Exhibit
10.17  Execution
Version  DIRECTOR DESIGNATION AGREEMENT  This
DIRECTOR DESIGNATION AGREEMENT, dated
as of September 10, 2010 (this Agreement), is entered into by and
among K-Sea General Partner GP LLC, a Delaware limited liability company (GP
LLC), K-Sea General Partner L.P., a Delaware limited partnership (GP
LP), K-Sea Transportation Partners L.P., a Delaware limited partnership (K-Sea
and, together with GP LLC and GP LP, the K-Sea Entities), K-Sea
Investors A L.P., a Delaware limited partnership (KSP A), K-Sea
Investors B L.P., a Delaware limited partnership (KSP B), K-Sea
Investors C L.P., a Delaware limited partnership (KSP C), the other
members of GP LLC signatory hereto (together with KSP A, KSP B and KSP C, the GP
LLC Members), and KA First Reserve, LLC, a Delaware limited liability
company (the Purchaser).  Recitals  WHEREAS,
pursuant to the Purchase Agreement, K-Sea has agreed to issue and sell Series A
Preferred Units;  WHEREAS,
to induce the Purchaser to enter into the Purchase Agreement and the
transactions contemplated thereby, each of the K-Sea Entities and the GP LLC
Members is required to deliver this Agreement, duly executed by each of the
K-Sea Entities and the GP LLC Members, to the Purchaser contemporaneously with
the Closing of the transactions contemplated by the Purchase Agreement; and  WHEREAS,
the Purchasers investment in K-Sea pursuant to the Purchase Agreement is
reasonably expected to benefit, directly or indirectly, each of the K-Sea
Entities and the GP LLC Members, and the general partner, board of directors,
board of managers or other governing body of each of the K-Sea Entities and the
GP LLC Members has determined that entering into and executing this Agreement
is in the best interests of such K-Sea Entity and GP LLC Member.  NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each party hereto, the parties hereby agree as
follows:  Agreement  Section 1.Definitions.  Capitalized
terms used in this Agreement and not defined herein shall have the meanings
ascribed to such terms in the Purchase Agreement.  As used in this Agreement, the following
terms have the meanings indicated:  Agreement
shall have the meaning specified in the introductory paragraph of this
Agreement.  Arrearage
Event shall have the meaning specified in Section 2(b)(v) of
this Agreement.  Beneficial Owner shall have the
meaning specified in the K-Sea Partnership Agreement.


Board
means the Board of Directors of the general partner of K-Sea or, in the event
that the general partner of K-Sea is a limited partnership, the Board of
Directors of the general partner of such limited partnership.  As of the date of this Agreement, the term Board
refers to the Board of Directors of GP LLC.  Designated
Director means a director designated by the Purchaser in accordance with Section 2(b) of
this Agreement.  GP
LLC shall have the meaning specified in the introductory paragraph of this
Agreement.  GP
LLC Members shall have the meaning specified in the introductory paragraph
of this Agreement.  GP
LP shall have the meaning specified in the introductory paragraph of this
Agreement.  Grantees
shall have the meaning specified in Section 5(a) of this
Agreement.  K-Sea
shall have the meaning specified in the introductory paragraph of this
Agreement.  K-Sea
Entities shall have the meaning specified in the introductory paragraph of
this Agreement.  K-Sea
Partnership Agreement means the Fourth Amended and Restated Agreement of
Limited Partnership of K-Sea Transportation Partners L.P.  KSP
A shall have the meaning specified in the introductory paragraph of this
Agreement.  KSP
B shall have the meaning specified in the introductory paragraph of this
Agreement.  KSP
C shall have the meaning specified in the introductory paragraph of this
Agreement.  One
Director Threshold shall have the meaning specified in Section 2(b)(iii) of
this Agreement.  Outstanding
shall have the meaning specified in the K-Sea Partnership Agreement.  Park
Avenue means Park Avenue Transportation, Inc., a Delaware corporation
and sole general partner of each of KSP A, KSP B and KSP C.  Preferred
Distribution Arrearage means, with respect to any Series A Preferred
Unit, the excess, if any, of (a) the required distribution with respect to
a Series A Preferred Unit in  2


respect
of such Quarter over (b) the sum of all distributions with respect to a Series A
Preferred Unit in respect of such Quarter.  Purchase
Agreement means the Securities Purchase Agreement, dated as of September 1,
2010, by and among K-Sea, GP LP and the Purchaser.  Purchaser
shall have the meaning specified in the introductory paragraph of this
Agreement.  Quarter
shall have the meaning specified in the K-Sea Partnership Agreement.  Resignation
Event means that a Designated Director, as determined by the Board in good
faith following compliance with the procedures set forth below in this
definition when applicable, (a) ceases to be an officer or employee of the
Purchaser, First Reserve Fund XI, L.P., Kayne Anderson Capital Advisors, L.P or
any of their respective Affiliates; (b) is prohibited or disqualified from
serving as a member of the Board under any rule or regulation of the
Commission, the NYSE or by applicable Law; (c) has engaged in acts or
omissions constituting a breach of the Designated Directors duty of loyalty to
K-Sea or its members; (d) has engaged in acts or omissions which involve
intentional misconduct or an intentional violation of Law; or (e) has
engaged in any transaction involving K-Sea from which the Designated Director
derived an improper personal benefit. 
Prior to making a determination that any Resignation Event described in
clause (a) through (e) above has occurred, the Board shall provide
the Designated Director and the Purchaser with proper notice of a meeting of
the Board to discuss and, if applicable, to dispute the proposed
determination.  At such duly called and
held Board meeting, the Board shall provide the Designated Director with a
reasonable opportunity to be heard and to present information relevant to the
Boards proposed determination.  The
Board may make a determination that a Resignation Event has occurred only
following its consideration in good faith of such information presented by the
Designated Director.  Three
Director Threshold shall have the meaning specified in Section 2(b)(i) of
this Agreement.  Two
Director Threshold shall have the meaning specified in Section 2(b)(ii) of
this Agreement.  Section 2.Director
Designation Rights.  (a)During the term
of this Agreement, the Board shall have no more than six (6) members plus
the number of Designated Directors permitted to be members of the Board
pursuant to this Section 2 without the written consent of the
Purchaser, except that the Board shall be increased to such number as is
necessary to achieve the result contemplated by Section 2(b)(v) of
this Agreement.  (b)At any meeting
at which members of the Board are appointed or persons are nominated for
election to the Board, the number of persons that the Purchaser shall have the
right to designate for appointment or nomination, as the case may be, shall be
determined as follows:  3


(i)As of the
Closing and for so long as the Purchaser and its Affiliates are the Beneficial
Owners of more than 33% of the Outstanding Common Units (the Three Director
Threshold), then the Purchaser shall have the right to designate three
directors to the Board.  The Purchasers
initial designees shall be Gary D. Reaves II, James C. Baker and Kevin S.
McCarthy.  (ii)For so long as
the Purchaser and its Affiliates are the Beneficial Owners of more than 22% of
the Outstanding Common Units and up to 33% of the Outstanding Common Units (the
Two Director Threshold), then the Purchaser shall have the right to
designate two directors to the Board.  (iii)For so long as
the Purchaser and its Affiliates are the Beneficial Owners of more than 11% of
the Outstanding Common Units and up to 22% of the Outstanding Common Units (the
One Director Threshold), then the Purchaser shall have the right to
designate one director to the Board.  (iv)If the
Purchaser and its Affiliates are the Beneficial Owners of 11% or less of the
Outstanding Common Units, then the Purchaser shall no longer have the right to
designate any directors to the Board.  (v)If, at any time
after June 30, 2012, a Preferred Distribution Arrearage is outstanding for
at least four consecutive fiscal quarters (an Arrearage Event), then
the Purchaser and its Affiliates shall have the right for all times after an
Arrearage Event and regardless of whether a Preferred Distribution Arrearage is
no longer outstanding, to designate directors constituting a mathematical
majority of the directors on the Board.  (vi)For purposes of
this Agreement, the number of Outstanding Common Units shall be calculated
taking into account the Series A Preferred Units on an as-converted basis.  (c)The GP LLC
Members shall take all actions necessary or advisable to cause each Designated
Director to be appointed or elected, as the case may be, to the Board, and to
cause each Designated Director to be a Continuing Director; provided,
that each Designated Director shall, in the reasonable judgment of Park Avenue,
(A) have the requisite skill and experience to serve as a director of a
publicly traded company, (B) not be prohibited or disqualified from
serving as a director pursuant to any rule or regulation of the
Commission, the NYSE or by applicable Law, (C) be a citizen of the United
States within the meaning of 46 U.S.C. Sec. 50501 for the purpose of operating
the vessels in the coastwise trade of the United States, (D) not be an
employee or director of any Competitor, and (E) not require the disclosure
of any of the reportable events described under Item 401(f) of Regulation
S-K of the Securities Act of 1933, as amended, and the rules and
regulations thereunder (or any successor regulation thereto).  The Purchaser agrees to timely provide K-Sea
with accurate and complete information relating to the Purchaser and each
Designated Director that may be required to be disclosed by K-Sea under the
Exchange Act.  Notwithstanding anything
in this Agreement to the contrary, no individual shall serve as a Designated
Director if (i) such individual is a plaintiff in any litigation involving
K-Sea or its Affiliates or (ii) in the event that any relevant antitrust
governmental authority requires such individual to terminate his position as a
Designated Director, and in  4


either
such event, such individual shall immediately resign as a Designated Director
and, failing such a resignation, the Purchaser shall remove and replace such
individual.  In the event that the
Purchaser fails to remove and replace such individual, K-Sea may remove such
individual by giving notice to the Purchaser to the effect that such individual
has been removed pursuant to this Section 2(c).  Following an Arrearage Event, the GP LLC
Members shall take all actions necessary or advisable to immediately increase
the size of the Board or cause directors to resign from the Board in order to
implement Section 2(b)(v).  (d)Except as
otherwise provided in this Agreement, each Designated Director will hold office
until his or her term expires and such Designated Directors successor has been
duly elected and qualified or until such Designated Directors earlier death,
resignation or removal.  (e)A Designated
Director may be removed from the Board:  (i)by the
Purchaser at any time; or  (ii)by a majority
of the other director(s) then serving on the Board upon written notice
from K-Sea to the Purchaser that a Resignation Event has occurred with respect
to such Designated Director, which notice shall set forth in reasonable detail
the facts and circumstances constituting the Resignation Event and following
receipt of which the Purchaser will cause such Designated Director to resign as
a member of the Board within two Business Days; provided, that any
vacancy created by such resignation shall be filled by a director designated by
the Purchaser as provided in Section 2(b) and subject to Section 2(c).  (f)Any action by
the Purchaser to designate or replace a Designated Director shall be evidenced
in writing furnished to Park Avenue and shall be signed by or on behalf of the
Purchaser.  (g)Prior to
designating an individual to become a director on the Board, the Purchaser
shall enter into a written agreement with such individual whereby such
individual agrees to resign as a member of the Board upon a Resignation
Event.  The Purchaser acknowledges and
agrees that such an agreement is in the best interest of the K-Sea Entities,
the GP LLC Members and the Purchaser, and that the K-Sea Entities and the GP
LLC Members shall be a third party beneficiary of the terms and conditions of
such an agreement, and the K-Sea Entities and the GP LLC Members shall have the
right to enforce such an agreement to the same extent as the parties thereto.  (h)The K-Sea
Entities and the GP LLC Members shall not take any action that would lessen,
restrict, prevent or otherwise have an adverse effect upon the foregoing rights
of the Purchaser to Board representation; provided, however, that
the K-Sea Entities and the GP LLC Members shall not be prohibited from taking
such action that the Board determines (i) may be necessary to (A) comply
with any rule or regulation of the Commission or the NYSE or (B) comply
with applicable Law or (ii) is required to achieve compliance with the
provisions of the K-Sea Partnership Agreement or the GP LLC Agreement.  5


Section 3.Required
Resignation of Designated Directors.  Promptly
upon (and in any event within two Business Days following) receipt of a written
request from K-Sea:  (a)upon the
failure of the Purchaser and its Affiliates to maintain the Three Director
Threshold, the Purchaser shall cause one Designated Director then serving as a
member of the Board, such Designated Director being chosen at the Purchasers
sole discretion, to resign as a member of the Board and all committees thereof,
if three Designated Directors continue to serve on the Board at the time of
such written request;  (b)upon the
failure of the Purchaser and its Affiliates to maintain the Two Director
Threshold, the Purchaser shall cause one Designated Director then serving as a
member of the Board, such Designated Director being chosen at the Purchasers
sole discretion, to resign as a member of the Board and all committees thereof,
if two Designated Directors continue to serve on the Board at the time of such
written request; and  (c)upon the
failure of the Purchaser and its Affiliates to maintain the One Director
Threshold, the Purchaser shall cause each Designated Director then serving as a
member of the Board to resign as a member of the Board and all committees
thereof.  Section 4.Director
Indemnification.  At
all times while a Designated Director is serving as a member of the Board, and
following any such Designated Directors death, resignation, removal or other
cessation as a director in such former Designated Directors capacity as a
former director, each Designated Director shall be entitled to all rights to
indemnification and exculpation as are then made available to any other member
of the Board.  All such rights of
indemnification shall specify that, as between K-Sea, on the one hand, and the
Purchaser and its Affiliates (other than K-Sea), on the other hand, K-Sea
shall, in all events, be the full indemnitor of first resort and shall not be
entitled to any contribution, indemnification or other payment by or from any
of the Purchaser or its Affiliates (other than K-Sea).  Section 5.Miscellaneous.  (a)Proxy.  In order to secure the obligations set forth
herein, each GP LLC Member hereby irrevocably appoints during the term of this
Agreement as its proxy and attorney-in-fact, as the case may be, Park Avenue
and any individual or entity which shall hereafter succeed to Park Avenue
(collectively, the Grantees), each of them individually, with full
power of substitution, to vote or execute written consents with respect to the
ownership interests of such GP LLC Member in GP LLC for the purpose, and solely
for the purpose, of effecting the purposes and intent of this Agreement.  To the fullest extent permitted by law, this
proxy is coupled with an interest and shall be irrevocable, and each GP LLC
Member will take such further action or execute such other instruments as may
be necessary to effectuate the intent of this proxy and hereby revokes any
proxy previously granted by such GP LLC Member with respect to its ownership
interests in GP LLC to the extent that such proxy is inconsistent with the
provisions of this Agreement.  (b)Entire
Agreement.  This
Agreement is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the  6


agreement
and understanding of the parties hereto in respect of the subject matter
contained herein.  There are no
restrictions, promises, warranties or undertakings other than those set forth
or referred to herein with respect to the rights granted by the K-Sea Entities,
the GP LLC Members or any of their respective Affiliates or the Purchaser or
any of its Affiliates set forth herein. 
This Agreement supersedes all prior agreements and understandings
between the parties with respect to the subject matter hereof.  (c)Notices.  All notices and demands provided for in this
Agreement shall be in writing and shall be given as provided in Section 8.07
of the Purchase Agreement.  (d)Interpretation.  Section references in this Agreement are
references to the corresponding Section to this Agreement, unless
otherwise specified.  All references to
instruments, documents, contracts and agreements are references to such
instruments, documents, contracts and agreements as the same may be amended,
supplemented and otherwise modified from time to time, unless otherwise
specified.  The word including shall
mean including but not limited to and shall not be construed to limit any
general statement that it follows to the specific or similar items or matters
immediately following it.  Any reference
in this Agreement to $ shall mean U.S. dollars. 
Whenever any determination, consent or approval is to be made or given
by a party, such action shall be in such partys sole discretion, unless otherwise
specified in this Agreement.  If any
provision in this Agreement is held to be illegal, invalid, not binding or
unenforceable, (i) such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid, not
binding or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions shall remain in full force and effect
and (ii) the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby are consummated as originally contemplated to the greatest extent
possible.  When calculating the period of
time before which, within which or following which any act is to be done or
step taken pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. 
If the last day of such period is a non-Business Day, the period in
question shall end on the next succeeding Business Day.  Any words imparting the singular number only
shall include the plural and vice versa. 
The words such as herein, hereinafter, hereof and hereunder
refer to this Agreement as a whole and not merely to a subdivision in which
such words appear unless the context otherwise requires.  The division of this Agreement into Sections
and other subdivisions and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in construing or
interpreting this Agreement.  (e)Governing
Law; Submission to Jurisdiction.  This Agreement, and all claims or causes of
action (whether in contract or tort) that may be based upon, arise out of or
relate to this Agreement or the negotiation, execution or performance of this
Agreement (including any claim or cause of action based upon, arising out of or
related to any representation or warranty made in or in connection with this
Agreement), will be construed in accordance with and governed by the Laws of
the State of Delaware without regard to principles of conflicts of Laws.  Any action against any party relating to the
foregoing shall be brought in any federal or state court of competent
jurisdiction located within the State of Delaware, and the parties hereto
hereby irrevocably submit to the non-exclusive jurisdiction of any federal or
state court located within the State of Delaware over any such action.  Each of the parties hereby irrevocably  7


waives,
to the fullest extent permitted by applicable Law, any objection that it may
now or hereafter have to the laying of venue of any such dispute brought in
such court or any defense of inconvenient forum for the maintenance of such
dispute.  Each of the parties hereto
agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by Law.  (f)Waiver
of Jury Trial.  EACH OF THE
PARTIES TO THIS AGREEMENT HEREBY WAIVES, AND AGREES TO CAUSE ITS AFFILIATES TO
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.  (g)No
Waiver; Modifications in Writing.  (i)Delay.  No failure or delay on the part of any party
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.  The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to a party at law or in equity or otherwise.  (ii)Specific
Waiver. Except as otherwise provided herein, no amendment, waiver, consent,
modification or termination of any provision of this Agreement shall be effective
unless signed by each of the parties hereto affected by such amendment, waiver,
consent, modification or termination. 
Any amendment, supplement or modification of or to any provision of this
Agreement, any waiver of any provision of this Agreement and any consent to any
departure by a party from the terms of any provision of this Agreement shall be
effective only in the specific instance and for the specific purpose for which
made or given.  Except where notice is
specifically required by this Agreement, no notice to or demand on a party in
any case shall entitle such party to any other or further notice or demand in
similar or other circumstances.  Any
investigation by or on behalf of any party shall not be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein.  (h)Execution
in Counterparts.  This
Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which  8


counterparts,
when so executed and delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
agreement.  (i)Binding
Effect; Assignment.  This
Agreement will be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, but will not be
assignable or delegable by any party hereto without the prior written consent of
each of the other parties; provided, however, that any of the
rights and obligations of the Purchaser hereunder may be transferred or
assigned in whole or in part by the Purchaser to any Affiliate of the
Purchaser; provided, further, that such rights and obligations
shall terminate and cease to be so transferred or assigned upon any Affiliate
to which such rights and obligations are transferred or assigned no longer
being an Affiliate of the Purchaser.  (j)Independent
Counsel.  Each of the parties acknowledges
that it has been represented by independent counsel of its choice throughout
all negotiations that have preceded the execution of this Agreement and that it
has executed the same with consent and upon the advice of said independent
counsel.  Each party and its counsel
cooperated in the drafting and preparation of this Agreement and the documents
referred to herein, and any and all drafts relating thereto will be deemed the
work product of the parties and may not be construed against any party by reason
of its preparation.  Accordingly, any rule of
Law or any legal decision that would require interpretation of any ambiguities
in this Agreement against the party that drafted it is of no application and is
hereby expressly waived.  (k)Specific
Enforcement.  Each of the
parties acknowledges and agrees that monetary damages would not adequately
compensate an injured party for the breach of this Agreement by any party, that
this Agreement shall be specifically enforceable and that any breach or
threatened breach of this Agreement shall be the proper subject of a temporary
or permanent injunction or restraining order without a requirement of posting
bond.  Further, each party hereto waives
any claim or defense that there is an adequate remedy at law for such breach or
threatened breach.  (l)Further
Assurances.  Each of the
parties hereto shall, from time to time and without further consideration,
execute such further instruments and take such other actions as any other party
hereto shall reasonably request in order to fulfill its obligations under this
Agreement to effectuate the purposes of this Agreement.  [Signature Page Follows]  9


IN
WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the
date first above written.  K-SEA
  TRANSPORTATION PARTNERS L.P.By:
  K-Sea
  General Partner L.P., its general partnerBy:
  K-Sea
  General Partner GP LLC, its general partnerBy:
  /s/
  Timothy J. CaseyTimothy
  J. CaseyChief
  Executive Officer and PresidentK-SEA
  GENERAL PARTNER L.P.By:
  K-Sea
  General Partner GP LLC, its general partnerBy:
  /s/
  Timothy J. CaseyTimothy
  J. CaseyChief
  Executive Officer and PresidentK-SEA
  GENERAL PARTNER GP LLCBy:
  /s/
  Timothy J. CaseyTimothy
  J. CaseyChief
  Executive Officer and President  Signature
Page to Director Designation Agreement


K-SEA
  INVESTORS A L.P.By:
  Park
  Avenue Transportation, Inc., its general partnerBy:
  /s/
  Brian P. FriedmanBrian
  P. FriedmanPresidentK-SEA
  INVESTORS B L.P.By:
  Park
  Avenue Transportation, Inc., its general partnerBy:
  /s/
  Brian P. FriedmanBrian
  P. FriedmanPresident  Signature
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K-SEA
  INVESTORS C L.P.By:
  Park
  Avenue Transportation, Inc., its general partnerBy:
  /s/
  Brian P. FriedmanBrian
  P. FriedmanPresidentKA
  FIRST RESERVE, LLCBy:
  KA
  Fund Advisors, LLC, its managing memberBy:
  /s/
  James C. BakerName:
  James C. BakerTitle:
  Senior Managing Director  Signature
Page to Director Designation Agreement


REMAINING
  GP LLC MEMBERS/s/
  Timothy J. CaseyTimothy
  J. Casey/s/
  Terrence P. GillTerrence
  P. Gill/s/
  Richard P. FalcinelliRichard
  P. Falcinelli/s/
  Thomas SullivanThomas
  Sullivan/s/
  Gregory HaslinskyGregory
  Haslinsky  Signature
Page to Director Designation Agreement