First Transaction Purchased Units is subject to the satisfaction (or waiver by
the Purchaser) on or prior to the First Transaction Closing of the following
conditions:

 

(i)            All of the representations and warranties of K-Sea contained in
this Agreement shall be true and correct as of the First Transaction Closing as
if made on the First Transaction Closing Date (other than the representations
and warranties as of a specified date, which shall be true and correct on and as
of such date) without giving effect to any limitation as to materiality or K-Sea
Material Adverse Effect set forth therein, except to the extent that any
breaches of such representations and warranties, individually or in the
aggregate, have not had, or would not reasonably be expected to have, a K-Sea
Material Adverse Effect; provided that, the representations and warranties of
K-Sea set forth (x) in the first sentence of Section 3.01 (Formation and
Qualification; Citizenship), Section 3.02 (Ownership of Subsidiaries),
Section 3.04 (Authorization; Enforceability, Valid Issuance), Section 3.05 (No
Preemptive Rights, Registration Rights or Options), and Section 3.06
(Capitalization) shall be true and correct in all respects, and (y) in
Section 3.11 (No Material Adverse Change) shall be true and correct in all
respects (without disregarding the references to materiality or K-Sea Material
Adverse Effect therein).

 

(ii)           Each of the K-Sea Entities shall have performed in all material
respects all of the covenants required to be performed by it hereunder prior to
the First Transaction Closing.

 

(iii)          The General Partner shall have entered into the K-Sea Partnership
Agreement in the form attached hereto as Exhibit A, and the K-Sea Partnership
Agreement, as amended, shall be in full force and effect.

 

(iv)          The Debt Agreements shall be in full force and effect, with only
such amendments thereto after the date hereof as are approved by the Purchaser
in accordance with Section 5.04(b) hereof, and no defaults shall have occurred
and be continuing thereunder.

 

(v)           Each of the initial Designated Directors shall be nominated and
approved as members of the Board of Directors of GP LLC, effective as of the
First Transaction Closing, and shall each be a Continuing Director.

 

(vi)          The transactions contemplated by the Nigerian Vessel Sale
Agreement shall have closed and the Operating Partnership or its Affiliates
shall have received the entire consideration thereunder.

 

12

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

 

(vii)         The limited liability company agreement of K-Sea IDR Holdings
shall have been amended to include the provisions of Section 5.09(c) hereof and
shall be in a form reasonably acceptable to the Purchaser.

 

(viii)        The Operating Partnership or its Affiliates shall have amended the
TD Equipment Finance Agreements on terms reasonably satisfactory to the
Purchaser such that the covenants set forth therein, taking into account such
amendments, shall be no more restrictive on K-Sea or any of its Affiliates than
such covenants as set forth in the Debt Agreements and TD Equipment Finance
shall have consented to the amendments to the Debt Agreements entered into as of
the date hereof.

 

(ix)          The delivery by K-Sea of all of the following:

 

(1)           a certificate or certificates (bearing the legend set forth in
Section 4.05(d) of this Agreement) representing the First Transaction Purchased
Units and meeting the requirements of the K-Sea Partnership Agreement,
registered in such name(s) as the Purchaser has designated (which shall be
limited to Purchaser and its Affiliates);

 

(2)           a certificate of the Secretary or Assistant Secretary of GP LLC,
on behalf of K-Sea, certifying as to and attaching: (i) the K-Sea Partnership
Agreement, (ii) the resolutions of the Board authorizing the execution and
delivery of the Basic Documents and the transactions contemplated thereby,
including the issuance of the Purchased Units and (iii) the incumbency of the
officers authorized to execute the Basic Documents on behalf of K-Sea;

 

(3)           copies of (i) the Certificate of Limited Partnership of K-Sea and
all amendments thereto, (ii) the Certificate of Limited Partnership of the
General Partner and all amendments thereto and (iii) the Certificate of
Formation of GP LLC and all amendments thereto, each certified by the Secretary
of State (or corresponding state official) of its state of formation and dated
as of a recent date;

 

(4)           certificates from the Secretary of State (or corresponding state
official) of the state of formation of each of  K-Sea, the General Partner and
GP LLC evidencing that each such entity is in good standing in their respective
jurisdiction of incorporation or formation;

 

(5)           a certificate of the Secretary of State (or corresponding
official) of each of the jurisdictions listed on Schedule 1.01(b) hereto, dated
as of a recent date, evidencing the qualification and good standing of each of
the K-Sea Entities as a

 

13

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

 

foreign limited liability company, foreign limited partnership or foreign
corporation, as the case may be;

 

(6)           a cross-receipt executed by K-Sea and delivered to the Purchaser
certifying that it has received the First Transaction Purchase Price as of the
Closing;

 

(7)           the K-Sea Partnership Agreement, which shall have been duly
executed by the General Partner;

 

(8)           the Director Designation Agreement, which shall have been duly
executed by K-Sea;

 

(9)           the Registration Rights Agreement, which shall have been duly
executed by K-Sea;

 

(10)         a certificate, signed by a duly authorized officer of K-Sea and
dated the First Transaction Closing Date, to the effect that the conditions set
forth in Section 2.03(b)(i) and Section 2.03(b)(ii) have been satisfied or
waived; and

 

(11)         all other documents, instruments and writings required to be
delivered by K-Sea at the First Transaction Closing under the Basic Documents.

 

(c)           Conditions to K-Sea’s Obligations at the First Transaction
Closing.  The obligation of K-Sea to issue and sell the First Transaction
Purchased Units is subject to the satisfaction (or waiver by the Purchaser) on
or prior to the First Transaction Closing of the following conditions:

 

(i)            All of the representations and warranties of the Purchaser
contained in this Agreement shall be true and correct as of the First
Transaction Closing as if made on the First Transaction Closing Date (other than
the representations and warranties as of a specified date, which shall be true
and correct on and as of such date) without giving effect to any limitation as
to materiality set forth therein, except to the extent that any breaches of such
representations and warranties, individually or in the aggregate, have not or
would not reasonably be expected to delay or impair the Purchaser’s ability to
effect the First Transaction Closing or perform its obligations under this
Agreement; provided that, the representations and warranties of the Purchaser
set forth in the first sentence of Section 4.01 (Existence; Citizenship) and
Section 4.02 (Authorization; Enforceability) shall be true and correct in all
respects.

 

(ii)           The Purchaser shall have performed in all material respects all
of the covenants required to be performed by it hereunder prior to the First
Transaction Closing.

 

(iii)          The delivery by the Purchaser of all of the following:

 

14

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

 

(1)           the First Transaction Purchase Price, in immediately available
funds;

 

(2)           the Registration Rights Agreement which shall have been duly
executed by the Purchaser;

 

(3)           the Director Designation Agreement, which shall have been duly
executed by the Purchaser;

 

(4)           a cross-receipt executed by the Purchaser and delivered to K-Sea
certifying that it has received the First Transaction Purchased Units;

 

(5)           a certificate, signed by a duly authorized officer of the
Purchaser and dated the First Transaction Closing Date, to the effect that the
conditions set forth in Section 2.03(c)(i) and Section 2.03(c)(ii) have been
satisfied or waived; and

 

(6)           all other documents, instruments and writings required to be
delivered by the Purchaser at the First Transaction Closing under the Basic
Documents

 

Section 2.04          Conditions of the Parties’ Obligations at the Second
Transaction Closing.

 

(a)           Mutual Conditions.  The respective obligations of each party to
consummate the purchase and issuance and sale of the Second Transaction
Purchased Units shall be subject to the satisfaction on or prior to the Second
Transaction Closing Date of each of the following conditions (any or all of
which may be waived by a particular party on behalf of itself in writing, in
whole or in part, to the extent permitted by applicable Law):

 

(i)            No statute, rule, order, decree or regulation shall have been
enacted or promulgated, and no action shall have been taken, by any Governmental
Authority which temporarily, preliminarily or permanently restrains, precludes,
enjoins or otherwise prohibits the consummation of the transactions contemplated
hereby or makes the transactions contemplated hereby illegal;

 

(ii)           There shall not be pending any suit, action or proceeding by any
Governmental Authority seeking to restrain, preclude, enjoin or prohibit the
transactions contemplated by this Agreement.

 

(iii)          The waiting periods applicable to the consummation of the Second
Transaction Closing under the HSR Act shall have expired or been terminated; and

 

(iv)          The First Transaction Closing shall have occurred in accordance
with the terms of this Agreement.

 

(b)           Conditions to the Purchaser’s Obligations at the Second
Transaction Closing.  The obligation of the Purchaser to purchase the Second
Transaction Purchased Units is

 

15

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

 

subject to the satisfaction (or waiver by the Purchaser) on or prior to the
Second Transaction Closing of all of the conditions set forth in
Section 2.03(b) hereof (other than the conditions set forth in
Section 2.03(b)(iii), Section 2.03(b)(v) and Sections 2.03(b)(ix)(7)-(9));
provided that, for each such condition, any reference to the First Transaction
Closing, the First Transaction Closing Date and the First Transaction Purchased
Units shall instead refer to the Second Transaction Closing, the Second
Transaction Closing Date and the Second Transaction Purchased Units,
respectively.

 

(c)           Conditions to K-Sea’s Obligations at the Second Transaction
Closing.  The obligation of K-Sea to issue and sell the Second Transaction
Purchased Units is subject to the satisfaction (or waiver by the Purchaser) on
or prior to the Second Transaction Closing of all of the conditions set forth in
Section 2.03(c) hereof (other than the conditions set forth in Sections
2.03(c)(iii)(2) and (3)); provided that, for each such condition, any reference
to the First Transaction Closing, the First Transaction Closing Date and the
First Transaction Purchase Price shall instead refer to the Second Transaction
Closing, the Second Transaction Closing Date and the Second Transaction Purchase
Price, respectively.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF K-SEA

 

K-Sea represents and warrants to the Purchaser, on and as of the date of this
Agreement and on and as of each of the Closing Dates, as follows:

 

Section 3.01          Formation and Qualification; Citizenship.

 

Each of the K-Sea Entities has been duly formed and is validly existing in good
standing under the Laws of its jurisdiction of formation, and is duly registered
or qualified to do business and is in good standing as a foreign corporation,
limited liability company, limited partnership or general partnership, as the
case may be, in each jurisdiction in which its ownership or lease of property or
the conduct of its businesses requires such registration or qualification,
except where the failure so to register or qualify would not individually or in
the aggregate, reasonably be expected to have a K-Sea Material Adverse Effect. 
Each of the K-Sea Entities has all corporate, limited liability company, limited
partnership or general partnership, as the case may be, power and authority
necessary to own or lease its Properties currently owned or leased and to
conduct its business as currently conducted, in each case in all material
respects as described in the K-Sea SEC Documents.  Each of K-Sea and the
Operating Partnership is a citizen of the United States within the meaning of 46
U.S.C. Sec. 50501 for the purpose of operating the vessels in the coastwise
trade of the United States.

 

Section 3.02          Ownership of Subsidiaries.

 

Schedule 1.01(b) hereto sets forth the name of each of the K-Sea Subsidiaries
and the jurisdiction of its incorporation or formation, as applicable.  K-Sea,
directly or indirectly, owns 100% of the issued and outstanding capital stock,
membership interests or partnership interests, as the case may be, of the K-Sea
Subsidiaries, free and clear of any Liens, except for Liens created pursuant to
the Debt Agreements.  Such capital stock, limited liability company interests or
limited partnership interests, as the case may be, have been duly authorized and
validly issued

 

16

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

 

and are fully paid (to the extent required under such Subsidiary’s applicable
constituent documents) have not been issued in violation of any pre-emptive
rights or other similar rights, and are non-assessable (except as such
non-assessability may be affected by matters described in: (A) Sections 18-607
and 18-804 of the Delaware Limited Liability Company Act, in the case of a
Delaware limited liability company, and (B) Sections 17-303, 17-607 and 17-804
of the Delaware Revised Uniform Limited Partnership Act (the “Delaware LP Act”),
in the case of a Delaware limited partnership).

 

Section 3.03                             No Other Subsidiaries.  Other than its
ownership interests in the K-Sea Subsidiaries, K-Sea does not own, directly or
indirectly, any equity or long-term debt securities of any other Person that,
individually or in the aggregate, would be deemed to be a “significant
subsidiary” as such term is defined in Rule 405 of the Securities Act.

 

Section 3.04                             Authorization; Enforceability; Valid
Issuance.

 

(a)                                  K-Sea has all requisite limited partnership
power and authority to issue and sell the Purchased Units, in accordance with
and upon the terms and conditions set forth in the Basic Documents, and no
further consent or authorization is required.

 

(b)                                 The Basic Documents to which K-Sea is a
party are or will be at the time of the Closings duly authorized and validly
executed and delivered by K-Sea and, assuming due authorization, execution and
delivery by the Purchaser or its Affiliate, as applicable (if either the
Purchaser or its Affiliate is a party thereto), will constitute, valid and
binding obligations of K-Sea; provided, that the enforceability thereof may be
limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar Laws relating to or affecting creditors’ rights
generally, (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and (iii)
public policy, applicable law relating to fiduciary duties, indemnification and
contribution, and an implied covenant of good faith and fair dealing.

 

(c)                                  The Purchased Units and the limited partner
interests represented thereby will be at the time of the applicable Closing duly
authorized by K-Sea in accordance with the K-Sea Partnership Agreement and, when
issued and delivered against payment therefor in accordance with this Agreement,
will be validly issued, fully paid (to the extent required under the K-Sea
Partnership Agreement), will not be issued in violation of any pre-emptive
rights or other similar rights, and are non-assessable (except as such
non-assessability may be affected by matters described in Sections 17-303,
17-607 and 17-804 of the Delaware LP Act) and will be free of any and all Liens
and restrictions on transfer, other than (i) restrictions on transfer under
Partnership  Agreement or this Agreement and under applicable state and federal
securities laws, (ii) such Liens as are created by the Purchaser and (iii) such
Liens as arise under the K-Sea Partnership Agreement or the Delaware LP Act.

 

(d)                                 Upon issuance in accordance with this
Agreement and the K-Sea Partnership Agreement, the Conversion Units will be duly
authorized, validly issued, fully paid (to the extent required by the K-Sea
Partnership Agreement) and non-assessable (except as such non-assessability may
be affected by matters described in Sections 17-303, 17-607 and 17-804 of the
Delaware LP Act) and will be free of any and all Liens and restrictions on
transfer, other than

 

17

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

 

(i) restrictions on transfer under the K-Sea Partnership Agreement or this
Agreement and under applicable state and federal securities laws, (ii) such
Liens as are created by the Purchaser and (iii) such Liens as arise under the
K-Sea Partnership Agreement or the Delaware LP Act.

 

(e)                                  The K-Sea Entity Operating Agreements have
been duly authorized, executed and delivered by the respective K-Sea Entities
that are parties thereto, and are valid and legally binding agreements of the
respective K-Sea Entities that are parties thereto, enforceable against such
parties in accordance with their terms; provided, that the enforceability
thereof may be limited by (i) applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws relating to or affecting
creditors’ rights generally, (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and (iii) public policy, applicable law relating to fiduciary duties,
indemnification and contribution, and an implied covenant of good faith and fair
dealing.

 

Section 3.05                             No Preemptive Rights, Registration
Rights or Options.

 

There are no preemptive rights or other rights to subscribe for or options or
warrants to purchase, nor any restriction upon the voting or transfer of, any
equity securities in any of the K-Sea Entities, except (i) as described in the
K-Sea SEC Documents, (ii) for phantom units granted pursuant to the K-Sea
Transportation Partners L.P. Long-Term Incentive Plan (the “LTIP”) or restricted
units issued pursuant to the K-Sea Transportation Partners L.P. Employee Unit
Purchase Plan, and (iii) as contemplated by the Basic Documents.  Except as
contemplated by the Basic Documents, the issuance and sale of the Purchased
Units as contemplated by this Agreement does not give rise to any rights for or
relating to the registration of any Common Units or other securities of K-Sea
other than as have been waived.

 

Section 3.06                             Capitalization.

 

As of the date of this Agreement and as of the First Transaction Closing Date,
immediately prior to the issuance and sale of the First Transaction Purchased
Units, the issued and outstanding interests of K-Sea consist of 19,127,411
Common Units, the incentive distribution rights (as defined in the K-Sea
Partnership Agreement, the “Incentive Distribution Rights”) and 202,447 general
partner units, excluding non-vested phantom units under the LTIP.  As of the
Second Transaction Closing Date, immediately prior to the issuance and sale of
the Second Transaction Purchased Units, the issued and outstanding interests of
K-Sea consist of 19,127,411 Common Units, the First Transaction Purchased Units,
the Incentive Distribution Rights and 202,447 general partner units, excluding
non-vested phantom units under the LTIP.  All outstanding Common Units and
Incentive Distribution Rights and the limited partner interests represented
thereby have been duly authorized and validly issued in accordance with the
K-Sea Partnership Agreement and are fully paid (to the extent required under the
K-Sea Partnership Agreement) and non-assessable (except as such
non-assessability may be affected by matters described in Sections 17-303,
17-607 and 17-804 of the Delaware LP Act).

 

Section 3.07                             No Breach.

 

None of the issuance and sale by K-Sea of the Purchased Units, the execution,
delivery and performance of the Basic Documents or the consummation of the
transactions contemplated

 

18

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

 

hereby or thereby (i) conflicts or will conflict with or constitutes or will
constitute a violation of any of the Operating Agreements, (ii) requires any
consent, approval or notice under or results in a breach or violation of, or
constitutes a default (or an event which, with notice or lapse of time or both,
would constitute such a default) under, any Contract to which any of the K-Sea
Entities is a party or by which any of them or any of their respective
Properties may be bound (other than conflicts, breaches, violations or defaults
that have been waived or cured), (iii) violates or will violate any Law of any
Governmental Authority in a proceeding to which any of them or their Property is
or was a party or (iv) results or will result in the creation or imposition of
any Lien upon any property or assets of any of the K-Sea Entities, which
conflicts, breaches, violations, defaults or Liens, in the case of clauses (ii),
(iii) or (iv), could reasonably be expected to be material to the K-Sea
Entities, taken as a whole.

 

Section 3.08                             No Approvals.

 

Except for (i) the approvals required by the Commission in connection with any
registration statement filed under the Registration Rights Agreement, (ii) such
consents that have been obtained and (iii) such consents, approvals,
authorizations or orders that, if not obtained, would not reasonably be expected
to be material to the K-Sea Entities, taken as a whole, or the Purchaser, no
consent, approval, authorization or order of, or filing or registration with,
any Governmental Authority is required in connection with the issuance and sale
by K-Sea of the Purchased Units, the execution, delivery and performance of each
of the Basic Documents to which it is a party or the consummation by K-Sea of
the transactions contemplated by the Basic Documents.

 

Section 3.09                             No Default.

 

Except as set forth in Schedule 3.09, none of the K-Sea Entities (i) is in
violation of its applicable Operating Agreement, (ii) is in default (and no
event has occurred which, with notice or lapse of time or both, would constitute
such a default) in the due performance or observance of any term, covenant or
condition contained in any Contract to which it is a party or by which it is
bound or to which any of its properties or assets is subject or (iii) is in
violation of any Law of any Governmental Authority, which default or violation
in the case of clause (ii) or (iii), would reasonably be expected to result in a
liability, individually or in the aggregate, to the K-Sea Entities, taken as a
whole, in excess of $5,000,000.

 

Section 3.10                             K-Sea SEC Documents; K-Sea Financial
Statements.

 

(a)                                  K-Sea has filed or furnished with the
Commission all reports, schedules, forms, statements and other documents
(including exhibits and other information incorporated therein) required to be
filed or furnished by it under the Exchange Act or the Securities Act since July
1, 2009 (all such documents, collectively, the “K-Sea SEC Documents”).  The
K-Sea SEC Documents, at the time filed or furnished (except to the extent
corrected by a subsequently filed or furnished K-Sea SEC Document filed or
furnished prior to the date hereof), (i) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein (in the light of the
circumstances under which they were made in the case of any prospectus) not
misleading and (ii) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities

 

19

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

 

Act, as applicable.  All of (i) the audited financial statements and unaudited
interim financial statements of K-Sea included in the K-Sea SEC Documents (the
“K-Sea SEC Financial Statements”), at the time filed or furnished (except to the
extent corrected by a subsequently filed or furnished K-Sea SEC Document filed
or furnished prior to the date hereof) and (ii) the unaudited financial
statements of K-Sea for the fiscal year ended June 30, 2010 set forth on
Schedule 3.10(a) hereto, and together with the K-Sea SEC Financial Statements,
the “K-Sea Financial Statements”), as of the date hereof, (a) were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the Commission) and (b) fairly present
(subject in the case of unaudited statements to normal, recurring and year-end
audit adjustments) in all material respects the financial position and results
of operations of the K-Sea Entities  taken as a whole as of the dates and for
the periods indicated.  PricewaterhouseCoopers LLP is an independent registered
public accounting firm with respect to K-Sea and has not resigned or been
dismissed as independent registered public accountants of K-Sea as a result of
or in connection with any disagreement with K-Sea on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures.

 

(b)                                 Except as reflected, reserved against or
accrued in the K-Sea Financial Statements and for Liabilities that would not be
required to be disclosed on a balance sheet in accordance with GAAP, the K-Sea
Entities have no Liabilities other than (i) Liabilities that were incurred since
June 30, 2010 in the Ordinary Course and that would not reasonably be expected
to have, individually or in the aggregate, a K-Sea Material Adverse Effect and
(ii) Liabilities that would not reasonably be expected to be material to the
K-Sea Entities, taken as a whole.

 

Section 3.11                             No Material Adverse Change.

 

Except as reflected, reserved against or accrued in the K-Sea Financial
Statements, since June 30, 2009, or as set forth in or contemplated by the K-Sea
SEC Documents (excluding any disclosures set forth in any risk factor section or
in any other section to the extent they are forward looking statements or
cautionary, predictive or forward-looking in nature), there has not been (i) any
material adverse change, or any development involving a prospective material
adverse change, in the business, Properties, management, financial condition or
results of operations of the K-Sea Entities taken as a whole, (ii) any
transaction that is material to the K-Sea Entities taken as a whole, (iii) any
obligation or liability, direct or contingent (including any off-balance sheet
obligations), incurred by any of the K-Sea Entities that is material to the
K-Sea Entities taken as a whole, (iv) any change in the capital stock,
membership or other equity interests or outstanding Indebtedness of any of the
K-Sea Entities that is material to the K-Sea Entities taken as a whole, (v) any
dividend or distribution of any kind declared, paid or made on the capital stock
of, or in respect of membership or partnership interests in, the K-Sea Entities,
except for dividends or distributions made or paid to the K-Sea Entities, (vi)
any material loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance or from any labor dispute
or action, investigation or decree by a Governmental Authority sustained by any
of the K-Sea Entities, (vii) any material change in K-Sea’s accounting
principles, practices or methods, or (viii) any change, event, occurrence,
effect, fact, circumstance or condition that is or would reasonably be expected
to have, individually or in the aggregate, a K-Sea Material Adverse Effect.

 

20

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

 

Section 3.12                             Title to Real Property; Leases.

 

(a)                                  Each of the K-Sea Entities has good and
marketable title to all Property described in the K-Sea SEC Documents as owned
by such K-Sea Entity, free and clear of all (i) Liens and security interests
except Liens or security interests arising under or securing indebtedness
incurred under Debt Agreements or, with respect to the K-Sea Vessels, Liens and
security interests used to finance the acquisition of the K-Sea Vessels, all of
which have been previously disclosed to the Purchaser or (ii) other claims and
other encumbrances (other than Liens or security interests) except, in each
case, (a) as described, and subject to the limitations contained, in the K-Sea
SEC Documents, (b) such as do not materially affect the value of such Property
taken as a whole or (c) such as do not materially interfere with the use of such
Properties taken as a whole as they have been used in the past and are proposed
to be used in the future.

 

(b)                                 Each of the K-Sea Entities has valid and
enforceable leases with respect to any real property and buildings held under
lease by such K-Sea Entity with such exceptions as do not materially interfere
with the use of the Properties of the K-Sea Entities taken as a whole as they
have been used in the past and are proposed to be used in the future.

 

Section 3.13                             Insurance.

 

The K-Sea Entities maintain insurance covering their properties, operations,
personnel and businesses against such losses and risks and in such amounts as is
reasonably adequate for the conduct of their respective businesses and the value
of their respective Properties and as is customary for companies engaged in
similar businesses in similar industries.  None of the K-Sea Entities has
received written notice from any insurer or agent of such insurer that
substantial capital improvements (relating to K-Sea and the K-Sea Subsidiaries
on a consolidated basis) or other substantial expenditures will have to be made
in order to continue such insurance, and all such insurance is outstanding and
in force on the date hereof.

 

Section 3.14                             Litigation.

 

Except as set forth in Schedule 3.14, there are no actions, suits, claims,
investigations or proceedings (including any of the foregoing relating to any
Environmental Law) pending before any Governmental Authority or, to the
Knowledge of K-Sea, threatened against any of the K-Sea Entities before or by
any Governmental Authority or any self-regulatory organization or other
non-governmental regulatory authority (including the NYSE) that are required to
be described in the K-Sea SEC Documents but are not described as required or
that would reasonably be expected to result in a liability, individually or in
the aggregate, to the K-Sea Entities, taken as a whole, in excess of $5,000,000.

 

Section 3.15                             Employment Related Matters.

 

Except as set forth on Schedule 3.15, (1) Neither K-Sea nor any K-Sea Entity is
a party to any collective bargaining agreement or other contract or agreement
with any labor organization or other representative of any of K-Sea’s employees,
nor is any such contract or agreement presently being negotiated; (2) to the
Knowledge of K-Sea, no campaigns are being conducted to solicit cards from any
of employees of any K-Sea Entity to authorize representation by any labor

 

21

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

 

organization, and no such campaigns have been conducted within the past three
years; (3) no labor strike, slowdown, work stoppage, dispute, lockout or other
labor controversy is in effect or, to the Knowledge of K-Sea, threatened, and no
K-Sea Entity has experienced any such labor controversy within the past three
years; (4) no unfair labor practice charge or complaint is pending or, to the
Knowledge of K-Sea, threatened against any K-Sea Entity; (5) no grievance or
arbitration proceeding is pending or, to the Knowledge of K-Sea, threatened
which, if adversely decided, may reasonably, individually or in the aggregate,
create a liability in excess of $500,000, or cause any K-Sea Entity to incur
expenses or forego operating savings in excess of $500,000; (6) no action,
complaint, charge, inquiry, proceeding or investigation by or on behalf of any
employee, prospective employee, former employee, labor organization or other
representative of any K-Sea Entity’s employees is pending or, to the best
knowledge of K-Sea, threatened which, if adversely decided, may reasonably,
individually or in the aggregate, create a liability in excess of $500,000; (7)
no K-Sea Entity is a party to, or otherwise bound by, any consent decree with,
or citation by, any Government Authority relating to employees or employment
practices; (8) the K-Sea Entities are in material compliance with all applicable
laws, agreements, contracts, policies, plans, and programs relating to
employment, employment practices, compensation, benefits, hours, terms and
conditions of employment, and the termination of employment, including but not
limited to any obligations pursuant to the Worker Adjustment and Retraining
Notification Act of 1988; (9) no K-Sea Entity will have any liability under any
benefit or severance policy, practice, agreement, plan, or program which exists
or arises, or may be deemed to exist or arise, under any applicable law or
otherwise, as a result of or in connection with the transactions contemplated
hereunder or the termination of any of K-Sea Entity’s employees on or prior to
the Closing Dates; and (10) no K-Sea Entity has closed any plant or facility,
effectuated any layoffs of employees or implemented any early retirement,
separation or window program within the past three years, nor has any  K-Sea
Entity planned or announced any such action or program for the future.

 

Section 3.16                             Tax Returns.

 

(a)                                  Each of the K-Sea Entities has filed all
material Tax Returns required to be filed through the date of this Agreement,
which returns are correct and complete in all material respects, and all
material Taxes due in relation to the K-Sea Entities have been paid in full,
other than those (i) that are being contested in good faith by appropriate
action and for which adequate reserves have been established in accordance with
GAAP, or (ii) where payment is not yet due and adequate provision has been made
in the K-Sea Financial Statements in accordance with GAAP.  There are no
material Liens with respect to Taxes upon any of the assets or properties of the
K-Sea Entities, other than with respect to Taxes not yet due and payable.

 

(b)                                 There are no asserted or threatened
deficiencies or assessment of Taxes from any taxing authority with respect to or
attributable to the K-Sea Entities. There are no ongoing material audits or
examinations of any of the Tax Returns relating to or attributable to the K-Sea
Entities and no such material audit or examination is threatened in writing. The
K-Sea Entities have not granted any requests, agreements, consents or waivers to
extend the statutory period of limitations applicable to the assessment of any
material Taxes.

 

22

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

 

(c)                                  No K-Sea Entity has any material obligation
under any Tax sharing or Tax indemnity agreement or similar contract or
arrangement.  No closing agreement pursuant to Section 7121 of the Internal
Revenue Code of 1986, as amended (the “Code”) (or any similar provision of
state, local or foreign law) has been entered into by or with respect to any
K-Sea Entity.  No K-Sea Entity has any material liability for Taxes of any other
person as a transferee or successor, by contract, or otherwise.

 

(d)                                 No K-Sea Entity has engaged in a transaction
that would be a “listed transaction” by or with respect to any K-Sea Entity
pursuant to Treasury Regulation Section 1.6011-4 or any predecessor thereto.

 

(e)                                  Any K-Sea Entity which is treated as a
flow-through entity for U.S. federal income tax purposes has a valid Section 754
election in effect.

 

Section 3.17                             Employee Benefit Plans.

 

(a)                                  Except for those Plans set forth on
Schedule 3.17, all material Plans of the K-Sea Entities have been disclosed in
the K-Sea SEC Documents.

 

(b)                                 Each Plan has been operated and administered
in all material respects in accordance with its terms and the requirements of
all applicable Laws, including ERISA and the Code.  No action, claim or
proceeding is pending or, to the Knowledge of K-Sea, threatened with respect to
any Plan (other than claims for benefits in the Ordinary Course) that would
result in any material liability to any K-Sea Entity and, to the Knowledge of
K-Sea, no fact or event exists that would give rise to any such action, claim or
proceeding.  No administrative investigation, audit or other administrative
proceeding by the Department of Labor, the Department of Treasury, the IRS or
other Governmental Authority are pending or, to the Knowledge of K-Sea,
threatened.

 

(c)                                  Each Plan that is intended to be qualified
under Section 401(a) of the Code has timely received a favorable determination
letter from the IRS and each trust established in connection with any Plan that
is intended to be exempt from federal income taxation under Section 501(a) of
the Code has received a determination letter from the IRS that it is so exempt,
and, to the Knowledge of K-Sea, no fact or event has occurred since the date of
such determination letter or letters from the IRS that would reasonably be
expected to adversely affect the qualified status of any such Plan or the exempt
status of any such trust.

 

(d)                                 No event has occurred and no condition
exists with respect to any Plan that would subject any K-Sea Entity, either
directly or by reason of its affiliation with any Person that, together with any
of the K-Sea Entities, is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code (an “ERISA Affiliate”), to any material tax, fine,
lien, penalty or other liability imposed by ERISA, the Code or other applicable
Law.

 

(e)                                  No Plan is subject to the requirements of
Title IV of ERISA.  No Plan is a “multiemployer plan” (as defined in Section
4001(a)(3) of ERISA) and none of the K-Sea Entities nor any of their ERISA
Affiliates has at any time contributed to, or has or had any liability or
obligation in respect of, any multiemployer plan.  No Plan provides
post-employment welfare (including health, medical or life insurance) benefits
and none of the K-

 

23

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

 

Sea Entities has any obligation to provide any such post-employment welfare
benefits now or in the future, other than as required by Section 4980B of the
Code or any other applicable Law.

 

(f)                                    No Plan exists that, as a result of the
execution and delivery of the Basic Documents, nor the consummation of the
transactions contemplated hereby or thereby, will (alone or together with any
other event) (i) entitle any current or former employee, director or independent
contractor of any of the K-Sea Entities to severance, termination, change in
control, retention or any similar compensation, benefits, or property or (ii)
accelerate the time of payment or vesting, or increase the amount of any
compensation due to, or in respect of, any current or former employee, director
or independent contractor of any of the K-Sea Entities.

 

Section 3.18                             Environmental Compliance.

 

Except as set forth in Schedule 3.18, the K-Sea Entities (i) are in compliance
with, and have not violated, any and all Environmental Laws, and, to the
Knowledge of K-Sea, there is no condition or circumstance that would reasonably
be expected to prevent or interfere with such compliance in the future, (ii)
have received all Environmental Permits required of them under applicable
Environmental Laws to conduct their respective businesses as they are currently
being conducted, (iii) are in compliance with all, and have not violated any,
terms and conditions of any such Environmental Permits and, to the Knowledge of
K-Sea, there is no condition or circumstance that would reasonably be expected
to prevent or interfere with such compliance in the future, (iv) do not have any
Liability in connection with the disposal of Hazardous Material or with the
release or threatened release into the environment of any Hazardous Material,
and Hazardous Materials are not present at or about any property or facility
currently or formerly owned, leased or operated by any of the K-Sea Entities in
condition that would reasonably be expected to result in Liability to any K-Sea
Entity relating to any Environmental Law, and (v) have not assumed, retained or
provided indemnity against any Liability of any other Person relating to any
Environmental Law, except where such failure to comply with Environmental Laws,
such failure to receive required Environmental Permits, such failure to comply
with the terms and conditions of such Environmental Permits, such liability in
connection with disposal, releases, or presence of such Hazardous Materials, or
such assumption, retention or indemnity would not reasonably be expected to
result in a liability, individually or in the aggregate, to the K-Sea Entities,
taken as a whole, in excess of $5,000,000.

 

Section 3.19                             Compliance with Laws; Permits.

 

(a)                                  Except as set forth in Schedule 3.19(a),
each of the K-Sea Entities is in compliance with all Laws applicable to its
business, operations or assets, except for such failures to be in compliance as
would not reasonably be expected to result in a liability, individually or in
the aggregate, to the K-Sea Entities, taken as a whole, in excess of
$5,000,000.  None of the K-Sea Entities has received any written notice of or
been charged with any violation of any Laws, except where such were such
violations (i) would not reasonably be expected to be material to the K-Sea
Entities, taken as a whole or (ii) have been disclosed in the K-Sea SEC
Documents.

 

(b)                                 Except as set forth in Schedule 3.19(b),
excluding any Environmental Permits, each of the K-Sea Entities has such
permits, consents, licenses, franchises, certificates and authorizations of
governmental or regulatory authorities (“Permits”) as are necessary to own

 

24

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

 

its Properties and to conduct its business in the manner it is currently
conducted except for such permits which, if not obtained, would not reasonably
be expected to result in a liability, individually or in the aggregate, to the
K-Sea Entities, taken as a whole, in excess of $5,000,000.  Except as set forth
in Schedule 3.19(b) or except as set forth in the K-Sea SEC Documents, each of
the K-Sea Entities has fulfilled and performed all its material obligations with
respect to such permits which are or will be due to have been fulfilled and
performed by such date and no event has occurred that would prevent the permits
from being renewed or reissued or which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in any impairment of
the rights of the holder of any such permit, except for such non-renewals,
non-issues, revocations, terminations and impairments that would not reasonably
be expected to result in a liability, individually or in the aggregate, to the
K-Sea Entities, taken as a whole, in excess of $5,000,000.  Except as described
in the K-Sea SEC Documents, none of such permits contains any restriction that
is materially burdensome to the K-Sea Entities considered as a whole.

 

Section 3.20                             NYSE Listing.

 

The Common Units are listed on the NYSE, and K-Sea has not received any notice
of delisting.  The issuance and sale of the Purchased Units and the issuance of
Conversion Units does not contravene NYSE rules and regulations.

 

Section 3.21                             Investment Company.

 

None of the K-Sea Entities is now, and after the sale of the Purchased Units to
be sold by K-Sea to the Purchaser hereunder will be, an “investment company” or
a company “controlled by” an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

 

Section 3.22                             MLP Status.

 

Other than as set forth on Schedule 3.22, none of the K-Sea Entities is treated
as a corporation for U.S. federal Tax purposes.  K-Sea has, for each taxable
year beginning after December 31, 2003, during which K-Sea was in existence, met
the gross income requirements of Section 7704(c)(2) of the Code and for any
taxable year beginning on or prior to December 31, 2003, K-Sea was not a
“publicly traded partnership” within the meaning of Section 7704 of the Code. 
K-Sea expects to meet the gross income requirements of Section 7704(c)(2) of the
Code for its taxable year ending December 31, 2010.

 

Section 3.23                             Certain Fees.

 

Except for the fees to be paid by K-Sea to UBS, no fees or commissions are or
will be payable by K-Sea to brokers, finders or investment bankers with respect
to the sale of any of the Purchased Units or the consummation of the
transactions contemplated by this Agreement.  K-Sea agrees that it will
indemnify and hold harmless the Purchaser from and against any and all claims,
demands or liabilities for broker’s, finder’s, placement or other similar fees
or commissions incurred by K-Sea or alleged to have been incurred by K-Sea in
connection with the sale of the Purchased Units or the consummation of the
transactions contemplated by this Agreement.

 

25

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

 

Section 3.24                             Form S-3 Eligibility.

 

K-Sea is eligible to register the resale of its Common Units for resale by the
Purchaser under Form S-3 promulgated under the Securities Act.

 

Section 3.25                             Material Agreements.

 

Each material agreement (as defined in Section 601(b)(10) of Regulation S-K
promulgated by the Commission), including each exhibit to the K-Sea SEC
Documents, including amendments to or other modifications of pre-existing
material agreements, to which K-Sea is a party (the “Material Agreements”) is in
full force and effect and is valid and enforceable against the K-Sea Entity
party thereto. Except as set forth in Schedule 3.25, none of the K-Sea Entities
is in default (with or without due notice or lapse of time or both) in any
material respect under any Material Agreement.

 

Section 3.26                             Books and Records; Sarbanes-Oxley
Compliance.

 

(a)                                  Each of the K-Sea Entities (i) has
established and maintains a system of internal accounting control over financial
reporting sufficient to comply with all legal and accounting requirements
applicable to the K-Sea Entities, (ii) has disclosed, based on its most recent
evaluation of internal controls, to the K-Sea Entities’ auditors and its audit
committee, (x) any significant deficiencies and material weaknesses in the
design or operation of its internal accounting controls which are reasonably
likely to materially and adversely affect the K-Sea Entities, taken as a whole,
ability to record, process, summarize, and report financial information, and
(y) any fraud known to the K-Sea Entities that involves management or other
employees who have a significant role in internal controls, and (iii) has not
received any complaint, allegation, assertion, or claim in writing regarding the
accounting practices, procedures, methodologies, or methods of any of the K-Sea
Entities or their internal accounting controls over financial reporting,
including any such complaint, allegation, assertion, or claim that any of the
K-Sea Entities has engaged in questionable accounting or auditing practices.

 

(b)                                 (i) K-Sea has established and maintains
disclosure controls and procedures (as such term is defined in Rule 13a-15 under
the Exchange Act), (ii) such disclosure controls and procedures are designed to
ensure that the information required to be disclosed by K-Sea in the reports it
files or submits under the Exchange Act is accumulated and communicated to
management of K-Sea, including its principal executive officers and principal
financial officers, as appropriate, to allow timely decisions regarding required
disclosure to be made and (iii) such disclosure controls and procedures are
effective in all material respects in alerting K-Sea in a timely manner to
material information required to be disclosed in K-Sea’s reports filed with the
Commission.

 

(c)                                  There is and has been no failure on the
part of K-Sea or, to the Knowledge of K-Sea, any of K-Sea’s officers, or any
member of the Board, in their capacities as such, to comply in all material
respects with the provisions of the Sarbanes-Oxley Act of 2002, as amended, and
the rules and regulations promulgated in connection therewith.

 

26

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

 

Section 3.27                             Foreign Corrupt Practices Act.

 

None of the K-Sea Entities, nor any director, officer, agent or employee acting
in his or her capacity as a director, officer, agent or employee of any of the
K-Sea Entities, has, directly or indirectly through an intermediary or
otherwise, (i) made any unlawful payment to foreign or domestic government
officials or employees or to any foreign or domestic political parties or
campaigns or violated any provision of any applicable antibribery Laws,
including the Foreign Corrupt Practices Act of 1977, as amended, or (ii) taken
any action that would constitute a violation of any applicable antibribery Laws,
including the Foreign Corrupt Practices Act of 1977, as amended.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

The Purchaser hereby represents and warrants to K-Sea with respect to itself, on
and as of the date of this Agreement and as of each of the Closing Dates, as
follows:

 

Section 4.01                             Existence; Citizenship.

 

The Purchaser is duly organized and validly existing and in good standing under
the laws of its state of formation, with all necessary power and authority to
own properties and to conduct its business as currently conducted.  Purchaser is
a citizen of the United States within the meaning of 46 U.S.C. Sec. 50501 for
the purpose of operating the vessels in the coastwise trade of the United
States.

 

Section 4.02                             Authorization; Enforceability.

 

(a)                                  The Purchaser has all necessary legal power
and authority to purchase the Purchased Units, in accordance with and upon the
terms and conditions set forth in the Basic Documents, and no further consent or
authorization of the Purchaser is required.

 

(b)                                 This Agreement has been, and the Basic
Documents to which the Purchaser will be a party at the time of the Closings
will be, duly authorized and validly executed and delivered by the Purchaser
and, assuming due authorization, execution and delivery by K-Sea, will
constitute legal, valid and binding obligations of the Purchaser; provided, that
the enforceability thereof may be limited by (i) bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws relating to or
affecting creditors’ rights generally, (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and (iii) public policy, applicable law relating to fiduciary
duties, indemnification and contribution, and an implied covenant of good faith
and fair dealing.

 

Section 4.03                             No Breach.

 

The execution, delivery and performance of the Basic Documents by the Purchaser
and the consummation by the Purchaser of the transactions contemplated thereby
will not (i) conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any material agreement to
which the Purchaser is a party or by which the Purchaser is bound or to which
any of the property or assets of the Purchaser is subject, (ii) conflict with or
result in any violation of the provisions of the organizational documents of the
Purchaser, or (iii) violate any statute, order, rule or regulation of any court
or Governmental Authority, except in

 

27

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

 

the case of clauses (i) and (iii), for such conflicts, breaches, violations or
defaults as would not prevent the consummation of the transactions contemplated
by the Basic Documents.

 

Section 4.04                             Certain Fees.

 

No fees or commissions are or will be payable by the Purchaser to brokers,
finders or investment bankers with respect to the purchase of any of the
Purchased Units or the consummation of the transactions contemplated by this
Agreement.  The Purchaser agrees that it will indemnify and hold harmless K-Sea
from and against any and all claims, demands or liabilities for broker’s,
finder’s, placement or other similar fees or commissions incurred by the
Purchaser or alleged to have been incurred by the Purchaser in connection with
the purchase of the Purchased Units or the consummation of the transactions
contemplated by the Basic Documents.

 

Section 4.05                             Unregistered Securities.

 

(a)                                  Accredited Investor Status; Sophisticated
Purchaser.  The Purchaser is an “accredited investor” within the meaning of
Rule 501 under the Securities Act and is able to bear the risk of its investment
in the Purchased Units and the Conversion Units.  The Purchaser has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the purchase of the Purchased Units and the
Conversion Units.

 

(b)                                 Information.  The Purchaser and its
Representatives have been furnished with materials relating to the business,
finances and operations of K-Sea and relating to the offer and sale of the
Purchased Units and the Conversion Units that have been requested by the
Purchaser.  The Purchaser and its Representatives have been afforded the
opportunity to ask questions of K-Sea or its Representatives.  The Purchaser
understands and acknowledges that its purchase of the Purchased Units involves a
high degree of risk and uncertainty.  The Purchaser has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its investment in the Purchased Units.

 

(c)                                  Purchaser Representation.  The Purchaser is
purchasing the Purchased Units for its own account and not with a view to
distribution in violation of any securities laws.  The Purchaser understands and
acknowledges that there is no public trading market for the Purchased Units and
that none is expected to develop.  The Purchaser has been advised and
understands and acknowledges that none of the Purchased Units and the Conversion
Units have been registered under the Securities Act or under the “blue sky” laws
of any jurisdiction and may be resold only if registered pursuant to the
provisions of the Securities Act (or if eligible, pursuant to the provisions of
Rule 144 promulgated under the Securities Act or pursuant to another available
exemption from the registration requirements of the Securities Act).  The
Purchaser has been advised of and is aware of the provisions of Rule 144
promulgated under the Securities Act.

 

(d)                                 Legend.  The Purchaser understands and
acknowledges that, until such time as the Purchased Units and the Conversion
Units have been registered pursuant to the provisions of the Securities Act, or
the Purchased Units and the Conversion Units are eligible for resale pursuant to
Rule 144 promulgated under the Securities Act without any restriction as to

 

28

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

 

the number of securities as of a particular date that can then be immediately
sold, the Purchased Units and the Conversion Units will bear the following
restrictive legend:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.  THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
THEREUNDER AND, IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS
SOLD PURSUANT TO RULE 144 UNDER SUCH ACT OR THE ISSUER HAS RECEIVED
DOCUMENTATION REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT
REQUIRE REGISTRATION UNDER SUCH ACT. THIS SECURITY IS SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH IN (i) THE FOURTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP, DATED AS OF SEPTEMBER [•], 2010, AND (ii) THE
SECURITIES PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 1, 2010, BY AND BETWEEN
K-SEA AND THE PURCHASER PARTY THERETO, IN EACH CASE A COPY OF WHICH MAY BE
OBTAINED FROM K-SEA AT ITS PRINCIPAL EXECUTIVE OFFICES.”

 

(e)                                  Reliance Upon the Purchaser’s
Representations and Warranties.  The Purchaser understands and acknowledges that
the Purchased Units are being offered and sold in reliance on a transactional
exemption from the registration requirements of federal and state securities
laws, and that K-Sea, the Placement Agent and Latham & Watkins LLP, counsel for
K-Sea, are relying in part upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set
forth in this Agreement in (i) concluding that the issuance and sale of the
Purchased Units is a “private offering” and, as such, is exempt from the
registration requirements of the Securities Act, and (ii) determining the
applicability of such exemptions and the suitability of the Purchaser to
purchase the Purchased Units.

 

Section 4.06                             Short Selling.

 

The Purchaser represents and warrants that it has not entered into any Short
Sales of the Common Units owned by it between the time it first began
discussions with K-Sea or the Placement Agent about the transactions
contemplated by this Agreement and the date hereof.

 

Section 4.07                             K-Sea Information.

 

The Purchaser acknowledges and agrees that K-Sea has provided or made available
to the Purchaser (through EDGAR, K-Sea’s website or otherwise) all K-Sea SEC
Documents, as well as all press releases issued by K-Sea through the date of
this Agreement that are included in a filing by K-Sea on Form 8-K or clearly
posted on K-Sea’s website.

 

29

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

 

ARTICLE V

COVENANTS

 

Section 5.01                             Transfer Restrictions.

 

(a)                                  Without the prior written consent of the
Purchaser, K-Sea shall not, during the period commencing on the First
Transaction Closing Date and ending 180 days thereafter, (i) offer, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly; or (ii) enter into any
swap or other transaction or arrangement that transfers or that is designed to,
or that might reasonably be expected to, result in the transfer to another, in
whole or in part, any of the economic consequences of ownership of, (any such
transaction described in (i) or (ii) above, a “Transfer”), its Common Units,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Units or such other securities, in cash or
otherwise.  For the avoidance of doubt, nothing herein shall be deemed to
restrict the Purchaser’s ability to request the filing of a registration
statement at any time pursuant to Section 2.01 of the Registration Rights
Agreement.

 

(b)                                 Without the prior written consent of K-Sea,
the Purchaser shall not, during the period commencing on the First Transaction
Closing Date and ending 180 days thereafter, Transfer its Purchased Units;
provided, however, that the Purchaser may pledge all or any portion of its
Purchased Units to any holders of obligations owed by the Purchaser, including
to the trustee for, or representative of, such holders; and provided, further,
that the Purchaser may Transfer the Purchased Units to an Affiliate of the
Purchaser if such Transfer to an Affiliate would not, when aggregated with all
other sales or exchanges of Securities within the prior 12 month period, cause a
technical termination under Section 708 of the Code, provided, that (a) any such
transferee (1) agrees to be bound by all of the terms and conditions of this
Agreement, including this Section 5.01, (2) expressly assumes a proportionate
share (based on the number of Series A Preferred Units being Transferred
relative to the total number of Purchased Units) of the Purchaser’s obligations
in respect of indemnification pursuant to Section 6.02 of this Agreement, and
(3) is a citizen of the United States within the meaning of 46 U.S.C. Sec. 50501
for the purpose of operating the vessels in the coastwise trade of the United
States, and (b) the Purchaser acknowledges and agrees that it shall remain the
primary obligor under this Agreement.

 

(c)                                  Prior to the second anniversary of the
First Transaction Closing, the Purchaser will not, directly or indirectly,
Transfer any Series A Preferred Units or Conversion Units to (i) any Competitor
of K-Sea or (ii) any other Person or “group” (within the meaning of
Section 13(d) of the Exchange Act) that will own more than 20% of the
outstanding Common Units on an as converted basis after such Transfer; provided
that, nothing in this Section 5.01(c) shall restrict the Purchaser from
Transferring any Series A Preferred Units or Conversion Units to any of the
Persons referenced in clauses (i) and (ii) of this Section 5.01(c) if such
Transfer is pursuant to an underwritten public offering (and not a direct
placement of registered units to such Persons).

 

30

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

 

Section 5.02                             Standstill Obligation.

 

(a)                                  Prior to the second anniversary of the
First Transaction Closing (the “Standstill Termination Date”), without the prior
written consent of K-Sea, the Purchaser agrees that it shall not, nor shall it
permit any of its Affiliates to, nor shall the Purchaser agree, advise, assist,
provide information or provide financing to others, or permit its Affiliates to
agree, advise, assist, provide information or provide financing to others, to,
individually or collectively, directly or indirectly:

 

(i)                                       acquire or offer to acquire or agree
to acquire from any Person, directly or indirectly, by purchase or merger,
through the acquisition of control of another Person, by joining a partnership,
limited partnership or other “group” (within the meaning of Section 13(d)(3) of
the Exchange Act) or otherwise, beneficial ownership of more than 1% of the
equity securities of K-Sea, or direct or indirect rights (including convertible
securities) or options to acquire such beneficial ownership (collectively, the
“Securities”) (or otherwise act in concert with respect to any such Securities
with any Person that so acquires, offers to acquire or agrees to acquire);
provided, however, that no such acquisition, offer to acquire or agreement to
acquire shall be deemed to occur solely due to: (a) the issuance of the
Purchased Units (including the issuance of any Conversion Units underlying the
Purchased Units and any additional Series A Preferred Units issued in respect of
in-kind distributions by K-Sea), (b) a unit split, reverse unit split,
reclassification, reorganization or other transaction by K-Sea affecting any
class of the outstanding equity securities of K-Sea generally or (c) a dividend
of units or other pro rata distribution by K-Sea to holders of its outstanding
equity securities; or

 

(ii)                                    make, or in any way participate in,
directly or indirectly, any “solicitation” of “proxies” to vote (as such terms
are used in the Regulation 14A promulgated under the Exchange Act), become a
“participant” in, or encourage, support or aid any other Person to become a
“participant,” in any “election contest” (as such terms are defined in
Rule 14a-11 promulgated under the Exchange Act) or initiate, propose or
otherwise solicit unitholders of K-Sea for the approval of any unitholder
proposals, in each case with respect to K-Sea; or

 

(iii)                                 form, join, in any way participate in, or
encourage the formation of, a “group” (within the meaning of Section 13(d)(3) of
the Exchange Act) with respect to any voting securities of K-Sea; or

 

(iv)                                deposit any securities of K-Sea into a
voting trust, or subject any securities of K-Sea to any agreement or arrangement
with respect to the voting of such securities, or other agreement or arrangement
having similar effect.

 

The foregoing provisions of this Section 5.02(a) shall not apply (i) to the
Purchaser with respect to a Significant Event or (ii) to any person who is a
director of K-Sea acting in his capacity as a director of K-Sea in the ordinary
course and within K-Sea’s Board process.

 

(b)                                 If prior to the Standstill Termination Date,
K-Sea or its Affiliates conduct a process with one or more potential bidders
relating to a sale of all or substantially all of K-Sea’s assets or a merger or
other business combination transaction involving K-Sea that would reasonably be
expected to result in K-Sea’s then current Unitholders owning less than 50% of
the outstanding equity securities of the combined Person following such sale,
merger or other

 

31

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

 

business combination transaction (a “Sales Transaction”), then K-Sea agrees that
it shall provide the Purchaser with an invitation to bid, using substantially
the same invitation to bid sent to other potential bidders in such process, and
shall provide to the Purchaser substantially the same information relating to
the K-Sea Entities that K-Sea provided in such process to such other potential
bidders, subject to a confidentiality agreement acceptable to K-Sea containing
confidentiality restrictions no more restrictive in the aggregate than those in
the confidentiality agreement entered into by any other potential bidder in
connection with such process, and the restrictions set forth in
Section 5.02(a) shall not apply to any process or transaction described in this
Section 5.02(b) for the limited purpose of allowing the Purchaser to bid,
negotiate and, with the approval and recommendation of the Board, complete a
Sales Transaction as contemplated by this paragraph.  If K-Sea elects not to
pursue a Sales Transaction with the Purchaser following the process described in
this Section 5.02(b), then the restrictions in Section 5.02(a) shall continue to
apply to the Purchaser.

 

(c)                                  Notwithstanding anything to the contrary in
this Section 5.02, prior to the Standstill Termination Date, at K-Sea’s request,
the Purchaser shall be permitted to provide strategic advice to K-Sea from time
to time.

 

Section 5.03                             Further Assurances; NYSE Listing;
Citizenship.

 

From time to time after the date hereof, without further consideration, K-Sea
and the Purchaser shall use their commercially reasonable efforts to take, or
cause to be taken, all actions necessary or appropriate to consummate the
transactions contemplated by this Agreement and the other Basic Documents. 
Without limiting the foregoing, K-Sea shall (a) file with the NYSE the proper
form or other notification and required supporting documentation, and provide to
NYSE any other requested information, related to the Conversion Units and
(b) ensure that the issuance of the Purchased Units and the Conversion Units is
in compliance with applicable NYSE rules and regulations.  At all times after
the Closings while it holds Conversion Units or Common Units, the Purchaser
shall remain a citizen of the United States within the meaning of 46 U.S.C. Sec.
50501 for the purpose of operating the vessels in the coastwise trade of the
United States.

 

Section 5.04                             Conduct of Business.

 

(a)                                  Subject to applicable Law, during the
period from the date hereof to the earlier of the Second Transaction Closing or
the Second Transaction Outside Date, except as otherwise required by this
Agreement, the K-Sea Entities (x) shall conduct the Business in the Ordinary
Course, maintain the assets of the Business in good operating condition suitable
in all material respects for their intended purposes, and use their commercially
reasonable efforts in the Ordinary Course to (A) preserve intact the Business
and its associated goodwill, and (B) preserve intact the K-Sea Entities’
relationships with their material customers, material suppliers, material
creditors and employees, and (y) except as the Purchaser otherwise consents in
writing in advance, shall cause each of the K-Sea Entities not to:

 

(i)                                     sell, lease, license, transfer, pledge,
mortgage, dispose of or encumber any material assets, properties (whether real,
personal, tangible or intangible), rights or businesses, other than sales or
dispositions of assets in the Ordinary Course of Business;

 

32

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

 

(ii)                                  enter into any Contract that would be
material to the Business, or terminate or materially extend or materially modify
any such Material Agreements in each case other than in the Ordinary Course of
Business;

 

(iii)                               declare, set aside or pay any dividend or
distribution on any Common Units, Incentive Distribution Rights or any other
equity securities of K-Sea;

 

(iv)                              amend its Operating Agreements;

 

(v)                                 split, combine, subdivide, reclassify or
redeem, or purchase or otherwise acquire, any outstanding equity interests,
including Common Units and Incentive Distribution Rights;

 

(vi)                              purchase, redeem or otherwise acquire or
dispose directly or indirectly any interests or shares of the capital stock or
other equity interests or securities of any of the K-Sea Subsidiaries;

 

(vii)                           merge or consolidate with any Person or adopt a
plan of complete or partial liquidation or authorize or undertake a dissolution,
consolidation, restructuring, recapitalization or other reorganization;

 

(viii)                        make a material change in its accounting or Tax
principles, methods or policies except as required by applicable regulatory
authorities or independent accountants, file any amended Tax Return that could
result in a material liability for Taxes to the Purchaser after the Closing,
enter into any closing agreement, surrender any right or claim a refund of any
Taxes or consent to any extension or waiver of the limitation period applicable
to any material Tax claim or assessment relating to the K-Sea Entities;

 

(ix)                                make any new Tax election or change or
revoke any existing Tax election, or settle or compromise any Tax liability, in
the case of any of the foregoing, which are material to the business, financial
condition or the results of operations of the K-Sea Entities;

 

(x)                                   make any acquisition of any assets or
equity of any Person except in the Ordinary Course of Business;

 

(xi)                                make any loans, advances or capital
contributions to or investments in any Person (other than the Companies) in
excess of $1 million in the aggregate except in the Ordinary Course of Business;

 

(xii)                             incur, amend or modify in any material respect
the terms of, or refinance, any Indebtedness for borrowed money, guarantee of
Indebtedness for borrowed money or debt securities any of the K-Sea Entities;

 

(xiii)                          waive, release or settle any pending or
threatened litigation or other proceedings before a Government Authority
(A) that will require the K-Sea Entities to pay an amount in excess of $1
million or (B) entail the incurrence of (1) any obligation or liability of the
K-Sea Entities in excess of such amount, including costs or revenue reductions
or (2) 

 

33

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

 

obligations that would impose any material restrictions on the business or
operations of the K-Sea Entities; and

 

(xiv)                         authorize or enter into any agreement or
commitment with respect to any of the foregoing.

 

(b)                              From the date hereof until the Second
Transaction Outside Date, K-Sea shall not, and shall cause the K-Sea
Subsidiaries not to, amend the Debt Agreements without the prior written consent
of the Purchaser, not to be unreasonably withheld.

 

(c)                               K-Sea shall comply with applicable law and the
terms of any collective bargaining agreements with respect to the obligations
owed by any K-Sea Entities to any labor organizations arising out of the
transaction contemplated by this agreement.

 

Section 5.05                             Use of Proceeds.

 

K-Sea shall apply all the proceeds of the sale of the Purchased Units, net of
fees and expenses related to the negotiation and consummation of this Agreement,
to pay unpaid principal and accrued interest outstanding pursuant to the Debt
Agreements.

 

Section 5.06                             Reasonable Best Efforts.

 

(a)                                  The Purchaser and K-Sea shall, and K-Sea
shall cause the K-Sea Entities, (i) to use their reasonable best efforts to
consummate the transactions contemplated by this Agreement and to obtain as
promptly as practicable all authorizations, consents, orders and approvals of
all Government Authorities that either party reasonably determines may be or may
become necessary, proper or advisable under this Agreement and applicable Laws
to be obtained respectively by them to consummate and make effective such
transactions, including, but not limited to, the clearance required under the
HSR Act, (ii) subject to such limitations as set forth in this Section 5.06(a),
take all actions as may be reasonably requested by any such Government Entity to
obtain such authorizations, consents, orders and approvals, and (iii) cooperate
with the reasonable requests of each other in seeking to obtain as promptly as
practicable all such authorizations, consents, orders and approvals.  Neither
the Purchaser nor K-Sea shall, and K-Sea shall cause the K-Sea Subsidiaries not
to, take or cause to be taken any action that they are aware or should
reasonably be aware would have the effect of delaying, impairing or impeding in
any material respect the receipt or making of any such required authorizations,
consents, orders, approvals or filings or the consummation of the transactions
contemplated hereby.

 

(b)                                 Each of Purchaser and K-Sea shall, and K-Sea
shall cause the K-Sea Entities to, use its reasonable best efforts to file, as
promptly as practicable, but in no event later than ten (10) Business Days
following the execution and delivery of this Agreement, with the United States
Federal Trade Commission and the United States Department of Justice, the HSR
Act notification and report form in respect of the Second Transaction Closing
contemplated hereby and any supplemental information requested in connection
therewith pursuant to the HSR Act.  Each of Purchaser and K-Sea shall furnish to
each other’s counsel such necessary information and reasonable assistance as the
other may request in connection with its preparation of any filing or submission
that is necessary or advisable under the HSR Act.

 

34

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

 

(c)           Purchaser and K-Sea shall, and K-Sea shall cause the K-Sea
Entities to, keep each other apprised of the status of any communications with,
and any inquiries or requests for additional information from any Governmental
Authority and shall comply promptly with any such inquiry or request.

 

(d)           Notwithstanding the foregoing or anything else in this Agreement
to the contrary, nothing in this Agreement shall require Purchaser, any of the
K-Sea Entities or any of their respective Affiliates to agree to any divestiture
or to proffer its willingness to effect any divestiture, or to agree to any
other requirements or condition imposed on Purchaser, any of the K-Sea Entities
or any of their respective Affiliates or any requirement, condition or request
of any Government Authority.  In addition, nothing in this Agreement shall
obligate Purchaser or any K-Sea Entity to agree to any remedy not conditioned on
the consummation of the Second Transaction Closing.

 

Section 5.07          Short Sales.

 

The Purchaser agrees not to enter into any Short Sales of the Common Units owned
by the Purchaser from the date hereof until such time as the Shelf Registration
Statement (as defined in the Registration Rights Agreement) is declared or
deemed effective by the Commission.

 

Section 5.08          Public Disclosure.

 

Notwithstanding anything to the contrary contained herein, except as may be
required to comply with the requirements of any applicable Law and the rules and
regulations of the Commission or the NYSE, neither K-Sea nor the Purchaser
shall, and K-Sea and the Purchaser will cause their respective Affiliates and
representatives not to, from and after the date hereof, issue any press release
in respect of this Agreement or the transactions contemplated hereby or
otherwise disclose the identity of, or any other information concerning, the
Purchaser or any of its Affiliates without providing K-Sea or the Purchaser, as
applicable, a reasonable opportunity to review and comment on such disclosure
(with such comments being incorporated or reflected, to the extent reasonable,
in any such disclosure); provided, however, that nothing in this Section 5.08
shall delay any required filing or other disclosure with the NYSE or any
Governmental Authority or otherwise hinder the K-Sea Entities’, the Purchaser or
their respective representatives’ ability to timely comply with all laws or
rules and regulations of the NYSE or any Governmental Authority.

 

Section 5.09          Incentive Distribution Rights Option.

 

(a)           During the Option Period, the General Partner hereby grants the
Purchaser an irrevocable option (the “Option”) to purchase 35% of the
outstanding equity interests in K-Sea IDR Holdings (the “IDR Interests”) in
exchange for $100,000 in cash (the “Option Consideration”).  The Option shall be
exercisable at any time during the Option Period for all, but not less than all,
of the IDR Interests by giving written notice to the General Partner (the
“Option Exercise Notice”).  Upon receipt of the Option Exercise Notice, the
General Partner shall promptly, and in any event within 10 Business Days,
transfer the IDR Interests to the Purchaser free and clear of all liens,
encumbrances, security interests or other charges, and the

 

35

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

 

Purchaser shall transfer the Option Consideration to the General Partner
concurrently with such transfer.

 

(b)           The General Partner hereby represents, warrants and covenants that
(i) the General Partner is, and at all times during the Option Period will be,
the sole record and beneficial owner of the all of the outstanding equity
interests in K-Sea IDR Holdings, (ii) K-Sea IDR Holdings is, and at all times
during the Option Period will be, the sole record and beneficial owner of the
all of the outstanding Incentive Distribution Rights, (iii) K-Sea IDR Holdings
holds no other assets or liabilities other than the Incentive Distribution
Rights, and shall at all times during the Option Period hold no other assets or
liabilities other than the Incentive Distribution Rights, (iv) the Incentive
Distribution Rights and the outstanding equity interests of K-Sea IDR Holding
are, and at all times will be, free and clear of all liens, encumbrances,
security interests or other charges, and (v) as of the date hereof and at all
times, there are no preemptive rights or other rights to subscribe for or
options or warrants to purchase, nor any restriction upon the voting or transfer
of, the Incentive Distribution Rights and any equity interests of K-Sea IDR
Holding, except as issued to the Purchaser pursuant to this Section 5.09 or as
set forth in the Partnership Agreement.

 

(c)           Prior to the First Transaction Closing, the General Partner and
the Purchaser shall negotiate mutually agreeable amendments to the certificate
of formation and limited liability company agreement of K-Sea IDR Holdings,
which shall include:

 

(i)            reasonable and customary antidilution protections and pre-emptive
rights;

 

(ii)           tag-along rights, pursuant to which the Purchaser shall have the
right to transfer a pro rata portion of the IDR Interests in any transfer of the
equity interests of K-Sea IDR Holdings by any holder of such equity interests
for the same per interest consideration as such transferring holder, excluding
certain transfers to affiliates of such transferring holder; and

 

(iii)          drag along rights, pursuant to which the Purchaser may be
obligated to transfer all, but not less than all, of the IDR Interests in any
transaction involving the transfer of more than 50% of the outstanding equity
interests of K-Sea IDR Holdings for the same per interest consideration as such
transferring holder, excluding certain transfers to affiliates of such
transferring holder.

 

(d)           Without the prior written consent of GP LLC, the Purchaser shall
not, during the period commencing on the First Transaction Closing Date and
ending 180 days thereafter, Transfer its IDR Interests; provided, however, that
the Purchaser may Transfer the IDR Interests to an Affiliate of the Purchaser,
provided, that (a) any such transferee agrees to be bound by all of the terms
and conditions of this Section 5.09, and (b) the Purchaser acknowledges and
agrees that it shall remain the primary obligor under this Section 5.09.  From
the date of the First Transaction Closing and for all times thereafter, the
Purchaser shall not Transfer its IDR Interests to any Person that is not a
citizen of the United States within the meaning of 46 U.S.C. Sec. 50501 for the
purpose of operating the vessels in the coastwise trade

 

36

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

 

of the United States.  Prior to the second anniversary of the First Transaction
Closing, the Purchaser will not, directly or indirectly, Transfer its IDR
Interests to any Competitor of K-Sea.

 

ARTICLE VI
INDEMNIFICATION, COSTS AND EXPENSES

 

Section 6.01          Indemnification by K-Sea.

 

From and after the First Transaction Closing, K-Sea agrees to indemnify the
Purchaser and its Representatives (collectively, “Purchaser Related Parties”)
from, and hold each of them harmless against, any and all losses, actions,
suits, proceedings (including any investigations, litigation or inquiries),
demands and causes of action, and, in connection therewith, and promptly upon
demand, pay or reimburse each of them for all reasonable costs, losses,
liabilities, damages or expenses of any kind or nature whatsoever (including the
reasonable fees and disbursements of counsel and all other reasonable expenses
incurred in connection with investigating, defending or preparing to defend any
such matter that may be incurred by them or asserted against or involve any of
them), whether or not involving a Third Party Claim, as a result of, arising out
of, or in any way related to (i) the failure of any of the representations or
warranties made by K-Sea contained herein to be true and correct in all material
respects as of the date hereof, as of the First Transaction Closing Date and, if
there is a Second Transaction Closing, as of the Second Transaction Closing Date
(except with respect to any provisions including the word “material” or words of
similar import, with respect to which such representations and warranties must
have been true and correct) or (ii) the breach of any of the covenants of K-Sea
contained herein; provided, that in the case of the immediately preceding clause
(i), such claim for indemnification relating to a breach of any representation
or warranty is made prior to the expiration of such representation or warranty;
provided, however, that for purposes of determining when an indemnification
claim has been made, the date upon which a Purchaser Related Party shall have
given notice (stating in reasonable detail the basis of the claim for
indemnification) to K-Sea shall constitute the date upon which such claim has
been made; provided, further, that the liability of K-Sea shall not be greater
in amount than the Purchase Price.

 

Section 6.02          Indemnification by the Purchaser.

 

From and after the Closing, the Purchaser agrees to indemnify the K-Sea Entities
and their respective Representatives (collectively, “K-Sea Related Parties”)
from, and hold each of them harmless against, any and all losses, actions,
suits, proceedings (including any investigations, litigation or inquiries),
demands and causes of action, and, in connection therewith, and promptly upon
demand, pay or reimburse each of them for all reasonable costs, losses,
liabilities, damages or expenses of any kind or nature whatsoever (including the
reasonable fees and disbursements of counsel and all other reasonable expenses
incurred in connection with investigating, defending or preparing to defend any
such matter that may be incurred by them or asserted against or involve any of
them), whether or not involving a Third Party Claim, as a result of, arising out
of, or in any way related to (i) the failure of any of the representations or
warranties made by the Purchaser contained herein to be true and correct in all
material respects as of the date hereof, as of the First Transaction Closing
Date and, if there is a Second Transaction Closing, as of the Second Transaction
Closing Date or (ii) the breach of any of the covenants of the Purchaser
contained herein; provided, that in the case of the immediately

 

37

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

 

preceding clause (i), such claim for indemnification relating to a breach of any
representation or warranty is made prior to the expiration of such
representation or warranty; provided, however, that for purposes of determining
when an indemnification claim has been made, the date upon which a K-Sea Related
Party shall have given notice (stating in reasonable detail the basis of the
claim for indemnification) to the Purchaser shall constitute the date upon which
such claim has been made; provided, further, that the liability of the Purchaser
(and its Affiliates, if the Purchaser Transfers a portion or all of the
Purchased Units to an Affiliate as permitted by Section 5.01) shall not be
greater in amount than the Purchase Price.

 

Section 6.03          Indemnification Procedure.

 

(a)           A claim for indemnification for any matter not involving a Third
Party Claim may be asserted by notice to the party from whom indemnification is
sought; provided, however, that failure to so notify the indemnifying party
shall not preclude the indemnified party from any indemnification that it may
claim in accordance with this Article VI, except as otherwise provided in
Sections 6.01 and 6.02.

 

(b)           Promptly after any K-Sea Related Party or Purchaser Related Party
(hereinafter, the “Indemnified Party”) has received notice of any indemnifiable
claim hereunder, or the commencement of any action, suit or proceeding by a
third person, which the Indemnified Party believes in good faith is an
indemnifiable claim under this Agreement (each, a “Third Party Claim”), the
Indemnified Party shall give the indemnitor hereunder (the “Indemnifying Party”)
written notice of such Third Party Claim but failure to so notify the
Indemnifying Party will not relieve the Indemnifying Party from any liability it
may have to such Indemnified Party hereunder except to the extent that the
Indemnifying Party is materially prejudiced by such failure.  Such notice shall
state the nature and the basis of such Third Party Claim to the extent then
known.  The Indemnifying Party shall have the right to defend and settle, at its
own expense and by its own counsel, any such matter as long as the Indemnifying
Party pursues the same diligently and in good faith.  If the Indemnifying Party
undertakes to defend or settle such Third Party Claim, it shall promptly, and in
no event later than five (5) days, notify the Indemnified Party of its intention
to do so, and the Indemnified Party shall cooperate with the Indemnifying Party
and its counsel in all commercially reasonable respects in the defense thereof
and/or the settlement thereof.  Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records and other
information reasonably requested by the Indemnifying Party and in the
Indemnified Party’s possession or control.  Such cooperation of the Indemnified
Party shall be at the cost of the Indemnifying Party. After the Indemnifying
Party has notified the Indemnified Party of its intention to undertake to defend
or settle any such asserted liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in connection
with any defense or settlement of such asserted liability; provided, however,
that the Indemnified Party shall be entitled (i) at its expense, to participate
in the defense of such asserted liability and the negotiations of the settlement
thereof and (ii) if (A) the Indemnifying Party has, within ten (10) Business
Days of when the Indemnified Party provides written notice of a Third Party
Claim, failed (y) to assume the defense or settlement of such Third Party Claim
and employ counsel and (z) notify the Indemnified Party of such assumption, or
(B) if the defendants in any such action include both the Indemnified Party and
the Indemnifying Party and counsel to the Indemnified Party shall have concluded
that there may

 

38

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

 

be reasonable defenses available to the Indemnified Party that are different
from or in addition to those available to the Indemnifying Party or if the
interests of the Indemnified Party reasonably may be deemed to conflict with the
interests of the Indemnifying Party, then the Indemnified Party shall have the
right to select a separate counsel and to assume such settlement or legal
defense and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the Indemnifying Party as incurred. 
Notwithstanding any other provision of this Agreement, the Indemnifying Party
shall not settle any indemnified claim without the consent of the Indemnified
Party, unless the settlement thereof imposes no liability or obligation on, and
includes a complete release from liability of, and does not contain any
admission of wrongdoing by, the Indemnified Party.

 

Section 6.04          Other Matters.

 

All indemnification payments under this Article VI shall be adjustments to the
Purchase Price, except as otherwise required by applicable Law.

 

ARTICLE VII
TERMINATION

 

Section 7.01          Termination.

 

This Agreement may be terminated at any time prior to the First Transaction
Closing:

 

(a)           by the mutual written consent of the Purchaser and K-Sea;

 

(b)           by either the Purchaser or K-Sea, by giving written notice of such
termination to the other party, if the First Transaction Closing shall not have
occurred on or prior to September 30, 2010 (the “Outside Date”); provided,
however, that the right to terminate this Agreement under this
Section 7.01(b) shall not be available to any party hereto whose failure to take
any action required to fulfill any of such party’s obligations under this
Agreement has been the cause of, or resulted in, the failure of the First
Transaction Closing to occur prior to such date;

 

(c)           by either the Purchaser or K-Sea, if any court of competent
jurisdiction or a Governmental Authority shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and nonappealable;

 

(d)           By K-Sea, if the Purchaser shall have breached any of its
representations, warranties, covenants or agreements contained in this
Agreement, which breach (x) would result in the failure of the conditions set
forth in Section 2.03(c)(i) or Section 2.03(c)(ii) and (y) cannot be or is not
cured prior to the Outside Date; provided, however, that K-Sea is not then in
material breach of this Agreement so as to cause any of the conditions set forth
in Section 2.03(b)(i) or Section 2.03(b)(ii) not to be satisfied;

 

39

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

 

(e)           By the Purchaser, if K-Sea shall have breached any of its
representations, warranties, covenants or agreements contained in this
Agreement, which breach (x) would result in the failure of the conditions set
forth in Section 2.03(b)(i) or Section 2.03(b)(ii) and (y) cannot be or is not
cured prior to the Outside Date; provided, however, that the Purchaser is not
then in material breach of this Agreement so as to cause any of the conditions
set forth in Section 2.03(c)(i) or Section 2.03(c)(ii) not to be satisfied.

 

Section 7.02          Effect of Termination.

 

In the event of the termination of this Agreement, written notice thereof shall
promptly be given to the other party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further action by or
liability of any party; provided, however, that except as set forth below,
nothing herein shall relieve any party from liability for any breach hereof
prior to such termination; provided, further, that this Section 7.02 and
Article VIII (excluding Section 8.03 but including any related definitional
provisions in Article I), shall survive any termination of this Agreement.

 

ARTICLE VIII
MISCELLANEOUS

 

Section 8.01          Interpretation.

 

Article, Section and Schedule references in this Agreement are references to the
corresponding Article, Section and Schedule to this Agreement, unless otherwise
specified.  All Schedules to this Agreement are hereby incorporated and made a
part hereof as if set forth in full herein and are an integral part of this
Agreement.  All references to instruments, documents, Contracts and agreements
are references to such instruments, documents, Contracts and agreements as the
same may be amended, supplemented and otherwise modified from time to time,
unless otherwise specified.  The word “including” shall mean “including but not
limited to” and shall not be construed to limit any general statement that it
follows to the specific or similar items or matters immediately following it. 
Whenever K-Sea has an obligation under the Basic Documents, the expense of
complying with that obligation shall be an expense of K-Sea unless otherwise
specified.  Any reference in this Agreement to $ shall mean U.S. dollars. 
Whenever any determination, consent or approval is to be made or given by the
Purchaser, such action shall be in the Purchaser’s sole discretion, unless
otherwise specified in this Agreement.  If any provision in the Basic Documents
is held to be illegal, invalid, not binding or unenforceable, (i) such provision
shall be fully severable and the Basic Documents shall be construed and enforced
as if such illegal, invalid, not binding or unenforceable provision had never
comprised a part of the Basic Documents, and the remaining provisions shall
remain in full force and effect and (ii) the parties hereto shall negotiate in
good faith to modify the Basic Documents so as to effect the original intent of
the parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.  When calculating the period of time before which,
within which or following which any act is to be done or step taken pursuant to
the Basic Documents, the date that is the reference date in calculating such
period shall be excluded.  If the last day of such period is a non-Business Day,
the period in question shall end on the next succeeding Business Day.  Any words
imparting the singular number only shall include the plural and vice versa.  The
words

 

40

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

 

such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this
Agreement as a whole and not merely to a subdivision in which such words appear
unless the context otherwise requires.  The provision of a Table of Contents,
the division of this Agreement into Articles, Sections and other subdivisions
and the insertion of headings are for convenience of reference only and shall
not affect or be utilized in construing or interpreting this Agreement.

 

Section 8.02          Survival of Provisions.

 

The representations and warranties set forth in Sections 3.01, 3.02, 3.04, 3.06,
3.08, 3.21, 3.23, 4.01, 4.02, 4.04 and 4.05 hereunder shall survive the
execution and delivery of this Agreement indefinitely, the representations and
warranties set forth in Sections 3.16 shall survive until sixty (60) days
following the expiration of the applicable statute of limitations, the
representations and warranties set forth in Sections 3.17 and 3.22 shall survive
for a period of two (2) years following the date hereof, regardless of any
investigation made by or on behalf of K-Sea or the Purchaser, and the other
representations and warranties set forth herein shall survive until the later of
(i) a period of twelve (12) months following the date hereof or (ii) 30 days
following the date on which the Purchaser is provided the audited financial
statements of K-Sea for the fiscal year ended June 30, 2011; regardless of any
investigation made by or on behalf of K-Sea or the Purchaser.  The covenants
made in this Agreement or any other Basic Document that by their terms apply or
are to be performed in whole or in part after the First Transaction Closing will
survive for the period provided in such covenants and agreements, if any, or
until fully performed; provided that, the covenants and agreements contained in
Section 8.04(b) hereof shall survive indefinitely.  All covenants and agreements
that by their terms apply or are to be performed in their entirety on or prior
to the First Transaction Closing shall terminate at the First Transaction
Closing.

 

Section 8.03          No Waiver; Modifications in Writing.

 

(a)           Delay.  No failure or delay on the part of any party in exercising
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy.  The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to a party at law or in equity
or otherwise.

 

(b)           Specific Waiver.  Except as otherwise provided herein, no
amendment, waiver, consent, modification or termination of any provision of this
Agreement or any other Basic Document (except in the case of the K-Sea
Partnership Agreement for amendments adopted pursuant to the terms thereof)
shall be effective unless signed by each of the parties hereto or thereto
affected by such amendment, waiver, consent, modification or termination.  Any
amendment, supplement or modification of or to any provision of this Agreement
or any other Basic Document, any waiver of any provision of this Agreement or
any other Basic Document and any consent to any departure by K-Sea from the
terms of any provision of this Agreement or any other Basic Document shall be
effective only in the specific instance and for the specific purpose for which
made or given.  Except where notice is specifically required by this Agreement,
no notice to or demand on K-Sea in any case shall entitle K-Sea to any other or
further notice or demand in similar or other circumstances.  Any investigation
by or on behalf of

 

41

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

 

any party shall not be deemed to constitute a waiver by the party taking such
action of compliance with any representation, warranty, covenant or agreement
contained herein.

 

Section 8.04          Binding Effect; Assignment.

 

(a)           Binding Effect.  This Agreement shall be binding upon K-Sea, the
Purchaser and their respective successors and permitted assigns.  Except as
expressly provided in this Agreement, this Agreement shall not be construed so
as to confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and permitted assigns.

 

(b)           Assignment of Rights.  The Purchaser’s rights and obligations
hereunder (including the right to seek indemnification) may be transferred or
assigned in whole or in part by the Purchaser to any Affiliate of the Purchaser
without the consent of K-Sea so long as any such assignee is a citizen of the
United States within the meaning of 46 U.S.C. Sec. 50501 for the purpose of
operating the vessels in the coastwise trade of the United States.  Upon any
such permitted transfer or assignment, references in this Agreement to the
Purchaser (as they apply to the transferor or assignor, as the case may be)
shall thereafter apply to such transferee or assignee of the Purchaser unless
the context otherwise requires.  Without the written consent of K-Sea, which
consent shall not be unreasonably withheld, no portion of the rights and
obligations of the Purchaser under this Agreement may be assigned or transferred
by the Purchaser or such a transferee of Purchased Units to a Person that is not
an Affiliate of the Purchaser.  No portion of the rights and obligations of
K-Sea under this Agreement may be transferred or assigned without the prior
written consent of the Purchaser, which consent shall not be unreasonably
withheld.

 

Section 8.05          Confidentiality.

 

(a)           The Purchaser agrees to abide by its obligations under the
Confidentiality Agreement.

 

(b)           The K-Sea Entities and any of their respective Representatives
shall disclose any information naming the Purchaser or any of its Affiliates
(other than simply naming the Purchaser and its Affiliates as a party to certain
of the Basic Documents and describing the transactions contemplated by the Basic
Documents) in any filing with the Commission, NYSE or any Governmental Authority
or other public disclosure, only after providing the Purchaser a reasonable
opportunity to review and comment on such disclosure (with such comments being
incorporated or reflected, to the extent reasonable, in any such disclosure);
provided, however, that nothing in this Section 8.05 shall delay any required
filing with the Commission, the NYSE or any Governmental Authority or other
public disclosure or otherwise hinder the K-Sea Entities’ or their
Representatives’ ability to timely comply with all Laws or rules and regulations
of the Commission, NYSE or other Governmental Authority.

 

Section 8.06          Communications.

 

All notices and demands provided for hereunder shall be in writing and shall be
given by hand delivery, registered or certified mail, return receipt requested,
regular mail, facsimile or air courier guaranteeing overnight delivery to the
following addresses:

 

42

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

 

(a)           If to the Purchaser:

 

First Reserve Corporation

One Lafayette Place
Greenwich, CT 06830
Attention: Alan G. Schwartz
Facsimile: (203) 661-6729

 

with a copy to:

 

Simpson Thacher & Bartlett LLP
425 Lexington Avenue       
New York, New York 10017
Attention: Patrick J. Naughton
Facsimile: (212) 455-2502

 

(b)           If to K-Sea:

 

K-Sea Transportation Partners L.P.
One Town Center Boulevard, 17th Floor

East Brunswick, New Jersey 08816
Attention: Timothy J. Casey
Facsimile: (732) 339-6140

 

with a copy to:

 

Latham & Watkins LLP
717 Texas Avenue, 16th Floor
Houston, Texas 77002
Attention: Sean T. Wheeler
Facsimile: (713) 546-5401

 

or to such other address as K-Sea or the Purchaser may designate in writing. All
notices and communications shall be deemed to have been duly given: (i) at the
time delivered by hand, if personally delivered; (ii) upon actual receipt if
sent by registered or certified mail, return receipt requested, or regular mail,
if mailed; (iii) when receipt is acknowledged, if sent by facsimile; and
(iv) upon actual receipt when delivered to an air courier guaranteeing overnight
delivery.

 

Section 8.07           Removal of Legend.

 

(a)           The Purchaser may request K-Sea to remove the legend set forth in
Section 4.05(d) from the certificates evidencing the Purchased Units by
submitting to K-Sea such certificates, together with an opinion of counsel to
the effect that such legend is no longer required under the Securities Act or
applicable state laws as the case may be, as K-Sea may request; provided, that
no opinion of counsel shall be required if the Purchaser is effecting a sale of
Purchased Units pursuant to Rule 144 under the Securities Act (and the Purchaser
delivers a Rule 144 Representation Letter to K-Sea) or the Conversion Units have
been registered under the

 

43

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

 

Securities Act pursuant to an effective registration statement.  K-Sea shall
cooperate with the Purchaser to effect removal of such legend.

 

(b)           Certificates evidencing Conversion Units shall not contain any
legend (including the legend set forth in Section 4.05(d)), (i) while a
registration statement covering the resale of such security is effective under
the Securities Act and the Purchaser delivers to K-Sea a representation letter
agreeing that such Conversion Units will be sold under such effective
registration statement, or (ii) following any sale of such Conversion Units
pursuant to Rule 144, or (iii) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission).

 

Section 8.08           Entire Agreement.

 

This Agreement, the other Basic Documents and the other agreements and documents
referred to herein are intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein and therein.  There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein or the other
Basic Documents with respect to the rights granted by K-Sea or any of its
Affiliates or the Purchaser or any of its Affiliates set forth herein or
therein.  This Agreement, the other Basic Documents and the other agreements and
documents referred to herein or therein supersede all prior agreements and
understandings between the parties with respect to such subject matter.

 

Section 8.09           Governing Law; Submission to Jurisdiction.

 

This Agreement, and all claims or causes of action (whether in contract or tort)
that may be based upon, arise out of or relate to this Agreement or the
negotiation, execution or performance of this Agreement (including any claim or
cause of action based upon, arising out of or related to any representation or
warranty made in or in connection with this Agreement), will be construed in
accordance with and governed by the laws of the State of Delaware without regard
to principles of conflicts of laws.  Any action against any party relating to
the foregoing shall be brought in any federal or state court of competent
jurisdiction located within the State of Delaware, and the parties hereto hereby
irrevocably submit to the non-exclusive jurisdiction of any federal or state
court located within the State of Delaware over any such action.  The parties
hereby irrevocably waive, to the fullest extent permitted by applicable Law, any
objection that they may now or hereafter have to the laying of venue of any such
dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute.  Each of the parties hereto agrees that a judgment
in any such dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Law.

 

Section 8.10           Waiver of Jury Trial.

 

THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, AND AGREES TO CAUSE ITS
AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR (ii) IN ANY WAY

 

44

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

 

CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT,
EQUITY OR OTHERWISE.  THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.

 

Section 8.11           Execution in Counterparts.

 

This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same agreement.

 

[Remainder of Page Left Intentionally Blank]

 

45

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

 

IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of
the date first above written.

 

 

K-SEA TRANSPORTATION PARTNERS L.P.

 

 

 

By:

K-Sea General Partner L.P., its general partner

 

 

 

 

 

By:

K-Sea General Partner GP LLC, its general partner

 

 

 

 

 

 

 

By:

/s/ Timothy J. Casey

 

 

 

 

Timothy J. Casey

 

 

 

 

Chief Executive Officer and President

 

 

 

 

 

 

 

KA FIRST RESERVE, LLC

 

 

 

 

By:

KA Fund Advisors, LLC, its managing member

 

 

 

 

By:

/s/ James C. Baker

 

 

Name: James C. Baker

 

 

Title: Senior Managing Director

 

 

Signature Page to Purchase Agreement

 

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

 

 

K-SEA GENERAL PARTNER L.P.

 

 

 

 

By:

K-Sea General Partner GP LLC, its general partner

 

 

 

 

 

By:

/s/ Timothy J. Casey

 

 

 

Timothy J. Casey

 

 

 

Chief Executive Officer and President

 

 

Signature Page to Purchase Agreement

 

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