Exhibit 4.2


 


K-SEA TRANSPORTATION
PARTNERS L.P.


 


EMPLOYEE UNIT
PURCHASE PLAN


 


(As Amended June 30,
2004)


 


1.             Purpose of the Plan.


 


The K-Sea
Transportation Partners Employee Unit Purchase Plan (the “Plan”) is intended to
(i) promote the interests of K-Sea Transportation Partners L.P., a Delaware
limited partnership (the “Partnership”), by providing to Employees of the
Partnership and its Affiliates the opportunity to acquire or increase their
ownership of Units, (ii) provide a means whereby such individuals may develop a
sense of proprietorship and personal involvement in the development and
financial success of the Partnership and (iii) encourage such individuals to
devote their best efforts to the business of the Partnership, thereby advancing
the interests of the Partnership.


 


2.             Definitions.


 


(a)           As
used in the Plan, the following terms shall
have the meanings set forth below:


 


“Affiliates” means with respect to any
Person, any other Person that directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control with, the
Person in question.  As used herein, the
term “control” means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.


 


“Board” means the Board of Directors of K-Sea
General Partner GP LLC, a Delaware limited liability company.


 


“Committee” means the Compensation Committee
of the Board appointed to administer the Plan pursuant to Section 8.


 


“Employee” means any individual who is a
United States citizen for maritime law purposes and a full-time employee of the
Partnership or one of its Affiliates, but,
until the Committee decides otherwise, excluding any employee covered by a
collective bargaining agreement unless such bargaining agreement provides for
his or her participation in the Plan.


 


“Employer” means the Partnership and/or one
of its Affiliates, as the case may be.


 


“Fair Market Value” means the closing sales
price of a Unit on the applicable date (or if there is no trading in the Units
on such date, on the next preceding date on which there was trading) as
reported in The Wall Street Journal (or other reporting service approved by the
Committee).  In the event Units are not
publicly traded at the time a determination of Fair Market Value is required to
be made hereunder, the determination of Fair Market Value shall be made in good
faith by the Committee.


 


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“Offering Period” means each calendar quarter
or other period as designated by the Committee from time to time.


 


“Person” means an individual or a
corporation, limited liability company, partnership, joint venture, trust,
unincorporated organization, association, governmental agency or political
subdivision thereof or other entity.


 


“Purchase Period” means the 10-day period
following the end of each Offering Period; provided, however, the Purchase
Period shall include such other periods, if any, as may be designated by the
Committee from time to time.


 


“Unit” means a Common Unit of the
Partnership.


 


(b)           Gender and Number.  Except
when otherwise indicated by the context, the masculine gender shall also
include the feminine gender, and the definition of any term herein in the
singular shall also include the plural.


 


3.             Eligibility.


 


(a)           Eligibility and Plan Entry Date.  All
Employees shall be eligible to participate in the Plan.  An Employee is eligible to enter the Plan
beginning on the first day of the month following 180 days after such
individual’s employment commencement date.


 


(b)           Prior Service Credit.  The
Committee, in it is discretion, may grant prior service credit to individuals
that become Employees pursuant to a corporate merger or acquisition.


 


4.             Units Available Under the Plan.


 


Unless otherwise increased by the Board, the
maximum number of Units that may be purchased for Employees under the Plan is
200,000.  Units to be delivered under
the Plan may be Units acquired by the Partnership in the open market, Units
already owned by the Partnership, authorized but unissued Units, Units acquired
directly from any Person or any combination of the foregoing.  Upon an Employee’s termination of employment
with his or her Employer, all amounts then credited to his or her notional
account under the Plan, if any, shall be paid to the terminated Employee as
soon as practicable.  In the event that
any change is made to the Units deliverable under the Plan, the Committee may
make appropriate adjustments in the maximum number of Units deliverable under
the Plan.  The adjustments determined by
the Committee shall be final, binding and conclusive.


 


5.             Purchase of Units.


 


(a)           Employee Withholding Elections.  The
Committee shall provide an Employee with the ability to purchase Units under
the Plan upon the following terms and conditions:


 


(i)            Effective as of the
beginning of any month or, if administratively feasible, the beginning of the
next payroll period, an Employee may elect to have his Employer withhold from
the Employee’s cash base salary or cash base wages each future pay period, for
the purchase of Units hereunder, a designated whole percentage of the


 


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Employee’s
cash base payor wages (in whole percentages only, not to exceed 10%).  An
Employee may change (within the above limitations) or, subject to Section
5(a)(vi), stop his withholding election at any time; however, only two such
changes may be made during any calendar year. 
All Employee elections and any changes to an election shall be in such
written form as the Committee or its delegate may establish from time to time.


 


(ii)           Each withholding election made by an Employee hereunder shall be an
ongoing election until the earlier of the date changed by the Employee or the
date the Employee ceases to be eligible to participate in the Plan.


 


(iii)          The Employer shall maintain for each electing Employee a separate
notional or ledger account reflecting the aggregate amount of his cash base
payor wages that has been withheld and not yet applied to the purchase of Units
for such Employee.  An Employer, other
than the Partnership, shall remit to the Partnership all amounts of base pay or
wages withheld by the Employer promptly upon request by the Partnership in order
to permit the Partnership to fulfill its obligations under this Plan with
respect to the purchase of Units for Employees.  Amounts of base pay or wages withheld by the Employer and
remitted to the Partnership shall not be segregated from the general assets of
the Partnership and shall not bear interest.


 


(iv)          During each Purchase Period, the Partnership shall use, to the fullest
extent practicable, all amounts then credited to the notional accounts of the
electing Employees to purchase Units for such Employees.  Purchases of Units may be made at any time
or times during the Purchase Period on any securities exchange on which the
Units are traded, in the over-the-counter market and/or in negotiated
transactions as the Committee shall determine.


 


(v)           Upon an Employee’s termination of Employment with his or her Employer,
all amounts then credited to his or her notional account under the Plan, if
any, shall be paid to the terminated Employee as soon as reasonably
practicable.


 


(vi)          Provided an Employee submits his or her election to stop withholding
prior to the fourteen business day period before the beginning of an
immediately upcoming Purchase Period, all amounts then credited to such
Employee’s notional account shall be returned to the Employee as soon as administratively
practicable.  Unless otherwise
administratively feasible, to the extent an Employee submits his or her
election to stop withholding within the fourteen business day period before the
beginning of the immediately upcoming Purchase Period, all amounts credited to
such Employee’s notional account will be applied toward the purchase of


 


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Units in the immediately following Purchase Period and the Employee’s
election to stop withholding shall become effective as of the commencement of
the next following Offering Period.  All
requests to withdraw from the Plan submitted during a Purchase Period will
become effective as of the commencement of the next following Offering Period.


 


(b)           Purchase
of Units and Plan Expenses.
During each Purchase Period, the Partnership, using funds withheld from
Employees’ wages pursuant to this Section 5, shall purchase for the electing
Employees the maximum number of Units (including fractional Units) that can be
acquired (using the Unit’s Fair Market Value on the date of purchase) based on
amounts then credited to the electing Employees’ notional accounts.  The Partnership shall pay, other than from
the notional accounts, all brokerage fees and other costs and expenses of the
Plan.  To the extent that Units are
purchased on multiple days or at multiple times during a single Purchase
Period, the Partnership shall use the average of the Units’ Fair Market Value
at the times of purchase as the applicable Unit price upon which Units are
allocated to the participating Employees.


 


(c)           Withholding
of Taxes.  To the extent that the Employer is required
to withhold any taxes in connection with the purchase of Units, it will be a
condition to the ownership of such Units that the Employee make arrangements
satisfactory to the Employer for the payment of such taxes, which may include,
but not be limited to, a reduction in the Employee’s notional account.


 


6.             Restrictions on
Units.


 


(a)           Holding Period.  Subject to the exception
provided below under Section 6(b), all Units purchased under the Plan shall be
subject to a “Holding Period” which shall expire on the first anniversary of
the date the Units were purchased under the Plan.  During such Holding Period, each Employee shall be prohibited
from pledging, transferring, selling or otherwise disposing of the restricted
Units.  Upon the expiration of such
Holding Period, the Employee may, if he or she desires, make a request to the
Partnership (or its designated third party plan administrator, if any) to
receive certificates for all of such unrestricted whole Units.  Otherwise, such Units shall be held without
restriction (1) by the Partnership or (2) in the name of the third party
administrator (or its designee), if any, for the benefit of the Employee. Upon
payment during the Holding Period of any distribution with respect to Units,
each Employee shall receive an amount in cash equal to, and at the same time
as, the amount of such distribution multiplied by the number of Units allocated
to such Employee.


 


(b)           Holding Period Exception. 
Notwithstanding the Holding Period imposed above under Section 6(a) and
subject to the conditions imposed pursuant to this Section 6(b), an Employee
will be permitted to pledge, transfer, sell or otherwise dispose of his or her
restricted whole Units during the one-year Holding Period (a “Restricted
Transfer”) by notifying the Employer (or its designated third party plan
administrator) of his or her intention to engage in a Restricted Transfer.  If a Restricted Transfer occurs, the
Employee shall be prohibited from participating in the Plan again until the
first Purchase Period following the first anniversary of the date of the
Restricted Transfer.  During this period
of prohibition, no amounts shall be withheld from the Employee’s cash base
salary


 


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or cash
base wages.  Such withholding shall not
be allowed to resume, at the earliest, until the first pay period following the
first anniversary of the date of the Restricted Transfer.  To the extent an Employee has amounts
credited to his or her notional account under the Plan on the date of a
Restricted Transfer, all such amounts will be returned to the Participant.  To the extent a Participant has a fractional
Unit credited to his or her notional account under the Plan on the date of a
Restricted Transfer, such fractional Unit will be liquidated and the
Participant will receive his pro rata portion of the proceeds from such
liquidation.


 


(c)           Investment Representation.  Unless
the Units subject to purchase under the Plan have been registered under the
Securities Act of 1933, as amended (the “1933 Act”), and, in the case of any
Employee who may be deemed an affiliate (for securities law purposes) of the
Partnership, such Units have been registered under the 1933 Act for resale by
such Participant, or the Partnership has determined that an exemption from
registration is available, the Partnership may require prior to and as a
condition of the delivery of any Units that the person purchasing such Units
hereunder furnish the Partnership with a written representation in a form
prescribed by the Committee to the effect that such person is acquiring such
Units solely with a view to investment for his or her own account and not with
a view to the resale or distribution of all or any part thereof, and that such
person will not dispose of any of such Units otherwise than in accordance with
the provisions of Rule 144 under the 1933 Act unless and until either the Units
are registered under the 1933 Act or the Partnership is satisfied that an
exemption from such registration is available.


 


(d)           Compliance with Securities Laws. 
Notwithstanding anything herein or in any other agreement to the
contrary, the Partnership shall not be obligated to sell or issue any Units to
an Employee under the Plan unless and until the Partnership is satisfied that
such sale or issuance complies with (i) all applicable requirements of the
securities exchange on which the Units are traded (or the governing body of the
principal market in which such Units are traded, if such Units are not then
listed on an exchange), (ii) all applicable provisions of the 1933 Act, and
(iii) all other laws or regulations by which the Partnership is bound or to
which the Partnership is subject.


 


7.             Rights of Employees; Participants.


 


(a)           Employment.  The Plan will not confer upon
any Employee any right with respect to continuance of employment or other
service with the Employer, nor will it interfere in any way with any right the
Employer would otherwise have to terminate such Employee’s employment or other
service at any time.


 


(b)           Nontransferability.  No
right to purchase Units or be reimbursed for the purchase of Units granted
under the Plan shall be assignable or transferable during the lifetime of any
Employee either voluntarily or involuntarily, or be subjected to any lien,
directly or indirectly, by operation of law, or otherwise, including execution,
levy, garnishment, attachment, pledge or bankruptcy.


 


8.             Plan Administration.


 


(a)           Authority of Committee.  The
Plan shall be administered by the Committee. 
Subject to the terms of the Plan and applicable law, and in addition to
other


 


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express
powers and authorizations conferred on the Committee by the Plan, the Committee
shall have full power and authority to: (i) determine which persons are
Employees who may participate; (ii) determine the number of Units to be
purchased by an Employee; (iii) determine the time and manner for purchasing
Units; (iv) interpret, construe and administer the Plan; (v) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan; (vi) make a
determination as to the right of any person to receive Units under the Plan;
(vii) correct any defect, supply any omission, or reconcile an inconsistency in
the Plan; and (viii) make any other determinations and take any other actions
that the Committee deems necessary or desirable for the administration of the
Plan.


 


(b)           Determination Under the Plan.  Unless
otherwise expressly provided in the Plan, all designations, determinations,
interpretations, and other decisions under or with respect to the Plan shall be
within the sole discretion of the Committee, may be made at any time and shall
be final, conclusive, and binding upon all persons, including the Partnership,
the Employer or any Employee.  No member
of the Committee shall be liable for any action, determination or
interpretation made in good faith, and all members of the Committee shall, in
addition to their rights as directors, be fully protected by the Partnership
with respect to any such action, determination or interpretation.


 


9.             Plan Amendment,
Modification and Termination.


 


The Plan may be amended from time to time by
the Committee.  The Plan may be
terminated at any time by the Committee and, unless Board approval is obtained
for an increase in the maximum number of available Units, shall automatically terminate
when all Units authorized for purchase pursuant to the Plan have been
purchased.  On termination of the Plan,
all amounts then remaining credited to the notional accounts for Employees
shall be returned to the affected Employees.


 


10.          Nonexclusivity of the
Plan.


 


The adoption of the Plan by the Partnership
shall not be construed as creating any limitations on the power or authority of
the Partnership or any of its Affiliates to adopt such other or additional
incentive or other compensation arrangements of whatever nature as the
Partnership or any of its Affiliates may deem necessary or desirable or to
preclude or limit the continuation of any other plan, practice or arrangement
for the payment of compensation or fringe benefits to employees, non-employee
directors, or consultants generally, or to any class or group of employees,
directors, or consultants, which the Partnership or any of its Affiliates now
has lawfully put into effect, including, without limitation, any  long-term incentive plan.


 


11.          Requirements of Law.


 


(a)           Requirements of Law.  The
issuance of Units pursuant to the Plan shall be subject to all applicable laws,
rules and regulations.


 


(b)           Governing Law.  The validity, construction and
effect of the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with applicable Federal law, and to the extent not
preempted thereby, with the laws of the State of Delaware, without regard to
conflicts of laws principles.


 


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