**Exhibit 99.4**

**EXECUTION VERSION**

**LOAN AGREEMENT**

Dated as of

May 12, 2006

Among

K-SEA OPERATING PARTNERSHIP L.P.

(as the Borrower)

AND

CITIZENS LEASING CORPORATION, d/b/a CITIZENS ASSET FINANCE(the Lender)and such other lenders as may become parties hereto from time to time

AND

CITIZENS LEASING CORPORATION, d/b/a CITIZENS ASSET FINANCE(as Agent and Collateral Trustee for the Lenders)

 

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**TABLE OF CONTENTS**
| SECTION 1.   DEFINITIONS                              |       | 1                                                                                    |
|-----------------------------------------------------------------|------------|--------------------------------------------------------------------------------------|
|                                                            |       |                                                                                 |
|                                                            | §1.1  | Defined Terms                                                                        |   | 1 |
|                                                            | §1.2  | Other Definitional and Interpretive Provisions                                       |   | 15 |
|                                                            |       |                                                                                 |   |   |
| SECTION 2.   THE TERM LOAN                            |       | 16                                                                                   |
|                                                            |       |                                                                                 |
|                                                            | §2.1  | Advances; Purposes                                                                   |   | 16 |
|                                                            | §2.2  | Note; Repayment of Principal and Interest                                            |   | 17 |
|                                                            | §2.3  | Prepayments                                                                          |   | 18 |
|                                                            | §2.4  | Payments Generally                                                                   |   | 19 |
|                                                            | §2.5  | Increased Costs and Reduced Return                                                   |   | 20 |
|                                                            | §2.6  | Payments Free and Clear of Taxes                                                     |   | 21 |
|                                                            | §2.7  | Mitigation Obligations                                                               |   | 22 |
|                                                            | §2.8  | Pro Rata Treatment                                                                   |   | 23 |
|                                                            |       |                                                                                 |   |   |
| SECTION 3.   REPRESENTATIONS  AND WARRANTIES          |       | 23                                                                                   |
|                                                            |       |                                                                                 |
|                                                            | §3.1  | Legal Existence and Good Standing, Etc.                                              |   | 23 |
|                                                            | §3.2  | Limited Partnership Power; Consents; Absence of  Conflict with Other Agreements Etc. |   | 23 |
|                                                            | §3.3  | Title to Properties                                                                  |   | 24 |
|                                                            | §3.4  | Financial Statements                                                                 |   | 24 |
|                                                            | §3.5  | No Material Changes Etc.                                                             |   | 24 |
|                                                            | §3.6  | Franchises, Patents, Copyrights, Licenses, Etc.                                      |   | 25 |
|                                                            | §3.7  | Litigation                                                                           |   | 25 |
|                                                            | §3.8  | No Materially Adverse Contracts, Etc.                                                |   | 25 |
|                                                            | §3.9  | Compliance with Other Instruments, Laws, Etc.                                        |   | 25 |
|                                                            | §3.10 | Tax Status                                                                           |   | 25 |
|                                                            | §3.11 | No Default                                                                           |   | 26 |
|                                                            | §3.12 | Absence of Liens                                                                     |   | 26 |
|                                                            | §3.13 | Use of Proceeds                                                                      |   | 26 |
|                                                            | §3.14 | Pension Plans                                                                        |   | 26 |
|                                                            | §3.15 | Holding Company and Investment Company                                               |   | 26 |
|                                                            | §3.16 | Disclosure                                                                           |   | 26 |
|                                                            | §3.17 | [Intentionally Omitted                                                               |   | 27 |
|                                                            | §3.18 | First Lien                                                                           |   | 27 |
|                                                            | §3.19 | Environmental Matters                                                                |   | 28 |
|                                                            | §3.20 | Solvency                                                                             |   | 29 |
|                                                            | §3.21 | Survival of Representations and Warranties, Etc.                                     |   | 29 |
|                                                            |       |                                                                                 |   |   |
| SECTION 4.   CONDITIONS OF  FUNDING THE FIRST ADVANCE |       | 29                                                                                   |
|                                                            |       |                                                                                 |
|                                                            | §4.1  | Execution and Delivery                                                               |   | 29 |
|                                                            | §4.2  | Representations and Warranties                                                       |   | 29 |

 

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|                                                             | §4.3  | Performance; No Default                                    |   | 30     |
|------------------------------------------------------------------|------------|------------------------------------------------------------|--------|--------|
|                                                             | §4.4  | Certified Copies of Charter Documents                      |   | 30     |
|                                                             | §4.5  | Proof of Partnership or General Partner Action             |   | 30     |
|                                                             | §4.6  | Incumbency Certificate                                     |   | 30     |
|                                                             | §4.7  | No Material Adverse Effect                                 |   | 30     |
|                                                             | §4.8  | Delivery of Notice of Borrowing                            |   | 30     |
|                                                             | §4.9  | Opinion of Counsel                                         |   | 30     |
|                                                             | §4.10 | Proceedings and Documents                                  |   | 30     |
|                                                             | §4.11 | Recorded Lien Searches                                     |   | 30     |
|                                                             | §4.12 | Financing Statements                                       |   | 31     |
|                                                             | §4.13 | Evidence of Insurance                                      |   | 31     |
|                                                             | §4.14 | Delivery of Invoices                                       |   | 31     |
|                                                             | §4.15 | Licenses, Permits and Consent                              |   | 31     |
|                                                             | §4.16 | Construction Contracts                                     |   | 31     |
|                                                             | §4.17 | Guaranty                                                   |   | 31     |
|                                                             | §4.18 | Lien Waivers                                               |   | 31     |
|                                                             |       |                                                       |   |   |
| SECTION 5.   CONDITIONS OF  INTERIM ADVANCES           |       | 32                                                         |
|                                                             |       |                                                       |
| SECTION 6.   CONDITIONS OF  FINAL ADVANCES OF THE LOAN |       | 32                                                         |
|                                                             |       |                                                       |
|                                                             | §6.1  | New Vessel Documentation                                   |   | 32     |
|                                                             | §6.2  | Execution of Note                                          |   | 33     |
|                                                             | §6.3  | Release of Fleet Mortgage (Additional Collateral           |   | 33     |
|                                                             |       |                                                       |   |   |
| SECTION 7.   AFFIRMATIVE  COVENANTS                    |       | 34                                                         |
|                                                             |       |                                                       |
|                                                             | §7.1  | Punctual Payment                                           |   | 34     |
|                                                             | §7.2  | Maintenance of Offices                                     |   | 34     |
|                                                             | §7.3  | Records and Accounts                                       |   | 34     |
|                                                             | §7.4  | Financial Statements, Certificates, and Other  Information |   | 34     |
|                                                             | §7.6  | Business and Limited Partnership Existence                 |   | 35     |
|                                                             | §7.7  | Payment of Taxes                                           |   | 36     |
|                                                             | §7.8  | Inspection of Properties and Books                         |   | 36     |
|                                                             | §7.9  | Licenses and Permits                                       |   | 36     |
|                                                             | §7.10 | Pension Plans                                              |   | 36     |
|                                                             | §7.11 | Environmental and Safety Matters                           |   | 37     |
|                                                             | §7.12 | Indemnities, Etc.                                          |   | 38     |
|                                                             | §7.13 | Performance of Contracts                                   |   | 39     |
|                                                             | §7.14 | Notice of Default                                          |   | 39     |
|                                                             | §7.15 | Notice of Material Claims and Litigation                   |   | 39     |
|                                                             | §7.16 | No Disposition of Collateral                               |   | 39     |
|                                                             | §7.17 | Borrower’s Title; Lender’s Security Interest     |   | 39     |
|                                                             | §7.18 | Compliance with Laws and Regulations                       |   | 40     |
|                                                             | §7.19 | Further Assurances                                         |   | 40     |

 

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|                                                            | §7.20 | Casualty Occurrence                |   | 40     |
|-----------------------------------------------------------------|------------|------------------------------------|--------|--------|
|                                                            |       |                               |   |   |
| SECTION 8.   NEGATIVE  COVENANTS; FINANCIAL COVENANTS |       | 41                                 |
|                                                            |       |                               |
|                                                            | §8.1  | Transactions with Affiliates       |   | 41     |
|                                                            | §8.2  | Terminate Pension Plan             |   | 41     |
|                                                            | §8.3  | ERISA                              |   | 41     |
|                                                            | §8.4  | Financial Covenants                |   | 41     |
|                                                            |       |                               |   |   |
| SECTION 9.   EVENTS OF  DEFAULT; ACCELERATION         |       | 42                                 |
|                                                            |       |                               |
|                                                            | §9.1  | Events of Default                  |   | 42     |
|                                                            | §9.2  | Remedies                           |   | 44     |
|                                                            |       |                               |   |   |
| SECTION 10.   EXPENSES                                |       | 46                                 |
|                                                            |       |                               |
| SECTION 11.   SURVIVAL  OF COVENANTS                  |       | 47                                 |
|                                                            |       |                               |
| SECTION 12.   CONFIDENTIALITY                         |       | 47                                 |
|                                                            |       |                               |
| SECTION 13.   SUCCESSORS  AND ASSIGNS; PARTICIPATIONS |       | 48                                 |
|                                                            |       |                               |
|                                                            | §13.1 | Successors and Assigns             |   | 48     |
|                                                            | §13.2 | Assignments                        |   | 48     |
|                                                            | §13.3 | Participations                     |   | 49     |
|                                                            | §13.4 | Disclosures                        |   | 50     |
|                                                            | §13.5 | Federal Reserve Bank               |   | 50     |
|                                                            | §13.6 | Register; Note                     |   | 50     |
|                                                            |       |                               |   |   |
| SECTION 14.   NOTICES                                 |       | 51                                 |
|                                                            |       |                               |
| SECTION 15.   ENTIRE  AGREEMENT                       |       | 52                                 |
|                                                            |       |                               |
| SECTION 17.   SEVERABILITY                            |       | 52                                 |
|                                                            |       |                               |
| SECTION 18.   SUBMISSION  TO JURISDICTION; WAIVER     |       | 52                                 |
|                                                            |       |                               |
| SECTION 19.   WAIVER  OF JURY TRIAL                   |       | 53                                 |
|                                                            |       |                               |
| SECTION 20.   CONCERNING  THE AGENT                   |       | 54                                 |
|                                                            |       |                               |
|                                                            | §20.1 | Appointment And Authority Of Agent |   | 54     |
|                                                            | §20.2 | Delegation of Duties               |   | 55     |
|                                                            | §20.3 | Standard of Care                   |   | 55     |

 

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|                                                                                      | §20.4                                                      | Independent Credit Evaluations                                                    |   | 55     |   |
|-------------------------------------------------------------------------------------------|-----------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|                                                                                      | §20.5                                                      | Limited Scope of Duties                                                                     |   | 55     |   |
|                                                                                      | §20.6                                                      | Reliance by the Agent                                                             |   | 57     |   |
|                                                                                      | §20.7                                                      | Exculpatory Provisions                                                                 |   | 57     |   |
|                                                                                      | §20.8                                                      | Reimbursement of the Agent                               |   | 57     |   |
|                                                                                      | §20.9                                                      | CAF Individually                                                                                                     |   | 58     |   |
|                                                                                      | §20.10                                                     | Dealing with the Lenders                                                                              |   | 58     |   |
|                                                                                      | §20.11                                                     | Duties Not to be Increased                |   | 58     |   |
|                                                                                      | §20.12                                                     | Successor Agent                                                                                                      |   | 58     |   |
|                                                                                      |                                                            |                                                                                                                 |   |   |   |
| SECTION 21.   AMENDMENTS  AND WAIVERS        |                                                            | 59                                                                                                                   |   |
|                                                                                      |                                                            |                                                                                                                 |   |
| SECTION 22.   MISCELLANEOUS                                                |                                                            | 60                                                                                                                   |   |
|                                                                                      |                                                            |                                                                                                                 |   |
| SCHEDULES                                                                                 |                                                            |                                                                                                                 |   |
| Schedule 1-A                                                                              | Description of the New Vessels                                  |                                                                                                                 |   |   |
| Schedule 1-B                                                                              | Description of the Pledged Vessels (K-Sea)                      |                                                                                                                 |   |   |
| Schedule 1-C                                                                              | Description of the Pledged Vessels (Sea Coast)                  |                                                                                                                 |   |   |
| Schedule 2                                                                                | Commitment(s)                                                   |                                                                                                                 |   |   |
|                                                                                      |                                                            |                                                                                                                 |   |   |
| EXHIBITS                                                                                  |                                                            |                                                                                                                 |   |   |   |
| Exhibit A                                                                                 | Form of Term Note                                               |                                                                                                                 |   |   |
| Exhibit B                                                                                 | Form of Notice of Borrowing                                     |                                                                                                                 |   |   |
| Exhibit C                                                                                 | Form of New Vessel Ship Mortgage                                |                                                                                                                 |   |   |
| Exhibit D                                                                                 | Form Fleet Mortgage (Additional Collateral)                     |                                                                                                                 |   |   |
| Exhibit E                                                                                 | Form of Fleet Mortgage (Sea Coast)                              |                                                                                                                 |   |   |
| Exhibit F                                                                                 | Form of Assignment and Acceptance                               |                                                                                                                 |   |   |
| Exhibit G                                                                                 | Form of Security Agreement                                      |                                                                                                                 |   |   |
| Exhibit H                                                                                 | Form of Lien Certificate                                        |                                                                                                                 |   |   |
| Exhibit I                                                                                 | Assignment of Project Documents                                 |                                                                                                                 |   |   |
| Exhibit J                                                                                 | Contractor’s Consent                                       |                                                                                                                 |   |   |
| Exhibit K-1                                                                               | Form of K-Sea Transportation Guaranty                           |                                                                                                                 |   |
| Exhibit K-2                                                                               | Form of Sea Coast Guaranty                                      |                                                                                                                 |   |
| Exhibit K-3                                                                               | Form of K-Sea Canada Guaranty                                   |                                                                                                                 |   |
| Exhibit L                                                                                 | Form of Louisiana Construction Mortgage and Security  Agreement |                                                                                                                 |   |

 

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**LOAN AGREEMENT**

This LOAN AGREEMENT (this “Agreement”), is made as of May12, 2006, byand between K-SEA OPERATING PARTNERSHIP L.P., a Delaware limited partnership(the “Borrower”), and CITIZENS LEASING CORPORATION, d/b/a CITIZENS ASSETFINANCE (“CAF”), a Rhode Island corporation, and such other banks as may becomeparty hereto from time to time (each individually, a “Lender” and collectively,the “Lenders”) and CAF in the separate capacity of Agent (and CollateralTrustee to the extent set forth in § 20.1(a) hereof) for the Lendersunder this Agreement (in such capacities, the “Agent”).

NOW THEREFORE, in consideration of the premises and of the mutualagreements herein contained, the parties hereto agree as follows:

**SECTION1.****                            DEFINITIONS**

**§1.1        DefinedTerms.** As used in this Agreement the following termsshall have the meanings assigned to them below:

“Actual Knowledge” means, with respect to anyPerson who is an individual, that Person, and with respect to any other Person,means the actual knowledge of a Certifying Officer of that Person.

“Advance” means an advance pursuant to §2.1.

“Advance Date” means the date fixed for themaking of an Advance in a Notice of Borrowing.

“Advance Limit” means, with respect to each NewVessel, an amount equal to 90% of the total purchase price payable by theBorrower to Bollinger under the applicable Vessel Construction Agreement.

“Advance Termination Date” means May 12, 2007or if earlier, the date on which the Note is executed pursuant to § 6.2.

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

“Agent” means CAF acting in the capacities of agent (andCollateral Trustee to the extent set forth in § 20.1(a) hereof) foritself and the other Lenders under this Agreement, and includes any other bankor financial institution succeeding to and for the time being acting in suchcapacity.

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“Agent’s Office” means the office of the Agent presently locatedat 189 Canal Street, Providence, Rhode Island or the designated office of suchother Lender which succeeds to the position as Agent under this Agreement.

“Agreement” - see preamble.

“Amendments” means, collectively, (1) AmendmentNo. 1 to First Preferred Ship Mortgage (DBL 28), dated the date hereof,between the Borrower and CAF; (2) Amendment No. 1 to First Preferred ShipMortgage (DBL 29), dated the date hereof, between the Borrower and CAF; (3)Amendment No. 1 to First Preferred Ship Mortgage (DBL 78), dated the date hereof, between the Borrower andCAF; (4) Amendment No. 2 to Security Agreement (DBL 28, DBL 29, DBL 78), datedthe date hereof, between the Borrower and CAF; (5) Amendment No. 1 to SecurityAgreement (340), dated the date hereof, between Sea Coast and CAF; (6)Amendment No. 1 to Security Agreement (MCS Barge, WJM Tug), dated the datehereof, between K- Sea Canada Corp. and CAF; (7) Amendment No. 1 to FirstPreferred Ship Mortgage (340), dated the date hereof, between Sea Coast andCAF; and (8) Amendment No. 1 to a Mortgage Agreement Collateral To StatutoryMortgages (“MCS Barge, WJM Tug”) dated the date hereof, between K-Sea CanadaCorp. and CAF.

“Amendments to the FirstPreferred Ship Mortgages” means collectively, (1) Amendment No. 1 to FirstPreferred Ship Mortgage (DBL 28), dated the date hereof, between the Borrowerand CAF; (2) Amendment No. 1 to First Preferred Ship Mortgage (DBL 78), datedthe date hereof, between the Borrower and CAF; (3) Amendment No. 1 to FirstPreferred Ship Mortgage (DBL 29), dated the date hereof, between the Borrowerand CAF; (4) Amendment No. 1 to First Preferred Ship Mortgage (340), dated thedate hereof, between Sea Coast and CAF; and (5) Amendment No. 1 to a MortgageAgreement Collateral To Statutory Mortgages (“MCS Barge, WJM Tug”) dated thedate hereof, between K-Sea Canada Corp. and CAF.

“Assignment of Project Documents” means theAssignment of Project Documents, dated as of the date hereof, substantially inthe form of Exhibit I (including the consent of Bollinger in the formappended thereto), pursuant to which the Borrower has granted to the Agent asecurity interest in all of the Borrower’s rights, title and interest under theVessel Construction Agreements as security for the Obligations.

“Authorized Officer” means any person holdingthe title of Chairman, President, Vice President, Chief Financial Officer orTreasurer (or other officer performing the functions thereof).

“Bollinger” means Bollinger Marine Fabricators,L.L.C., a Louisiana limited liability company.

“Borrower” - see preamble.

“Business Day” means any day on which banks inRhode Island and New York are open for the conduct of normal banking business.

“CAF” — see preamble.

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“Capital Expenditures” means any expenditure orliability that is properly charged to a capital account or otherwisecapitalized on K-Sea Transportation’s consolidated balance sheet in accordancewith GAAP.

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

“CBPA” means Citizens Bank of Pennsylvania.

“Certifying Officer” — see §7.4(f).

“Change in Control” means (a) the acquisitionof ownership, directly or indirectly, beneficially or of record, by any Personor group (within the meaning of the Securities Exchange Act of 1934 and therules of the Securities and Exchange Commission thereunder as in effect on thedate hereof), of ownership interests representing more than 50% of the generalpartnership interest in K-Sea Transportation or more than 50% of the aggregateordinary voting power represented by the issued and outstanding ownershipinterests of Borrower, or (b) for the period of twelve (12) consecutivecalendar months, a majority of the board of Borrower or any Guarantor shall nolonger be composed of individuals (i) who were members of said board on thefirst day of such period, (ii) whose election or nomination to said board wasapproved by individuals referred to in clause (i) above constituting at thetime of such election or nomination at least a majority of said board, or (iii)whose election or nomination to said board was approved by individuals referredto in clauses (i) and (ii) above constituting at the time of such election ornomination at least a majority of said board.

“Coast Guard” means the United States CoastGuard, which is currently part of the United States Department of Homeland Security.

“Code” shall mean the Internal Revenue Code of1986, and the rules and regulations promulgated thereunder, as amended fromtime to time.

“Collateral” means the Vessels, charter hire,freights and earnings, fees and all other amounts due or which become due andpayable to the Borrower arising out of the Vessels; all insurance proceedspayable to the Borrower with respect to the Vessels; and all other property,interests and rights now or at any time hereafter described, referred to in orcovered by the Security Documents.

“Collateral Trustee” see § 20.1(a).

“Commitment(s)” means (a) as to each Lender,the amount set forth opposite a Lender’s name in Schedule 2 in the columnheaded “Commitment”, as such amount may be changed from time to time in accordancewith the provisions hereof and (b) collectively, the agreements of each Lenderto participate in making the Loan to the Borrower from time to time prior tothe Advance Termination Date as contemplated by §2 up to the limitspecified in §2.1.

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“Commitment Percentage” means the percentagefigure set forth opposite a Lender’s name in Schedule 2 (as in effectfrom time to time) in the column headed “Commitment Percentage” and being thepercentage of the amount of the Loan that is to be advanced by such Lender.

“Control” means the possession, directly orindirectly, of the power to direct or cause the direction of the management orpolicies of a Person, whether through the ability to exercise voting power, bycontract or otherwise.  **“**Controlling**”** and **“**Controlled**”** have meaningscorrelative thereto.

“Controlled Group” means all trades orbusinesses (whether or not incorporated) under common control that, togetherwith the Borrower, are treated as a single employer under Section 414(b) or414(c) of the Code or Section 4001(a)(14) of ERISA.

“DBL 26” means a 28,000 barrel inland tankbarge being constructed for the Borrower by Bollinger pursuant to a VesselConstruction Agreement.

“DBL 27” means a 28,000 barrel inland tankbarge being constructed for the Borrower by Bollinger pursuant to a VesselConstruction Agreement.

“DBL 104” means a 100,000 barrel tank bargebeing constructed for the Borrower by Bollinger pursuant to a VesselConstruction Agreement.

“Default(s)” means the occurrence of any eventor condition which, after the giving of notice and/or the lapse of time (ifprovided for in §9), would become an Event of Default.

“Default Rate” means an interest rate of 300basis points per annum over the relevant interest rate in effect in accordancewith §2.2(b) and (c) or, if lower, the Highest Lawful Rate.

“Dollars” and the sign “$” means dollars orsuch coin or currency of the United States of America as at the time of paymentshall be legal funds for the payment of public and private debts in the UnitedStates of America.

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

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

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

(i)           Interest Expense of Borrower for suchfiscal period;

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

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

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

“Eligible Assignee” means any bank, insurancecompany or other financial institution or finance company having a net worth inexcess of $50,000,000.

“Environmental Laws” means any and all federal,state, local and foreign laws, statutes, ordinances, rules, judgments, orders,decrees, permits, concessions, grants, franchises, licenses, agreements orother governmental restrictions relating to fines, orders, injunctions,penalties, damages, contribution, cost recovery compensation, losses orinjuries resulting from the Release or threatened Release of HazardousMaterials or to the generation, storage, transportation, or disposal of HazardousMaterials, in any manner applicable to the Borrower or any of its properties,including the Comprehensive Environmental Response, Compensation, and LiabilityAct (42 U.S.C. §9601 Qt seq.), the Hazardous Material Transportation Act (49U.S.C. §1801 Qt seq.), the Solid Waste Disposal Act (42 U.S.C. §6901 etseq.), the Federal Water Pollution Control Act (33 U.S.C. §1251 etseq.), the Clean Air Act (42 U.S.C. §7401 et. seq.), the ToxicSubstances Control Act (15 U.S.C. §2601 et. seq.), the OccupationalSafety and Health Act (29 U.S.C. §651 et. seq.) and the EmergencyPlanning and Community Right-to-Know Act (42 U.S.C. §11001 et. seq.),each as amended or supplemented, and any analogous future or present local,state and federal or foreign statutes and rules and regulations promulgatedpursuant thereto, each as in effect on the date of determination.

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

“Event of Default” means any of the eventsspecified in §9, *provided* thatthere has been satisfied any requirement in connection with such event for thegiving of notice or the lapse of time, or both.

“Event of Loss” means, with respect to anyVessel, the actual or constructive loss of such Vessel or the use thereof, dueto theft, destruction, damage beyond repair or damage from any reasonwhatsoever, to an extent which makes repair uneconomical, or rendition thereofunfit for normal use, or the condemnation, confiscation or seizure of, orrequisition of title to or use of, such Vessel by any Governmental Authority(other than the United States pursuant to a requisition for hire) or any otherperson, whether or not acting under color of Governmental Authority.

“Excluded Tax” means, with respect to theLenders, any of the following Taxes:

(i)            anyTax imposed on or with respect to, or calculated by reference to, the gross ornet income, capital, capital stock, net worth, assets or conduct of business ofthe Lenders by any national, state (or equivalent) or local jurisdiction underthe laws of which the Lenders are incorporated or otherwise organized or inwhich such Lender has an office or other fixed place of business;

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(ii)           anyTax imposed on or payable by a Lender by any Governmental Authority or othertaxing authority in any jurisdiction if the jurisdictional basis for such Taxexists as a result of any activities, transactions or other connection of suchLender (or any of its Affiliates) in or with such jurisdiction that isunrelated to such Lender’s Loan to the Borrower pursuant to the Loan Documents;

(iii)          anyTax arising from a transfer, assignment or other disposition by a Lender of allor any part of its interest in or rights under the Loan or the Loan Documentsunless such transfer, assignment or other disposition occurs as the result ofan Event of Default and while such Event of Default is continuing;

(iv)          anyTax to the extent consisting of a fine, interest, a penalty or other additionto tax that would not have been required to be paid but for the failure of anyLender to file any tax return or other tax document, or to pay any tax, in aprocedurally proper and timely matter;

(v)           anyTax attributable to gross negligence or willful misconduct of any Lender or thebreach of any agreement of such Lender in the Loan Documents; and

(vi)          anyUnited States federal Tax imposed on, or required to be withheld from or withrespect to payments of, gross or net income (including any Tax imposed bySection 881, 884, 1441, 1442, or 3406 of the Code).

“Federal Funds Rate” means, for any day, therate per annum equal to the weighted average of the rates on overnight Federalfunds transactions with members of the Federal Reserve System arranged byFederal funds brokers on such day, as published by the Federal Reserve Bank ofNew York on the Business Day next succeeding such day; provided that (a) ifsuch day is not a Business Day, the Federal Funds Rate for such day shall besuch rate on such transactions on the next preceding Business Day as sopublished on the next succeeding Business Day, and (b) if no such rate is sopublished on such next succeeding Business Day, the Federal Funds Rate for suchday shall be the average rate (rounded upward, if necessary, to a wholemultiple of 1/100 of 1%) charged to the Borrower on such day on suchtransactions as determined by the Agent.

“Financial Covenants” — see §8.4.

“Financing Statements” means Uniform CommercialCode financing statements naming the Borrower as debtor or Sea Coast as debtor,as applicable, and the Agent as secured party and filed or to be filed in theoffice of the Secretary of State of Delaware and/or such other locations as maybe required from time to time under applicable law to perfect a securityinterest in certain of the Collateral.

“Fixed Charge Coverage Ratio” means, at anydate of determination, the ratio of (a) EBITDA less Maintenance CAPEX dividedby (b) Fixed Charges, in each case for the four fiscal quarter period ending onsuch date or, if such date is not the last day of a fiscal quarter, for theimmediately preceding four fiscal quarter period; provided, that, forany such determination EBITDA shall be adjusted to include, for the relevantfour fiscal quarter period, pro forma 

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EBITDA in an amount reasonably acceptable to the Agentrespecting any vessel or business acquisition for which debt service isincurred and included in Fixed Charges.

“Fixed Charges” means the sum, for any periodfor K-Sea Transportation and its consolidated Affiliates, including, withoutlimitation, the Borrower, on a consolidated basis, of the following: (i)Interest Expense, plus (ii) the current portion of capital lease payments, plus(iii) Scheduled Principal Payments, plus (iv) cash income taxes.

“Fleet Mortgages” means, collectively, theFleet Mortgage (Additional Collateral) and the Fleet Mortgage (Sea Coast).

“Fleet Mortgage (Additional Collateral)” meansthe First Preferred Fleet Mortgage substantially in the form of Exhibit D,granted by the Borrower in favor of the Agent in its capacity as CollateralTrustee with respect to each Pledged Vessel (K-Sea) as amended, supplemented,restated, replaced or otherwise modified from time to time.

“Fleet Mortgage (Sea Coast)” means the FirstPreferred Fleet Mortgage substantially in the form of Exhibit E, grantedby Sea Coast in favor of the Agent in its Capacity as Collateral Trustee withrespect to each Pledged Vessel (Sea Coast) as amended, supplemented, restated,replaced or otherwise modified from time to time.

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

“Governmental Authority” means any governmentor political subdivision or any agency, authority, bureau, central bank,commission, department or instrumentality of either, or any court, tribunal,grand jury or arbitrator, in each case whether foreign or domestic.

“Guarantee” of or by any Person (the “guarantor”)means any obligation, contingent or otherwise, of the guarantor guaranteeing orhaving the economic effect of guaranteeing any Indebtedness or other obligationof any other Person (the “primary obligor”) in any manner, whetherdirectly or indirectly, and including any obligation of the guarantor, director indirect, (a) to purchase or pay (or advance or supply funds for thepurchase or payment of) such Indebtedness or other obligation or to purchase(or to advance or supply funds for the purchase of) any security for thepayment thereof, (b) to purchase or lease property, securities or services forthe purpose of assuring the owner of such Indebtedness or other obligation ofthe payment thereof, (c) to maintain working capital, equity capital or anyother financial statement condition or liquidity of the primary obligor so asto enable the primary obligor to pay such Indebtedness or other obligation, or(d) as an account party in respect of any letter of credit or letter ofguaranty issued to support such Indebtedness or obligations; *provided*, that the term Guaranteeshall not include any endorsement for collection or deposit in the ordinarycourse of business.

“Guarantor(s)” means, collectively, K-SeaCanada Corp., Sea Coast and K-Sea Transportation.

“Guaranty” means each of the K-Sea Canada Corp.Guaranty, the Sea Coast Guaranty and the K-Sea Transportation Guaranty, andwhich are collectively referred to, the “Guaranties.”

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“Hazardous Materials” means (a) any oil,petroleum or petroleum derived substance, any drilling fluids, produced watersand other wastes associated with the exploration, development or production of crudeoil, any flammable substances or explosives, any radioactive materials, anyhazardous wastes or substances, any toxic wastes or substances or any othermaterials or pollutants which (i) pose a hazard to any property of the Borroweror to Persons on or about such property or (ii) cause such property to be inviolation of any Environmental Laws, (b) asbestos in any form which is or couldbecome friable, urea formaldehyde foam insulation, electrical equipment whichcontains any oil or electric fluid containing levels of polychlorinatedbiphenyls in excess of fifty parts per million; (c) any chemical, material orsubstance defined as or included in the definition of “hazardous substances,” “hazardouswastes,” “hazardous materials,” “extremely hazardous waste,” restrictedhazardous waste,” or “toxic substances” or words of similar import under anyapplicable local, state or federal law or under the rules and regulationsadopted or publications promulgated pursuant thereto, including EnvironmentalLaws, and (d) any other chemical, material or substance, exposure to which isprohibited, limited or regulated by any Governmental Authority havingjurisdiction over the Borrower, or any of its properties, including theVessels.

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

“Highest Lawful Rate” means the maximum lawfulrate of interest (or, if the context requires, an amount calculated at suchrate) that the Agent is allowed to contract for, charge, take, reserve orreceive under applicable Law.

“Indebtedness” means, with respect to anyPerson, without duplication, (a) all obligations of such Person for borrowedmoney or with respect to deposits or advances of any kind, (b) all obligationsof such Person evidenced by bonds, debentures, notes or similar instruments,(c) all obligations of such Person upon which interest charges are customarilypaid, (d) all obligations of such Person under conditional sale or other titleretention agreements relating to property acquired by such Person, (e) allobligations of such Person in respect of the deferred purchase price of propertyor services (excluding current accounts payable incurred in the ordinary courseof business), (f) all Indebtedness of others secured by (or for which theholder of such Indebtedness has an existing right, contingent or otherwise, tobe secured by) any Lien on property owned or acquired by such Person, whetheror not the Indebtedness secured thereby has been assumed, (g) all Guarantees bysuch Person of Indebtedness of others, (h) all Capital Lease Obligations ofsuch Person, (i) all operating lease obligations of such Person, (j) allobligations, contingent or otherwise, of such Person as an account party inrespect of letters of credit and letters of guaranty, and (k) all obligations,contingent or otherwise, of such Person in respect of bankers’ acceptances; provided,however, that “Indebtedness” shall not include (x) secured nonrecourseobligations and (y) nonrecourse obligations incurred in connection withleveraged lease transactions as determined in accordance with GAAP.

“Indemnified Party” - see §7.11(d).

“Indemnified Tax” means any Tax (other than anExcluded Tax) imposed on or with respect to (i) the execution, delivery,recording, registration, notarization or other formalization, 

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performance, or enforcement of the Loan or the Note orany of the other Loan Documents or (ii) any payment pursuant to the LoanDocuments.

“Initial Lender” means Citizens LeasingCorporation, d/b/a Citizens Asset Finance, a Rhode Island corporation.

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

“K-Sea Canada Corp.” means K-Sea Canada Corp.,a Nova Scotia unlimited liability company.

“K-Sea Canada Guaranty” means the GuarantyAgreement in the form of Exhibit K-3 dated as of the date hereof betweenK-Sea Canada Corp. and the Agent, as amended, supplemented, restated, replacedor otherwise modified from time to time.

“K-Sea Transportation” means K-SeaTransportation Partners L.P., a Delaware limited partnership, and owner of a99.99% limited partner interest in the Borrower.

“K-Sea Transportation Guaranty”  means the Guaranty Agreement in the form of Exhibit K-1 dated as of thedate hereof between K-Sea Transportation and the Agent, as amended,supplemented, restated, replaced or otherwise modified from time to time.

“Law” means any law (including common law),constitution, statute, treaty, convention, regulation, rule, ordinance, order,injunction, writ, decree or award of any Governmental Authority.

“Lender(s)” — see the preamble.

“Lender Register” as defined in §13.6.

“LIBOR Rate” means relative to any one-monthinterest period, the offered rate for delivery in two London Banking Days (asdefined below) of deposits of U.S. Dollars which the British BankersAssociation fixes as its LIBOR rate as of 11:00 a.m. London time on the day onwhich the interest period commences, and for a period approximately equal tosuch interest period.  If the first dayof any interest period is not a day which is both a (i) Business Day, and (ii) aday on which US dollar deposits are transacted in the London interbank market(a “London Banking Day”), the LIBOR Rate shall be determined in reference tothe next preceding day which is both a Business Day and a London BankingDay.  If for any reason the LIBOR Rate isunavailable and/or the Agent is unable to determine the LIBOR Rate for any suchinterest period, the LIBOR Rate shall be deemed to be equal to the FederalFunds Rate plus****140 basis points.

 

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“Lien” means, with respect to any property orasset (or any income or profits therefrom of any Person) (in each case whetherthe same is consensual or nonconsensual or arises by contract, operation oflaw, legal process or otherwise) (a) any mortgage, pledge, hypothecation,assignment, security interest, encumbrance, lien (statutory or otherwise),levy, execution, attachment, seizure, garnishment or charge of any kind ordescription, whether or not choate, vested, or perfected, thereupon or inrespect thereof and shall include any agreement to give any of the foregoing,any conditional sale or other title retention agreement, any lease in thenature thereof including any lease or similar arrangement with a publicauthority executed in connection with the issuance of industrial developmentrevenue bonds or pollution control revenue bonds or other similar bonds, andthe filing of, or agreement to file any ship mortgage, financing statement orother document with the Coast Guard or under the UCC, or similar law of anyjurisdiction, or (b) any other arrangement, express or implied, under which thesame is subordinated, transferred, sequestered or otherwise identified so as tosubject the same to, or make the same available for, the payment or performanceof any liability or obligation in priority to the payment of the ordinary,unsecured creditors of such Person.

“Lien Certificates” — see §4.18.

“Loan” means, as at any date, the aggregateoutstanding principal amount of all Advances.

“Loan Documents” collectively, this Agreement,the Notes, the Security Agreement, the Financing Statements, the ShipMortgages, the Guaranties, the Assignment of Project Documents, and any otherinstruments or agreements executed and delivered by the parties in connectionwith the transactions contemplated by this Agreement, in each case as the samemay be amended, supplemented, restated, replaced or otherwise modified fromtime to time.

“Louisiana Ship Mortgage” means the LouisianaConstruction Mortgage and Security Agreement in the form of Exhibit Ldated as of May 12, 2006 between Borrower and Lender.

“Maintenance CAPEX” means all CapitalExpenditures made for the purpose of maintaining (and not increasing) theoperating capacity of the Vessels during the twelve (12) calendar months immediatelypreceding any date of determination thereof.

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

“New Vessel(s)” means, collectively, DBL 26,DBL 27, and DBL 104, and individually, any one of them, as more particularlydescribed in Schedule 1-A hereto.

“New Vessel Ship Mortgage(s)” means the threeFirst Preferred Ship Mortgages substantially in the form of Exhibit C,each granted by the Borrower in favor of the Agent in its 

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capacity as Collateral Trustee with respect to eachNew Vessel, as such mortgages may be amended, supplemented, restated, replacedor otherwise modified from time to time.

“Note(s)” — see §2.2(a).

“Notice of Borrowing” — see §2.1.

“Obligations” means all indebtedness, obligations and liabilities of the Borrower orthe Guarantor to the Agent or to the Lenders existing on the date of thisAgreement or arising thereafter, direct or indirect, joint or several, absoluteor contingent, matured or unmatured, liquidated or unliquidated, secured orunsecured, in each case arising by contract, operation of law or otherwiseunder or in connection with (i) this Agreement or in respect of the Loan andthe Note or the other Loan Documents, as all of the same may be amended,extended, renewed, replaced, restated or otherwise modified from time to time,and (ii) any Hedging Agreement between the Borrower and one or more of theAgent, the Lenders or any Affiliate of the Agent or any Lender, in each case,respecting this Agreement or in respect of the Loan and the Note or other LoanDocuments.

“Officer’s Certificate” means a certificatesigned on behalf of the Borrower or the Guarantor by an Authorized Officer ofthe Borrower or the Guarantor, as applicable.

“Original Vessel Documents” means the U.S.Coast Guard Certificates of Documentation for each of the Vessels and theAmerican Bureau of Shipping Classification Certificates.

“Participant” — see §13.3.

“Permitted Lien” means (a) Liens granted to theLenders or the Agent (in its capacities as Agent and as Collateral Trustee) pursuantto the Loan Documents; and (b):

(i)            Liensfor current crew’s wages, including wages of the master to the extent providedin Public Law 90-293, for general average or salvage (including contractsalvage) or for wages of stevedores employed directly by the Borrower, theoperator, agent or master of the Vessels which in each case (A) are unclaimedor (B) shall not have been due and payable for longer than ten (10) days aftertermination of a voyage;

(ii)           Liensfor repairs or incident to current operations of the Vessels (other than thosereferred to in clause (i)), but only to the extent in each case that such liensare based on (x) claims not yet delinquent, (y) in the case of liens incidentto current operations, are incurred in the ordinary course of business and donot exceed $250,000 in the aggregate for the New Vessels after delivery thereoffrom Bollinger and $1,000,000 in the aggregate for the Pledged Vessels, and (z)do not involve a significant risk of a sale, forfeiture, hindrance to operationor loss of the Vessels;

(iii)          Liensfor amounts (including Taxes) that are not delinquent or that are due andunpaid for not more than sixty (60) days after such amounts shall become duethat do not involve a significant risk of a sale, forfeiture, hindrance tooperation or loss of the Vessels;

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(iv)          Liensfor amounts being contested by the Borrower in good faith by appropriateprocedures, diligently prosecuted or appealed which do not involve asignificant risk of a sale, forfeiture, hindrance to operation or loss of theVessels;

(v)           Liensfor charges that, in the opinion of the Borrower or as indicated by the writtenadmission of liability therefor by an insurance company, are covered byinsurance;

(vi)          Liensarising from the taking or requisition for use of the Vessels by the governmentor any governmental body of the United States of America to the extent that thecreation or incurrence of such lien shall have been beyond the control of theBorrower during such requisition, provided that all such liens referred to inthis clause (vi) shall be removed and discharged within thirty (30) days aftersuch requisition shall have terminated; and

(vii)         priorto the delivery date of the New Vessels, respectively, liens arising as amatter of law or in accordance with the terms of the Vessel ConstructionContracts in favor of, or through Bollinger.

“Person” means a natural person, a partnership,a corporation, a limited liability company, a limited partnership, a limitedliability partnership, a joint venture, a trust, an unincorporatedorganization, or a government or any agency or political subdivision thereof.

“Plan” means at any time, an employee pensionor other benefit plan that is subject to Title IV of ERISA or subject to theminimum funding standards under Section 412 of the Code and is either (i)maintained by the Borrower or any member of the Controlled Group for employeesof the Borrower or any member of the Controlled Group, or (ii) maintainedpursuant to a collective bargaining agreement or any other arrangement underwhich more than one employer makes contributions and to which the Borrower orany member of the Controlled Group is then making or accruing an obligation tomake contributions or has within the preceding five Plan years madecontributions.

“Pledged Vessels” means, collectively, thePledged Vessels (K-Sea) and the Pledged Vessels (Sea Coast).

“Pledged Vessels (K-Sea)” means, collectively,DBL 2202, DBL 16, Essex, DBL 3201, Wallabout Bay, Newark Bay, Josiah Bartlett,KTC 30, Great Lakes, and Great Gull, as more particularly described in Schedule1-B hereto.

“Pledged Vessels (Sea Coast)” means,collectively, the SCT 180, SCT 280, and SCT 282 as more particularly describedon Schedule 1-C hereto.

“Prepayment Premium” means an additional amountto be paid in connection with any prepayment made pursuant to §2.3(a), §2.3(b)(other than relating to a prepayment arising as a result of an Event of Loss)or §9.2, (a) if such prepayment occurs prior to the firstanniversary of the Advance Termination Date, an amount equal to three percent(3%) of the prepaid principal thereof, (b) if such prepayment occurs on orafter the first anniversary of the Advance Termination Date, but prior to thesecond anniversary of the Advance Termination Date, an amount equal to 2% ofthe prepaid principal thereof, and (c) if such prepayment occurs on or afterthe second anniversary of the Advance Termination Date, an amount equal to 1%of the 

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prepaid principal thereof, provided that the Borrowershall be entitled to prepay (in a one time prepayment) up to an aggregateamount of Twelve Million Dollars ($12,000,000.00) of the principal amount ofthe Loan at any time after the date that is twelve (12) months after the firstof the month following Advance Termination Date without incurring anyPrepayment Premium.

“Proceeds” shall have the meaning assigned toit under the UCC and, in any event, shall include, but not be limited to, thefollowing at any time whatsoever arising or receivable: (a) whatever isreceived upon the collection, exchange, sale or other disposition of anyCollateral, and any property into which any of the Collateral is converted,whether cash or non-cash proceeds, (b) any and all proceeds of any insurance,indemnity, warranty or guarantee payable to the Borrower from time to time withrespect to any of the Collateral, (c) any and all payments (in any formwhatsoever) made or due and payable to the Borrower from time to time inconnection with any requisition, confiscation, condemnation, seizure orforfeiture of any of the Collateral by any Governmental Authority (or anyPerson acting under color of governmental authority), and (d) any and all otheramounts from time to time paid or payable under or in connection with any ofthe Collateral.

“Registration Agent” as defined in §13.6.

“Release” means any release, spill, emission,leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching,or migration in, by, from or related to any real property (including allbuildings, fixtures or other improvements located thereon) or personal propertyowned, leased or operated by the Borrower into the indoor or outdoorenvironment, including the movement of any Hazardous Material through air,soil, surface water, groundwater or property.

“Required Lenders” means, as at a particulardate, the Lenders to which greater than 66 2/3% of the aggregate principal ofthe Loan is owing or, if no principal of the Loan is outstanding, the Lenderswhich together have Commitments aggregating greater than 66 2/3% of the total Commitments.

“Scheduled Principal Payments” means, withrespect to any Person as of any date, all scheduled payments of principal onIndebtedness paid by such Person during the twelve (12) calendar month periodimmediately preceding such date; provided that any Indebtedness repaidin full or in part from proceeds of Loans shall be excluded (entirely, in thecase of Indebtedness repaid in full and partially to the extent of suchrepayment, in the case of Indebtedness repaid in part) in the determination of ScheduledPrincipal Payments.

“Sea Coast” means Sea Coast Transportation LLC,a Delaware limited liability company.

“Sea Coast Guaranty” means  the Guaranty Agreement in the form of ExhibitK-2 dated as of the date hereof between Sea Coast and the Agent, as amended,supplemented, restated, replaced or otherwise modified from time to time.

“Security Agreement” means the SecurityAgreement, dated as of the date hereof, substantially in the form of ExhibitG pursuant to which the Borrower has granted to the Agent, a securityinterest in certain rights and assets of the Borrower relating to the Vesselsas security for the Obligations.

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“Security Documents” means the SecurityAgreement, the Ship Mortgages and the Assignment of Project Documents.

“Ship Mortgage(s)” means, collectively, the NewVessel Ship Mortgages, the Fleet Mortgages****and theLouisiana Ship Mortgage**.**

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

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

“Tangible Net Worth” means the excess of totalassets over total liabilities, total assets and total liabilities each to bedetermined in accordance with GAAP consistent with those applied in thepreparation of the financial statements referred to in §7.4 hereof,excluding, however, from the determination of total assets all assets whichwould be classified as intangible assets under GAAP, including, withoutlimitation, capitalized organizational costs, goodwill, licenses, patents,trademarks, trade names, copyrights and franchises.

“Taxes” means, with respect to any Person, anyand all present or future taxes, including any change in the basis of taxation(except a change in the rate of taxation on the overall net income of suchPerson, by the jurisdiction, or by any political subdivision or taxingauthority of any such jurisdiction, in which such Person has its principaloffice), levies, imposts, duties, fees, assessments, deductions, withholdingsor other charges of whatever nature, including gross receipts, excise,property, sales, transfer, license, payroll, social security and franchisetaxes now or hereafter imposed or levied by the United States of America, orany state, local or foreign government or by any department, agency or otherpolitical subdivision or taxing authority thereof and all interest, penalties,additions to tax or similar liabilities with respect thereto.  Notwithstanding the foregoing, the definition“Taxes” shall not include any taxes or other charges as mentioned above on orwith respect to the income of any Lender or the Agent.

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

“Total Funded Debt to EBITDA Ratio” means, atany date of determination, the ratio of Total Funded Debt divided by EBITDA forthe four fiscal quarter period ending on such date or, 

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if such date is not the last day of a fiscal quarter,for the immediately preceding four fiscal quarter period; provided, that, forany such determination, EBITDA shall be adjusted to include, for the relevantfour fiscal quarter period, pro forma EBITDA in an amount reasonably acceptableto the Agent respecting any vessel or business acquisition for which debt isincurred and included in Total Funded Debt.

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

“UCC” means the Uniform Commercial Code as ineffect from time to time in the State of New York.

“Vessels” means, collectively, the New Vesselsand the Pledged Vessels.

“Vessel Construction Agreement(s)” means,collectively, (a) the Vessel Construction Agreement dated August 26, 2005(including all associated plans, specifications and related documents) betweenBollinger and the Borrower with respect to the construction by Bollinger of DBL26, (b) the Vessel Construction Agreement dated September 22, 2005 (includingall associated plans, specifications and related documents) between Bollingerand the Borrower with respect to the construction by Bollinger of DBL 27, and(c) the Vessel Construction Agreement dated November 18, 2005 (including allassociated plans, specifications and related documents) between Bollinger andthe Borrower with respect to the construction by Bollinger of DBL 104.

**§1.2        OtherDefinitional and Interpretive Provisions**.

(a)           All terms in thisAgreement, the Exhibits and Schedules hereto shall have the same definedmeanings when used in any other Loan Documents, unless the context shallrequire otherwise.

(b)           Exceptas otherwise expressly provided herein, all accounting terms not specificallydefined or specified herein shall have the meanings generally attributed tosuch terms under GAAP, including applicable statements and interpretationsissued by the Financial Accounting Standards Board and bulletins, opinions,interpretations and statements issued by the American Institute of CertifiedPublic Accountants or its committees.

(c)           Allpersonal pronouns used in this Agreement, whether used in the masculine,feminine or neuter gender, shall include all other genders; the singular shallinclude the plural, and the plural shall include the singular.

(d)           Thewords “hereof,” “herein” and “hereunder” and words of similar import when usedin this Agreement shall refer to this Agreement as a whole and not to anyparticular provisions of this Agreement.

(e)           Thepreamble hereto is part of this Agreement. Titles of Sections in this Agreement are for convenience only, do notconstitute part of this Agreement and neither limit nor amplify the provisionsof this Agreement, and all references in this Agreement to Sections, Subsections,paragraphs, clauses, subclasses, Schedules or Exhibits shall refer to thecorresponding Section, Subsection, paragraph clause, subclause, Schedule orExhibit attached to 

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this Agreement, unless specific reference is made to the articles, sectionsor other subdivisions or divisions of such Schedule or Exhibit to or in anotherdocument or instrument.

(f)            Eachdefinition of a document in this Agreement shall include such document asamended, modified, supplemented, restated, renewed or extended from time totime.

(g)           Exceptwhere specifically restricted, reference to a party in a Loan Document includesthat party and its successors and assigns permitted hereunder or under suchLoan Document.

(h)           Unlessotherwise specifically stated, whenever a time is referred to in this Agreementor in any other Loan Document, such time shall be the local time in Providence,Rhode Island and New York, New York.

(i)            Anylist in this Agreement of one or more items preceded by the words “include or “including”shall not be deemed limited to the stated items but shall be deemed withoutlimitation.

**SECTION2.****                            THETERM LOAN.**

**§2.1        Advances;Purposes.**

(a)           Subject to the termsand conditions set forth herein, and in reliance upon the representations andwarranties contained herein, during the period from the date hereof through andincluding the Advance Termination Date, the Lenders, shall make advances, eachin a principal amount equal to such Lender’s Commitment Percentage of the totalamount to be borrowed on any occasion, of the Loan (each, an “Advance,” andcollectively, the “Advances”), the principal amount of which, in aggregateshall not exceed $23,000,000.00 (the “Loan”). To request Advances of the Loan, the Borrower shall deliver to theAgent, not less than three Business Days before each requested funding date, awritten notice of borrowing in substantially the form of Exhibit Battached hereto, with the appropriate insertions and additions therein (the “Noticeof Borrowing”) specifying, among other things, (A) the proposed Advance Date(which shall be on or before the Advance Termination Date), and (B) the amountof such Advance, (which shall not be less than $250,000.00).

(b)           Theproceeds of the Loan shall be used to make advances to the Borrower from timeto time to finance construction period progress payments for each of the NewVessels.

(c)           TheNotice of Borrowing when given shall be irrevocable. Unless the Agentdetermines that any of the applicable conditions set forth in §4, §5or §6 have not then been satisfied, the Lenders will make such Advanceto the order of the Borrower prior to the Agent’s close of business on eachAdvance Date by (i) credit in immediately available funds to the Borrower’saccount maintained with the Agent or (ii) by wire transfer pursuant to theBorrower’s instruction.

(d)           Uponreceipt of a Notice of Borrowing, the Agent will promptly advise each Lender ofthe contents thereof or deliver a copy of such Notice of Borrowing to each 

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Lender. With respect to each borrowing, each Lender will make availableto the Agent at the place designated in the Agent’s notice to the Lenders notlater than 1:00 p.m., New York time, on the date specified for borrowing, suchLender’s Commitment Percentage of the amount of the Advance.  The obligations of each Lender under this §2.1(d)are several and not joint, and the failure of any Lender to fulfill itsobligations hereunder shall not diminish or discharge the obligations of any ofthe other Lenders.

**§2.2        Note;Repayment of Principal and Interes**t.

(a)           Theobligations of the Borrower to repay the Loan, to pay interest thereon from andafter the Advance Termination Date, and all other sums which may become payablewith respect thereto, shall be evidenced with respect to the Loan by thisAgreement and by promissory notes of the Borrower substantially in the form of ExhibitA (the “Notes”), payable to the order of each Lender in a principal amountequal to its aggregate Advances and appropriately completed in accordance withthe provisions of this Agreement and dated as of the Advance TerminationDate.  The principal amount of the Loanthat is outstanding on the Advance Termination Date shall be repaid in 84consecutive monthly installments, the first such installment becoming due andpayable on the date that is one month after the Advance Termination Date.  If not earlier prepaid pursuant to §2.3,the entire remaining principal amount of the Loan shall become immediately dueand payable on the date which occurs 85 months after the AdvanceTermination Date, as set forth in each Note, without presentment, demand orfurther notice of any kind, together with all accrued interest and otheramounts then owing by the Borrower to the Agent, on behalf of each Lender,hereunder and under the other Loan Documents. The principal balance of eachNote may be prepaid pursuant to §2.3, *provided*thatno amount of the Loan that is so prepaid shall be available for reborrowing.Partial prepayments of each Note shall be applied to installment payments inthe inverse order of maturity.

(b)           Priorto the Advance Termination Date, the obligations of the Borrower to repay theLoan, to pay interest thereon, and all other sums which may become payable withrespect thereto, shall be evidenced by this Agreement.  Prior to the Advance Termination Date, theoutstanding principal amount of the Loan shall bear interest at the LIBOR Rateplus 140 basis points (1.4%).  Interestprior to the Advance Termination Date shall be due and payable monthly inarrears, on the first day of each month, commencing on the date that is thefirst day of the month immediately following the date of the initial Advancehereunder, for the period commencing on the first day of the immediatelypreceding month (or commencing on the date of the initial Advance with respectto the first interest payment) and ending on and including the last day of suchmonth and shall be paid by the Borrower to the Agent for the account of eachLender.

(c)           Afterthe Advance Termination Date, the outstanding principal amount of the Loan shallbear interest at the rate, and such interest shall be payable on the dates, asprovided in the Notes.

(d)           Atany time during the term of the Loan after the first anniversary of the date ofthe Note, the Borrower may request that the rate of interest payable under theNote be converted to a fixed rate.  Ifaccepted by the Borrower, such fixed rate shall be set for the remainder of theterm of the Loan and shall be offered by the Agent, as determined by the Agent,

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based on the closest whole-year interest rate swaps reported in theFederal Reserve H-15 Report of the day prior to fixing the rate, plus 140 basispoints (1.40%).

(e)           TheAgent shall notify the Borrower and the Lenders of each determination of therate pursuant to this §2.2(e). Each determination of an interest rate by the Agent pursuant to thisAgreement shall be conclusive and binding on the Borrower and the Lenders inthe absence of manifest error.  The Agentwill, at the request of the Borrower, furnish to the Borrower, a statementshowing the computations used by the Agent in determining any interest ratepursuant hereto.

(f)            TheBorrower shall pay to the Agent, for the account of each Lender, interest atthe Default Rate on the principal of the Loan, and on any other amounts payableby the Borrower under this Agreement or the other Loan Documents (includinginterest to the extent permitted by law) that is not paid on the due datethereof, calculated from the day following such due date.  In addition, if any payment set forth in theNotes or hereunder shall not be made within ten (10) days of the due date, theBorrower shall pay as an administrative and late charge an amount equal to 3%of the amount of any such overdue payment. All interest provided for in this §2.2(f) shall be payable on demandof the Agent.  The payment or acceptanceof the rate provided by this §2.2(f) or any such late charge shall notconstitute a waiver of any Default or Event of Default or an amendment to thisAgreement or otherwise prejudice or limit any rights or remedies of the Lendersor the Agent.

(g)           Inno event shall the amount of interest due or payable under the Loan, the Notesor any of the other Loan Documents, exceed the Highest Lawful Rate, and in theevent any such excess is paid by the Borrower or received by the Agent or theLenders, then such excess sum shall be deemed to be inadvertently paid orreceived and shall be credited as a payment of principal, unless the Borrowershall notify the Agent that the Borrower elects to have such excess returned toit forthwith.  It is the express intenthereof that the Borrower not pay and the Agent and the Lenders not receive, directly or indirectly, in any mannerwhatsoever, interest in excess of that which may be lawfully paid by theBorrower under applicable Law.

(h)           Thebooks and records of the Agent shall, absent demonstrable error, be conclusiveas to the outstanding amount of the Loan, all interest accrued thereon and allother amounts owed by the Borrower hereunder.

**§2.3        Prepayments**.

(a)           VoluntaryPrepayments.  At any time subsequentto the Advance Termination Date, the Borrower shall have the right to prepaythe Loan in whole or in part, together with accrued interest, *provided* that such prepayment shall be accompanied bypayment of the applicable Prepayment Premium (subject to the proviso set forthin the definition of Prepayment Premium), and *providedfurther*that the Borrower shall give the Agent notice of its intentto prepay the Loan or a portion thereof not later than 2:00 p.m. on the datethat is three Business Days prior to the date of prepayment (which prepaymentdate must be a date upon which a principal installment payment is due under theapplicable Note).  Such notice shall beirrevocable; once given, the principal amount of the Loan designated in theBorrower’s notice shall become due and payable on the prepayment date specifiedtherein.

 

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(b)           MandatoryPrepayments.  The Borrower shall berequired to prepay the principal balance of each Note, subject to thelimitations set forth below in the “provided” clause, together with allaccrued interest and any other amounts then owing and constituting Obligations(including the applicable Prepayment Premium), (i) without derogating inany way from §7.16, in an amount equal to 100% of the net proceedsreceived by the Borrower from the sale or other transfer of legal, equitable orbeneficial title of one or more (A) New Vessels, and, (B) if an Event ofDefault has occurred and is continuing, one or more of the Pledged Vessels or(ii) in an amount equal to 100% of the proceeds of an Event of Loss to prepaythe Notes on a date that is not earlier than the date the insurance proceedsare received by the Borrower upon the occurrence of an Event of Loss withrespect to any (A) New Vessel, and, (B) if an Event of Default has occurred andis continuing, one or more of the Pledged Vessels, *provided*that (A) if the Borrower receives proceeds as a result of any of the eventsdescribed in clauses (i) and (ii) with respect to DBL 26 only (and not DBL 27or DBL 104) the Borrower shall be required to prepay only an amount equal to1/6 of the then outstanding principal balance of the Loan, (B) if the Borrowerreceives proceeds as a result of any of the events described in clauses (i) and(ii) with respect to DBL 27 only (and not DBL 26 or DBL 104) the Borrower shallbe required to prepay only an amount equal to 1/6 of the then outstandingprincipal balance of the Loan, and (C) if the Borrower receives proceeds as aresult of any of the events described in clauses (i) and (ii) with respect tothe DBL 104 only (and not DBL 26 or DBL 27), the Borrower shall be required to prepayonly an amount equal to 2/3 of the then outstanding principal balance of theLoan.

**§2.4        PaymentsGenerally**.

(a)           Allpayments hereunder shall be made in Dollars and in immediately available fundsand shall be made prior to 2:00 p.m. on the date of payment to the principaloffice of the Agent, for the respective accounts of the Lenders, or such otheroffice as the Agent shall designate in writing. Payments received after 2:00 p.m. shall be deemed to be payments madeprior to 2:00 p.m. on the next succeeding Business Day.  Interest on the Loan and fees due and payablehereunder and under each Note or any of the other Loan Documents shall becomputed on the basis of the actual number of days elapsed over twelve (12) thirty(30) day months, including the first day but excluding the last day of therelevant period.  Any payment which fallsdue on a day which is not a Business Day shall be rescheduled to the nextsucceeding Business Day and interest and fees shall continue to accrue to suchrescheduled Business Day.  The Borrowerhereby irrevocably authorizes the Agent to charge any and all of the Borrower’saccounts with the Agent for the amount of each such payment (the Agent agreeingto give notice to the Borrower contemporaneously thereof), with the Borrowerremaining liable for any deficiency.

(b)           TheBorrower agrees to pay principal, interest, fees and all other amounts duehereunder or under each Note or under any other Loan Document without setoff,recoupment or counterclaim.  All amountsreceived by the Agent, on account of each Lender, for application to theObligations (whether voluntary or mandatory payments or prepayments, proceedsfrom liquidation of Collateral, or otherwise) shall be applied by the Agent inthe following order of priority: (i) to the payment of any fees then due andpayable, (ii) to the payments of all other amounts not otherwise referred to inthis §2.4 then due and payable hereunder or under the other LoanDocuments (including any reasonable costs and expenses incurred by any Lenderor the 

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Agent as a result of a Default or an Event of Default), (iii) to thepayment of interest then due and payable on the Loan, and (iv) to the paymentof principal then due and payable on the Loan, to be applied in the inverseorder of maturity.  No application ofpayments will cure any Event of Default or prevent acceleration, or continuedacceleration, of amounts payable under the Loan Documents or prevent theexercise, or continued exercise, of rights and remedies of any Lender or theAgent hereunder, under any of the other Loan Documents or under applicable Law.

(c)           Ifthe Agent makes any payment to a Lender or to the Borrower in the belief thatthe Borrower or Lender has or should have paid the amount thereof to the Agentand it proves to be the case that the Borrower or such Lender, as the case maybe, has not paid such amount to the Agent, the recipient of such payment fromthe Agent shall forthwith upon demand repay such amount to the Agent and shallalso indemnify the Agent as provided in §20.8 against any funding costsincurred by the Agent as a result of its having paid out such amount beforehaving received payment from the Person which was obliged to have paid suchamount to the Agent.

(d)           Subjectto the provisions of §20.8, the Agent shall immediately distribute toeach Lender, in the same type of funds in which received by the Agent, (i) suchLender’s ratable share of each payment of principal of or interest and otheramounts payable in respect of the Loan and (ii) so much, if any, as such Lenderis entitled to receive of each other payment made to the Agent pursuant to thisAgreement.

(e)           Notwithstandinganything to the contrary contained in this Agreement, if it shall becomeunlawful or, in the reasonable judgment of the Agent, impracticable, for anypayment to be made as above provided and the Agent shall have given notice tothe other parties hereto to that effect, then the Borrower shall pay to eachLender for its own account in such funds as are required by this §2.4 orin such other manner as may be agreed between the Borrower and each affectedLender and to such account as may have been specified by the Lender to theBorrower the amount of such Lender’s pro rata share of the payment inquestion.  Each Lender shall keep theAgent fully informed as to all amounts received by it and as to all agreementsmade between it and the Borrower as referred to above.

**§2.5        IncreasedCosts and Reduced Return. **TheBorrower agrees that if any Governmental Authority enacts or promulgates afterthe date hereof any Law, or any request, guideline or directive (whether or nothaving the force of law and whether or not failure to comply therewith would beunlawful) or any change in the interpretation or administration of any existingLaw by any Governmental Authority charged with the administration thereof,which shall either (a) impose, affect, modify or deem applicable any reserve,special deposit, capital maintenance or similar requirement against the Loan,or (b) impose on any Lender any other condition regarding the Loan, thisAgreement, or the Notes, or (c) result in any requirement regarding capitaladequacy (including any risk-based capital guidelines) affecting any Lenderbeing imposed or modified or deemed applicable to any Lender and the result ofany event referred to in clause (a), (b) or (c) above shall be to increase thecost to any Lender of making, funding or maintaining the Loan or to reduce theamount of any sum receivable by any Lender or such Lender’s rate of return oncapital with respect to the Loan to a level below that which any such Lendercould have achieved but for such imposition, modification or deemedapplicability (taking into consideration such Lender’s policies with respect tocapital adequacy) by an amount 

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deemed by such Lender (in the exercise of its reasonable discretion) tobe material, then, upon demand by such Lender in writing, the Borrower shallpay to such Lender, within ten (10) Business Days after receipt of such Lender’swritten demand and the statement described in the following sentence,additional amounts which shall be sufficient to compensate such Lender for suchincreased cost or reduced rate of return, provided that the Borrower shall haveno obligation to pay any such amount (x) to the extent that such increased costor reduction in rate of return on capital is a result of any one or more of thefollowing: (1) any Lender’s transfer of its interest in the Loan and theapplicable Note to another lending office, (2) circumstances applicable to anyLender but not of general application to other similar lenders, (3) a downgradein the credit rating accorded any Lender (or an Affiliate of such Lender) byany credit rating agency, or (4) any Lender’s unreasonably treating the Loanless favorably than other similarly situated loans in such Lender’s loanportfolio, or (y) except after an Event of Default shall have occurred, in thecase of any Person that becomes a Lender after the date hereof, to the extentthat the amount of the increased cost or reduction in rate of return on capitalexceeds the amount of the increased cost or reduction in rate of return oncapital that would have been suffered by the Initial Lender if the InitialLender owned such Person’s interest in the Loan.  In the absence of manifest error, a statementsetting forth the basis for requesting such compensation and the method for,and reasonable calculations for, determining the amount thereof, submitted byany Lender to the Borrower, shall be final, conclusive and binding on allparties for all purposes.

**§2.6        PaymentsFree and Clear of Taxes**.

(a)           Exceptas provided in the following sentence, payments of principal, interest, feesand other amounts under this Agreement, the Notes or any other Loan Document orotherwise paid or payable to the Agent, for the accounts of the Lenders (asused in this §2.6, “Payments”) shall be made free and clear of, andwithout deduction by reason of, Indemnified Taxes, all of which shall be paidby the Borrower for its own account not later than the date when due.  If the Borrower is required by law orregulation to deduct or withhold any Taxes from any Payment, it shall: (i) makesuch deduction or withholding; (ii) pay the amount so deducted or withheld tothe appropriate taxing authority not later than the date when due; (iii)deliver to the Agent and the affected Lender(s), promptly and in any eventwithin 15 days after the date on which such Taxes become due, original taxreceipts (if reasonably obtainable) or other evidence satisfactory to the Agentand the affected Lender(s) of the payment when due of the full amount of suchTaxes; and (iv) pay to the Agent, for the accounts of the affected Lender(s)forthwith upon request from time to time, such additional amounts as may benecessary so the affected Lender(s) receives, free and clear of all Taxes(other than Excluded Taxes), the full amount of such Payment stated to be dueunder this Agreement, the Note or any other Loan Document as if no suchdeduction or withholding had been made.

(b)           TheBorrower agrees to indemnify each of the Agent and the Lenders for the fullamount of Indemnified Taxes paid by such Lender and any liability (includingpenalties, interest and expenses) arising therefrom or with respect theretowithin ten Business Days after receipt of such Lender’s written demandtherefore (which written demand shall include or be accompanied by (x) adescription in reasonable detail of the Indemnified Tax involved and thecalculation of the amount of indemnity demanded and (y) a copy of each writtencommunication which such Lender received from any Governmental Authority orother taxing authority with respect to such Indemnified Tax.

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(c)           Ifthe Borrower pays any Indemnified Tax to any Governmental Authority or othertaxing authority, or pays any amount to a Lender pursuant to §§2.6(a)(iv)or 2.6(b) with respect to any Tax:

(i)            theBorrower shall be subrogated to the rights of each Lender with respect to suchTax, and such Lender shall take such action as the Borrower may reasonablyrequest to enable the Borrower to exercise those rights; and

(ii)           tothe extent that a Lender receives a refund of such Tax, such Lender shall paythe amount of such refund to the Borrower within thirty (30) days after receiptthereof.

(d)           Notwithstandingany provision to the contrary in the Loan Documents, the Borrower shall have noobligation to pay, or to indemnify any Lender for, any Tax pursuant to this §2.6to the extent that such Tax has been taken into account in the calculation ofany amount paid or payable by the Borrower to the Lender pursuant to §2.5or §10.

(e)           TheBorrower’s deduction or withholding from any Payment any withholding tax thatis an Excluded Tax and the Borrower’s payment of such Payment reduced by suchwithholding tax in accordance with this §2.6 shall not be a Default oran Event of Default.

(f)            Ifany Lender receives a written claim from any Governmental Authority or othertaxing authority for any Indemnified Tax, such Lender shall send a copy of suchwritten claim to the Borrower promptly after receipt thereof.  If requested by the Borrower and the Borroweracknowledges, in writing, that such Tax is an Indemnified Tax, such Lendershall contest (or permit the Borrower to contest) such claim in accordance withapplicable Law (including appealing any adverse determination) and shall notconcede, settle, compromise or discontinue such contest without the Borrower’sprior written consent (which shall not be unreasonably withheld) , and theBorrower shall pay the reasonable expenses incurred by such Lender in connectionwith such contest.

**§2.7        MitigationObligations** Ifany Lender requests compensation under §2.5 hereof or if the Borrower isrequired to pay any additional amount to such Lender (or to any GovernmentalAuthority for account of any Lender) pursuant to §2.6 hereof or if achange in Law after the date hereof gives rise to a reasonable expectation thatsuch a request or requirement would (but for §2.7) occur, then (ifreasonably practicable) such Lender shall use reasonable efforts to designate adifferent lending office for funding or booking the Loan or to assign itsrights and obligations hereunder to another of its offices, branches orAffiliates, if such designation or assignment (i) would eliminate or reduceamounts payable pursuant to §2.5 or §2.6 hereof, as the case maybe, in the future, and (ii) would not subject such Lender to any unreimbursedcost or expense and would not otherwise be disadvantageous to such Lender.  The Borrower agrees to pay the reasonablecosts and expenses incurred by such Lender in connection with any suchdesignation or assignment.

If any Lender requests compensation under §2.5hereof, or if the Borrower is required to pay any additional amount to suchLender (or to any Governmental Authority for account of 

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such Lender) pursuant to §2.6 hereof, or if achange in Law after the date hereof gives rise to a reasonable expectation thatsuch a request or requirement would (but for this §2.7) occur, or ifsuch Lender defaults in its obligation to fund Advances hereunder, then theBorrower may, at its sole expense, upon notice to the Agent, prepay such Lender’sportion of the Loan in whole, subject to the requirements of §2.3(a)hereof other than the requirement to pay the applicable Prepayment Premium, *provided*, that the Agent, on account of such Lender shallhave received payment of an amount equal to the outstanding principal of suchLender’s portion of the Loan, accrued interest thereon, accrued fees and allother amounts payable to it hereunder, from the Borrower.  The Borrower shall not be permitted to makeany such prepayment free of an otherwise applicable Prepayment Premium underthis §2.7 if, prior thereto, as a result of a waiver by such Lender orotherwise, the circumstances entitling the Borrower to make such prepaymentunder this paragraph cease to apply.

**§2.8        ProRata Treatment.** Except as otherwise provided herein, (a) each borrowing from the Lendershereunder will be made from the Lenders pro rata according to their respectiveCommitment Percentages; and (b) each payment and prepayment of principal of orinterest on the Loan and each payment of each fee which is payable to the Agentfor the respective accounts of the Lenders will be made to the Agent for theaccount of the Lenders pro rata in accordance with their respective CommitmentPercentages.  Notwithstanding anything tothe contrary contained in the Loan Documents, no Lender shall be required tomake an Advance to the extent that the principal amount of such Advance, when aggregatedwith the aggregate outstanding principal amount of the Loan of such Lenderwould exceed the Commitment of such Lender.

**SECTION3.****                            REPRESENTATIONSAND WARRANTIES**

To induce the Agent and the Lenders to enter into thisAgreement and to make the Loan hereunder, the Borrower represents and warrantsto each Lender and the Agent that:

**§3.1        LegalExistence and Good Standing, Etc**.

(a)           TheBorrower is a limited partnership validly formed and existing under the laws ofthe State of Delaware and has all requisite limited partnership or other powerto own the Vessels, its other property and conduct its business substantiallyas presently conducted by it and as proposed to be conducted by it.

(b)           TheBorrower maintains its chief executive office and principal place of businessat 3245 Richmond Terrace, Staten Island, New York 10303, at which placeits principal books and records are kept.

(c)           TheBorrower is qualified to do business and is in good standing in alljurisdictions in which a failure to be so qualified and in good standing mighthave a Material Adverse Effect.

**§3.2        LimitedPartnership Power; Consents; Absence of Conflict with Other Agreements Etc.** The execution, delivery and performance of the Loan Documents by theBorrower and the borrowings and transactions contemplated thereby:

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(a)           arewithin the Borrower’s powers as a limited partnership, and have been dulyauthorized by all necessary limited partnership action of the Borrower and itsgeneral partner;

(b)           donot require any approval or consent of, or filing with, any Governmental Authoritybearing on the validity of such instruments and borrowings which is required byany Law and are not in contravention of Law or the terms of the Borrower’spartnership agreement or other organizational document, or any amendment of anythereof;

(c)           willnot violate or result in any breach or contravention of or the creation of anyLien under (except in favor of the Agent) any indenture, agreement, lease,instrument or undertaking to which the Borrower is a party or by which it orany of its properties are bound; and

(d)           areand will be valid and legally binding obligations of the Borrower, enforceablein accordance with their respective terms, except as such enforcement may belimited by bankruptcy, insolvency, reorganization, moratorium or similar lawsrelating to or affecting generally the enforcement of creditors’ rights, andexcept to the extent that the availability of equitable remedies with respectto such obligations may be subject to the discretion of the court before whichany proceedings for such remedies may be brought.

**§3.3        Titleto Properties.** K-Sea Transportation and its Subsidiaries ownall of their assets reflected in the balance sheet of K-Sea Transportation andits Subsidiaries as at December 31, 2005, or acquired since that date, subject,in the case of the Vessels, to no Liens of record on the Collateral except therelevant Fleet Mortgages on the Pledged Vessels at the National VesselDocumentation Center.  Each of theBorrower and Sea Coast has good and marketable title to all items of Collateralpledged by it, free and clear of any Liens, except Permitted Liens.  On each Advance Date the Pledged Vesselsshall be properly documented as vessels of the United States in the name of theBorrower or Sea Coast, as applicable, and on the respective delivery datethereof and thereafter, and each of the New Vessels shall be properlydocumented as a vessel of the United States in the name of the Borrower.

**§3.4        FinancialStatements.** TheBorrower has furnished to the Agent a copy of K-Sea Transportation’s and itsSubsidiaries balance sheets as at December 31, 2005 and statements of incomeand changes in financial position unaudited for the six (6) months thenended.  All such financial statementshave been prepared in accordance with GAAP and fairly present the financialcondition and the results of operations of K-Sea Transportation and itsSubsidiaries taken as a whole as at the close of business on the date thereofsubject to year end adjustments.  There areno liabilities, contingent or otherwise, of the Borrower involving materialamounts, known to the officers of the Borrower and not disclosed in saidfinancial statements and the related notes thereto or not reflected in thefinancial statements most recently delivered in connection with §§7.4(a)or (b).

**§3.5        NoMaterial Changes Etc.** No material adverse changes have occurred in the financial condition orbusiness of K-Sea Transportation and its Subsidiaries taken as a whole as shownon or reflected in the balance sheets or other financial statements deliveredon or before 

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the date hereof or in the balance sheets or other financial statementsmost recently delivered in connection with §§7.4(a) or (b).

**§3.6        Franchises,Patents, Copyrights, Licenses, Etc.**** **The Borrowerpossesses franchises, patents, copyrights, trademarks, trade names, licensesand permits, and rights in respect of the foregoing adequate for the conduct ofits business as now conducted without any known conflict with any rights ofothers.

**§3.7        Litigation**.  There are no actions, suits, proceedings orinvestigations of any kind pending or, to the best knowledge of the Borrower,threatened against the Borrower or K-Sea Transportation and its Subsidiaries,before any court, tribunal or administrative agency or board which, if adverselydetermined, might reasonably be expected to, either in any case or in theaggregate have a Material Adverse Effect or result in any liability notadequately covered by insurance.

**§3.8        NoMaterially Adverse Contracts, Etc.** The Borrower is not subject to any charter,limited partnership or other legal restriction, or any judgment, decree, order,rule or regulation which in the judgment of its officers has or is reasonablyexpected in the future to have a Material Adverse Effect.  The Borrower is not a party to any contractor agreement which in the judgment of its officers has or is reasonablyexpected to have any Material Adverse Effect, except as otherwise reflected inadequate reserves.

**§3.9        Compliancewith Other Instruments, Laws, Etc.** The Borrower is notin violation of any provision of its charter documents or its partnershipagreement or any agreement, lease or other instrument by which it or any of itsproperties may be bound, or any Law, decree, order, judgment, statute, license,rule or regulation, in a manner which could reasonably be expected to result inthe imposition of substantial penalties or otherwise have a Material AdverseEffect.  There are no past or presentevents, conditions, circumstances, activities, practices, incidents, actions orplans known to the Borrower which reasonably could be expected to interferewith or prevent continued compliance, or which reasonably could be expected togive rise to any common law or statutory liability, under, relating to or inconnection with any Environmental Law or otherwise form the basis of any claim,action, proceeding, hearing or investigation under applicable Law based on orrelated to the manufacture, processing, distribution, use, treatment, storage,disposal, transport, or handling, or the emission, discharge, release orthreatened release into the environment, of any pollutant, contaminant, orHazardous Material or waste with respect to the Borrower or its business whichcould reasonably be expected to have a Material Adverse Effect.

**§3.10      TaxStatus**.  TheBorrower has filed all material federal and state income and all other materialtax returns, reports and declarations which the Borrower is required by anyapplicable Law of any jurisdiction to which it is subject or has obtained anextension for filing such returns, reports and declarations which is still ineffect; has paid all taxes and other governmental assessments and charges shownor determined to be due on such returns, reports and declarations, except thosebeing contested in good faith by appropriate proceedings diligently pursued;and has set aside on its books provisions reasonably adequate for the paymentof all material taxes for periods subsequent to the periods to which suchreturns, reports or 

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declarations apply. There are no material unpaid taxes claimed to bedue by the taxing authority of any jurisdiction, and the officers of theBorrower know of no basis for any such claim.

**§3.11      NoDefault.**  NoDefault or Event of Default exists at the delivery of this Agreement.

**§3.12      Absenceof Liens.**At the time of the making of each Advancehereunder, there will be no financing statement, security agreement or shipmortgage granted or agreed to by the Borrower or any Guarantor in effect whichpurports to cover, create, perfect or give notice of any present or possiblefuture Lien on the New Vessel being financed with such Advance or rightsthereunder, or any other Liens thereon or on any of the other Collateral,except for Permitted Liens and Liens in favor of the Agent.

**§3.13      Useof Proceeds.** The proceeds of the Loan shall be used asspecified in §2.1(b).  No portionof the Loan is to be used for the purpose of purchasing or carrying any “marginsecurity” or “margin stock” in contravention of Regulations U or X of the Boardof Governors of the Federal Reserve System, and the Borrower is not engaged inthe business of extending credit to others for such purpose.

**§3.14      PensionPlans.** Neitherthe Borrower nor any other member of any Controlled Group that includes theBorrower maintains or pays contributions to, or is required to paycontributions to, any Plan.

The Lenders (i) represent and warrant to the Borrowerthat none of the funds to be used by the Lenders to make or maintain the Loanor to acquire or hold the Notes are or will be “assets” (as defined in theregulations to Section 406 of ERISA) of an “employee benefit plan” (as definedin Section 3(3) of ERISA) or of a “plan” (as defined in Section 4975(e)(1) ofthe Code), and (ii) covenant that (notwithstanding anything herein or in anyother Loan Document to the contrary) no Lender will sell, transfer, assign, orgrant a participation in, any part of its interest in the Loan, this Agreementor the Note to any other Person unless such Person (A) makes (1) arepresentation and warranty that is equivalent to the representation andwarranty contained in clause (i) and (2) the covenant contained in this clause(ii), and (B) agrees to be bound by all of the provisions hereof and of all theother Loan Documents applicable to the Lenders.

**§3.15      HoldingCompany and Investment Company**.  The Borrower is not a “holding company” or a “subsidiarycompany” of a “holding company” or an “affiliate” of a “holding company”, assuch terms are defined in the Public Utility Holding Company Act of 1935; nor isit a “registered investment company” or an “affiliated company or a “principalunderwriter” of a “registered investment company”, as such terms are defined inthe Investment Company Act of 1940, as amended.

**§3.16      Disclosure**.  This Agreement and all certificates andwritten statements furnished by or on behalf of the Borrower to the Lenders orthe Agent in connection herewith (all of which shall constitute representationsand warranties made by the Borrower hereunder) do not contain any untruestatement of a material fact or omit to state a material fact necessary inorder to make the statements contained herein and therein not misleading.  There is no fact known to the 

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Borrower which has or is expected to have a Material Adverse Effect,except as has been disclosed previously to the Agent in writing.

**§3.17      [IntentionallyOmitted]**

**§3.18      FirstLien**.

(a)           Upon filing theFinancing Statements with the Delaware Secretary of State, the SecurityAgreement will create a legal, valid and perfected first lien on and firstpriority security interest in all of the Collateral (to the extent a lien isperfectable by filing with the Delaware Secretary of State respecting any itemof Collateral) described therein (and any Proceeds thereof), as security forthe Obligations, free and clear of all other Liens whatsoever except PermittedLiens.  No security agreement, financingstatement, equivalent security or lien instrument or continuation statementcovering all or any part of the Collateral, which has been signed by the Borroweror Sea Coast or which the Borrower or Sea Coast has authorized any other Personto sign or file or record, is on file or of record with any public officeexcept in favor of the Agent.

(b)           Uponexecution and filing for recording thereof with the Coast Guard, each ShipMortgage (except for the Louisiana Ship Mortgage) will create legal, valid andperfected first liens on and first priority security interests in favor of theAgent with respect to all Collateral described therein as security for the Obligations(provided with respect to any portion of the Obligations that is incurred inconnection with a Hedging Agreement, upon the filing of any necessary amendmentto the Ship Mortgage), free and clear of all other Liens whatsoever other thanPermitted Liens.  No mortgage, pledge,security agreement, financing statement, equivalent security or lien instrumentor continuation statement covering all or any part of the Collateral, which hasbeen signed by the Borrower or Sea Coast or any predecessor-in-interest of theBorrower or Sea Coast or which the Borrower or Sea Coast has authorized anyother Person to sign or file or record, is on file or of record with the CoastGuard or with any other public office except in favor of the Agent.

(c)           Uponexecution and filing for recording thereof with the offices of the Recorder ofMortgages for the St. Mary’s Parish,State of Louisiana, the Louisiana Ship Mortgage will create a perfected lien onand a security interest in favor of the Agent with respect to all Collateraldescribed therein as security for the Obligations to the extent that a securityinterest therein may be perfected by filing pursuant to the UCC in effect inthe State of Louisiana, free and clear of all other Liens whatsoever other thanPermitted Liens.  No mortgage, pledge,security agreement, financing statement, equivalent security or lien instrumentor continuation statement covering all or any part of the Collateral, which hasbeen signed by the Borrower or any predecessor-in-interest of the Borrower orwhich the Borrower has authorized any other Person (other than Bollinger) tosign or file or record, is on file or of record with the offices of theRecorder of Mortgages for the Parish of Lafourches, State of Louisiana****or with any other public office except infavor of the Agent.

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**§3.19      Environmental Matters**.

(a)           The Borrower andeach of its Subsidiaries has obtained all material permits, licenses and otherauthorizations which are required under all Environmental Laws, except to theextent failure to have any such permit, license or authorization would not havea Material Adverse Effect.  The Borrowerand each of its Subsidiaries is in compliance in all material respects with theterms and conditions of all such permits, licenses and authorizations, and arealso in compliance in all material respects with all other limitations,restrictions, conditions, standards, prohibitions, requirements, obligations,schedules and timetables contained in any applicable Environmental Law or inany regulation, code, plan, order, decree, judgment, injunction, notice ordemand letter issued, entered, promulgated or approved thereunder, except tothe extent failure to comply would not have a Material Adverse Effect on theirbusiness, financial condition or operations taken as a whole.

(b)           No notice, notification, demand,request for information, citation, summons or order has been issued, nocomplaint has been filed, no premium has been assessed and no investigation orreview is pending or, to the knowledge of the Borrower without any independentverification, threatened by any governmental or other entity with respect toany alleged failure by the Borrower or any of its Subsidiaries to have anypermit, license or authorization required in connection with the conduct of itsbusiness or with respect to any Environmental Laws, including EnvironmentalLaws relating to the generation, treatment, storage, recycling, transportation,disposal or release of any Hazardous Materials.

(c)           Except as set forth in the “LegalProceedings” section of K-Sea Transportation’s most recent Form 10-Qfiled on February 7, 2006 with the Securities and Exchange Commission andexcept with respect to the total loss of the DBL 152, no material oral orwritten notification of a release of a Hazardous Material has been filed by oron behalf of the Borrower or any of its Subsidiaries and no property now orpreviously owned, leased or used by the Borrower or any of its Subsidiaries islisted or, to the Borrower’s knowledge without any independent verification,proposed for listing on the National Priorities List under the ComprehensiveEnvironmental Response, Compensation and Liability Act of 1980, as amended, oron any similar state list of sites requiring investigation or clean-up.

(d)           There are no Liens or encumbrancesarising under or pursuant to any Environmental Laws on any of the real propertyor properties owned, leased or used by the Borrower or any of its Subsidiariesother than Liens, if any, that do not (i) materially detract from the value ofthe property or (ii) materially impair the use thereof in the operation of thebusiness of the Borrower or any of its Subsidiaries or (iii) have a MaterialAdverse Effect on the ability of the Borrower or any of its Subsidiaries takenas a whole to perform its obligations under the Loan Documents, and nogovernmental actions have been taken or, to the knowledge of the Borrowerwithout any independent verification, are in process which might reasonably beexpected to subject any of such properties to such Liens or encumbrances or, asa result of which the Borrower or any of its Subsidiaries would be required toplace any notice or restriction relating to the presence of Hazardous Materialsat any property owned by it in any deed to such property.

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(e)           Neither the Borrower nor any of itsSubsidiaries, nor, to the knowledge of the Borrower without any independentverification, any previous owner, tenant, occupant or user of any propertyowned, leased or used by the Borrower or any of its Subsidiaries has (i)engaged in or permitted any operations or activities upon or any use oroccupancy of such property, or any portion thereof, for the purpose of or inany way involving the handling, manufacture, treatment, storage, use,generation, release, discharge, refining, dumping or disposal of any HazardousMaterials on, under, in or about such property, except in compliance in allmaterial respects with all Environmental Laws, or (ii) transported anyHazardous Materials to, from or across such property except in compliance inall material respects with all Environmental Laws; nor to the best knowledge ofthe Borrower have any Hazardous Materials migrated from the properties upon,about or beneath such property, nor, to the best knowledge of the Borrower, areany Hazardous Materials presently constructed, deposited, stored or otherwiselocated on, under, in or about such property except in compliance in allmaterial respects with all Environmental Laws.

**§3.20      Solvency**.  The Borrower, after giving effect to theLoan, is solvent.

**§3.21      Survivalof Representations and Warranties, Etc.**All statementscontained in any certificate, financial statement or other instrument deliveredby or on behalf of the Borrower or the Guarantors pursuant to or in connectionwith this Agreement or any of the Loan Documents (including any suchrepresentation or warranty made or in connection with any amendment thereto)shall constitute representations and warranties made under this Agreement.  All representations and warranties made underthis Agreement shall be deemed to be made at and as of the date hereof and asof the date of the making of each Advance of the Loan.  All representations and warranties made underthis Agreement shall survive, and not be waived by, the execution and deliveryof this Agreement or any other Loan Document, any investigation or inquiry bythe Lenders or the Agent, or by making the Loan under this Agreement.

**SECTION4.****                            CONDITIONSOF FUNDING THE FIRST ADVANCE.**

The obligation of the Lenders to fund the firstAdvance of the Loan shall be subject to the prior satisfaction of the followingconditions precedent (in the case of covenants or other evidence of compliancein form and substance satisfactory to the Agent acting on behalf of theLenders).  The request by the Borrowerfor such Advance shall be deemed a certification by the Borrower that theconditions precedent set forth in this §4 have been satisfied or will besatisfied on such Advance date:

**§4.1        Executionand Delivery.** (i) All of the Loan Documents (other than the New Vessel Ship Mortgageand the Notes) shall have been executed and delivered by the Borrower and eachGuarantor, as applicable, to the Agent.

(ii)           Suchdocumentation relating to the Pledged Vessels, as the Agent may request, shallhave been delivered by the Borrower or Sea Coast, as applicable, to the Agent.

**§4.2        Representationsand Warranties.** The representations and warranties containedin §3 shall have been true and correct at and as of the date on whichmade and shall also be true and correct at and as of the Advance Date with thesame effect as if made at and as of such date.

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**§4.3        Performance;No Default.** TheBorrower and each Guarantor shall have performed and complied with all termsand conditions of the Loan Documents required to be performed or complied withby it prior to or at the time of the Advance Date, and at the time of theAdvance Date, there exists no Default or Event of Default, nor shall anyDefault or Event of Default exist or occur after giving effect to the fundingof the first Advance of the Loan.

**§4.4        CertifiedCopies of Charter Documents**.  The Agent shall have received from each ofthe Borrower and each Guarantor, copies, certified by an Authorized Officer tobe true and complete as of the Advance Date, of its partnership agreement, orother organizational document, all as in effect on such date.

**§4.5        Proofof Partnership or General Partner Action**.**** The Agent shall havereceived from the Borrower copies, certified by an Authorized Officer to betrue and complete as of the first Advance Date, of the records of allpartnership actions taken to authorize: (a) its execution and delivery of theLoan Documents (b) its performance of all of its agreements and obligationsunder each of such documents, and (c) the borrowings and other transactionscontemplated by this Agreement.

**§4.6        IncumbencyCertificate**. The Agent shall have received from the Borrower and each Guarantor anincumbency certificate, dated as of the first Advance Date and signed by anAuthorized Officer, giving the name and bearing a specimen signature of eachindividual who shall be authorized: (i) to sign the applicable Loan Documents,in its name and on its behalf, (ii) to make application for the Loan, and (iii)to give notices and to take other action on its behalf under this Agreement.

**§4.7        NoMaterial Adverse Effect.** No event or change shall have occurred, in thesole judgment of the Agent that has caused or evidences a Material AdverseEffect.

**§4.8        Deliveryof Notice of Borrowing.**  A Notice of Borrowing (including theAuthorization/Acceptance Certificate appended thereto) for such Advance shallhave been duly completed by the Borrower and submitted to the Agent inaccordance with §2.1.

**§4.9        Opinionof Counsel**.  TheAgent shall have received on the first Advance Date from Holland & KnightLLP, counsel for the Borrower, a favorable opinion addressed to the Agent andthe Lenders and dated such first Advance Date, in form and substancesatisfactory to the Agent and its counsel.

**§4.10      Proceedingsand Documents**. All proceedings in connection with the transactions contemplated by thisAgreement and all documents incident thereto shall be reasonably satisfactoryin substance and in form to the Agent and its counsel, and the Agent and suchcounsel shall have received all information and such counterpart originals orcertified or other copies of such documents as the Agent or such counsel mayreasonably request.

**§4.11      RecordedLien Searches.** The  Agent shall have received:(a) UCC search reports with respect to the records of the (i) DelawareSecretary of State office, (ii) New York Secretary of State office, and(iii) Richmond County office, and copies of executed Form UCC-3 FinancingStatement Amendments for all financing statements on record against theBorrower or Sea Coast and that otherwise would cover any of the Collateral,together with evidence of the 

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filing thereof, and (b) a U.S. Coast Guard Abstract of Titleverifying that there are no outstanding ship mortgages recorded with the CoastGuard covering any of the Collateral or any other assets or rights associatedtherewith.

**§4.12      FinancingStatements. **TheAgent shall have received satisfactory evidence that the Financing Statementshave been duly filed with the office of the Secretary of State of Delaware andany other filing locations required hereunder to create and perfect a firstpriority Lien on all of the Collateral to the extent the Borrower or Sea Coasthas rights in the Collateral as of such date.

**§4.13      Evidenceof Insurance.**The Agent shall have receivedcertificates of insurance covering the Pledged Vessels demonstrating compliancewith the insurance requirements of the Fleet Mortgages covering such vesselsand evidence that Bollinger has insurance on the New Vessels that conforms tothe Vessel Construction Agreements.

**§4.14      Deliveryof Invoices.** The Agent shall have received copies of allvessel construction invoices and evidence of payment thereof with respect tothe New Vessel(s) that are the subject of the Advance.

**§4.15      Licenses,Permits and Consent.** The Borrower or Bollinger shall have obtained all licenses, permits andconsents (including from Governmental Authorities) required in connection withthe construction of the New Vessels to the extent appropriately issued as ofsuch date.

**§4.16      ConstructionContracts**.  TheBorrower shall have furnished in form and substance satisfactory to the Agentan executed copy of the Vessel Construction Agreements for the New Vessels.

**§4.17      Guaranty**.  Each Guaranty (a) shall have been executedand delivered by the applicable Guarantor, (b) shall be satisfactory to theAgent in form and substance, in its absolute discretion, and (c) shall be infull force and effect in accordance with its respective terms.

**§4.18      LienWaivers***.*  The Borrower shall have obtained and attachedto each application for an Advance, including the Advance to cover finalpayment to Bollinger under the Vessel Construction Agreements, executed liencertificates substantially in the form of Exhibit H hereto (“LienCertificates”), together with acknowledgments of payments of all sums due andreleases of laborer’s, mechanic’s and materialmen’s liens, satisfactory to theAgent, from Bollinger respecting it and any subcontractors and any other partyhaving lien rights, which acknowledgments of payment and releases of liensshall cover all work, labor, equipment, materials done, supplied, performed, orfurnished prior to such application for an Advance.

**§4.19      Amendments.**  The Amendments (a) shall have been executedand delivered to the Agent, (b) shall be satisfactory to the Agent in form and substancein its absolute discretion, (c) shall be in full force and effect in accordancewith their respective terms, and (d) in the case of the Amendments to the FirstPreferred Ship Mortgages, shall be filed with the National Vessel DocumentationCenter or appropriate Canadian authority.

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**SECTION5.****                            CONDITIONSOF INTERIM ADVANCES**

The conditions precedent set forth in §§4.2, 4.3,4.7, 4.8, 4.10, 4.14, 4.18, and 4.19shall be requirements for the first Advance and each subsequent Advance.  The conditions precedent set forth in §§4.1,4.4, 4.5, 4.6, 4.9, 4.11, 4.12, 4.13,4.15, 4.16 and 4.17 shall be requirements of the firstAdvance only, *provided* that such conditionsmust remain satisfied throughout the term of the Loan.  The request by the Borrower for any suchAdvance shall be deemed a certification by the Borrower that the applicableconditions precedent set forth in this §5 have been satisfied or will besatisfied on such Advance Date.

**SECTION6.****                            CONDITIONSOF FINAL ADVANCES OF THE LOAN**

The Advances to be made to fund the final constructionpayment to Bollinger with respect to the New Vessels shall be subject to theadditional conditions precedent set forth below (in each case as to the NewVessel that is the subject of such Advance, except with respect to the deliveryof the Notes).  The request by theBorrower for any such Advance shall be deemed a certification by the Borrowerthat the conditions precedent set forth in this §6 have been satisfiedor will be satisfied on such Advance Date.

**§6.1        NewVessel Documentation.** The Agent shall have received or verified allof the following with respect to the applicable New Vessel:

(a)           Evidencesatisfactory to the Agent that all work on the New Vessel requiring inspectionby any Governmental Authority has been duly inspected and approved by suchauthority, and that all parties performing work have been paid, or will bepaid, for such work;

(b)           Intentionallyomitted;

(c)           Ifrequested by the Agent, a desktop appraisal of recent date, prepared andcertified by a qualified marine appraiser certifying the fair market value ofthe New Vessel as completed;

(d)           Acceptanceof the completed New Vessel by the Borrower, as reflected by a completedProtocol of Delivery and Acceptance;

(e)           Thatthe Borrower has received a final bill of sale or builder’s certificate,application for documentation, and such New Vessel has been documented as aUnited States vessel with the United States Coast Guard and such vessel’sCertificate of Documentation endorsed for the coastwise trade;

(f)            TheBorrower shall have executed and filed a New Vessel Ship Mortgage with respectto the New Vessel, sufficient to grant to the Agent (in its capacity asCollateral Trustee) a first priority preferred ship mortgage on such New Vesselwith the National Vessel Documentation Center;

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(g)           Evidencethat the Borrower has obtained all insurance and protection and indemnitycoverages as are required under the New Vessel Ship Mortgage with respect tothe New Vessel;

(h)           Anopinion letter of counsel to the Borrower with respect to the due execution anddelivery of the New Vessel Ship Mortgage with respect to the New Vessel and thefirst lien priority of such mortgage; and

(i)            Evidencesatisfactory to the Agent that all licenses have been obtained by the Borrower andare in full force and effect to operate the New Vessel according to itsintended use, and that all advisable American Bureau of Shipping (ABS)certifications have been obtained;

(j)            Evidencesatisfactory to the Agent that the total amount of the Advances that will havebeen made with respect to such New Vessel (including the final Advance) willnot exceed the Advance Limit with respect thereto;

(k)           TheAgent shall have received copies of executed Form UCC-1 Financing Statementsnaming the Borrower as debtor with respect to each New Vessel and filed withthe Delaware Secretary of State;

(l)            TheAgent shall have received UCC search reports with respect to the records of the(i) Delaware Secretary of State office, (ii) New York Secretary of Stateoffice, (iii) Richmond County office and (iv) St. Mary Parish office in theState of Louisiana;

(m)          TheAgent shall have received and approved copies of all charter agreements thatwill be applicable to such New Vessel;

(n)           TheAgent shall have received a U.S. Coast Guard Abstract of Title verifying thatthere are no outstanding ship mortgages recorded with the Coast Guard coveringsuch New Vessel or any other assets or rights associated therewith(post-closing); and

(o)           Acertificate of ownership and encumbrance with respect to such New Vessel(post-closing).

**§6.2        Executionof Note**.

The Borrower shall have executed and delivered theNotes on the date of the financing of the third New Vessel hereunder.

**§6.3        Releaseof Fleet Mortgages**.

Upon the satisfaction by the Borrower of theconditions set forth in §6.1  and§6.2 (as to the third New Vessel to be financed hereunder), and so longas no Default or Event of Default has occurred and is continuing, the Agentshall discharge both Fleet Mortgages, shall release all liens thereunder, shallfile copies of executed Form UCC-3 Financing Statements with respect to thePledged Vessels and shall execute a termination agreement respecting insurancesand other security interests if requested by the Borrower or Sea Coast, asapplicable.

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**SECTION7.****                            AFFIRMATIVECOVENANTS.**

The Borrower covenants and agrees that so long as theLoan remains outstanding and unpaid:

**§7.1        PunctualPayment. **TheBorrower shall duly and punctually pay or cause to be paid the installmentpayments of principal and interest on the Loan, and any other amounts at anytime owing hereunder or under the Notes or other Loan Documents, all inaccordance with the terms of this Agreement, the Notes, and the other LoanDocuments.

**§7.2        Maintenanceof Offices**.**** The Borrower shall maintain a place ofbusiness at the location specified in §14, or at such other place in theUnited States of America as it shall designate upon written notice, addressedas provided in §14, to the Agent where notices, presentations anddemands to or upon the Borrower in respect of the Loan Documents may be givenor made.

**§7.3        Recordsand Accounts**. The Borrower shall keep true records and books of account in which full,true and correct entries shall be made in accordance with GAAP and maintainadequate accounts and reserves for all Taxes, all depreciation, depletion,obsolescence and amortization of their properties, all contingencies, and allother reserves.

**§7.4        FinancialStatements, Certificates, and Other Information**.  If requested by Agent, the Borrower shalldeliver to the Agent:

(a)           Assoon as practicable and, in any event, not later than the date by which K-SeaTransportation is required to deliver to the Securities and Exchange Commissionits Annual Report on Form 10-K (or, at any time that K-Sea Transportation isnot required to file such a report, within 120 days after the end of eachfiscal year), consolidated balance sheets of K-Sea Transportation and itsSubsidiaries as at the end of such fiscal year, and consolidated statements ofincome, cash flow and members’ equity, each for the fiscal year then ended andeach setting forth in comparative form the figures for the previous fiscalyear, all in reasonable detail and prepared in accordance with GAAP, and areport and opinion of the K-Sea Transportation’s independent accountants, whichreport and opinion shall have been prepared in accordance with GAAP;

(b)           Assoon as practicable and, in any event, not later than the date by which K-SeaTransportation is required to deliver to the Securities and Exchange Commissionits Quarterly Report on Form 10-Q (or, at any time that K-Sea Transportation isnot required to file such a report, within 45 days after the end of each of thefirst three quarters during each fiscal year of the Borrower), an unauditedconsolidated balance sheet of K-Sea Transportation and its Subsidiaries as atthe end of such quarter, and consolidated statement of income, cash flow andmembers’ equity, each for the portion of the fiscal year then ended, each inreasonable detail and prepared in accordance with GAAP (subject to year-endadjustments), certified to the Agent by the chief financial officer or otherfinancial officer of such entity;

(c)           Promptlyupon receipt thereof, copies of all management letters and other reports ofsubstance which are submitted to K-Sea Transportation by its independentaccountants 

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in connection with any annual or interim audit of the books of K-SeaTransportation made by such accountants;

(d)           Assoon as practicable and, in any event, within 10 days after the issuancethereof, copies of such other financial statements and reports as K-SeaTransportation shall send to its partners, members or stockholders, and copiesof all regular and periodic reports which K-Sea Transportation may be requiredto file with the Securities and Exchange Commission or any similar orcorresponding governmental commission, department or agency substitutedtherefore, or any similar or corresponding governmental commission, department,board, bureau, or agency, federal or state;

(e)           Withreasonable promptness, such financial information (including consolidatingfinancial statements and projections) or other data as the Agent reasonably mayrequest;

(f)            Simultaneouslywith the delivery of the financial statements referred to in clauses (a) and(b) of this §7.4, a copy of the certification signed by the principalexecutive officer and the principal financial officer of K-Sea Transportation(each a “Certifying Officer”) as required by Rule 13A-14 under theSecurities Exchange Act of 1934 and a copy of the internal controls disclosurestatement by such Certifying Officer as required by Rule 13A-15 under theSecurities Exchange Act of 1934, each as included in K-Sea Transportation’sAnnual Report on Form 10-K or Quarterly Report on Form 10-Q, for the applicablefiscal period.

(g)           Within45 days after the end of each of the first three quarters during each fiscalyear of the Borrower, and within 120 days after the end of each fiscal year ofthe Borrower, the Borrower shall deliver to the Agent (with copies to eachLender) a certificate of a Certifying Officer of K-Sea Transportation (i)certifying as to whether a Default has occurred since the delivery of theprevious such certificate or to the date hereof and, if such a Default has occurred,specifying the details thereof and any action taken or proposed to be takenwith respect thereto, (ii) setting forth reasonably detailed calculationsdemonstrating compliance with §8.4(a), §8.4(b) and §8.4(c),(iii) stating whether any change in GAAP or in the application thereof hasoccurred since the date of the audited financial statements referred to in §7.04hereof, as applicable, has materially and adversely affected the financialstatements accompanying such certificate and, if so, the estimated dollaramount thereof, (iv) including a “customary” bringdown of the representationsand warranties contained in this Agreement with appropriate carveoutsacceptable to the Agent in its reasonable discretion and (v) certifying as towhether any default or event of default shall have occurred under any of theGuaranties.

Notwithstanding the forgoing, the Agent agrees to obtain the financialinformation required above in §§7.4(a), (b), (c), and (d)via public filings made by K-Sea Transportation with the Securities andExchange Commission, so long as such information is available via such publicfilings.

**§7.5       **[Intentionallyomitted].

**§7.6        Businessand Limited Partnership Existence.**   The Borrower shall (a) keep in full forceand effect its limited partnership existence and all rights, licenses, leasesand franchises 

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reasonably necessary to the conduct of its business, and (b) complywith (i) the applicable Laws wherever its business is conducted to the extentnon-compliance could reasonably be expected to have a Material Adverse Effect,(ii) the provisions of its partnership agreement, or other organizationaldocument, and (iii) all agreements, and instruments by which it or any of itsproperties may be bound and all applicable decrees, orders and judgments to theextent non-compliance could reasonably be expected to have a Material AdverseEffect.

**§7.7        Paymentof Taxes. **TheBorrower shall pay when due all lawful Taxes imposed upon it or upon its incomeor profit or upon any property, real, personal or mixed, belonging to it, *provided* that the Borrower shall not be required to pay anysuch Tax if the validity thereof is being contested in good faith byappropriate proceedings and if the Borrower shall have set aside on its booksreasonable reserves with respect to such Tax.

**§7.8        Inspectionof Properties and Books**.   So long as the Notes are outstanding theLenders or the Agent or their designated agent or representatives shall havethe right to visit and inspect for any purpose the Collateral, including theVessels, to examine the books of account of the Borrower and any otherdocuments required of the Borrower hereunder or otherwise reasonably related tothe transactions contemplated hereunder (and to make copies thereof andextracts therefrom), and to discuss the affairs, finances and accounts of theBorrower with, and to be advised as to the same by, its officers, all at suchreasonable times and intervals as the Lenders or the Agent may reasonablyrequest.  The costs of any suchexamination shall be for the account of such Lender or the Agent, *provided* that following the occurrence and during thecontinuation of any Default, all such reasonable costs shall be charged to theBorrower.

**§7.9        Licensesand Permits**.  Ifat any time while the Notes are outstanding, any authorization, consent,approval, permit or license from any Governmental Authority shall becomenecessary or required in order that the Borrower may fulfill any of itsobligations hereunder, the Borrower shall promptly take or cause to be taken allsteps reasonably necessary to obtain such authorization, consent, approval,permit or license and furnish the Agent with evidence thereof.

**§7.10      PensionPlans**.  Withrespect to any period of time during which the Borrower or any other member ofa Controlled Group that includes the Borrower maintains or is required to paycontributions to a Plan Borrower shall:

(a)           Fund, or cause the Plan sponsor oradopting employer to fund, such Plan as required by the provisions of Section302 of ERISA and Section 412 of the Code except where failure to do so wouldnot result in a material liability to the Borrower and make, or cause the Plansponsor or adopting employer to make, all material contributions to such Planrequired pursuant to any applicable collective bargaining agreement;

(b)           Furnish promptly to the Agent a copyof any notice of termination of such Plan required to be sent to the PensionBenefit Guaranty Corporation and a copy of any notice, report or demand sent orreceived by or with respect to such Plan pursuant to Sections 4041, 4041A,4042, 4043, 4062, 4063, 4065, 4066 or 4068 of ERISA or under subtitle E ofTitle IV of ERISA;

 

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(c)           Furnish promptly to the Agent a copyof all Forms 5500, Forms 5500-C and/or Forms 5500-R relating to such Plan,together with all attachments thereto, including any actuarial statementrelating to such Plan required to be submitted under Section 103(d) of ERISA;

(d)           Furnish the Agent with copies of anyrequest for waiver from the funding standards or extension of the amortizationperiods required by Section 303 and 304 of ERISA or Section 412 of the Codewith respect to any Plan no later than the date on which the request issubmitted to the Department of Labor or the Internal Revenue Service, as thecase may be;

(e)           Promptly notify the Agent of any “completewithdrawal”, “partial withdrawal” or “reorganization” with respect to any Planas such terms are defined in ERISA; and

(f)            With respect to any Plan, promptlynotify the Agent upon the occurrence of any “reportable event” as defined inSection 4043(c) of ERISA, other than a “reportable event” for which theprovision for 30-day notice to the Pension Benefit Guaranty Corporation hasbeen waived by regulation.

**§7.11      Environmentaland Safety Matters**. The Borrower shall:

(a)           Promptlyreport to the Agent upon becoming aware thereof (a) the introduction of anyHazardous Material onto any facility owned or operated by the Borrower if theintroduction thereof reasonably could be expected to have a Material AdverseEffect and (b) the initiation of any action, suit, proceeding, investigation orregulatory action against the Borrower or in connection with any such facilityrelating to any Release of Hazardous Materials if such could reasonably beexpected to have a Material Adverse Effect.

(b)           Promptlydeliver to the Agent copies of (a) all reports (other than routine reportsregularly submitted in the ordinary course of business) submitted to anyGovernmental Authority by the Borrower in connection with either the presenceof Hazardous Materials at any facility owned or operated by the Borrower or anyother environmental matter relating to such facility, and (b) all reports,notices, and correspondence transmitted to the Borrower by any GovernmentalAuthority in connection with either the presence of any Hazardous Materials ator near any such facility or any other environmental matter relating to suchfacility.

(c)           Exceptfor Hazardous Materials that the Borrower uses, transports or stores or that alessee or charterer of the Borrower uses, stores or transports in the ordinarycourse of its business and in compliance with all applicable Laws and inaccordance with the terms of any applicable lease or charter documents, keepall of its properties or assets free of Hazardous Materials.  The Borrower shall comply with and usecommercially reasonable efforts to ensure compliance by all tenants andsubtenants with all Environmental Laws and all Laws relating to occupationalsafety or health and shall obtain and comply with, and use commerciallyreasonable efforts to ensure that all tenants and subtenants obtain and complywith, any and all approvals, registrations or permits required thereunder.  The Borrower shall conduct and complete allinvestigations, studies, sampling and testing, and all remedial, removal, andother action necessary to clean up and remove all Hazardous Materials, on, fromor affecting any of its 

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properties or assets as required by all applicable material Laws,except as such laws, ordinances, rules, regulations, orders or directives maybe contested by the Borrower in good faith by appropriate proceedings and forwhich adequate reserves have been established in conformity with GAAP.

(d)           Defend,indemnify, and hold harmless each Lender, the Agent and their respectivedirectors, officers, employees, affiliates, representatives and agents (each an“Indemnified Party”) from and against any and all penalties, fines,liabilities, damages, costs, or expenses of whatever kind or nature assertedagainst such Indemnified Party (unless resulting from the gross negligence orwillful misconduct of an Indemnified Party or occurring after the Agent or anyLender shall have become a mortgagee in-possession subsequent to an Event ofDefault), arising out of, or in any way related to: (a) the Release orthreatened Release of any Hazardous Materials on, at or from any property atany time owned, operated or occupied by the Borrower; (b) any personal injury(including wrongful death) or property damage (real or personal) arising out ofor related to such Hazardous Materials; (c) any lawsuit brought or threatened,settlement reached, or government order relating to such Hazardous Materials,and/or (d) any violation of Laws which are based upon or in any way related tosuch Hazardous Materials or to any environmental matter, including reasonableattorney and consultant fees, investigation and laboratory fees, court costs, andlitigation expenses actually incurred.

**§7.12      Indemnities,Etc.**

(a)           TheBorrower shall indemnify and hold the Indemnified Parties harmless from andagainst any and all claims, damages, losses, liabilities, costs, and expenses(including reasonable legal fees) that may be incurred by or asserted orawarded against any Indemnified Party, in each case arising out of or inconnection with or by reason of (including in connection with anyinvestigation, litigation, or proceeding or preparation of defense in connectiontherewith) the ownership, operation or other use (whether authorized or not) ofthe Vessels, the Loan Documents, any of the transactions contemplated herein orthe actual or proposed use of the proceeds of the Loan, except to the extentthat such claim, damage, loss, liability, cost, or  expense (i) is found in a final,non-appealable judgment by a court of competent jurisdiction to have resultedfrom such Indemnified Party’s or the Agent or such Lender’s (as amortgagee-in-possession) gross negligence or willful misconduct or (ii) isa tax, levy, impost, duty, assessment, fee or other charge imposed by anyGovernmental Authority or other taxing authority or a fine, penalty, interestcharge or other additional charge with respect thereto (it being agreed that §2.6sets forth the Borrower’s obligations with respect to such liabilities, costsand expenses), or (iii) is an ordinary and usual operating, administrativeor overhead expense of any Lender or the Agent and is not caused directly by anEvent of Default.  In the case of aninvestigation, litigation or other proceeding to which the indemnity in this §7.12applies, such indemnity shall be effective whether or not such investigation,litigation or proceeding is brought by the Borrower, its directors,shareholders or creditors or an Indemnified Party or any other Person or anyIndemnified Party is otherwise is a party thereto and whether or not thetransactions contemplated hereby are consummated.  In respect of any litigation commenced withrespect to this §7.12, (i) the Borrower shall be entitled to control anddirect its defense if an Event of Default shall not have occurred and becontinuing and (ii) the Borrower shall be entitled to participate with anyLender or the Agent in the Borrower’s defense if no Event of Default shall haveoccurred and be continuing hereunder provided that the Borrower, prior tocommencing its 

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defense or participating in any defense of such litigation pursuant tothe foregoing clauses (i) and (ii), confirms and acknowledges, in writing, itsindemnification obligation with respect to such claim under this §7.12.  Notwithstanding the foregoing, the Borrowershall not be required to indemnify any Indemnified Party for any settlementreached without the prior consent of the Borrower (which consent shall not beunreasonably withheld) or for any judgment entered into against an IndemnifiedParty if the Borrower shall have not been afforded an opportunity toparticipate, at its expense, in the defense of the claim.  The Borrower agrees not to assert any claimagainst any Lender, the Agent or any of their affiliates, or any of theirrespective directors, officers, employees, attorneys, agents, and advisers, onany theory of liability, for special, indirect, consequential, or punitivedamages arising out of or otherwise relating to the Loan Documents, any of thetransactions contemplated herein or the actual or proposed use of the proceedsof the Loan, other than fraud or intentional misconduct.

(b)           Withoutprejudice to the survival of any other agreement of the Borrower hereunder, theagreements and obligations of the Borrower contained in this §7.12 shallsurvive the payment in full of the Loan and all other amounts payable underthis Agreement.

**§7.13      Performanceof Contracts.** The Borrower shall perform and comply in allmaterial respects with all of its obligations under any contracts and all otheragreements to which it is a party or by which it is bound relating to theCollateral, and shall use reasonable efforts to cause each other party theretoto so perform and comply.

**§7.14      Noticeof Default**.  TheBorrower shall promptly upon becoming aware thereof give written notice to theAgent (with sufficient copies delivered to the Agent for each Lender) of: (a)the occurrence of any Default or Event of Default, (b) any litigation orproceeding affecting the Borrower or any of its properties or assets of which,if adversely determined, might have a Material Adverse Effect, and (c) anydispute between the Borrower and any Governmental Authority that mightmaterially interfere with its normal business operations.

**§7.15      Noticeof Material Claims and Litigation**.  The Borrower shall promptly notify the Agentof the commencement of any claims, actions, suits, proceedings orinvestigations of any kind pending or threatened against the Borrower beforeany Governmental Authority in an amount in excess of $500,000, if relating toone or all of the Vessels, or which, if adversely determined, would have aMaterial Adverse Effect.

**§7.16      NoDisposition of Collateral.** The Borrower shall obtain the prior writtenconsent of the Agent (which may be granted or denied in the Agent’s solediscretion), prior to the sale, conveyance, transfer, exchange, lease orcharter, in either case on a bareboat basis (except with respect to theExisting Bareboat Charter Agreement dated January 1, 1999, as amended,supplemented or modified from time to time relating to the vessel JosiahBartlett (O.N. 269796)), or disposition by the Borrower of all or any part ofthe Collateral or the Borrower’s otherwise relinquishing possession of any ofthe Collateral.

**§7.17      Borrower’sTitle; Agent’s Security Interest.**

(a)           TheBorrower shall warrant and defend its good and marketable title to theCollateral (to the extent the Borrower or Sea Coast, as applicable, has rightsin such items of 

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Collateral) and the Agent’s perfected first priority security interest in the Collateral (to theextent the Borrower or Sea Coast, as applicable, has rights in such items ofCollateral), against all claims and demands whatsoever.

(b)           TheBorrower shall, at its expense, take such action (including the obtaining andrecording of waivers) as may be necessary to prevent any third party fromacquiring any right to or interest in the Collateral other than Permitted Liens(to the extent the Borrower has rights in such items of Collateral), and if atany time any Person shall claim any such right or interest, the Borrower shall,at its expense, cause such claim to be waived in writing or otherwiseeliminated to the Agent’s satisfaction within 30 days after such claim shallhave first become known to the Borrower.

**§7.18      Compliancewith Laws and Regulations. **TheBorrower shall comply with all laws, regulations, directives and orders of anyand all local, state, federal and other governmental agencies and authoritieshaving jurisdiction over it or its property, non-compliance with which couldreasonably be expected to cause a Material Adverse Effect.

**§7.19      Further Assurances.**   TheBorrower shall promptly, at any time and from time to time, at its soleexpense, execute and deliver to the Agent such further instruments anddocuments, (including the execution of a replacement promissory note due toloss or destruction of any Note), and take such further action, as the Agentmay from time to time reasonably request in order to carry out to the Agent’ssatisfaction the transactions contemplated by this Agreement and to establishand protect the rights, interests and remedies created, or intended to becreated, in favor of any Lender or the Agent, hereby and under the other LoanDocuments, including the execution, delivery, recordation and filing offinancing statements and continuation statements.  The Borrower hereby authorizes the Agent, insuch jurisdictions where such action is authorized by law, to effect any suchrecordation or filing of financing statements without the signature of theBorrower thereon and to file as valid financing statements in the applicablefinancing statement records, any financing statement executed in connectionherewith.  The Borrower will pay, orreimburse the Agent for, any and all reasonable fees, costs and expenses ofwhatever kind or nature incurred in connection with the creation, preservationand protection of the Agent’s security interest in the Collateral, includingall fees and taxes in connection with the recording or filing of instrumentsand documents in public offices, payments or discharges of Taxes or Liens uponor in respect of the Collateral, premiums for insurance required to be obtainedpursuant to the Loan Documents with respect to the Collateral and all otherreasonable fees, costs and expenses in connection with protecting, maintainingor preserving the Collateral and the Agent’s interests therein, whether throughjudicial proceedings or otherwise, or in connection with defending orprosecuting any actions, suits or proceedings arising out of or related to theCollateral; and all such reasonable amounts that are paid by the Agent shall,until reimbursed by the Borrower, constitute Obligations of the Borrowersecured by the Collateral.

**§7.20      CasualtyOccurrence**.  Inthe event of any material (involving damages to any party thereto in excess of$500,000) casualty with respect to any Collateral or Vessel, the Borrower shallgive the Agent written notice ofsuch casualty promptly after discovering or receiving notice of the casualty,which notice shall identify the affected Collateral or other Vessel.  The Borrower shall, within a reasonableperiod of time, remedy or repair such casualty 

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to bring the Collateral into conformity with the provisions of thisAgreement unless such casualty shall constitute an Event of Loss and theprovisions of §2.3(b) apply.

**SECTION 8.****                            NEGATIVECOVENANTS; FINANCIAL COVENANTS**.

The Borrower covenants and agrees that so long as theLoan remains outstanding and unpaid, it shall not:

**§8.1        Transactionswith Affiliates.** Except as otherwise provided herein, enter into or consummate anytransaction with any Affiliate of the Borrower unless such transaction is:

(a)           enteredinto in the ordinary course of business of the Borrower and pursuant to thereasonable requirements of the Borrower’s business; and

(b)           isupon terms no more or less favorable to the Borrower than would be the case ifsuch transaction were an arm’s-length transaction effected with a Person otherthan an Affiliate.

**§8.2        TerminatePension Plan.** Terminate, withdraw from, or permit thetermination of any Plan unless the asset value of such Plan is then at leastequal to the value of the benefits guaranteed by the Pension Benefit GuarantyCorporation if such termination could reasonably be expected to have a MaterialAdverse Effect.

**§8.3        ERISA**.  Permit any Plan maintained by it to (a)engage in any “prohibited transaction” (as defined in Section 4975 of the Code)which could reasonably be expected to result in material liability for excisetaxes or fiduciary liability under Section 406 of ERISA, (b) incur anymaterial “accumulated funding deficiency” (as defined in Section 302 of ERISA)whether or not waived, or (c) terminate any Plan in a manner that couldreasonably be expected to result in the imposition of a lien or encumbrance onthe assets of the Borrower or any of its Subsidiaries pursuant to Section 4068of ERISA if the material liability described in clause (a) or the accumulatedfunding deficiency described in clause (b) or the lien or encumbrance describedin clause (c) could reasonably be expected to have a Material Adverse Effect.

**§8.4        FinancialCovenants.** Until the Obligations payable under the Loan Documents shall have beenpaid in full, Borrower covenants and agrees with the Agent that:

(a)           Borrowershall not permit the Fixed Charge Coverage Ratio as of the end of any fiscalquarter to be less than 1.85 to 1.00;

(b)           Borrowershall not permit the Total Funded Debt to Tangible Capitalization Ratio as ofthe end of any fiscal quarter to be greater than 0.65 to 1.00; and

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(c)           Borrower shall notpermit the Total Funded Debt to EBITDA Ratio at any time during each periodsset forth below to be greater than the ratios set forth below with respect tosuch period:

|                                                | **Period** | ** **   | ** ** | **Ratio** | ** ** |
|------------------------------------------------|------------|--------------|------------|-----------|------------|
| Date hereof to  and including December 31,2006 |       | 4.00 to 1.00 |       |
| January 1, 2007 and  thereafter                |       | 3.75 to 1.00 |       |

 

**SECTION9.****                            EVENTSOF DEFAULT; ACCELERATION.**

**§9.1        Eventsof Default.**  Theoccurrence of any one or more of the following events or conditions shallconstitute an “Event of Default” hereunder regardless of the reason for suchevent and whether it shall be voluntary or involuntary or within or without thecontrol of the Borrower or the Guarantor or be effected by operation of orpursuant to any Law:

(a)           ifthe Borrower shall fail to make any payment not more than three (3) BusinessDays after the due date thereof of any principal or interest due hereunder oron the Note or other amount provided for hereunder whether at maturity or atany date fixed for payment or prepayment or by declaration or otherwise; or

(b)           Ifthe Borrower shall default in the performance of or compliance with any termcontained in §§7.6, 7.10(a), 7.10(b), or 7.16; 7.17(a)or §§8.2, 8.3 or 8.4; or

(c)           Ifthe Borrower shall default in the performance or compliance with any termcontained in §§7.9, 7.14 or 7.17(b), and such defaultshall continue for more than thirty (30) days; or

(d)           ifthe Borrower shall default in the performance of or compliance with any termcontained herein, or in the performance of or compliance with any other termcontained in any of the other Loan Documents (other than those referred to inthe foregoing paragraphs (a), (b) and (c)), and such default shall not havebeen remedied within thirty (30) days after written notice thereof shall havebeen given to the Borrower by the Agent;or

(e)           ifany representation, warranty or certification made in writing by or on behalfof the Borrower or any Guarantor herein or in connection with any of thetransactions contemplated hereby shall prove to have been false or incorrect inany material respect on the date as of which made; or

(f)            ifthe Borrower or any Guarantor makes an assignment for the benefit of creditors,or petitions or applies for the appointment of a liquidator or receiver orcustodian (or similar official) of itself or of any substantial part of itsassets or commences any proceeding or case relating to it under any bankruptcy,reorganization, arrangements, insolvency, readjustment of debt, dissolution orliquidation or similar law of any jurisdiction, now or hereafter in effect; or

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(g)           ifany such petition or application is filed or any such proceeding or case iscommenced against the Borrower or any Guarantor and such party indicates itsapproval thereof, consent thereto or acquiescence therein or an order isentered appointing any such liquidator or receiver or custodian (or similarofficial), or adjudicating the Borrower or any Guarantor bankrupt or insolvent,or approving a petition in any such proceeding or a decree or order for reliefis entered in respect of the Borrower or any Guarantor in an involuntary caseunder any bankruptcy, reorganization, arrangements, insolvency, readjustment ofdebt, dissolution or liquidation or similar law of any jurisdiction, now orhereafter in effect, and such order remains in effect for more than sixty (60)days, whether or not consecutive; or

(h)           ifany order is entered in any proceeding by or against the Borrower or anyGuarantor decreeing or permitting its dissolution or split-up or the winding upof its affairs; or

(i)            ifthe Borrower or any Guarantor shall generally not pay its debts as such debtsbecome due, or shall admit in writing its inability to pay its debt generally;or

(j)            ifthere shall remain in force, undischarged, unsatisfied and unstayed, for morethan thirty (30) days, whether or not consecutive, any final unappealablejudgment against the Borrower or any Guarantor, which with other outstandingfinal unappealable judgments, undischarged, against the Borrower or anyGuarantor, exceed in the aggregate $500,000 (other than amounts that aresubject to insurance coverage); or

(k)           ifany of the Security Documents shall for any reason cease to be in full forceand effect or any Security Document or the Lien purported to be granted therebyshall become adjudged by a competent court to be invalid or unenforceable; or

(l)            ifthe Borrower shall (i) default (as principal or guarantor or other surety) inthe payment of any principal of, premium, if any, or interest on anyIndebtedness to the Lenders (or its affiliates) or under any other Indebtednessowed to any other Person in excess of $500,000, in any single amount or inaggregate, in respect of borrowed money or credit received, or (ii) default inthe performance of or compliance with any other term, covenant, provision orobligation contained in any agreement or instrument evidencing or securing suchIndebtedness and, in each case, the holder or holders of such Indebtednessshall have accelerated the maturity thereof or commenced the exercise of anyother remedies in respect of such default; or

(m)          ifany “Mortgage Event of Default” as defined in any Ship Mortgage or any Event ofDefault (as defined in the Security Agreement) shall occur; or

(n)           ifthe Borrower or any Guarantor shall terminate its existence by merger,consolidation, sale of substantially all of its assets, dissolution orotherwise; or

(o)           ifa Change in Control shall have occurred; or

(p)           ifthe Guarantor shall default on the performance of or compliance with any termcontained in Section 3 of any Guaranty and such default shall have not beenremedied within 10 business days after written notice from the Agent to anyGuarantor; or

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(q)           iffor any reason any Vessel Construction Agreements shall be terminated prior tocompletion of any New Vessel, or if the Borrower shall default under any VesselConstruction Agreement and Bollinger shall have demanded arbitrationthereunder.

**§9.2        Remedies**.

(a)           Uponthe occurrence of an Event of Default described in §§9.1(f), (g)or (h), immediately and automatically, and upon the occurrence of anyother Event of Default, and at any time thereafter while such Event of Defaultis continuing, at the option of the Agent and upon the Agent’s declaration atthe option and upon the direction of the Required Lenders:

(i)            theLenders’ Commitments to make any further Advances hereunder shall terminate;

(ii)           theunpaid principal amount of the Loan together with accrued interest and anyapplicable Prepayment Premium, and all other Obligations shall becomeimmediately due and payable without presentment, demand, protest or furthernotice of any kind, all of which are hereby expressly waived; and

(iii)          theAgent may, subject in each case to provision of indemnity against expenses andliabilities satisfactory to the Agent, exercise (on behalf of itself and theLenders) any and all rights the Agent and the Lenders have under thisAgreement, the Loan Documents, or any other documents or agreements executed inconnection herewith (including the exercise of rights and remedies with respectto any or all Collateral), or at law or in equity, and proceed to protect andenforce the Lenders’ and the Agent’s rights by any action at law, in equity orother appropriate proceeding, whether for the specific performance of anycovenant or agreement contained in this Agreement or any other Loan Document,including the obtaining of the ex-parte appointment of a receiver, and, if suchamount shall have become due, by declaration or otherwise, proceed to enforcethe payment thereof or any other legal or equitable right of the Lenders andthe Agent, including the exercise of remedies against the Collateral under theSecurity Documents.

(b)           Ifany one or more of the Events of Default specified in §9.1 shall have occurredand be continuing, and whether or not the Notes shall have been accelerated asprovided above, any Lender may proceed to protect and enforce its rights bysuit in equity, action at law and/or by other appropriate proceeding, whetherfor the specific performance of any covenant or agreement contained in thisAgreement or any other Loan Document, including the obtaining of the ex-parteappointment of a receiver, and, if the Notes shall have become due, bydeclaration or otherwise, proceed to enforce the payment of such Notes or anyother of its legal or equitable rights.

(c)           OtherRemedies.  Unless and except to theextent expressly provided for to the contrary herein, the rights of the Lendersand the Agent specified herein shall be in addition to, and not in limitationof, any Lender’s or the Agent’s rights under any statute or rule of law orequity, or under any other provision of any of the Loan Documents, or under theprovisions of any other document, instrument or other writing executed by theBorrower or any third party in favor of any Lender or the Agent, all of whichmay be exercised successively or concurrently.

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(d)*  **Cash Collection System*.   Inaddition to any other right of the Agent hereunder and under applicable Law, effective upon demand by theAgent  at any time and from time to timethat an Event of Default exists, all payments that the Borrower receives as aresult of its ownership and operation of the Vessels, shall be deposited in adeposit account maintained at an Affiliate of the Agent. The Borrower expresslyauthorizes the Agent  hereunder to applyall such funds deposited in such account to the obligations as they come duehereunder and under the other Loan Documents in the manner set forth in §2.4(b).

(e)    Notwithstandinganything to the contrary contained in clause (a) above, the Agent  shall not exercise any of the remedies setforth in clause (a) or any other remedies available under applicable Lawif the exercise of such remedies shall invalidate the qualification of any ofthe Vessels to operate in the coastwise trade.

(f)*  **Sharing of Payments Generally*.   TheAgent and each Lender further agree that, if the Agent or such Lender shallreceive from the Borrower or from any other source whatsoever, in payment orsatisfaction in whole or in part of the Obligations, whether by voluntarypayment, exercise of the right of set-off, counterclaim, cross action, orenforcement of any claim evidenced by the Notes, this Agreement or the otherLoan Documents, or by proof thereof in bankruptcy, reorganization, liquidation,receivership or similar proceedings, or otherwise, any amount which is inexcess of its ratable portion of the amounts received by all of Lenders, thenthe Agent or such Lender shall make such disposition and arrangement with theother Lenders with respect to such excess, either by way of distribution untilthe amount of such excess has been exhausted, assignment of claims, subrogationor otherwise, as shall result in each Lender receiving in respect of its Notesand the amounts due such Lender under this Agreement and the other LoanDocuments its ratable share of all such amounts, provided that any arrangementregarding the disposition of any excess amounts shall, to the extent involvingpayments other than in cash, also be ratable among Lenders as to the form ofsuch payments.

**§9.3****  **Set-Off;Adjustments.

(a)    Inaddition to any rights or remedies provided by law and regardless of theadequacy of any Collateral, upon the occurrence of any Event of Default, eachLender and the Agent is hereby authorized without notice to the Borrower orcompliance with any other condition precedent now or hereafter imposed bystatute, rule of law or otherwise (all of which are hereby expressly waived bythe Borrower) to set off, appropriate and apply, to the extent permitted, bylaw, all deposits (general and special) held by such Person for the Borrower inany currency and all other Indebtedness at any time owing by such Person to theBorrower against any Obligations of the Borrower owing to such Person in suchamounts as such Person may elect, although such Obligations may be partly ortotally contingent or unmatured.

(b)    If anyamount to be set off is to be applied to Indebtedness of the Borrower to suchLender or the Agent (other than Indebtedness in respect of Obligations orotherwise due to any such Person hereunder or under the Security Documents) ,such amount shall be applied ratably to such other Indebtedness and to that inrespect of the Loan made by such Person or otherwise due to such Personhereunder or under the Security Documents.

 

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(c)    Except asotherwise expressly provided herein, if any Lender shall at any time receivepayment of all or part of the Obligations held by it, whether by set-off,Lender’s lien, counterclaim, similar right or otherwise, in a greaterproportion than the payments made in respect of the Obligations held by theother Lenders, such Lender shall purchase for cash, ratably from each of theother Lenders, such portion of the Obligations held by such other Lenders, andmake such other adjustments from time to time as shall be equitable, so thatafter such purchase each Lender shall hold an unpaid principal and interestamount of the Obligations bearing the same proportion of the total amount ofthe Obligations at such time outstanding as existed immediately prior to anysuch greater proportionate payment.  Inthe event that at any time any Lender shall be required to refund any amountswhich have been paid to or received by it on account of the Obligations held bysuch Lender and which have been applied to the purchase of portions of theObligations held by other Lenders pursuant to this §9.3**then, upon notice from such Lender, each of the otherLenders shall repurchase said portions for cash to the extent of the respectiveratable shares of such refund.

(d)    Any Personwhich shall have exercised any right of set-off shall as soon as practicablenotify the Borrower and the Agent that it has done so, but failure or delay inso doing shall not affect the validity of such set-off or subject such Personto any liability in respect thereof except as otherwise expressly providedherein.  The Borrower agrees that anyLender so purchasing a participation in the Obligations held by the otherLenders may exercise all rights of set-off, Lender’s lien, counterclaim,similar rights or otherwise with respect to such participation as fully as ifsuch Lender were a direct holder of such Obligations in the amount of suchparticipation.  Nothing contained hereinshall require any Lender to exercise any such right or shall affect the rightof any Lender to exercise and retain the benefits of any rights in respect of theindebtedness or obligation of the Borrower.

(e)    The rightsof the Lenders and the Agent under this §9.3 are in addition to otherrights and remedies (including other rights of set-off) that the Lenders andthe Agent may have.

**§9.4**   Enforcement by the Agent.**  **ThisAgreement and each other Loan Document may be enforced against the Borrower bythe Agent as agent of each of the Lenders without the necessity of joining anyor all of them as parties in the enforcement proceedings.

**SECTION 10.   EXPENSES.**

The Borrower will pay on demand all reasonableout-of-pocket expenses of the Agent and the Lenders (including reasonable feesof outside counsel) in connection with: the negotiation, preparation,execution, and delivery of this Agreement, the other Loan Documents or otherdocuments executed in connection therewith; any advice or analysis from outsidecounsel, accountants or other professionals retained by the Agent or theLenders from time to time in connection with this Agreement or the transactionscontemplated hereby; any amendment, waiver, or consent from time to timerelated thereto; and the Agent and the Lenders’ exercise, preservation orenforcement of any of their rights, remedies or options hereunder or thereunderafter the occurrence and during the continuation of an Event of Default,including in all such cases the reasonable fees of outside legal counsel andany local counsel, accounting, consulting, brokerage or other similarprofessional fees or expenses, and any reasonable fees or 

 

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expenses associated withany travel or other costs relating to any appraisals conducted in connectionwith the Obligations or any Collateral therefore after the date of thisAgreement; and the amount of all such expenses shall, until paid, bear interestat the interest rate applicable to principal hereunder (including any defaultrate). After the occurrence and during the continuance of an Event of Default,the Borrower shall pay the reasonable costs of any field audit examinationsthat the Lender in its discretion may conduct and shall also pay all reasonableout-of-pocket expenses of the Agent and the Lenders in connection with theexercise, preservation or enforcement of any of its rights, remedies or optionsunder any of the Security Documents.

**SECTION 11.   SURVIVALOF COVENANTS.**

All covenants, agreements, representations andwarranties made herein and in any certificates or other papers delivered by oron behalf of the Borrower pursuant hereto are material and shall be deemed tohave been relied upon by the Lenders and the Agent, notwithstanding anyinvestigation heretofore or hereafter made by them, and shall survive themaking of the Loan, as herein contemplated, and shall continue in full forceand effect so long as the Loan or other amounts due under the Loan Documentsand the Note remain outstanding and unpaid. All statements contained in any certificate or other paper delivered tothe Agent and/or the Lenders at any time by or on behalf of the Borrower pursuanthereto or in connection with the transactions contemplated hereby shallconstitute representations and warranties by the Borrower hereunder.

**SECTION 12.   CONFIDENTIALITY.**

The Agent and the Lenders agree to take and to causetheir respective Affiliates to take normal and reasonable precautions andexercise due care to maintain the confidentiality of all information providedto the Lenders or the Agent by the Borrower, under this Agreement or any otherLoan Document, and none of the Lenders, any of their respective Affiliates orthe Agent shall use any such information other than in connection with or inenforcement of this Agreement and the other Loan Documents, except to theextent such information (i) was or becomes generally available to the publicother than as a result of disclosure by any Lender or the Agent or (ii) was orbecomes available on a non-confidential basis from a source other than theBorrower, *provided* that any Lender or the Agentmay disclose such information (A) at the request or pursuant to any requirementof any governmental authority to which any Lender or the Agent is subject or inconnection with an examination of any Lender or the Agent by any suchauthority; (B) pursuant to subpoena or other court process; (C) when requiredto do so in accordance with the provisions of any applicable law; (D) to theextent required in connection with any litigation or proceeding to which anyLender, its respective affiliates, or the Agent may be party; (E) to the extentany Lender or the Agent is required in connection with the exercise of anyremedy hereunder or under any other Loan Document; (F) to any Lender’s or theAgent’s independent auditors and other professional advisors; (G) to anyEligible Assignee or participant (including prospective institutions that maybecome assignees or participants pursuant to §*13*),*provided* that such Person agrees inwriting to keep such information confidential to the same extent required ofthe Lenders and the Agent hereunder; (H) as to the Lenders, their respectiveAffiliates or the Agent, as expressly permitted under the terms of any otherdocument or agreement regarding confidentiality to which the Borrower is aparty or is deemed a party with such Lender, such Affiliate or the Agent; and(I) to their respective Affiliates.

 

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**SECTION 13.   SUCCESSORSAND ASSIGNS; PARTICIPATIONS.**

**§13.1**   Successors and Assigns.****   Wheneverin this Agreement any of the parties hereto is referred to, such referenceshall be deemed to include the successors and assigns of such party; and allcovenants, promises and agreements by or on behalf of the Borrower, the Lendersor the Agent shall bind and inure to the benefit of their respective successorsand assigns.  Notwithstanding theforegoing, the Borrower shall not be entitled to assign any of its rights orobligations hereunder.

**§13.2****  **Assignments.

(a)    EachLender may, at its expense (unless such assignment is initiated by theBorrower) assign to one or more Eligible Assignees (but not to exceed fiveLenders hereunder at any one time) all or a portion (not less than $3,000,000)of its interests, rights and obligations under this Agreement and the otherLoan Documents, including all or a portion of the Loan at the time made by orowing to it, *provided*(i) that the parties toeach such assignment shall execute and deliver to such Lender an Assignment andAcceptance in the form set forth as Exhibit D (an “Assignment andAcceptance”).  Upon acceptance andrecording pursuant to §13.6, from and after the effective date specifiedin each Assignment and Acceptance (which effective date shall be at least fiveBusiness Days after the execution thereof), (A) the Eligible Assignee shall bea party hereto and, to the extent provided in such Assignment and Acceptance,have the same rights and obligations as such Lender under this Agreement, and(B) such Lender shall be released from any obligations under this Agreementwith respect to the interests assigned, *provided* thatin the case of an Assignment and Acceptance covering all or the remainingportion of such Lender’s rights and obligations under this Agreement, suchLender shall continue to be entitled to the benefits of §2.5 and §2.6,as well as to any fees or amounts accrued for its account hereunder and not yetpaid.  An Eligible Assignee shall beentitled to sell participations in its interests, rights and obligations underthis Agreement and the other Loan Documents, as provided in §13.3, andshall be entitled to grant assignments thereof pursuant to an Assignment andAcceptance and otherwise in accordance with this §13.

(b)    Byexecuting and delivering an Assignment and Acceptance, the applicable Lenderand Eligible Assignee shall be deemed to confirm to and agree with each otherand the other parties hereto as follows: (i) other than the representation and warranty that it is the legaland beneficial owner of the interest being assigned thereby free and clear ofany adverse claim, such Lender makes no representation or warranty and assumesno responsibility with respect to any statements, warranties or representationsmade in or in connection with this Agreement or the execution, legality,validity, enforceability, genuineness, sufficiency or value of this Agreement,any other Loan Document or any other instrument or document furnished pursuanthereto, (ii) such Lender makes no representation or warranty and assumesno responsibility with respect to the financial condition of the Borrower orthe performance or observance by the Borrower of any of its obligations underthis Agreement, any other Loan Document or any other instrument or document furnishedpursuant hereto, (iii) such Eligible Assignee confirms that it hasreceived a copy of this Agreement and the other Loan Documents, together withcopies of the most recent financial statements delivered pursuant to §7.4and such other documents and information as it has deemed appropriate to makeits own credit analysis and decision to enter into such Assignment andAcceptance, (iv) such Eligible Assignee shall 

 

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independently and withoutreliance upon such Lender or any other Eligible Assignee or Participant andbased on such documents and information as it shall deem appropriate at thetime, continue to make its own credit decisions under this Agreement, and(v) such Eligible Assignee agrees that it shall perform in accordance withtheir terms all the obligations which by the terms of this Agreement arerequired to be performed by it as an Eligible Assignee.

(c)    If,pursuant to this §13.2, any interest in this Agreement is assigned toany Eligible Assignee which is not incorporated or organized under the laws ofthe United States or a state thereof, the applicable Lender shall cause suchEligible Assignee to agree that, on or prior to the effective date specified inthe Assignment and Acceptance, it will deliver to the Borrower (i) twovalid, duly completed copies of United States Internal Revenue ServiceForm W-8BEN or W-8EC1 or applicable successor form, as thecase may be, certifying in each case that such Eligible Assignee is entitled toreceive payments made under this Agreement and the Note without deduction orwithholding of any United States federal income taxes, and (ii) a valid,duly completed Internal Revenue Service Form W-8BEN or W-9 or applicablesuccessor form, as the case may be, to establish an exemption from UnitedStates backup withholding tax.  TheEligible Assignee which delivers to the Borrower a Form W-8BEN or W-8EC1and Form W-8BEN or W-9 pursuant to the preceding sentencefurther undertakes to deliver to the Borrower two copies of the Form W-8BENor W-8EC1 and Form W-8BEN or W-9, or applicablesuccessor forms, or other manner of certification, as the case may be, on orbefore the date that any such form expires or becomes obsolete or otherwise isrequired to be resubmitted as a condition to obtaining an exemption fromwithholding tax or after the occurrence of any event requiring a change in themost recent form previously delivered by it to the Borrower, and suchextensions or renewals thereof as may reasonably be requested by the Borrower,certifying in the case of a Form W-8BEN or W-8EC1 that suchEligible Assignee is entitled to receive payments made under this Agreement andthe Note without deduction or withholding of any United States federal incometaxes, unless any change in treaty, law or regulation or officialinterpretation thereof has occurred prior to the date on which any suchdelivery would otherwise be required which renders all such forms inapplicableor which would prevent such Eligible Assignee from duly completing anddelivering any such form with respect to it and such Eligible Assignee advisesthe Borrower that it is not capable of receiving payments without any deductionor withholding of United States federal income tax, and in the case of aForm W-8BEN or W-9, establishing an exemption from UnitedStates backup withholding tax.

**§13.3**   Participations.****   EachLender and the Eligible Assignee may, at their respective expense, sell to oneor more Persons (each, a “Participant”) participations in all or a portion (notless than $3,000,000) of its interests, rights and obligations under this Agreementand the other Loan Documents (including all or a portion of any Commitments andthe Loans owing to it), *provided* that(i) such Lender or such Eligible Assignee shall remain solely responsiblefor the performance of its obligations under this Agreement, (ii) theParticipant shall be entitled to the benefit of the cost protection provisionsand indemnities contained in §§2.5 and 7.12, but shall not beentitled to receive any greater payment thereunder than the selling Lender orEligible Assignee would have been entitled to receive with respect to theinterest so sold if such interest had not been sold, and (iii) theBorrower, such Lender (in the case of a sale of any participation interest byan Eligible Assignee), and any Eligible Assignee shall continue to deal solelyand directly with such Lender or Eligible Assignee in connection with itsrights and obligations under this Agreement. A Participant shall not be entitled to require such Lender to take oromit to take 

 

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any action hereunderexcept in connection with any of the following: (a) any amendment that subjects such Lender to any additionalobligations; (b) a reduction of the principal of or interest on any Note,or of any fees payable hereunder; (c) a postponement of any date fixed forany payment in respect of principal of or interest on any Note or any feespayable hereunder; (d) the release of any Collateral from the Lien of theLoan Documents.

**§13.4**   Disclosures.****   EachLender and any Eligible Assignee may, in connection with any proposedassignment (by such Lender) or participation (by such Lender or the EligibleAssignee) pursuant to this §13, disclose to the proposed EligibleAssignee or Participant any information in its possession relating to theBorrower, *provided*that prior to any suchdisclosure, each such Eligible Assignee or Participant or proposed EligibleAssignee or Participant shall execute an agreement whereby such EligibleAssignee or Participant shall agree (subject to customary exceptions) topreserve the confidentiality of any confidential information relating to anythe Borrower received from such Participant.

**§13.5**   Federal Reserve Bank.****   EachLender, Eligible Assignee and Participants may at any time pledge or assign allor any portion of their rights under this Agreement to a Federal Reserve Bank.

**§13.6****  **Register;Note.

(a)    TheInitial Lender agrees to act as agent for the Borrower (the “Registration Agent”)and in that capacity to establish and shall maintain at its address referred toin §14 a register (the “Lender Register”) in which it shall record thename and address of each Lender hereunder and the principal amount of the Loanowing to each Lender from time to time. The entries in the Lender Register shall be final and binding for allpurposes, absent manifest error, and the Borrower shall treat each Person whosename is recorded in the Lender Register as a Lender for all purposes of theLoan Documents.

(b)    Uponreceipt of a completed Assignment and Acceptance executed by an assigningLender and an Eligible Assignee, together with the Note or Note subject to suchassignment, the Registration Agent shall record the relevant informationcontained in the Assignment and Acceptance in the Lender Register, and theBorrower (i) shall execute and deliver to the Assignee in exchange for thesurrendered Note or Note a new Note made payable to the Assignee in an amountequal to the principal amount of the Loan acquired by the Assignee, and(ii) if the assigning Lender assigned less than its entire interest in theLoan, execute and deliver to the assigning Lender a new Note made payable tothe assigning Lender in an amount equal to the principal amount of the Loanretained by the assigning Lender.  Thesum of the principal amounts of the new Note shall be equal to the aggregateoutstanding principal amount of the surrendered Note or Note.  The new Note or Note shall be dated theeffective date of such Assignment and Acceptance and shall otherwise be insubstantially the form of the surrendered Note or Note.

(c)    TheRegistration Agent may transfer its obligations under this §13.6 to anEligible Assignee in connection with the assignment of all (but not less thanall) of the Registration Agent’s interest in the Loan in accordance with §13.2,in which event the 

 

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Assignment and Acceptanceshall be amended or supplemented to effect such transfer of obligations asRegistration Agent.

(d)    TheRegistration Agent agrees to follow the reasonable requests of the Borrowerwith respect to the maintenance of the Lender Register, provided that theRegistration Agent shall not be required to follow any such Borrower request ifan Event of Default shall have occurred and be continuing unless and until suchEvent of Default shall be cured or otherwise cease to exist.

**SECTION 14.   NOTICES.**

Except as otherwise specified herein, all notices andother communications made or required to be given pursuant to this Agreementshall be in writing and shall be delivered by hand, sent by facsimile, sent byovernight express courier service or mailed by first-class mail, postageprepaid, addressed as follows (or to such other address as any party maydesignate by notice to the other parties):
| If to the Lender: | Citizens Leasing Corporation, d/b/a Citizens Asset  Finance |
|-------------------|-------------------------------------------------------------|
|              | 189 Canal Street                                            |
|              | Mail Stop: RCE-150                                          |
|              | Providence,  Rhode Island 02903                             |
|              | Attention:                                                  | Team Leader |
|              |                                                        | Direct Originations |
|              | FAX:                                                        | (401) 459-3171 |
| With a copy to:   | Citizens Leasing  Corporation, d/b/a Citizens Asset Finance |
|              | 189 Canal Street                                            |
|              | Mail Stop: RCE-150                                          |
|              | Providence,  Rhode Island 02903                             |
|              | Attention:                                                  | David T. Miele, Esq. |
|              | FAX:                                                        | (401) 459-3171 |
| With a copy to:   | Day, Berry & Howard  LLP                                |
|              | One  International Place                                    |
|              | Boston,  Massachusetts 02110-3179                           |
|              | Attention:                                                  | William A. Hunter, Esq. |
|              |                                                        | Louise A. Laudano, Esq. |
|              | FAX:                                                        | (617) 345-4745 |
| If to the Agent:  | Citizens Leasing  Corporation, d/b/a Citizens Asset Finance |
|              | 189 Canal Street                                            |
|              | Mail Stop: RCE-150                                          |
|              | Providence,  Rhode Island 02903                             |
|              | Attention:                                                  | Team Leader |
|              |                                                        | Direct Originations |
|              | FAX:                                                        | (401) 459-3171 |

 

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| If to the Borrower: | K-Sea Operating Partnership L.P.      |   |   |
|---------------------|---------------------------------------|--------|--------|
|                | 3245 Richmond Terrace                 |   |   |
|                | Staten Island, New York 10303         |   |   |
|                | Attention: Chief Financial Officer    |   |   |
|                | Telephone: (718) 720-7207             |   |   |
|                | Fax: (718) 720-4358                   |   |   |
|                | Email: jnicola@k-sea.com              |   |   |
|                |                                  |   |   |
| With a copy to:     | Holland & Knight LLP              |   |   |
|                | 195 Broadway                          |   |   |
|                | New York, New York 10007              |   |   |
|                | Attention: Christopher G. Kelly, Esq. |   |   |
|                | Phone: 212-513-3264                   |   |   |
|                | Fax: 212-385-9010                     |   |   |
|                | Email: ckelly@hklaw.com               |   |   |
|                |                                  |   |   |

Any notice so addressed and mailed by registered orcertified mail shall be deemed to have been given when mailed.  Electronic mail and internet and intranetwebsites may be used only to distribute routine communications by the Agent tothe Lenders, such as financial statements and other information as provided in§7.4 and for the distribution and execution of the Loan Documents forexecution by the parties thereto, and may not be used for any other purpose.

**SECTION 15.**                     ENTIREAGREEMENT.

This Agreement and any other documents executed inconnection herewith express the entire understanding of the parties withrespect to the transactions contemplated hereby.  Neither this Agreement nor any term hereofmay be changed, waived, discharged or terminated orally or in writing, exceptas provided in §21.

**SECTION 16.**                     [IntentionallyOmitted].

**SECTION17.****                     SEVERABILITY**.

Any provision of this Agreement which is prohibited orunenforceable in any jurisdiction shall, as to such jurisdiction, beineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions hereof, and any such prohibition orunenforceability in any jurisdiction shall not invalidate or renderunenforceable such provision in any other jurisdiction.

**SECTION 18.**                     SUBMISSION TOJURISDICTION; WAIVER.

EACH OF THE BORROWER, EACH LENDER, AND THE AGENTHEREBY IRREVOCABLY AND UNCONDITIONALLY:

(a)           SUBMITSFOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING DIRECTLYOR INDIRECTLY TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITIONAND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-

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EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORKLOCATED IN MANHATTAN AND COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, THECOURTS OF THE UNITED STATES OF AMERICA FOR THE DISTRICT OF MASSACHUSETTS ANDTHE SOUTHERN DISTRICT OF NEW YORK AND APPELLATE COURTS FROM ANY THEREOF.

(b)           CONSENTSTHAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS, AND WAIVESANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTIONOR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHTIN AN INCONVENIENT FORUM AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

(c)           WAIVESPERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND AGREES THAT ALL SUCH SERVICEOF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPYTHEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OFMAIL), POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH IN §13OR AT SUCH OTHER ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANTTHERETO AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THEEARLIER OF ACTUAL RECEIPT OR THREE BUSINESS DAYS AFTER THE SAME SHALL HAVE BEENPOSTED TO THEIR RESPECTIVE ADDRESS AS SET FORTH IN §13;

(d)           WAIVESANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING ANYLENDER OR THE AGENT TO EXERCISE ANY REMEDIES SET FORTH HEREIN OR IN ANY OF THEOTHER LOAN DOCUMENTS; AND

(e)           AGREESTHAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANYOTHER MANNER PERMITTED BY LAW OR SHALL LIMIT OR OTHERWISE AFFECT THE RIGHT OFTHE OTHER PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST THE OTHER PARTY ORITS PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.

**SECTION 19.****                     WAIVEROF JURY TRIAL.**

THE BORROWER, EACH LENDER AND THE AGENT HEREBYINTENTIONALLY AND VOLUNTARILY WAIVE ANY RIGHT WHICH ANY OF THEM MAY HAVE TO ATRIAL BY JURY IN CONNECTION WITH ANY MATTER DIRECTLY OR INDIRECTLY RELATING TOTHIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY ANDALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECTMATTER OF THE TRANSACTIONS DESCRIBED IN THIS AGREEMENT AND THE OTHER LOANDOCUMENTS, INCLUDING, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, ANDALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE BORROWER, EACH LENDER AND THE AGENT EACH ACKNOWLEDGE THAT THISWAIVER IS A 

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MATERIAL INDUCEMENT TO ENTER INTO A BUSINESSRELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THISAGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATEDFUTURE DEALINGS.  THE BORROWERACKNOWLEDGES THAT NEITHER THE LENDERS, THE AGENT NOR ANY PERSON ACTING ONBEHALF OF THE LENDERS OR THE AGENT HAS MADE ANY REPRESENTATIONS OF FACT TOINDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY MODIFY OR NULLIFY ITSEFFECT.  THE BORROWER FURTHERACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BEREPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVERBY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL.  THIS WAIVER IS IRREVOCABLE, MEANING THAT ITMAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TOANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THISAGREEMENT OR THE OTHER LOAN DOCUMENTS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTENCONSENT TO A TRIAL BY THE COURT.

**SECTION 20.**                     CONCERNINGTHE AGENT.

**§20.1      AppointmentAnd Authority Of Agent.**

(a)           EachLender hereby appoints CAF to serve as the Agent for such Person under thisAgreement and as the “Collateral Trustee” under the Ship Mortgages, and herebyirrevocably authorizes such Person, as the Agent and the Collateral Trustee, totake such action in its behalf under this Agreement and to exercise such powersand to perform such duties hereunder as are specifically delegated to orrequired of the Agent and the Collateral Trustee by the terms hereof, togetherwith such other powers as are reasonably incidental thereto.  CAF hereby accepts its appointment as theAgent and the Collateral Trustee.  Unlessotherwise specifically provided herein or in the Ship Mortgages, the provisionsof this Section 20 pertaining to the Agent shall also apply to the CollateralTrustee.

(b)           Inaddition to the powers and duties specifically delegated to the Agenthereunder, the Agent shall generally be responsible for and be empowered, butnot be obligated, to act in respect of (i) all matters relating to the receipton behalf of the Lenders of all payments made, and including repayment (whetheron maturity or earlier) of the principal amounts of the Loan or any Advancethereof, payments of interest on the Loan and payments of fees and otheramounts due hereunder; disbursement to the Lenders of their respective sharesof such amounts; collection from each Lender and disbursement to the Borrowerof the portion of each Advance required to be funded by such Lender; themaintenance of records relating to all advances and repayments of the Loan,payments of interest with respect thereto and fees payable hereunder; and allnotices relating to the foregoing; (ii) the preparation, review, dissemination,execution, delivery, filing, recording and registration of, and enforcement ofrights and remedies under, all documentation relating to the transactionscontemplated by this Agreement, including the preparation of this Agreement andall other Loan Documents, the filing, registration or recording of the SecurityDocuments and any amendments thereto, any releases from or waivers with respectto the provisions of this Agreement or any Loan Documents; all reports,statements,

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certificates and other documents delivered, by the Borrower hereunder;any amendments or supplements to any Loan Documents; the taking of any and allaction to enforce the rights and remedies available to the Lenders or the Agentunder the Loan Documents including all matters relating to recovery of amountsdue thereunder and foreclosure or other methods of recovery as against anycollateral; and hiring and consulting with domestic and foreign counsel inconnection with any of the foregoing; and (iii) all administrative mattersrelating to the admission of new Lenders to the group of Lenders hereunder andthe polling of the members of the group of Lenders hereunder on all mattersrequiring a vote of the Lenders.

**§20.2      Delegationof Duties**.  TheAgent may exercise its powers and execute its duties by or through employees oragents.

**§20.3      Standardof Care**.  Inperforming its duties and functions hereunder, the Agent will endeavor toexercise the same degree of care which it normally exercises in making andhandling loans in which it alone is interested, but it does not assume furtherresponsibility.

**§20.4      IndependentCredit Evaluations**. Each Lender expressly acknowledges to the Agent that the Agent has notmade any representations or warranties to it regarding this Agreement, theother Loan Documents, any of the other documents mentioned herein or therein orthe transactions contemplated hereby and thereby or regarding the Borrower orits business or financial position.  EachLender acknowledges to the Agent and to each other Person that it hasindependently and without reliance on the Agent or any other Person, and basedupon such documents and inquiries as it has deemed appropriate, made its owncredit analyses of the Borrower and its own decision to enter into thisAgreement and the other Loan Documents. Each Lender agrees that it will, independently and without reliance onthe Agent or any other Person, and based upon such documents and inquiries asit shall deem appropriate at the time, continue to make its own credit analysesand decisions in taking or not taking actions under this Agreement and to makesuch investigations as it deems necessary to keep current its informationrelating to the affairs, financial position and creditworthiness of theBorrower.

**§20.5      LimitedScope of Duties**.

(a)           Nothingin this Agreement, expressed or implied, is intended to, or shall be construedas to, impose upon the Agent any duties or responsibility in respect of thisAgreement except as expressly set forth herein or as set forth in §20.5(b).  Except as set forth explicitly in §20.1(a)hereof, the relationship between the Agent and each of the Lenders is that ofagent and principal only and the duties and obligations of the Agent are of anadministrative and mechanical nature only. Except as set forth explicitly in §20.1(a) hereof, nothing inthis Agreement shall be construed so as to constitute the Agent as a trustee orfiduciary for any Lender, or any Person, or to impose upon the Agent any dutiesor responsibilities other than those for which express provision is madeherein.  The Agent, in performing itsduties and functions hereunder, does not assume, and shall not be deemed tohave assumed, any obligations toward, or relationship of agency, fiduciary, ortrust with or for the Borrower.

(b)           Exceptfor notices, financial statements and other documents expressly required to befurnished to the Lenders by the Agent pursuant to the provisions of thisAgreement, the Agent shall not have any duty or responsibility, eitherinitially or on a continuing

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basis, to provide any Lender with any credit or other information concerningthe business or financial condition of the Borrower which may come into thepossession of the Agent or any of its Affiliates, whether before or after themaking of any Advance pursuant hereto, nor shall the Agent have any duty toinspect the properties or books of the Borrower.

(c)           TheAgent shall be entitled to assume that no Event of Default or Default hasoccurred and is continuing, unless the Agent has Actual Knowledge of such factor has received notice from a Lender or the Borrower, as the case may be, thatsuch Lender or the Borrower, as the case may be, considers that an Event ofDefault or Default has occurred and is continuing and specifying the naturethereof. In acting as Agent hereunder for the Lenders, the Agent shall beregarded as acting through its agency division which shall be treated as aseparate entity from any of its other departments or divisions, and anyinformation received by some other department of the Agent may be treated asconfidential and shall be regarded as having been given to the Agent’s agencydivision.

(d)           Solong as the Agent shall be entitled, pursuant to §20.5(c) to assume thatno Event of Default or Default has occurred and is continuing, the Agent shallbe entitled to use its discretion with respect to exercising or refraining fromexercising any rights which may be vested in it by, or with respect to takingor refraining from taking any action or actions which it may be able to takeunder or in respect of this Agreement, except that the Agent shall not exerciseany rights under §9.2 of this Agreement, except upon the written requestor with the written consent of the Required Lenders in respect of the Loan andthe Commitments or the written request, subject to §20.5 and except thatthe Agent shall be required to act or not act upon the instructions of theRequired Lenders (or all of the Lenders in any circumstances governed by theprovisions of §21 of this Agreement) and those instructions shall bebinding upon the Agent and the Lenders (including, but not limited to, anyLender which has not signed such instructions or which has dissented from theactions or inactions specified in such instructions), provided that the Agentshall not be required to act or not act if to do so, in its sole judgment,would expose the Agent to liability or would be contrary to this Agreement, anyother Loan Document or to applicable law, except that the Agent shall so act ornot act if doing so would expose it to liability if and only if it shall havereceived from the Lenders such indemnities against and such security as theAgent may reasonably require (whether by way of payment in advance orotherwise) against all such liabilities, costs, claims, and any and allexpenses, including fees and expenses of its counsel satisfactory to it in itssole judgment.

(e)           Inthe event that the Agent shall have acquired Actual Knowledge of a Default orEvent of Default, the Agent shall promptly give notice thereof to the Lendersand will take such action and assert such rights under this Agreement and/orunder the Security Agreement as the Required Lenders shall direct, providedthat the Agent shall not be required to act or not to act if to do so wouldexpose the Agent to liability or would be contrary to this Agreement, theSecurity Documents or applicable law and provided further that if the RequiredLenders entitled so to direct the Agent shall fail, for ten (10) days after thegiving of any such notice, so to direct the Agent, the Agent may take suchaction and assert such rights as it deems to be advisable, in its discretion,for the protection of the interests of the Lenders and the Agent.

(f)            Notwithstandinganything to the contrary expressed or implied herein or in the SecurityDocuments, the Agent shall not be bound to disclose any other person any

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information relating to any Lender or the Borrower if such disclosurewould or might obviously constitute a breach of any law or regulation or wouldor might in their opinion be otherwise actionable at the suit of any person.

**§20.6      Relianceby the Agent**. The Agent shall be entitled to rely on any notice, consent, certificate,affidavit, letter, facsimile, telegram, teletype message, e-mail statement,order or other document received by it and believed by it to be genuine andcorrect and to have been signed and sent delivered by a proper Person orPersons and, in respect of legal matters, upon the advice and statements oflawyers, independent accountants and other experts selected by the Agent.  The Agent and each Lender may relyconclusively on each incumbency certificate furnished to it pursuant to §4.6until it receives a further such certificate amending or rescinding the priorcertificate.

**§20.7      ExculpatoryProvisions**.

(a)           Neither the Agentnor any of its respective shareholders, directors, officers, employees oragents shall be liable in any manner to any of the Lenders for any actiontaken, or omitted to be taken, in good faith by it or them hereunder or inconnection herewith, or be responsible for the consequences of any oversight orerror of judgment, except for losses due to its gross negligence or willfulmisconduct.  The Agent shall not bedeemed to have any fiduciary obligation to any of the Lenders or the Borrower.

(b)           TheAgent shall not be responsible in any manner to any of the Lenders for the dueexecution, effectiveness, genuineness, validity or enforceability of any of theLoan Documents or the Loan or for the truth, accuracy or completeness of anyrecital, statement or warranty contained herein or in any other Loan Documentor in any certificate, report or other document hereinafter furnished to it byor on behalf of any Person in connection with this Agreement or any other LoanDocument; nor shall the Agent be under any obligation to any of the Lenders toascertain or inquire as to the performance or observance by the Borrower or anyother Person of any of the agreements or conditions set forth herein or in anyother Loan Document or as to use of any moneys loaned hereunder.

**§20.8      Reimbursementof the Agent.**

(a)           TheLenders, severally, agree to indemnify the Agent (to the extent not reimbursedby the Borrower or from the income or proceeds of the sale of any of theCollateral) from and against any and all liabilities, obligations, losses,damages, penalties, actions, suits, judgments, court costs and otherout-of-pocket costs and expenses of any kind or nature whatsoever (hereinaftercalled, collectively, “Expenses”) which may be imposed on, incurred by orasserted against the Agent, as such, in any way relating to or arising out of thisAgreement or any other Loan Document or any action taken or omitted by theAgent under this Agreement or any other Loan Document, provided that no Lendershall be liable for any portion of such Expenses resulting from the grossnegligence or willful misconduct of the Agent hereunder.

(b)           The Agent shall not be required toexpend any of its own money to make up the full amount of any Advance requestedby the Borrower hereunder, or otherwise or incur any expense as a consequenceof the failure of any Lender to make available to the Agent any

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Advance which the Lenders havebecome obliged to make hereunder.  Shouldsuch a failure occur and the Agent shall nevertheless have advanced money ofits own or incur expense in order to make up the full amount of any suchAdvance, it shall be deemed to have done so at the request of any Lender whichis in default, unless such Lender shall have previously notified the Agent thatit should not make such an advance or incur such an expense to make good suchfailure, and in the absence of such prior notice, such Lender shall be obligedto pay to the Agent on demand the amount expended by the Agent out of its ownfunds plus any costs incurred by the Agent to carry such funds while suchLender is in default to the Agent hereunder, all of which shall constitute aloan by the Agent to such Lender.  Duringthe continuance of any such default as between the Agent and such Lender, andnotwithstanding anything elsewhere herein to the contrary expressed or implied,the principal amount of Indebtedness in respect of Advance made by such Lenderin default shall be deemed to be reduced, so long as the default continues, bythe amount not remitted by it to the Agent to make up such Lender’s share ofthe amount of such Advance and such principal amount and interest thereon shallbe deemed assigned to and collectible by the Agent for its own account forapplication against the amount of its claim under the preceding sentence.

(c)           Inthe event that the Agent does not receive from any Lender a payment which suchLender is required by the terms hereof to make to the Agent and the Agent hasmade the amount thereof available to the Borrower, as the intended recipientthereof, if the Borrower repays the Agent the amount made available to it, theBorrower shall be subrogated to the Agent’s right to recover such amount fromany Lender which failed to make such required payment.

**§20.9      CAFIndividually**. With respect to its obligation to lend under this Agreement and theadvances made by it pursuant hereto, CAF shall have the same obligations andthe same rights, powers and privileges as it would have were it not the Agent,and the word “Lenders” and “Lender” wherever appearing in thisAgreement shall include such Person in its individual capacity unless thecontext clearly indicates otherwise.  CAFmay accept deposits from, lend money to and, generally, engage in any kind ofbanking, trust or other business with the Borrower and any of its Subsidiariesand Affiliates in all respects as if such Person were not acting as the Agenthereunder or as the Agent and CAF may accept fees and other consideration forservices in connection with this Agreement and otherwise without beingaccountable there for to any of the other Lenders.

**§20.10   Dealingwith the Lenders**. The Agent may at all times deal solely with the several Lenders for allpurposes of this Agreement and the protection, enforcement and collection ofthe Obligations, including the acceptance and reliance upon any certificate,consent or other document of such Lenders and the division of payments pursuantto §2.8 notwithstanding possession by the Agent of Actual Knowledge thatany Lender has sold a participation in the Loan made or Advances to be made byit hereunder to another Person.

**§20.11   DutiesNot to be Increased.** The duties and liabilities of the Agent shall not be increased withoutthe written consent of the Agent.

**§20.12   SuccessorAgent**.  TheAgent may resign at any time by giving written notice to the Lenders and theBorrower, such resignation to become effective only upon the appointment

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of a successor Agent as hereinafter provided.  Upon any such resignation, all of the Lenders(excluding the Agent) shall have the right (after consultation with theBorrower) to appoint a successor Agent, which shall be one of the Lenders,unless none of them is willing to act as successor Agent hereunder, in whichevent the Lenders will appoint as successor Agent any financial institution ofnational standing which is willing to act in that capacity.  If no successor Agent shall have beenappointed by the Lenders, then the retiring Agent may on behalf of the Lendersappoint a successor Agent which shall be a financial institution of nationalstanding.  Upon the acceptance of itsappointment as Agent hereunder by any such successor Agent, the latter shallthereupon succeed to and become vested with the duties, rights, powers andprivileges of the retiring Agent and the resigning Agent shall be dischargedfrom all duties and liabilities under this Agreement.  After the resignation of the Agent hereunder,the provisions of this §20 shall inure to its benefit as to any actionstaken or omitted to be taken by it while it was Agent hereunder.

The obligations of each Lender and the Agentare several only and neither any Lender nor the Lenders shall be responsiblefor the obligation of any other party hereto. Nothing contained herein shall be constituted, or be so construed as toconstitute, the several Lenders and the Agent an association or jointventure or partners with one another for any purpose whatsoever.

**SECTION 21.**                     AMENDMENTSAND WAIVERS.

Except as elsewhere provided herein, neither thisAgreement nor any other Loan Document nor any of the terms hereof or thereofmay be terminated, amended or supplemented or compliance therewith waived(either generally or in a particular instance and either prospectively orretrospectively) except by one or more substantially concurrent instruments ofsubstantially similar purport signed by the Borrower and the Required Lenders, *provided* that:

(a)           nosuch amendment or waiver shall:

(i)            alterthe Commitment or Commitment Percentage of any Lender without its writtenconsent;

(ii)           exceptas otherwise provided herein, alter any of the provisions of §9 withoutthe written consent of all of the Lenders;

(iii)          increasethe duties or liabilities of the Agent without its written consent;

(iv)          reducethe respective percentage specified in the definitions of Required Lenders orall of the Lender without the written consent of all of the Lenders;

(v)           amendor eliminate this §21 without the written consent of all of the Lenders;

(vi)          reducethe amount or extend the time for payment of the principal of any Indebtednessin respect of any Advance or the Loan or reduce the rate or amount of interest,due hereunder or extend the time for payment of interest on any Advance or theLoan or

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modify any provision of this Agreement relating to the payment orprepayment of any Advance or the Loan or fee payable under this Agreement,without the written consent of all of the Lenders;

(vii)         increasethe applicable percentages set forth in the definition of Advance Limit in §1.1without the written consent of all of the Lenders;

(viii)        releaseany substantial portion of the Collateral that constitutes security under theLoan Documents *provided* that the Agent, in itscapacity as collateral agent or Collateral Trustee under the Security Agreementand the Ship Mortgages, shall have the authority, without obtaining the consentof any Lender, to release Vessels from the Lien of the Security Agreement orthe Ship Mortgages, from time to time upon the request of the Borrower, inconnection with a prepayment or substitution in accordance with §2.3(b)or as specified in §6.2; or

(ix)           waiveany condition precedent set forth in §§4, 5 or 6 without the writtenconsent of all of the Lenders.

(b)           unlessexpressly stated therein, no waiver of any Default or Event of Default shallextend to any other then existing or subsequent Default or Event of Default orimpair any right consequent thereon.

Any Default or Event of Default that shall have been waivedunconditionally pursuant to this §21 shall be deemed no longer to exist.

Any amendment or waiver pursuant to this §21 shall apply equallyto all of the Lenders and the Agent and shall be binding upon them, upon eachof their successors and permitted assigns and upon the Borrower and itssuccessors and permitted assigns.

**SECTION 22.**                     MISCELLANEOUS.

THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY,AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITEDSTATES OF AMERICA, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY ANDPERFORMANCE, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THANTITLE 14 OF ARTICLE 5 OF THE GENERAL OBLIGATIONS LAW).  The rights and remedies herein expressed arecumulative and not exclusive of any other rights which the Lender or the Agentwould otherwise have.  Any instrumentsrequired by any of the provisions hereof to be in the form annexed hereto as anexhibit shall be substantially in such form with such changes therefrom, ifany, as may be approved by the Agent. This Agreement or any amendment may be executed in separatecounterparts, each of which when so executed and delivered shall be anoriginal, but all of which together shall constitute one instrument.  In making proof of this Agreement, it shallnot be necessary to produce or account for more than one such counterpartsigned by the party against whom enforcement is sought.

*[Remainderof page intentionally left bland]*

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be dulyexecuted and delivered by their proper and duly authorized officers as of theday and year first above written.
|        |   |   | BORROWER                                                                                                  |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                      |
|   |   |   | K-SEA OPERATING PARTNERSHIP L.P.                                                                          |
|   |   |   |                                                                                                      |   |
|   |   |   |                                                                                                      |   |
|   |   |   | By:                                                                                                       | K-Sea OLP GP, LLC, its General Partner  |
|   |   |   |                                                                                                      |   |
|   |   |   |                                                                                                      |   |
|   |   |   |                                                                                                      |   |
|   |   |   | By:                                                                                                       | /s/ John J. Nicola |
|   |   |   |                                                                                                      | Name: John J. Nicola |
|   |   |   |                                                                                                      | Title: Chief Financial Officer |
|   |   |   |                                                                                                      |   |
|   |   |   |                                                                                                      |   |
|   |   |   | ADMINISTRATIVE AGENT, COLLATERAL TRUSTEE (to the  extent set forth in Section   20.1(a)), AND AS A LENDER |
|   |   |   |                                                                                                      |   |
|   |   |   | CITIZENS LEASING CORPORATION, D/B/A CITIZENS ASSET  FINANCE                                               |
|   |   |   |                                                                                                      |   |
|   |   |   |                                                                                                      |   |
|   |   |   |                                                                                                      |   |
|   |   |   | By:                                                                                                       | /s/ John M. Young |
|   |   |   |                                                                                                      | Name: John M. Young |
|   |   |   |                                                                                                      | Title: Senior Vice President |

 

*Signature page to Loan Agreement*

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SCHEDULE 1-A

DESCRIPTION OF NEWVESSELS

(1) BargeName:  DBL 26Hull No. 504

 

(2) BargeName:  DBL 27Hull No. 507

 

(3) BargeName:  DBL 104Hull No. 514 

 

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SCHEDULE 1-B

DESCRIPTION OFPLEDGED VESSELS (K-SEA)

(1)Name:  DBL 2202Official Number: 287892

(2)Name:  DBL 16Official Number: 267427

(3)Name:  EssexOfficial Number: 512241

(4)Name:  DBL 3201Official Number: 512882

(5)Name:  Wallabout BayOfficial Number: 907855

(6)Name:  Newark BayOfficial Number: 520433

(7)Name:  Josiah BartlettOfficial Number: 269796

(8)Name:  KTC 30Official Number: 284032

(9)Name:  Great LakesOfficial Number: 290943

(10)Name:  Great GullOfficial Number: 518745

 

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SCHEDULE 1-C

DESCRIPTION OFPLEDGED VESSELS (SEA COAST)

(1)Name:  SCT 180Official Number: 630338

(2)Name:  SCT 280Official Number: 587804

(3)Name:  SCT 282Official Number: 596502

 

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SCHEDULE 2

 

| **COMMITMENTS**     |   | **COMMITMENT  PERCENTAGE** |
|---------------------|--------|----------------------------|
| CAF  $23,000,000.00 |   | 100%                       |

 

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