Document:

Exhibit 10.3.10.1

 

	
  

  	
   

  	
  Employment Contract

  

Westaff e-form Ÿ
Westaff e-form Ÿ Westaff
e-form Ÿ Westaff e-form Ÿ
Westaff e-form Ÿ Westaff
e-form Ÿ Westaff e-form

Electronic Form Template
2/03 (emp_con.dot)

 

This contract is entered into by and between Westaff (USA), Inc. (“Westaff”)
and

 

	
  Stephen Russo

  	
   

  	
  (“you”).

  
	
  (full
  name of employee).

  	
   

  	
   

  

 

Westaff hereby agrees to hire you or continue your employment and you
agree to accept employment or continue your employment with Westaff upon the
following terms and conditions:

 

1. Duration. Your employment
shall start or continue as of 7/1/04 and shall continue thereafter until
terminated by either party giving to the other two weeks’ advance notice of
termination. However, Westaff will not obliged to give
you such advance notice if:

 

a. Termination
occurs during the first year of your employment; or

b. You are a
part-time employee; or

c. You accept
an offer of employment with a business competitive to Westaff; or

d.
You are terminated for misconduct, violation of this Contract or violation of
Westaff’s policies or rules as set forth in Westaff’s Employee Handbook or
otherwise made known to you.

 

2. Terminable-At-Will. You are a
“terminable-at-will” employee. You may resign at any time with or without a
reason. Likewise, Westaff may dismiss you at any time with or without cause.
You acknowledge that there are no other express or implied agreements between
you and Westaff for any specific period of employment, nor
for continuing or long-term employment.

 

3. Pay. You will be paid a
beginning salary of $ 180,000 per year or a wage of $ N/A per hour. Your pay
may be revised without impairing the effectiveness of any other provisions of
this Contract. Your pay will be paid in equal installments every two weeks.
Each pay period is distinct and severable, and your employment for part of a
pay period or part of a year will not entitle you to pay for more than the time
you actually worked. In the event your employment terminates during a pay
period, your pay will be prorated to the date of termination, and will include
earned vacation pay, if any.

 

4. Confidentiality. Westaff is a
provider of temporary staffing and employment services. You acknowledge that by
virtue of your employment, you will become familiar with or have access to Westaff’s
valuable proprietary information, confidential data and trade secrets which
include but are not limited to, customers’ and employees’ names, addresses and
telephone numbers, bill and pay rates, employees’ pay and skills, other
statistical information, sales techniques, methods of operation, advertising
materials, formulas and operating manuals. As the misappropriation of such
information, data or secrets would result in great damage or loss to Westaff.

 

5. Non-Diversion. You agree that
you will not, directly or indirectly, either for yourself or for any other
person, firm or corporation, solicit or attempt to divert any Westaff customer
or recruit any Westaff employee during your Westaff employment and for a period
of one year thereafter. For purposes of this paragraph, a Westaff customer is
defined as any person, firm or corporation that Westaff has serviced within one
year preceding the termination of your employment and with whom you have had
contact on behalf of Westaff, and a Westaff employee is defined as any person
who has received salary or wages from Westaff within one year preceding the
termination of your employment.

 

*Vacation Accrual @ 4
weeks per year.

 

Providing Essential
Staffing Services

 

 

6. Non-Competition (not applicable in California).
You agree to devote your best efforts to the performance of your Westaff duties
and to perform no acts detrimental to Westaff’s best interests. You will not
engage in any other business nor work for any other person or entity during
your Westaff workday.  While employed by
Westaff, you will not engage in any competitive temporary staffing or
employment services business. You further agree that you will not engage in a
competitive temporary staffing or employment services business, in a same or
similar capacity in which you were employed by Westaff, for yourself or for any
other person, firm or corporation, within a radius of twenty-five miles from
the Westaff office(s) where you were working for a period of one year after the
termination of your Westaff employment.

 

7. Authority. You shall have no
authority to enter into any contract or agreement or otherwise bind Westaff
without the prior consent of an office of Westaff.

 

8. Property. Upon termination of
your employment, you agree to immediately deliver to Westaff all equipment,
supplies, keys, manuals, monies, overpayments, lists, records, resumes,
diskettes or other material related to the business of Westaff and all Westaff
property of whatever nature in your possession or control or which you may have
entrusted to any other party.

 

9. Violation. You acknowledge
that the obligations and restrictions set forth in this Contract are reasonably
necessary for the protection of Westaff’s business, goodwill, property,
customer and employee relationships. You recognize that irreparable damage will
result to Westaff in the event of any violation of this Contract and hereby
agree to the issuance of a restraining order and/or an injunction against you
for such a violation, in addition to any other legal or equitable remedies
Westaff may have.

 

10. Assignment. Westaff’s rights
and/or duties under this Contract may be assigned or delegated to any successor
of Westaff. However none of your right and/or duties under this contract may be
assigned by you to any other party.

 

11. Modification. The terms of
this Contract may be amended, modified or replaced only by a subsequent written
agreement signed by you and an authorized representative of Westaff.

 

12. Severability. Every
provision of this Contract is distinct and severable. If any such provision is
held to be illegal, unenforceable or void, it shall not affect the legality,
enforceability or validity of any of the other provisions.

 

13. Acknowledgment. You hereby
acknowledge that you have read and understood this Contract. By signing below,
you acknowledge receipt of a copy of this Contract and agree to abide by its
terms and conditions.

 

 

	
  Employee:

  	
     /s/ Stephen J. Russo

  	
   

  	
  Date:

  	
  1 July 2004

  
	
   

  	
  (signature of
  employee)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Westaff (USA), Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
     /s/ Margaret Gonzalez

  	
   

  	
  Location:

  	
     Walnut Creek, CA

  
	
   

  	
  (signature of
  Westaff representative)

  	
   

  	
   

  	
  (City, State and Westaff office number)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
         H/R Asst.
  II

  	
   

  	
   

  	
   

  
								

 

 

FIRST AMENDMENT

TO

EMPLOYMENT CONTRACT

BY AND BETWEEN

WESTAFF (USA), INC. AND STEPHEN
RUSSO

 

The Employment Contract
dated July 1, 2004 by and between Westaff (USA), Inc. (“Westaff”) and Stephen
Russo  (“You”) is hereby amended as
follows effective August 6, 2004.

 

The following paragraph
is added to Section 3:

 

“You are eligible for transition compensation in the
event of a “Change in Control” and the “elimination of your job” as defined in
Exhibit I, attached hereto and incorporated by reference herein. The transition
compensation will be in the form of a single lump sum cash payment equivalent
to twenty-six (26) weeks of your then current pay less appropriate
withholdings, provided that you are an active regular employee at the time of
the elimination of your  job, and you
have not voluntarily terminated employment prior to the elimination of your
job. This payment is in addition to other compensation which may be provided to
you under the Westaff Transition Compensation Plan in effect at that time.”

 

All other terms and conditions of the above-referenced Employment
Contract shall remain in full force and effect unless otherwise amended herein.

 

 

EMPLOYEE:

 

	
  /s/ Stephen J. Russo

  	
   

  
	
  Stephen Russo

  
	
   

  
	
   

  
	
  WESTAFF (USA), INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Dwight S. Pedersen

  	
   

  
	
   

  	
  Dwight S. Pedersen, President and

  
	
   

  	
  Chief Executive Officer

  
			

 

 

EXHIBIT I

TO

FIRST
AMENDMENT

TO

EMPLOYMENT CONTRACT

BY AND BETWEEN

WESTAFF (USA), INC.  AND STEPHEN RUSSO

 

1.               “Change of Control”
means:

 

a.                                       sale, lease or
disposition of substantially all of the assets of  Westaff and its parent, Westaff , Inc. (“the
Parent”);

 

b.                                      any
consolidation or merger of Westaff  and the Parent, with or into any other
corporation or other entity or person or any other corporate reorganization, in
which the stockholder of Westaff and  the
Parent immediately prior to such consolidation, merger or reorganization, own
less than 50% of Westaff’s and the Parent’s voting power immediately after such
consolidation, merger or reorganization; or

 

c.                                       any
transaction or series of related transactions to which Westaff and the Parent
is a party in  which in excess of fifty
percent (50%) of Westaff’s and the Parent’s voting power is transferred.

 

2.               “Elimination of
your job” means:

 

a.                                       within
one (1) year following a Change in Control 
your job is eliminated; and

 

b.                                      you
have not been offered a position similar in responsibility, skill requirements
and work schedule as your current position; and

 

c.                                       you
have not been offered a position for which the salary offered would require no
more than 10% reduction in your then current pay.

 

 

SECOND AMENDMENT

TO

EMPLOYMENT CONTRACT

BY AND BETWEEN

WESTAFF (USA), INC. AND STEPHEN
RUSSO

 

The Employment Contract
dated July 1, 2004 by and between Westaff (USA), Inc. (“Westaff”) and Stephen
Russo (“You”) and amended effective August 6, 2004 is further amended effective
September 19, 2004:

 

Item 1 in Exhibit
1 to the Employment Contract (the definition of “Change of Control”) is deleted
in its entirety and replaced with the following:

 

“Change in Control” means:

 

•                  The sale, lease
or disposition of substantially all of the assets of the Westaff  (directly or indirectly) and its
parent, Westaff, Inc. (“the Parent”);

 

•                  Any
consolidation or merger of Westaff and the Parent with or into any other
corporation or other entity or person, or any other corporate reorganization,
in which the stockholders of Westaff and the Parent immediately prior to such
consolidation, merger or reorganization, own less than 50% of  Westaff’s and the Parent’s voting
power immediately after such consolidation, merger or reorganization; or

 

•                  A change in
ownership or control of Westaff or the Parent effected through any of the
following transactions:

 

(i)                                     any
transaction or series of related transactions as a result of which any person
or related group of persons initially becomes the beneficial owner (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934), directly or
indirectly, of securities possessing more than fifty percent (50%) of the total
combined voting power of Westaff’s or the Parent’s then outstanding voting
securities.  For purposes of this
sub-paragraph, the term “person” shall exclude (i) a trustee or other fiduciary
holding securities under an employee benefit plan of the Parent or of a
subsidiary and (ii) a corporation owned directly or indirectly by the
stockholders of the Parent in substantially the same proportions as their
ownership of the common stock of the Parent;

 

(ii)                                  or
a change in the composition of the Board of the Parent over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more elections for Board membership,
to be comprised of individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in
office at the time such election or nomination was approved by the Board.

 

A transaction shall not constitute a Change in Control
if its sole purpose is to create a holding company that will be owned, directly
or indirectly, in substantially the same proportions by the persons who held
the Parent’s securities immediately before such transaction.

 

 

All other terms and conditions of the above-referenced Employment
Contract shall remain in full force and effect unless otherwise amended herein.

 

 

EMPLOYEE:

 

 

	
  /s/ Stephen J. Russo

  	
   

  
	
  Stephen Russo

  
	
   

  
	
   

  
	
  WESTAFF (USA), INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Dwight S. Pedersen

  	
   

  
	
   

  	
  Dwight S. Pedersen, President and

  
	
   

  	
  Chief Executive Officer

  
			

 

 

THIRD AMENDMENT

TO

EMPLOYMENT CONTRACT

BY AND BETWEEN

WESTAFF (USA), INC. AND STEPHEN
RUSSO

 

The Employment Contract
dated August 17, 2005 by and between Westaff (USA), Inc. (“Westaff”) and
Stephen Russo (“You”) and amended effective August 6, 2004, and amended further
effective September 19, 2004 is further amended effective August 17, 2005:

 

The following clause is
added as subparagraph d. to Exhibit 1, Item 2 to the Employment Contract, ‘“Elimination
of your job” means:’

 

d.                                      and you have not been offered a position
that would require you to travel 30 miles or less from your current primary
place of work.

 

All other terms and conditions of the above-referenced Employment
Contract shall remain in full force and effect unless otherwise amended herein.

 

 

EMPLOYEE:

 

 

	
  /s/ Stephen J. Russo

  	
   

  
	
  Stephen J. Russo

  
	
   

  
	
   

  
	
  WESTAFF (USA), INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ P. M. Newman

  	
   

  
	
   

  	
  Patricia M. Newman, President and

  
	
   

  	
  Chief Executive OfficerExhibit 10.1

 

EXECUTION VERSION

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

 

BY AND AMONG

 

K-SEA OPERATING PARTNERSHIP L.P.,

 

K-SEA TRANSPORTATION PARTNERS L.P.

 

MARINE RESOURCES GROUP, INC.

 

AND

 

SALTCHUK RESOURCES, INC.

 

 

DATED AUGUST 23, 2005

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I DEFINITIONS

  	
   

  
	
  ARTICLE II PURCHASE AND
  SALE OF MEMBERSHIP INTERESTS; CLOSING

  	
   

  
	
  Section 2.1

  	
  Purchase and
  Sale of Membership Interests

  	
   

  
	
  Section 2.2

  	
  Purchase
  Price

  	
   

  
	
  Section 2.3

  	
  Closing

  	
   

  
	
  Section 2.4

  	
  Post-Closing Adjustments

  	
   

  
	
  ARTICLE III
  REPRESENTATIONS AND WARRANTIES OF SELLER AND SALTCHUK

  	
   

  
	
  Section 3.1

  	
  Corporate
  Status and Good Standing; Citizenship

  	
   

  
	
  Section 3.2

  	
  Authorization

  	
   

  
	
  Section 3.3

  	
  Capitalization;
  Title to Shares; Title to Membership Interests

  	
   

  
	
  Section 3.4

  	
  Non-Contravention

  	
   

  
	
  Section 3.5

  	
  Validity

  	
   

  
	
  Section 3.6

  	
  Broker Involvement

  	
   

  
	
  Section 3.7

  	
  Litigation

  	
   

  
	
  Section 3.8

  	
  Title to Assets

  	
   

  
	
  Section 3.9

  	
  Continuity Prior
  to the Closing Date

  	
   

  
	
  Section 3.10

  	
  Contracts and Commitments

  	
   

  
	
  Section 3.11

  	
  Trademarks,
  Trade Names and Intellectual Property

  	
   

  
	
  Section 3.12

  	
  Financial Statements;
  Budget

  	
   

  
	
  Section 3.13

  	
  Bank Relations;
  Powers of Attorney

  	
   

  
	
  Section 3.14

  	
  Condition
  of Assets; Eligibility for Coastwise Trade

  	
   

  
	
  Section 3.15

  	
  Absence of
  Undisclosed Liabilities

  	
   

  
	
  Section 3.16

  	
  Real Estate

  	
   

  
	
  Section 3.17

  	
  Accounts Receivable

  	
   

  
	
  Section 3.18

  	
  Inventory

  	
   

  
	
  Section 3.19

  	
  Employees and Related
  Matters

  	
   

  
	
  Section 3.20

  	
  Employee Benefits

  	
   

  
	
  Section 3.21

  	
  Compliance With Law

  	
   

  
	
  Section 3.22

  	
  Environmental

  	
   

  
	
  Section 3.23

  	
  Insurance

  	
   

  
	
  Section 3.24

  	
  Government Licenses and
  Permits

  	
   

  
	
  Section 3.25

  	
  Responsible Carriers Plan

  	
   

  
	
  Section 3.26

  	
  Taxes

  	
   

  
	
  Section 3.27

  	
  No Material Adverse Change

  	
   

  
	
  Section 3.28

  	
  Books and Records

  	
   

  
	
  Section 3.29

  	
  Safety Reports

  	
   

  
	
  Section 3.30

  	
  Transactions with
  Certain Persons

  	
   

  
	
  Section 3.31

  	
  Investment Representations

  	
   

  
	
  Section 3.32

  	
  Disclosure

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
  BUYER

  	
   

  
	
  Section 4.1

  	
  Partnership Status
  and Good Standing

  	
   

  
	
  Section 4.2

  	
  Authorization

  	
   

  
	
  Section 4.3

  	
  Non-Contravention

  	
   

  
	
  Section 4.4

  	
  Validity

  	
   

  
	
  Section 4.5

  	
  Broker Involvement

  	
   

  

 

ii

 

	
  Section 4.6

  	
  Valid
  Issuance

  	
   

  
	
  Section 4.7

  	
  Exchange Act Reports

  	
   

  
	
  Section 4.8

  	
  Buyer’s
  Review

  	
   

  
	
  ARTICLE V COVENANTS

  	
   

  
	
  Section 5.1

  	
  Other
  Offers

  	
   

  
	
  Section 5.2

  	
  Conduct of Business
  Pending Closing

  	
   

  
	
  Section 5.3

  	
  Access

  	
   

  
	
  Section 5.4

  	
  Termination
  of Guarantees and Settlement of Intercompany Amounts

  	
   

  
	
  Section 5.5

  	
  Covenant Against Competition

  	
   

  
	
  Section 5.6

  	
  Further Assurances

  	
   

  
	
  Section 5.7

  	
  Governmental Filings

  	
   

  
	
  Section 5.8

  	
  Consents

  	
   

  
	
  Section 5.9

  	
  Public Announcements

  	
   

  
	
  Section 5.10

  	
  Tax Matters

  	
   

  
	
  Section 5.11

  	
  Restrictions on
  Transfer; Legends

  	
   

  
	
  Section 5.12

  	
  Matters
  Related to the Pre-Closing Merger

  	
   

  
	
  Section 5.13

  	
  Vessel Transfer to Sea
  Coast

  	
   

  
	
  Section 5.14

  	
  Seller Post-Closing Net
  Worth

  	
   

  
	
  Section 5.15

  	
  Employees

  	
   

  
	
  Section 5.16

  	
  Insurance

  	
   

  
	
  Section 5.17

  	
  Right of First Refusal

  	
   

  
	
  Section 5.18

  	
  Misdirected Payments

  	
   

  
	
  Section 5.19

  	
  Vessel Purchase Agreement

  	
   

  
	
  ARTICLE VI INDEMNIFICATION

  	
   

  
	
  Section 6.1

  	
  Seller’s Indemnity
  Obligations

  	
   

  
	
  Section 6.2

  	
  Buyer’s Indemnity
  Obligations

  	
   

  
	
  Section 6.3

  	
  Survival

  	
   

  
	
  Section 6.4

  	
  Indemnification Procedures

  	
   

  
	
  Section 6.5

  	
  General

  	
   

  
	
  Section 6.6

  	
  Exclusivity

  	
   

  
	
  ARTICLE VII CONDITIONS TO CLOSING

  	
   

  
	
  Section 7.1

  	
  Conditions to
  Obligations of Buyer

  	
   

  
	
  Section 7.2

  	
  Conditions to
  Obligations of Seller

  	
   

  
	
  ARTICLE VIII TERMINATION

  	
   

  
	
  Section 8.1

  	
  Grounds for Termination

  	
   

  
	
  Section 8.2

  	
  Effect of Termination

  	
   

  
	
  ARTICLE IX GENERAL PROVISIONS

  	
   

  
	
  Section 9.1

  	
  Release

  	
   

  
	
  Section 9.2

  	
  Arbitration

  	
   

  
	
  Section 9.3

  	
  Confidentiality

  	
   

  
	
  Section 9.4

  	
  Expenses

  	
   

  
	
  Section 9.5

  	
  Entire Agreement

  	
   

  
	
  Section 9.6

  	
  Waivers and Consents

  	
   

  
	
  Section 9.7

  	
  Notices

  	
   

  
	
  Section 9.8

  	
  Assignments,
  Successors and No Third-Party Rights

  	
   

  
	
  Section 9.9

  	
  Choice
  of Law

  	
   

  

 

iii

 

	
  Section 9.10

  	
  Jurisdiction and Venue

  	
   

  
	
  Section 9.11

  	
  Construction;
  Section Headings; Table of Contents

  	
   

  
	
  Section 9.12

  	
  Severability

  	
   

  
	
  Section 9.13

  	
  Counterparts

  	
   

  
	
  Section 9.14

  	
  Time of Essence

  	
   

  

 

	
  EXHIBITS

  	
   

  
	
   

  	
   

  
	
  Exhibit A

  	
  Seller’s Knowledge

  
	
  Exhibit B

  	
  Form of Escrow
  Agreement

  
	
  Exhibit C

  	
  Form of Release

  
	
  Exhibit D

  	
  Vessel Purchase
  Agreement

  
	
  Exhibit E

  	
  Form of
  Registration Rights Agreement

  
	
  Exhibit F

  	
  Contracts with Seller’s
  Affiliates

  
	
   

  	
   

  
	
  SCHEDULES

  	
   

  
	
   

  	
   

  
	
  Schedule 3.1

  	
  Foreign Qualifications

  
	
  Schedule 3.2

  	
  Authorization

  
	
  Schedule 3.4

  	
  Non-Contravention

  
	
  Schedule 3.6

  	
  Broker Involvement

  
	
  Schedule 3.7

  	
  Litigation

  
	
  Schedule 3.8

  	
  Title to Assets

  
	
  Schedule 3.9

  	
  Continuity Prior to
  Closing Date

  
	
  Schedule 3.10

  	
  Contracts and
  Commitments

  
	
  Schedule 3.11

  	
  Trademarks, Trade Names
  and Intellectual Property

  
	
  Schedule 3.12(a)

  	
  Unaudited Annual
  Financial Statements

  
	
  Schedule 3.12(b)

  	
  Unaudited Interim
  Financial Statements

  
	
  Schedule 3.12(e)

  	
  Liabilities of Sea
  Coast

  
	
  Schedule 3.12(f)

  	
  Intercompany
  Transactions

  
	
  Schedule 3.13

  	
  Bank Relations

  
	
  Schedule 3.14(a)(1)

  	
  Assets

  
	
  Schedule 3.14(a)(2)

  	
  Condition of Assets

  
	
  Schedule 3.14(a)(2)

  	
  Material Assets Not
  Being Conveyed

  
	
  Schedule 3.14(b)

  	
  Vessels

  
	
  Schedule 3.14(c)

  	
  Vessel Occurrences

  
	
  Schedule 3.14(d)

  	
  Coastwise Documentation
  and Permits

  
	
  Schedule 3.14(e)

  	
  Certificates

  
	
  Schedule 3.15

  	
  Undisclosed Liabilities

  
	
  Schedule 3.16(1)

  	
  Real Estate

  
	
  Schedule 3.16(2)

  	
  Public Service
  Interruptions

  
	
  Schedule 3.18

  	
  Inventory

  
	
  Schedule 3.19

  	
  Employees

  
	
  Schedule 3.20

  	
  Employee Benefits

  
	
  Schedule 3.21

  	
  Compliance with Law

  
	
  Schedule 3.22

  	
  Environmental

  

 

iv

 

	
  Schedule 3.22(d)

  	
  Non-Compliance with
  Environmental Law and Remedial Action

  
	
  Schedule 3.22(e)

  	
  Releases

  
	
  Schedule 3.22(f)

  	
  Notices

  
	
  Schedule 3.24

  	
  Governmental Licenses,
  Permits and Related Approvals

  
	
  Schedule 3.25

  	
  Responsible Carriers
  Plan

  
	
  Schedule 3.26(a)

  	
  Tax Returns

  
	
  Schedule 3.26(e)

  	
  Federal Tax Liability

  
	
  Schedule 3.26(f)

  	
  Federal Tax
  Depreciation and Amortization

  
	
  Schedule 3.28

  	
  Internal Controls

  
	
  Schedule 3.29

  	
  Safety Reports

  
	
  Schedule 3.30

  	
  Transactions with
  Certain Persons

  
	
  Schedule 3.31

  	
  Investor Questionnaire

  
	
  Schedule 5.2

  	
  Conduct of Business

  
	
  Schedule 5.10(a)(i)

  	
  Tax Allocation

  
	
  Schedule 5.13

  	
  Vessel Transfer to Sea
  Coast

  
	
  Schedule 5.15(c)

  	
  Terminated Plans

  
	
  Schedule 5.15(d)(1)

  	
  Retention Bonuses

  
	
  Schedule 5.15(d)(2)

  	
  Change-in-Control and
  Similar Payments

  

 

v

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

This Membership Interest Purchase Agreement (“Agreement”),
dated August 23, 2005, is among K-Sea Operating Partnership L.P., a
Delaware limited partnership (“Buyer”), K-Sea Transportation Partners L.P., a
Delaware limited partnership (the “Partnership”), Marine Resources Group, Inc.,
a Washington corporation (“Seller”), and, for certain provisions of this
Agreement, Saltchuk Resources, Inc., a Washington corporation (“Saltchuk”).

 

RECITALS

 

WHEREAS, Sea Coast Towing, Inc.,
a Washington corporation (“Sea Coast”), is engaged in the maritime
transportation of refined petroleum products and related businesses;

 

WHEREAS, the authorized
capital stock of Sea Coast consists of 100,000 shares of common stock, par
value $1.00 per share;

 

WHEREAS, Seller owns all
of the issued and outstanding shares of capital stock of Sea Coast (the “Shares”);

 

WHEREAS, immediately
prior to the Closing (as defined herein), Sea Coast shall merge with and into a
limited liability company organized under the laws of the State of Delaware (“Sea
Coast LLC”), and the Shares shall be converted into membership interests of Sea
Coast LLC (the “Membership Interests”); and

 

WHEREAS, Buyer wishes to
purchase from Seller, and Seller wishes to sell, transfer, convey, assign and
deliver to Buyer, the Membership Interests;

 

NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants and agreements stated herein,
the parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

Capitalized terms used in
this Agreement have the meanings specified in (a) the preamble, (b) the
recitals, (c) this Article I or (d) elsewhere in this Agreement,
as the case may be:

 

Accounts
Receivable means all accounts receivable of Sea Coast and all
other rights of Sea Coast to payment for goods sold or leased or for services
rendered, including, without limitation, those which are not evidenced by
instruments or chattel paper, whether or not they have been written off or
reserved against as a bad debt or doubtful account in any financial statements,
together with all instruments and all documents of title representing any of
the foregoing, all rights in any merchandise or goods which any of the same
represent, and all rights, title, security and guaranties in favor of Sea Coast
with respect to any of the foregoing.

 

Affiliate,
with respect to any Person, means any Person that directly or indirectly
controls, is controlled by or is under common control with such Persons.

 

1

 

Barge Assets
means tank barges and related charters.

 

Buyer Indemnified
Party means Buyer and its Affiliates and each of their
respective officers, directors, employees, agents and counsel.

 

Ceiling Amount
means (i) $77,000,000, plus (ii) 125,000 multiplied by the average of
the Closing Prices for the twenty consecutive trading days ending three trading
days before the Closing Date.

 

Closing Accounts
Receivable Target means Sea Coast’s Accounts Receivable as
reflected on the statement of Working Capital of Sea Coast as of the Closing
Date, as finally determined pursuant to Section 2.4(a), less the allowance
for doubtful accounts included therein.

 

Closing Price
means for each trading day the per unit closing price of Common Units as
reported on the New York Stock Exchange (or, in case no such reported sale
takes place on such trading day, the average of the reported closing bid and
asked prices of a Common Unit on such trading day on the New York Stock
Exchange (as reported in the Central edition of The Wall Street Journal or, if
not reported thereby, another authoritative source)).

 

Code
means the Internal Revenue Code of 1986, as amended.

 

Common Units
means common units representing limited partner interests in the Partnership.

 

Environmental Laws
means any federal, state, local, foreign or international Law regulating or
protecting the public health and safety (including in the workplace) or
regulating or protecting the environment and natural resources, including, but
not limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Sections 9602 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Sections 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Sections 6901 et seq.), the Clean Water Act (33
U.S.C. Sections 1251 et seq.), the Clean Air Act (42 U.S.C. Sections 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. Sections 7401 et seq.), the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Sections 2014 et
seq.), the Occupational Safety and Health Act (“OSHA”) (29 U.S.C. Sections 651
et seq.), and the Oil Pollution Act of 1990 (33 U.S.C. Sections 2701 et seq.)
and the regulations promulgated pursuant thereto.

 

ERISA
means the Employee Retirement Income Security Act of 1974.

 

ERISA Affiliate
means each entity which is or has been treated as a single employer with Sellers
for purposes of Section 414 of the Code or Section 4001(a)(14) of
ERISA.

 

Governmental Body
means any (a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature, (b) federal, state, local, municipal,
foreign, or other government, (c) governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal), (d) multinational
governmental organization or body, or (e) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory or taxing authority or power of any nature.

 

2

 

HSR Act
means the Hart-Scott-Rodino Antitrust Improvements Act.

 

Hazardous Material
means any substance, material or waste which is regulated pursuant to any
Environmental Law, including, without limitation, (a)  petroleum
(including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, asbestos or asbestos-containing materials, lead or
lead-based paints or materials, toxic mold, and (b)  any material or
substance which is defined or regulated as a “hazardous waste,” “hazardous
material,” “hazardous substance,” “extremely hazardous waste,” “restricted
hazardous waste,” “contaminant,” “pollutant,” “toxic waste,” or “toxic
substance,” under any Environmental Law.

 

Indemnified
Amounts means any and all claims, losses, damages,
liabilities, judgments, fines, penalties, assessments and expenses (including,
without limitation, reasonable attorneys’ fees); provided, however, to the
extent an Indemnified Amount is compensated for by insurance for which the
Indemnified Party is loss payee or insured, the Indemnified Amount is limited
to the uninsured portion thereof as follows: (A) any amount which
Indemnifying Party is obligated to pay Indemnified Party under Article VI
shall be reduced by the amount of insurance proceeds actually received by
Indemnified Party (net of any expenses (but excluding increases in current or
future insurance premiums) incurred by the Indemnified Party in obtaining such
insurance proceeds) with respect to the loss for which indemnity is sought (but
the Indemnifying Party shall not be entitled to delay payment of any amounts in
anticipation of receipt of insurance proceeds for more than 120 days after the
Indemnified Party’s submission of a claim to an insurance carrier for payment
to the extent such claim remains unpaid), and (B) if at any time after
such payment is made by Indemnifying Party to Indemnified Party hereunder, the
Indemnified Party should receive insurance proceeds with respect to the loss
for which such Indemnified Amount was previously paid hereunder, such party
shall reimburse Indemnifying Party the amount by which payment would have been
reduced had such insurance been received prior to such payment by Indemnifying
Party.  All parties shall take such
commercially reasonable actions to preserve their rights to, and obtain
insurance proceeds available with respect to, any such Indemnified Amount.

 

Laws
means all statutes, treaties, codes, ordinances, decrees, rules, regulations,
municipal bylaws, judicial or arbitral or administrative or ministerial or
departmental or regulatory judgments, orders, decisions, rulings or awards,
policies, certificates, codes, licenses, permits, approvals, guidelines,
voluntary restraints, inspection reports, or any provisions of such laws,
including general principles of common law and equity and the requirements of
all Governmental Bodies, binding or affecting the Person referred to in the
context in which such word is used; and “Law” means any one of them.

 

Lien
means any lien, pledge, claim, charge, security interest, mortgage, charter
option, title retention agreement, security interest of any nature, adverse
claim against title, title exception, title reservation, easement, right of
occupation, any matter capable of registration against title, option, right of
pre-emption, privilege or other encumbrance, or any contract to create any of
the foregoing or other similar rights of any third Person of any nature
whatsoever, whether recorded, secret, state, maritime or otherwise.

 

Partnership
Agreement means the Second Amended and Restated Limited
Partnership Agreement of the Partnership dated January 14, 2004.

 

3

 

Permitted
Restricted Businesses means the ownership and/or operation of
Barge Assets in a Restricted Business acquired by a Restricted Party after the
Closing Date if such Barge Assets are acquired as part of a business in a
larger transaction in which the gross revenue generated by such Barge Assets
represents less than 50% of the gross revenue of the assets or business
acquired.

 

Person
means any individual, firm, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization,
government or agency or subdivision thereof or any other entity.

 

Purchase Price
means the purchase price set forth in Section 2.2, as it may be adjusted
pursuant to Section 5.19.

 

Release
means any spill, effluent, emission, leaking, pumping, pouring, emptying,
escaping, dumping, injection, deposit, disposal, discharge, dispersal,
leaching, abandoning, adding, or migration into the indoor or outdoor
environment, or into or out of any property, facility or vessel.

 

Remedial Action
means all actions, including, without limitation, any capital expenditures
required by any Governmental Body or required under or taken pursuant to any
Environmental Law or voluntarily taken to (a) clean up, remove, treat,
contain, assess, monitor or evaluate, or in any other way, ameliorate or
address any Release or threat of Release of any Hazardous Material; (b) minimize
the further Release of any Hazardous Material so it does not endanger or
threaten to endanger the public or employee health or welfare or the indoor or
outdoor environment; (c) perform pre-remedial studies and investigations
or post-remedial monitoring and care pertaining to or relating to a Release or
threatened Release of any Hazardous Material; or (d) bring any party,
property, facility or vessel into compliance with any Environmental Law.

 

Restricted
Business means the coastal marine transportation of petroleum
products by barges subject to the Jones Act (46 U.S.C. App. 883); provided, however, that the Restricted Business does not
include (a) bunkering operations, (b) the intra-harbor transportation
of petroleum products, (c) the coastal marine transportation of petroleum
products subject to the Jones Act (46 U.S.C. App. 883) to Chevron Corporation
or its Affiliates using barges with a capacity of greater than 150,000 barrels
per barge, (d) Permitted Restricted Businesses, (e) the use by Delta
Western of unaffiliated third party providers of refined petroleum marine
transportation services or (f) the operation by Delta Western of tugs
and/or tank barges of less than 15,000 bbls. to deliver petroleum products of
Delta Western in Alaska.

 

Restricted
Territory means (a) the waters along the coasts of Alaska,
Washington, Oregon, California and Western Canada, (b) the waters along
the East Coast of the United States and Eastern Canada, (c) the Gulf of
Mexico, (d) the Great Lakes, and (e) the waters around Puerto Rico.

 

Seller Indemnified
Party means Seller and its Affiliates and each of their
respective officers, directors, employees, agents and counsel.

 

Shelf Prospectus
means the prospectus contained in the Partnership’s Registration

 

4

 

Statement on Form S-3
(333-122668), as amended or supplemented.

 

Taxes
means any and all federal, state, local, foreign and other taxes or other
assessments imposed by a Governmental Body, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, profit share, license, lease, service, service use, value
added, withholding, payroll, employment, excise, estimated severance, stamp,
occupation, premium, property, windfall profits, or other taxes of any kind whatsoever,
together with any interests, penalties, additions to tax, fines or other
additional amounts imposed thereon or related thereto, and the term “Tax”
means any one of the foregoing Taxes.

 

Tax Returns
means all returns, declarations, reports, statements and other documents of,
relating to, or required to be filed in respect of, any and all Taxes.

 

Threshold Amount
means $250,000.

 

“to the knowledge of
Seller” and phrases with similar wording, when used in this Agreement to
qualify a representation or warranty in Article III, means the knowledge,
after reasonable investigation, of Seller and each Person identified on Exhibit A.

 

Working Capital of Sea
Coast means (a) the sum of cash and cash equivalents,
trade accounts receivable (including, without limitation, trade accounts
receivable from Delta Western), other non-affiliate related receivables, unbilled
services, prepaid expenses and inventory, minus (b) trade accounts
payable, accrued operating expenses and other non-affiliate related payables,
as determined in accordance with generally accepted accounting principles
applied consistently with the application thereof in the Financial Statements
and in accordance with this Agreement, minus (c) deferred revenue.

 

ARTICLE II

PURCHASE AND SALE OF MEMBERSHIP INTERESTS; CLOSING

 

Section 2.1                                      Purchase and Sale of Membership Interests.  Upon the terms and subject to the conditions
of this Agreement, and on the basis of the representations and warranties
hereinafter set forth, at the Closing, Seller shall sell, transfer, convey,
assign and deliver to Buyer, and Buyer shall acquire and purchase from Seller,
the Membership Interests.

 

Section 2.2                                      Purchase Price.  The aggregate
purchase price payable to Seller for the Membership Interests shall consist of:

 

(a)                $77,000,000 cash
to be paid at the Closing by wire transfer to the account or accounts
designated in writing by Seller, subject to adjustment as provided in Section 2.4
and Section 5.19; and

 

(b)               the issuance and
delivery of 125,000 Common Units to Seller at the Closing (the “Closing Common
Units”).

 

5

 

Section 2.3                                      Closing.

 

(a)                The closing of the
transactions contemplated hereby (the “Closing”) shall take place at the
offices of Marine Resources Group, Inc., 1177 Fairview Ave N., Seattle, WA
98040, at 8:00 a.m., Seattle time, on the later of (1) October 21,
2005 or (2) the date that is three business days following the first day
on which all of the conditions set forth in Article VII have been
satisfied or waived (other than conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions), or at such other time and place as the parties may agree.  The date on which the Closing is held is
referred to in this Agreement as the “Closing Date.”

 

(b)               On the Closing
Date, Buyer shall wire the cash portion of the Purchase Price and deliver
certificates representing the Closing Common Units to U.S. Bank National
Association, as escrow agent (“Escrow Agent”), under the terms of an escrow
agreement, the form of which is attached hereto as Exhibit B.  After the Purchase Price has been delivered
to the Escrow Agent, Sea Coast shall merge with and into Sea Coast LLC, which
shall continue as the surviving limited liability company of the merger (the “Pre-Closing
Merger”).  After the Pre-Closing Merger
has become effective, the Escrow Agent shall distribute the Purchase Price to
Seller.

 

Section 2.4                                      Post-Closing Adjustments.

 

(a)                As soon as
practicable after the Closing, and in any event within ninety days following
the Closing Date, Buyer shall deliver to Seller a statement of Working Capital
of Sea Coast as of the Closing Date, accompanied by a certificate of the chief
financial officer of Buyer to the effect that such statement has been prepared
on a basis consistent with the terms of this Agreement and the Closing Date
Balance Sheet.  Within twenty days
following the delivery of such statement, Seller shall notify Buyer if Seller
disagrees with such determination of the Working Capital of Sea Coast as of the
Closing Date.  If Seller does not so
notify Buyer, Seller shall be deemed to have accepted such determination.  If Seller does so notify Buyer that Seller
disagrees with such determination, and Seller and Buyer are thereafter unable
to agree within thirty days upon the amount of the Working Capital of Sea Coast
as of the Closing Date, such amount shall be determined by an independent
accounting firm selected by Buyer from a list of three nationally recognized
independent accounting firms provided by Seller.  The determination by such accounting firm
shall be final and binding on Buyer and Seller, and the fees and expenses of
such accounting firm shall be borne equally by Seller, on the one hand, and
Buyer, on the other hand.  If the value
of the Working Capital of Sea Coast as of the Closing Date, as finally
determined pursuant to this Section 2.4, is less than $800,000, then
Seller shall promptly pay Buyer the difference between $800,000 and the Working
Capital of Sea Coast as of the Closing Date by wire transfer to an account
designated in writing by Buyer or by a bank cashier’s check made payable to
Buyer, as specified by Buyer. If the value of the Working Capital of Sea Coast
as of the Closing Date, as finally determined pursuant to this Section 2.4,
is greater than $800,000, then Buyer shall promptly pay Seller the difference
between the Working Capital of Sea Coast as of the Closing Date and $800,000 by
wire transfer to an account designated in writing by Seller or by a bank
cashier’s check made payable to Seller, as specified by Seller.

 

6

 

(b)               If after 120 days
following the Closing Date, Buyer is unable to collect Accounts Receivable in
an amount at least equal to the Closing Accounts Receivable Target, Seller
shall promptly refund to Buyer the difference between the Closing Accounts
Receivable Target and the Accounts Receivable actually collected by wire
transfer to an account designated in writing by Buyer or by a bank cashier’s
check made payable to Buyer, as specified by Buyer.  If after 120 days following the Closing Date
Buyer collects Accounts Receivable in an amount in excess of the Closing
Accounts Receivable Target, Buyer shall promptly pay to Seller the difference
between the Accounts Receivable actually collected and the Closing Accounts
Receivable Target, by wire transfer to an account designated in writing by
Seller or by a bank cashier’s check made payable to Seller, as specified by
Seller.  Buyer shall have no obligation
to continue efforts to collect the Accounts Receivable after 120 days following
the Closing Date, and any uncollected Accounts Receivable as of such date shall
be conveyed and assigned to Seller.  Any
amounts received by Buyer in payment of an account shall be applied to the
oldest outstanding balances for that account, unless otherwise specified by the
party making such payment.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER AND SALTCHUK

 

Seller (and with respect to Section 3.26,
Saltchuk) represents and warrants to Buyer and the Partnership as follows:

 

Section 3.1                                      Corporate Status and Good Standing; Citizenship.

 

(a)                Each of Seller and
Sea Coast is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington, with full corporate power
and authority under its articles of incorporation and bylaws to own and lease
its properties and to conduct business as the same exists on the date hereof
and on the Closing Date.  Sea Coast is
duly qualified to do business as a foreign corporation in the jurisdictions set
forth on Schedule 3.1.  Sea
Coast is duly qualified to do business as a foreign corporation in all
jurisdictions in which the nature of its business requires such qualification
and the failure to do so would have an adverse effect on Sea Coast.

 

(b)               At or prior to the
Closing Date, neither Seller nor Sea Coast has taken any action that would
impair or otherwise affect the due organization, valid existence or good
standing under the laws of the State of Delaware of Sea Coast LLC.

 

(c)                Each of Seller and
Sea Coast is, and as of the Closing Sea Coast LLC will be, a citizen of the
United States within the meaning of Section 2 of the Shipping Act, 1916,
as amended, for the purpose of operating the Vessels in the coastwise trade of
the United States.

 

Section 3.2                                      Authorization.

 

(a)                Seller has full
corporate power and authority under its articles of incorporation and bylaws,
and its board of directors and stockholders have taken all necessary action to
authorize it, to execute and deliver this Agreement and the exhibits and
schedules hereto, to consummate the transactions contemplated herein and
therein and to take all actions

 

7

 

required to be taken by it pursuant to the provisions hereof and
thereof.  A certified copy of resolutions
duly adopted by the board of directors and authorizing and approving the
execution and delivery of this Agreement, including the exhibits and schedules
hereto, and the consummation of the transactions contemplated herein and
therein, is attached as Schedule 3.2.  There is no action required by the
stockholders of Seller to authorize or approve the execution and delivery of
this Agreement, including the exhibits and schedules hereto, or the
consummation of the transactions contemplated herein or therein.

 

(b)               Each of this
Agreement and the exhibits and schedules hereto constitutes the valid and
binding obligation of Seller enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting creditors’ rights generally and to the principles of
equity (whether enforcement is sought in a proceeding in equity or at law).

 

Section 3.3                                      Capitalization; Title to Shares; Title to Membership Interests.

 

(a)                The authorized
equity securities of Sea Coast consist of 100,000 shares of common stock, par
value $1.00 per share, of which 20,000 shares are issued and outstanding and
constitute the Shares.  Seller owns
beneficially and of record all of the Shares and at the Closing will own
beneficially and of record all of the Membership Interests, in each case free
and clear of all Liens.  Such Shares are
not and at Closing the Membership Interests will not be subject to any
agreements or understandings with respect to the voting or transfer of any of
the Shares or Membership Interests (except the transfer of Membership Interests
contemplated by this Agreement and restrictions under applicable federal and
state securities laws).  The Shares have
been duly authorized and validly issued and are fully paid and
nonassessable.  At Closing, the
Membership Interests will be duly authorized and validly issued and will be
fully paid and nonassessable.  Seller has
full legal right to sell, assign, convey and transfer the Shares, and at
Closing will have full right to sell, assign, convey and transfer the
Membership Interests, to Buyer and will, upon delivery of a certificate or
certificates representing such Membership Interests to Buyer pursuant to the
terms hereof, transfer to Buyer title to such Membership Interests, free and
clear of any Liens.

 

(b)               There are no
outstanding subscriptions, options, convertible securities, warrants or calls
or preemptive rights of any kind issued or granted by, or binding upon, Sea
Coast to purchase or otherwise acquire or to sell or otherwise dispose of any
security of or equity interest in Sea Coast. 
At Closing, there will be no outstanding subscriptions, options,
convertible securities, warrants or calls or preemptive rights of any kind
issued or granted by, or binding upon, Sea Coast LLC to purchase or otherwise
acquire or to sell or otherwise dispose of any security of or equity interest
in Sea Coast LLC, except the transfer of Membership Interests contemplated by
this Agreement.

 

(c)                Sea Coast does not
own or control and at Closing Sea Coast LLC will not own or control, in either
case directly or indirectly, any interest in any Person and is not a
participant in any partnership, joint venture or similar arrangement.

 

8

 

Section 3.4                                      Non-Contravention. 
Except as set forth on Schedule 3.4, neither the execution
and delivery of this Agreement or any documents executed in connection
herewith, nor the consummation of the transactions contemplated herein or
therein, does or shall:

 

(a)                violate, conflict
with, result in a breach of or require notice or consent  under (i) any Law, (ii) the
certificate or articles of incorporation, certificate of formation, bylaws,
limited liability company agreement, board, stockholder or member resolutions
or other governing documents of Seller, Sea Coast or, at the Closing, Sea Coast
LLC or (iii) any provision of any agreement or instrument to which Seller
or Sea Coast is a party;

 

(b)               contravene,
conflict with, or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of such transactions or to exercise any
remedy or obtain any relief under, any Law, to which Seller or Sea Coast, or
any of the assets owned or used by Sea Coast, are bound;

 

(c)                contravene,
conflict with, or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any license, permit, consent, approval, authorization,
qualification, certificate, registration or order of any Governmental Body that
is held by Seller or Sea Coast or that otherwise relates to the business of, or
any of the assets owned or used by, Sea Coast;

 

(d)               except as required
by the HSR Act, otherwise require notice to or consent of any Governmental
Body;

 

(e)                result in the
imposition or creation of any Lien upon or with respect to the Shares, the
Membership Interests or any assets of Sea Coast or Sea Coast LLC; or

 

(f)                  result in the
acceleration or mandatory prepayment of any indebtedness, or any guaranty of
Sea Coast or afford any holder of any indebtedness, or any beneficiary of any
guaranty the right to require Sea Coast to redeem, purchase or otherwise
acquire, reacquire or repay any indebtedness, or to perform any guaranty.

 

Section 3.5                                      Validity.  There is no
investigation, claim, proceeding or litigation of any type pending or, to the
knowledge of Seller, threatened to which Seller is a party that (i) questions
or involves the validity or enforceability of any of Seller’s obligations under
this Agreement or any of the exhibits hereto or (ii) seeks (or reasonably
might be expected to seek) (A) to prevent or delay the consummation by Seller
of the transactions contemplated by this Agreement or (B) damages in
connection with any such consummation.

 

Section 3.6                                      Broker Involvement. 
Seller has not hired, retained or dealt with any broker or finder in
connection with the transactions contemplated by this Agreement, except as set
forth on Schedule 3.6.

 

Section 3.7                                      Litigation.  Except as
set forth on Schedule 3.7, there is no investigation, claim,
proceeding or litigation of any type pending or, to the knowledge of Seller,
threatened to which Sea Coast is or may become a party or with respect to which
any of Sea Coast’s properties or assets could become subject.  To the knowledge of Seller, Schedule 3.7
sets

 

9

 

forth each judgment,
order, writ, injunction or decree of any Governmental Body or arbitral tribunal
against or involving Sea Coast.   Except
as set forth on Schedule 3.7, there is no judgment, order, writ,
injunction or decree of any Governmental Body or arbitral tribunal against or
involving Sea Coast that might have a material adverse effect on Sea Coast,
Buyer or any of Buyer’s subsidiaries.

 

Section 3.8                                      Title to Assets. 
Except as set forth on Schedule 3.8, Sea Coast has good and
marketable title to all of its owned assets that are used in its business, free
and clear of any and all Liens.

 

Section 3.9                                      Continuity Prior to the Closing Date.  Except as set forth on Schedule 3.9,
from January 1, 2005, to and including the Closing Date, Sea Coast has not
conducted its business other than in the usual and customary manner and in the
ordinary course of business, consistent with historical practice, and there has
not been:

 

(a)                any change in its
authorized capital stock or in any of its outstanding capital stock or any
grant, issuance or sale of any derivative security with respect to its capital
stock;

 

(b)               any sale, lease,
distribution, transfer, mortgage, pledge or subjection to Lien of assets,
except sales of inventory and obsolete or surplus equipment in the ordinary and
usual course of business;

 

(c)                any transaction by
Sea Coast not in the ordinary and usual course of business;

 

(d)               any damage to or
destruction, loss or equipment failure related to any assets owned or used by
Sea Coast, whether or not covered by insurance, requiring or that may require
expenditures in excess of $75,000 in order to return such asset to its
condition prior to the happening of such event;

 

(e)                a material
modification to the terms of any agreement of Sea Coast with its vendors,
suppliers or customers, the early termination or threatened termination of any
material contract or relationship of Sea Coast with any vendor, supplier or
customer or the non-renewal or threatened non-renewal of any material contract
or relationship of Sea Coast with any vendor, supplier or customer;

 

(f)                  any incurrence
by it of any indebtedness for borrowed money or guaranty or any commitment to
incur the same;

 

(g)               any change in
accounting methods or principles or the application thereof or any change in
Sea Coast’s policies or practices with respect to items affecting working
capital;

 

(h)               any delay or
reduction in capital expenditures in contemplation of this Agreement or
otherwise, or any failure to continue to make capital expenditures in the
ordinary course of business consistent with past practice;

 

10

 

(i)                   any
acceleration of shipments, sales or orders or other similar action in
contemplation of this Agreement or otherwise not in the ordinary course of
business consistent with past practice;

 

(j)                   any bonus
payments, salary increases, commission increases or modifications, the
execution of or amendment of any employment agreement, severance arrangement,
or consulting arrangement or Plan, except as contemplated in Section 5.15
or set forth on Schedule 3.9;

 

(k)                any waiver of any
rights that, singly or in the aggregate, are material to Sea Coast’s business,
its assets or the financial condition or results of operation of Sea Coast;

 

(l)                   any labor
strikes or disruptions, union organizational activities or other similar
occurrence; or

 

(m)             any contract or
commitment to do or cause to be done any of the foregoing.

 

Section 3.10                                Contracts and Commitments. 
Schedule 3.10 lists all existing agreements, commitments,
contracts, undertakings or understandings (A) to which Sea Coast is a
party as of August 15, 2005 or (B) which relate to any of its
properties or assets, including, but not limited to, trademark, trade name or
patent license agreements, service agreements, leases, charters, contracts of affreightment,
purchase or sale agreements, supply agreements, distribution or distributor
agreements, purchase orders, customer orders and equipment rental agreements
that, in the case of either clause (A) or (B), are either material to Sea
Coast or involve consideration with a value of $75,000 or more.  Sea Coast is not in breach of or default
under any agreement, lease, contract or commitment listed or of a type required
to be listed on Schedule 3.10 (collectively, the “Agreements”).  Each Agreement is valid, binding and in full
force and effect and is an enforceable agreement of Sea Coast and, to the
knowledge of Seller, the other parties thereto. 
To Seller’s knowledge, there has not occurred any breach or default
under any Agreement on the part of the other parties thereto, and no event has
occurred which with the giving of notice or the lapse of time, or both, would
constitute a default under any Agreement. 
There is no dispute between the parties to any Agreement as to the
interpretation thereof or as to whether any party is in breach or default
thereunder, and no party to any Agreement has indicated to Sea Coast its
intention to terminate any Agreement. 
Sea Coast is not a party to any covenant or obligation of any nature
limiting the freedom of Sea Coast to compete in any line of business and
binding on Buyer after the Closing. 
Complete and correct copies of all Agreements listed or referred to in Schedule 3.10
have either been made available to Buyer or, if not provided because of pending
antitrust matters or confidentiality requirements, shall be provided as soon as
practicable to the extent permitted by the antitrust authorities or the
counterparties to such contracts, as applicable.

 

Section 3.11                                Trademarks, Trade Names and Intellectual Property.  Schedule 3.11 contains an
accurate and complete list of (a) all registered United States and foreign
trademarks, servicemarks, trade names, fictitious names, brand names, business
names, copyrights, designs and logos owned or used by Sea Coast in connection
with its business, and all registrations thereof, (b) all unregistered
United States and foreign trademarks, servicemarks,

 

11

 

trade names, fictitious
names and logos used by Sea Coast in connection with its business, and (c) all
patents (including all reissues, divisions, continuations and extensions
thereof), pending patent applications, patent rights, and invention memoranda
owned or used by Sea Coast in connection with its business (collectively,
including all rights to any of the foregoing, the “Intellectual Property”).  Sea Coast has the right to use all
Intellectual Property in the conduct of its business as it is currently being
conducted and the transactions contemplated by this Agreement will not have the
effect of terminating any such right. 
There is no pending or, to the knowledge of Seller, threatened action or
claim that would impair any such right.

 

Section 3.12                                Financial Statements; Budget.

 

(a)                The unaudited
financial statements of Sea Coast as of and for the three years ended December 31,
2004 (including the related notes) (the “Unaudited Annual Financial Statements”)
present fairly, in all material respects, the financial condition of Sea Coast
at the respective dates of the balance sheets included therein and the results
of operations, cash flows and stockholders’ equity of Sea Coast for the
respective periods set forth therein and have been prepared in accordance with
generally accepted accounting principles in the United States consistently
applied (“GAAP”), except for the absence of footnote disclosure.  A copy of the Unaudited Annual Financial
Statements is attached hereto as Schedule 3.12(a).

 

(b)               The unaudited
financial statements of Sea Coast as of and for the six months ended June 30,
2005 (including the related notes) (the “Unaudited Interim Financial Statements”)
present fairly, in all material respects, the financial condition of Sea Coast
at the respective dates of the balance sheets included therein and the results
of operations, cash flows and stockholders’ equity of Sea Coast for the
respective periods set forth therein and have been prepared in accordance with
GAAP, subject to normal recurring year end adjustments (the effect of which
will not, individually or in the aggregate, be materially adverse) and the
absence of footnote disclosure.  A copy
of the Unaudited Interim Financial Statements is attached hereto as Schedule 3.12(b).

 

(c)                As of the Closing
Date, the audited financial statements of Sea Coast as of and for the three
years ended December 31, 2004 (including the related notes) (the “Audited
Financial Statements”) present fairly, in all material respects, the financial
condition of Sea Coast at the respective dates of the balance sheets included
therein and the results of operations, cash flows and stockholders’ equity of
Sea Coast for the respective periods set forth therein and have been prepared
in accordance with GAAP.  As of the
Closing Date, the unaudited financial statements of Sea Coast as of and for the
three and six months ended June 30, 2005 (including the related notes)
(the “SAS 100 Reviewed Financial Statements” and, together with the Audited
Financial Statements, the Unaudited Annual Financial Statements and the
Unaudited Interim Financial Statements, the “Financial Statements”) present
fairly, in all material respects, the financial condition of Sea Coast at the
respective dates of the balance sheets included therein and the results of
operations, cash flows and stockholders’ equity of Sea Coast for the respective
periods set forth therein and have been prepared in accordance with GAAP.  As of the Closing Date, the Audited Financial
Statements will

 

12

 

be consistent in all material respects with the Unaudited Annual
Financial Statements and be free of a qualified opinion.  As of the Closing Date, the SAS 100 Reviewed
Financial Statements will be consistent in all material respects with the
Unaudited Interim Financial Statements. 
Neither the footnotes to the Audited Financial Statements nor the
footnotes to the SAS 100 Reviewed Financial Statements will disclose any fact
or circumstance (other than facts or circumstances reflected on the schedules
to this Section 3.12) that could reasonably be expected to materially and
adversely affect the business, prospects, results of operations, assets or
financial condition of Sea Coast.

 

(d)               Sea Coast’s fiscal
2005 budget and capital budget previously furnished by Sea Coast to Buyer (i) are
true and complete copies of Sea Coast’s most recent internal budgets for fiscal
2005 and (ii) were prepared by management of Sea Coast in good faith and
on a reasonable basis.

 

(e)                Schedule 3.12(e) contains
a schedule of (i) any liability of Sea Coast (A) for borrowed
money or arising out of any extension of credit to or for the account of Sea
Coast, or (B) evidenced by notes, bonds, debentures or similar instruments
of Sea Coast and (ii) any liability secured by any Lien upon any property
or other assets of Sea Coast.  Schedule 3.12(e) also
contains a schedule of any liability, contingent or otherwise, of Sea
Coast guaranteeing or otherwise becoming liable for any obligation of any other
Person in any manner, whether directly or indirectly.

 

(f)                  Schedule 3.12(f) reflects
all intercompany transactions between Sea Coast and Seller or any Affiliates
thereof since December 31, 2004.

 

Section 3.13                                Bank Relations; Powers of Attorney.  Schedule 3.13 sets forth: (a) the
name of each financial institution in which Sea Coast has borrowing or investment
arrangements, deposit or checking accounts or safe deposit boxes; (b) the
types of those arrangements and accounts, including, as applicable, names in
which accounts or boxes are held, the account or box numbers and the name of
each Person authorized to draw thereon or have access thereto; and (c) the
name of each Person holding a general or special power of attorney from Sea
Coast and a description of the terms of each such power.

 

Section 3.14                                Condition of Assets; Eligibility for Coastwise Trade.

 

(a)                Schedule 3.14(a)(1) sets
forth a list of all material assets of Sea Coast other than the Vessels, which
are listed on Schedule 3.14(b). 
Except as set forth in Schedule 3.14(a)(2), all tangible
assets of Sea Coast are in good, serviceable condition, subject only to normal
maintenance requirements and normal wear and tear reasonably expected in the
ordinary course of business. Except as set forth on Schedule 3.14(a)(3),
there are no material assets (whether or not owned by Sea Coast) not listed on Schedule 3.14(a)(1) or
Schedule 3.14(b) that are used in or necessary for the
operation of the business of Sea Coast as currently conducted.

 

(b)               Schedule 3.14(b) sets
forth a list of each vessel (including vessels under construction) (the “Vessels”)
of Sea Coast, with an indication (as applicable) of vessel type, year built,
American Bureau of Shipping Classification (including any recommendations),
flag, capacity (and/or horsepower as applicable), associated Liens, gross
tonnage and OPA 90 phase-out dates and date of last drydocking.

 

13

 

(c)                Except as set
forth in Schedule 3.14(c), each of the Vessels is seaworthy in all
material respects.  Each such Vessel is
equipped with the machinery, engines, instruments, rigging, anchors, chains,
cables, tackle, apparel, accessories, equipment, radio installation and
navigational equipment, inventory, spare parts and all other appurtenances
necessary for the operation of such Vessel in the ordinary course of business
consistent with past practices.  Except
as set forth on Schedule 3.14(c), since the Vessels’ last
drydocking, no Vessel has been grounded, stranded or suffered any other
occurrence or casualty that could have caused or actually did cause any damage
to such Vessel.

 

(d)               Except as set forth
on Schedule 3.14(d), each of the Vessels is duly documented in Sea
Coast’s name under the laws and flag of the United States of America and
satisfies the requirements for coastwise documentation, has not been “sold
foreign” within the meaning of the Jones Act (46 U.S.C. App. 883) and all
coastwise licenses, permits, certificates, registrations, approvals and other
authorizations necessary to operate the Vessels as currently operated are valid
and current.

 

(e)                Except as set
forth in Schedule 3.14(e), each Vessel has a valid, current and
unextended U.S. Coast Guard Inspection Certificate, where applicable, and all
other licenses, permits, certificates, registrations, approvals and other
authorizations (including Certificates of Financial Responsibility (Water
Pollution)) that are required by applicable Law.  There are no outstanding CG-835 certificates
or Captain of the Port orders with respect to the Vessels or the operation
thereof.

 

Section 3.15                                Absence of Undisclosed Liabilities.  Except as set forth in Schedule 3.15,
Sea Coast has no liability (whether absolute, accrued, contingent, unliquidated
or otherwise, whether due or to become due), other than liabilities (i) reflected
in the Financial Statements, (ii) arising under Agreements described in Schedule 3.10
(Contracts and Commitments) or contracts entered in the ordinary course of
business and consistent with past practice that are not required to be
disclosed therein due to dollar thresholds, (iii) arising out of matters
reflected in Schedule 3.7 (Litigation) or (iv) trade accounts
payable incurred after March 31, 2005 in the ordinary course of business
consistent with past practice.

 

Section 3.16                                Real Estate.

 

(a)                Sea Coast does not
currently own, and except as set forth on Schedule 3.16 has never
previously owned, any real property.  Schedule 3.16
sets forth a list and summary description (including property location, parties
and annual rental payments) of all leases, subleases and other agreements under
which Sea Coast is lessor or lessee of, or uses or occupies or allows the use
or occupancy of, any real property.  All
such leases, subleases and other agreements are valid and subsisting and in
full force and effect.

 

(b)               Except as set forth
on Schedule 3.16(1), the real property listed on Schedule 3.16
(i) has full and free access to and from public highways, streets and
roads and there is no proceeding pending or threatened that could result in the
termination of or material limitations on such access and (ii) is
connected to and serviced by utilities and public services, all of which are
adequate for the use of the real property listed thereon as the business of Sea
Coast is currently conducted.  Except as
set forth on Schedule 3.16(2), Sea Coast has not

 

14

 

experienced during the three years preceding the date hereof any
material interruption in the delivery of adequate quantities of any utilities
(including, without limitation, electricity, natural gas, potable water, water
for cooling or similar purposes and fuel oil) or other public services
(including, without limitation, sanitary and industrial sewer service) required
in the operation of the business of Sea Coast during such period and, to the
knowledge of Seller no such material interruption is threatened.

 

Section 3.17                                Accounts  Receivable.  All accounts receivable of Sea Coast that are
or will be reflected in the Financial Statements and that will be reflected in
the Closing Date Balance Sheet represent sales actually made in the ordinary
course of business and are collectible, less the reserve for doubtful accounts
included therein.

 

Section 3.18                                Inventory.  Schedule 3.18
sets forth the location of all inventory (including spare parts) related to the
Vessels that is not aboard such Vessels. 
Sea Coast has no inventory for sale in the ordinary course of
business.  The value of all inventory of
Sea Coast has been recorded on the books of Sea Coast at the lower of cost or
market in accordance with GAAP.

 

Section 3.19                                Employees and Related Matters.  Schedule 3.19 is a complete list
of all current employees of Sea Coast, listing the title or position held, base
salary, any commissions or other cash compensation, including bonuses, paid or
payable, and the terms of any written or oral employment agreement (including a
copy of any such written agreement and a description of any such oral
agreement) with Sea Coast or any Affiliate thereof.  Sea Coast has no employees covered by a
collective bargaining agreement.  There
are no facts or circumstances that have resulted or could result in a claim for
age discrimination against Sea Coast.

 

Section 3.20                                Employee Benefits.

 

(a)                Schedule 3.20
contains a complete list of each compensation or benefit plan, agreement,
program or policy (whether written or oral, formal or informal) sponsored,
maintained or contributed to by Sea Coast for the benefit of any of its present
or former directors, officers, employees, agents, consultants or other similar
representatives, including, but not limited to, 
any “employee benefit plan” as defined in section 3(3) of
ERISA, other than employment agreements or compensation practices described in Section 3.19
above (the foregoing are hereinafter collectively referred to as “Plans”).  Except as set forth in Schedule 3.20,
Sea Coast is not subject to any legal, contractual, equitable or other
obligation to enter into any new Plan or to modify or change any existing Plan.

 

(b)               With respect to
each Plan, Sea Coast has provided to Buyer a true and correct copy of each of the
following, as applicable:

 

(i)                                     the
current plan document (including all amendments adopted since the most recent
restatement) and its most recently prepared summary plan description and all
summaries of material modifications prepared since the most recent summary plan
description, and all material employee communications relating to such plan;

 

15

 

(ii)                                  annual
reports or information returns, including financial statements, for the last
three years;

 

(iii)                               all contracts relating
to any plan with respect to which Sea Coast may have any liability, including,
without limitation, each related trust agreement, insurance contract, service
provider contract, subscription or participation agreement, or investment management
agreement (including all amendments to each such document); and

 

(iv)                              the
most recent IRS determination letter or other opinion letter with respect to
the qualified status of such Plan under Code Section 401(a) or the
exempt status of a related trust under Code Section 501(a) or
501(c)(9).

 

(c)                Each Plan intended
to be qualified under Section 401(a) of the Code is and has been so
qualified in form and operation.  Each
Plan is and has been maintained in material compliance with its terms and the
provisions of all applicable laws, rules and regulations, including,
without limitation, ERISA and the Code. 
Other than claims for benefits in the ordinary course, there is no claim
pending, or, to the Seller’s or Sea Coast’s knowledge, threatened, involving
any Plan by any Person against such Plan. 
No Plan is subject to ongoing audit, investigation or other
administrative proceeding of the Internal Revenue Service, the Department of
Labor or any other governmental agency, and no Plan is the subject of any pending
application for administrative relief under any voluntary compliance program of
the Internal Revenue Service, the Department of Labor or any other governmental
entity.  There has been no transaction
that is prohibited under Section 4975 of the Code or Section 406 of
ERISA and not exempt under Section 4975 of the Code or Section 408 of
ERISA, respectively, in relation to any Plans. 
Schedule 3.20 contains a list of each Plan which provides
nonqualified deferred compensation and may be subject to Section 409A of
the Code, and each such Plan is either exempt from Section 409A of the
Code under current IRS guidance or has been operated in good faith compliance
with Section 409A of the Code and the IRS guidance issued thereunder.

 

(d)               Sea Coast does not
sponsor or maintain an “employee pension benefit plan” subject to Title IV of
ERISA or the minimum funding requirements of section 412 of the Code.  ERISA Affiliates do sponsor or maintain “employee
pension benefit plans” subject to Title IV of ERISA or the minimum funding
requirements of section 412 of the Code. 
There are no facts that have resulted or could result in a liability
(whether or not asserted as of the date hereof) to Sea Coast pursuant to Title
IV of ERISA.  No ERISA Affiliate has
terminated, and there is no intention on the part of an ERISA Affiliate of
terminating, any employee pension benefit plan subject to Title IV of ERISA
that is sponsored, maintained or contributed to by it on or before
Closing.  The execution of this Agreement
and the consummation of the transactions contemplated by this Agreement will
not be a “reportable event” with respect to any pension plan pursuant to Section 4043
of ERISA, other than a reportable event exempt from reporting to the Pension
Benefit Guaranty Corporation.  There has
been no partial or complete withdrawal under any of the multiemployer plans (as
defined in Section 3(37) of ERISA) that are contributed to by ERISA
Affiliates and there are no circumstances which would lead to such a partial or
complete withdrawal or the assertion of any withdrawal liability against any
ERISA Affiliate by the trustees of such a multiemployer

 

16

 

pension plan.  No multiemployer
plan contributed to by an ERISA Affiliate is in insolvency or reorganization.

 

(e)                No Plan provides
medical, surgical, hospitalization, death or similar benefits (whether or not
insured) for employees or former employees of Sea Coast or any Affiliate for
periods extending beyond their retirement date or other termination of service
other than (i) coverage mandated by applicable law, (ii) death
benefits under any “pension plan” or (iii) benefits the full cost of which
is borne by the current or former employee (or his beneficiary).

 

(f)                  Except as set
forth on Schedule 3.20, the execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any subsequent
employment-related event) (i) result in any payment becoming due to any
employee, former employee or group of employees or former employees, of Sea
Coast or any of its Affiliates, (ii) increase any benefits otherwise
payable under any Plan, (iii) result in the acceleration of the time of
payment or vesting of any such benefits, (iv) result in the incurrence or
acceleration of any other obligation related to the Plans or to any employee,
former employee or group of employees or former employees or (v) cause any
payments to be nondeductible under Section 280G of the Code.

 

(g)               Except as set forth
on Schedule 3.20, Sea Coast has the right to, in any manner, and
without the consent of any employee, beneficiary or dependent, employees’
organization or other Person, terminate, modify or amend any Plan (or their
participation in any such Plan) at any time sponsored, maintained or
contributed to by Sea Coast, effective as of any date on or after the Closing
except to the extent that any retroactive amendment would be prohibited by Section 204(g) of
ERISA, would adversely affect an accrued benefit or a previously granted award
under any such plan not subject to Section 204(g) of ERISA or would
be otherwise prohibited by applicable Law.

 

(h)               Except as set forth
on Schedule 3.20, all individuals who perform (or have performed within
the last six years) compensatory services for Sea Coast in any capacity have
been properly classified for purposes of employment and withholding taxes and
eligibility to participate in and coverage under any Plan.

 

Section 3.21                                Compliance With Law.  Except as set forth on Schedule 3.21,
Sea Coast is not in violation, in any material respect, of any provision of any
Law applicable to it, including, without limitation, those governing the
registration, ownership and operation of vessels documented to engage in the
coastwise trade of the United States, and Sea Coast has not received notice of
any alleged violation of any such Law. 
Without limiting the generality of the foregoing, (a) Sea Coast has
not made any offer, payment, promise to pay or authorization of the payment of
any money, or any offer, gift, promise to give or authorization of the giving
of anything of value, directly or indirectly, to or for the use or benefit of
any official or employee of any Governmental Body or to or for the use or benefit
of any political party, official or candidate unless such offer, payment, gift,
promise or authorization is authorized by the written laws or regulations of
the Governmental Body and (b) Sea Coast is familiar with and has complied
with the United States Foreign Corrupt Practices Act, 15 U.S.C. Sections 78dd-1
and 78dd-2.

 

17

 

Section 3.22                                Environmental.

 

(a)                Except as
described in Schedule 3.22, Sea Coast has been and is in material
compliance with all Environmental Laws.

 

(b)               Sea Coast has
obtained all licenses, permits, approvals, consents, certificates,
registrations and other authorizations under Environmental Laws (the “Environmental
Permits”) required for the operation of its business, all of which are listed
in Schedule 3.22.  Each
Environmental Permit is valid and in good standing, and any renewal application
required to keep each Environmental Permit in effect has been timely filed, and
Sea Coast is not in default or breach of any Environmental Permit, and no
proceeding is pending or, to the knowledge of Seller, threatened to revoke,
deny, condition or limit the renewal of any Environmental Permit.

 

(c)                Sea Coast has not
used or permitted to be used, except in material compliance with all Environmental
Laws, any of its currently or formerly owned or leased properties, facilities
or Vessels to generate, manufacture, process, distribute, use, treat, store,
dispose of, transport or handle any Hazardous Material.

 

(d)               Except as set forth
in Schedule 3.22(d), Sea Coast has not received any notice of nor
been prosecuted for an offense alleging, non-compliance with any Environmental
Law. Except as set forth in Schedule 3.22(d), there are no
outstanding orders requiring Remedial Actions with respect to the businesses or
currently or formerly owned or leased properties of Sea Coast, nor is Seller
aware of any condition or circumstance that could reasonably be expected to
require Remedial Actions.

 

(e)                Except as set
forth in Schedule 3.22(e), other than in compliance with all
Environmental Laws, there has been no Release of any Hazardous Material on,
into, under, or from Sea Coast’s currently or formerly owned or leased
properties, facilities, Vessels or other assets that could reasonably be
expected to require Remedial Actions. All Hazardous Materials used in whole or
in part by Sea Coast or resulting from its business have been disposed of,
treated, transported and stored in compliance with all Environmental Laws. Schedule 3.22(e) identifies
all of the locations where Hazardous Materials used in whole or in part by Sea
Coast have been or are being stored or disposed of.

 

(f)                  Sea Coast has
not received any notice that it is potentially responsible for a federal,
provincial, municipal, local or other clean-up site or other corrective action
under any Environmental Laws. Sea Coast has not received any request for
information in connection with an inquiry from any Governmental Body with
respect to its use of any disposal sites.

 

(g)               Seller has made
available to Buyer true and complete copies of all environmental audits,
evaluations, assessments, studies or tests of which it is aware relating to Sea
Coast or any of its currently or formerly owned or leased properties,
facilities, Vessels or other assets.

 

(h)               Sea Coast has
timely made all filings and timely submitted all reports required under any
Environmental Laws.

 

18

 

(i)                   No Hazardous
Material is required to be removed, encapsulated or abated, and no Remedial
Action is otherwise required under any Environmental Laws, with respect to any
currently or formerly owned or leased property, Vessel, facility or other asset
of Sea Coast.

 

(j)                   Sea Coast is
not required under any Environmental Laws by virtue of the transactions set
forth herein and contemplated hereby, or as a condition to the effectiveness of
any transactions contemplated hereby, (i) to perform a site assessment of
Hazardous Materials, (ii) to remove or remediate any Hazardous Materials, (iii) to
give notice to or receive approval from any Governmental Body (other than as
necessary to transfer, or to allow Buyer to operate under, Environmental
Permits required under Environmental Laws, and as necessary in connection with
the Pre-Closing Merger), or (iv) to record or deliver to any person or
entity (other than Buyer) any disclosure document or statement pertaining to
environmental matters.

 

(k)                There are no
facts, circumstances or conditions that have resulted or could result in (i) any
liability to Sea Coast under any Environmental Law, (ii) any liability to
Sea Coast arising from or associated with any exposure to Hazardous Materials,
or (iii) any liability to Buyer or its Affiliates based on, arising out of
or related to the matters described in clauses (i) and (ii) of this
subparagraph.

 

Section 3.23                                Insurance.  Sea Coast
has heretofore made available to Buyer a list and copies of all insurance
policies of Sea Coast or relating to its assets or the conduct of its
business.  Such policies are in full
force and effect, and Sea Coast is not in default under any of them.

 

Section 3.24                                Government Licenses and Permits.  Schedule 3.24 sets forth a list
of all licenses, permits, consents, authorizations, qualifications, plans
(including vessel response plans) approved by or submitted to Governmental
Bodies and orders of Governmental Bodies required for the operation or conduct
of the business of Sea Coast or the ownership of any of its assets, all of
which are in full force and effect.

 

Section 3.25                                Responsible Carriers Plan. 
Sea Coast has adopted an American Waterways Operators Responsible
Carriers Plan, a copy of which has been made available to Buyer, and is in
compliance with all Responsible Carrier Plan requirements.

 

Section 3.26                                Taxes.

 

(a)                Except as set
forth in Schedule 3.26(a), Saltchuk, Seller and Sea Coast have
caused to be timely filed with appropriate Governmental Bodies all Tax Returns
required to be filed by or with respect to Sea Coast, the assets and operations
of Sea Coast and the conduct of Sea Coast’s business (together “Sea Coast Items”),
and have paid or caused to be paid or made provisions for the payment of all
Taxes due with respect thereto.

 

(b)               Neither Saltchuk,
Seller nor Sea Coast has received, or has knowledge, of any notice of
deficiency or assessment or proposed deficiency or assessment relating to Taxes
with respect to Sea Coast Items from any Governmental Body, and there are no
outstanding agreements or waivers that extend any statutory period of
limitations applicable to

 

19

 

any federal, state or local income or franchise Tax Returns that
include Sea Coast Items.  To the
knowledge of Saltchuk, Seller and Sea Coast, there are no threatened audits of,
or assessments against, Saltchuk or Sea Coast with respect to Taxes that may be
asserted against Sea Coast.  Neither
Saltchuk, Seller nor Sea Coast is a party to any action or proceeding by any
Governmental Body for the collection or assessment of Taxes with respect to Sea
Coast Items.

 

(c)                All amounts
required in the operation of the business to be withheld by or with respect to
Sea Coast and paid to Governmental Bodies for Taxes, including income, social
security, unemployment insurance, sales, excise, use and other Taxes, have been
collected or withheld and to the extent required, paid to the proper
Governmental Body.  All deposits
applicable law requires to be made by or with respect to Sea Coast with respect
to employees’ withholding and other employment taxes have been made.

 

(d)               Saltchuk is not a “foreign
person” within the meaning of Section 1445(f)(3) of the Code.

 

(e)                Saltchuk is an S
corporation within the meaning of Section 1361(a)(1) of the
Code.  Seller is, and since October 2,
2000 has been, a qualified subchapter S subsidiary of Saltchuk within the
meaning of Section 1361(b)(3)(B) of the Code.  Sea Coast is, and since January 1, 1997
has been, a qualified subchapter S subsidiary of Saltchuk within the
meaning of Section 1361(b)(3)(B) of the Code.  Sea Coast does not own an interest in any other
entity.  Except as set forth on Schedule 3.26(e),
there is no federal Tax liability of Sea Coast or any other entity for which
Sea Coast could be held liable after the Closing under Treas. Reg.
§1.1361-4(a)(6), Treas. Reg. §1.1502-6, Treas. Reg. §301.7701-2(c)(2)(iii) or
similar principles.  Following the merger
of Sea Coast into Sea Coast LLC as contemplated by Section 5.12 hereof,
neither Saltchuk, Seller nor Sea Coast LLC shall make any election under Treas.
Reg. §301.7701-3 to treat Sea Coast as a corporation for federal Tax
purposes.  Sea Coast has been, since January 1,
1997, and will be, through the effective time of the Pre-Closing Merger,
classified as an entity whose existence apart from Saltchuk is disregarded for
federal Tax purposes.  Sea Coast LLC will
be classified as an entity whose existence apart from Saltchuk is disregarded
for federal tax purposes from the effective time of the Pre-Closing Merger
through the Closing.

 

(f)                  Schedule 3.26(f) sets
forth as of June 30, 2005 (i) the tax basis to Saltchuk of each asset
of Sea Coast, and (ii) the federal tax depreciation method, conventions
and history applicable to each such Sea Coast asset in the hands of
Saltchuk.  Except as set forth in Schedule 3.26(f),
none of the assets of Sea Coast is subject to any provision of applicable law
which eliminates or reduces the allowance for federal tax depreciation or
amortization in respect of that asset below the allowance generally available
to an asset of its type.

 

(g)               Sea Coast is not a
party to any Tax sharing agreement.

 

Section 3.27                                No Material Adverse Change. 
There has been no material adverse change in the business, prospects,
results of operations, assets or financial condition of Sea Coast

 

20

 

since December 31,
2004, and no event has occurred which could be expected to lead to or cause
such a material adverse change.

 

Section 3.28                                Books and Records. 
The books of account, minute books, stock record books, and other
records of the Sea Coast, all of which have been made available to Buyer, are
complete and correct and have been maintained in accordance with sound business
practices, in each case from and after January 1, 1995.  Except as set forth in Schedule 3.28,
Sea Coast has devised and maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management’s general or specific authorization, (ii) transactions
are recorded as necessary (a) to permit preparation of financial
statements in conformity with generally accepted accounting principles or any
other criteria applicable to such statements and (b) to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.  Since January 1, 1995,
the books, records and accounts of Sea Coast have accurately and fairly
reflected and currently accurately and fairly reflect, in reasonable detail and
in all material respects, the transactions and dispositions of the assets of
Sea Coast.  The minute books of Sea Coast
contain accurate and complete records of all meetings held of, and corporate
action taken by, the stockholders, Board of Directors and committees of the
Board of Directors of Sea Coast since January 1, 1995, and no meeting of
any such stockholders, Board of Directors or committee has been held since January 1,
1995 for which minutes have not been prepared and are not contained in such
minute books.

 

Section 3.29                                Safety Reports.  Schedule 3.29
sets forth a complete listing of all injury reports, workers’ compensation
reports and claims, safety citations and reports and OSHA reports relating to
any of the foregoing since January 1, 2002.

 

Section 3.30                                Transactions with Certain Persons.  Except as set forth on Schedule 3.30,
during the past two years, Sea Coast has not, directly or indirectly,
purchased, leased or otherwise acquired any property or obtained any services
from, or sold, leased or otherwise disposed of any property or furnished any
services to, or otherwise dealt with (except with respect to remuneration for
services rendered as a director, officer or employee of Sea Coast), in the
ordinary course of business or otherwise, (a) any officer, director or
shareholder of Sea Coast or any family member of any such person or (b) any
Person which, directly or indirectly, alone or together with others, controls,
is controlled by or is under common control with Sea Coast or any shareholder
thereof. Sea Coast does not owe any amount to, nor does it have any contract
with or commitment to, any of its shareholders, directors, officers, employees,
families of employees (including relatives by marriage) or consultants (other
than compensation to employees for current services not yet due and payable and
reimbursement of expenses of employees arising in the ordinary course of
business and on an arms-length basis not in excess of $75,000 in the
aggregate), and none of such Persons owe any amount to Sea Coast.

 

21

 

Section 3.31                                Investment Representations.

 

(a)                Experience; Status.

 

(i)                                     Seller
has substantial experience in analyzing and investing in companies like the
Partnership and is capable of evaluating the merits and risks of its investment
in the Partnership and has the capacity to protect its own interests. To the
extent necessary, Seller has retained, at its own expense, and relied upon,
appropriate professional advice regarding the investment, tax and legal merits
and consequences of the transfer to Seller from Buyer, and owning the Closing
Common Units that Seller will receive pursuant to this Agreement.

 

(ii)                                  Seller
is an Accredited Investor (as such term is used in Rule 501 under the
Securities Act of 1933, as amended, of the United States of America (the “Securities
Act”)) by reason of the criteria specified for Seller in Schedule 3.31,
is able to bear the economic risk of its investment in the Closing Common Units
indefinitely and has sufficient net worth to sustain a loss of its entire
investment in the Partnership without economic hardship if such loss should
occur.

 

(b)               Access to Information.

 

(i)                                     Seller
has had an opportunity to discuss the Partnership’s business, management and
financial affairs with the members of the Partnership’s management and has had
the opportunity to review the Partnership’s operations and facilities.  Seller has also had an opportunity to ask
questions of the officers of the Partnership, which questions were answered to
its satisfaction. Seller acknowledges that it is familiar with the nature of
the Partnership’s business.  Seller has
received and read the material described in Section 4.7.

 

(ii)                                  Seller
has not received representations or warranties from the Partnership or Buyer,
or their employees, affiliates, attorneys, accountants or agents, except as set
forth in this Agreement.

 

(iii)                               Seller understands that
the ownership of the Closing Common Units involves numerous risks, including
those described under the heading “Risk Factors” in Partnership’s Annual Report
on Form 10-K for the fiscal year ended June 30, 2004 and in the
Partnership’s other filings with the Securities and Exchange Commission.

 

(c)                Investment Purposes; Rule 144.

 

(i)                                     Seller
is acquiring the Closing Common Units solely for investment for its own
account, not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof.  Seller understands
that the Closing Common Units have not been registered under the Securities Act
or applicable state securities laws by reason of a specific exemption from the
registration provisions of the Securities Act and applicable state securities
laws,

 

22

 

the availability of which depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of Seller’s
representations as expressed herein. 
Seller understands that the Partnership and Buyer are relying, in part,
upon the representations and warranties contained in this Section 3.31(c) for
the purpose of determining whether this transaction meets the requirements for
such exemptions.

 

(ii)                                  Seller
acknowledges and understands that it must bear the economic risk of its
investment in the Closing Common Units for an indefinite period of time because
the Closing Common Units must be held indefinitely unless subsequently registered
under the Securities Act and applicable state securities laws or unless an
exemption from such registration is available. In addition, the Closing Common
Units are subject to the restrictions on transfer in Section 5.11.

 

(iii)                               Seller is aware of the current
provisions of Rule 144 promulgated under the Securities Act which permit
limited resales of securities purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the
existence of a public market for the securities, the availability of certain
current public information about the issuer of the securities, the resale
occurring not less than one year after a party has purchased from an issuer or
its affiliate and paid the full purchase price for the securities to be sold,
the sale being effected through a “broker’s transaction” or in transactions
directly with a “market maker” and the number of securities being sold during
any three month period not exceeding specified limitations.  Seller understands that any transfer agent of
the Partnership will be issued stop transfer instructions with respect to such
Closing Common Units unless such transfer is subsequently registered under the
Securities Act and applicable state securities laws or unless an exemption from
such registration is available.

 

Section 3.32                                Disclosure.  No
representation or warranty by Seller or Saltchuk in this Agreement, and in any schedule or
exhibit to this Agreement, or in any certificate or other document furnished to
Buyer by Seller, Saltchuk or their Affiliates at Closing, contains or, as of
the Closing Date, shall contain any untrue statement of a material fact or
omits or shall omit a material fact necessary to make the statements therein
not misleading.  EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES EXPRESSLY STATED IN THIS AGREEMENT, AND IN THE CERTIFICATES OR
OTHER DOCUMENTS DELIVERED AT CLOSING IN CONNECTION HEREWITH, SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES, WRITTEN OR ORAL, EXPRESS OR IMPLIED, TO BUYER
CONCERNING THE SHARES, THE MEMBERSHIP INTERESTS OR THE BUSINESS OF SEA COAST OR
SEA COAST LLC.

 

23

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer and the Partnership represent and warrant to
Seller as follows:

 

Section 4.1                                      Partnership Status and Good Standing.  Each of Buyer and the Partnership is a
limited partnership duly organized, validly existing and in good standing under
the laws of Delaware, with full partnership power and authority under its
certificate and agreement of limited partnership to conduct its business as the
same exists on the date hereof and on the Closing Date.

 

Section 4.2                                      Authorization.  Each
of Buyer and the Partnership has full partnership power and authority under its
certificate and agreement of limited partnership, and its general partner has
taken all necessary partnership action to authorize it, to execute and deliver
this Agreement and the exhibits and schedules hereto, to consummate the
transactions contemplated herein or therein and to take all actions required to
be taken by it pursuant to the provisions hereof or thereof, and each of this
Agreement and the exhibits hereto constitutes the valid and binding obligation
of each of Buyer and the Partnership, enforceable against each such party in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors’ rights
generally and to the principles of equity (whether enforcement is sought in a
proceeding in equity or at law).

 

Section 4.3                                      Non-Contravention. 
Neither the execution and delivery of this Agreement and the schedules
and exhibits hereto, nor the consummation of the transactions contemplated
herein or therein, does or shall violate, conflict with or result in breach of
or require notice or consent under any Law, the certificate or agreement of
limited partnership of  Buyer or the
Partnership nor or any provision of any agreement or instrument to which Buyer
or the Partnership is a party.

 

Section 4.4                                      Validity.  There is no
investigation, claim, proceeding or litigation of any type pending or, to the
knowledge of Buyer, threatened to which Buyer is a party that (i) questions
or involves the validity or enforceability of any of Buyer’s obligations under
this Agreement or any of the exhibits hereto or (ii) seeks (or reasonably
might be expected to seek) (A) to prevent or delay the consummation by
Buyer of the transactions contemplated by this Agreement or (B) damages in
connection with any such consummation.

 

Section 4.5                                      Broker Involvement. 
Neither Buyer nor the Partnership has hired, retained or dealt with any
broker or finder in connection with the transactions contemplated by this
Agreement.

 

Section 4.6                                      Valid Issuance.  At
the Closing Date, the Closing Common Units and the limited partner interests
represented thereby will be duly and validly authorized by the Partnership
Agreement and, when issued and delivered in accordance with the terms of this
Agreement, will be duly and validly issued, fully paid (to the extent required
under the Partnership Agreement) and non-assessable (except as such
nonassessability may be affected by matters described in the Shelf Prospectus
under the caption “The Partnership Agreement—Limited Liability”).

 

24

 

 

Section 4.7                                      Exchange Act Reports. 
The information concerning the Partnership in the Partnership’s filings,
reports and submissions under the Securities Exchange Act of 1934, as amended,
including, without limitation, the financial statements included therein, made
in the Partnership’s most recent Form 10-K and since the beginning of its
most recent fiscal year, true copies of which have been provided to Seller,
does not contain any untrue statement of a material fact or omit a material
fact necessary to make the statements therein not misleading in light of the
circumstances under which they were made.

 

Section 4.8                                      Buyer’s Review.  In
connection with its decision to purchase the Membership Interests, Buyer
acknowledges that it is a sophisticated party with such knowledge and
experience in business and financial matters as to be capable of evaluating the
merits and risks of the acquisition. 
Buyer has had an opportunity to review the records and business of Sea
Coast provided to Buyer and to ask questions and receive answers from Seller
and Sea Coast regarding Sea Coast.

 

ARTICLE V

COVENANTS

 

Section 5.1                                      Other Offers. From and after the date hereof and until the
Closing, neither Seller, Sea Coast nor any of their respective officers,
directors, shareholders, employees, Affiliates, representatives or agents
shall, directly or indirectly, (a) solicit, enter into or conduct
discussions relating to, initiate or knowingly encourage any offer or proposal
for, or any indication of interest in, a merger or business combination
involving Sea Coast or the acquisition of an equity interest in, or a
substantial portion of the assets of, Sea Coast (“a Transaction”), or (b) engage
in negotiations with or disclose any nonpublic information relating to Sea
Coast or its businesses, or afford access to the properties, books or records
of Sea Coast, to any Person (other than Buyer) with respect to a
Transaction.  Seller shall notify Buyer
of any such inquiry or proposal within three business day after receipt or
awareness of the same by Seller’s Chief Executive Officer.

 

Section 5.2                                      Conduct of Business Pending Closing.

 

(a)                Except as set
forth on Schedule 5.2, between the date of this Agreement and the
Closing Date, Seller will, and Seller will cause Sea Coast to:

 

(i)                                     conduct
the business of Sea Coast in the usual and ordinary course thereof, including,
without limitation, the making of proposals, quotations, bids and
solicitations, and the entering into of contracts for the purchase and sale of products
and services;

 

(ii)                                  communicate
regularly with Buyer and keep Buyer advised of any material developments
relating to the business of Sea Coast;

 

(iii)                               maintain and preserve
the business and assets of Sea Coast in customary repair, order and condition,
reasonable wear and tear excepted;

 

(iv)                              use
their reasonable best efforts to preserve Sea Coast’s business organization
intact, to retain the services of Sea Coast’s officers, employees and 

 

25

 

agents and to preserve Sea Coast’s relationships and good will with its
suppliers, customers, landlords, creditors, employees, agents and others having
business dealings with Sea Coast;

 

(v)                                 confer
with Buyer concerning operational matters of a material nature;

 

(vi)                              use
their reasonable efforts to cause all of the representations and warranties in Article III
hereof to continue to be true and correct; and

 

(vii)                           otherwise report
periodically to Buyer concerning the status of the business, operations and
finances of Sea Coast.

 

(b)               Except as otherwise
expressly permitted by this Agreement, between the date of this Agreement and
the Closing Date, Seller will not, and Seller will cause Sea Coast not to,
without the prior written consent of Buyer, take any affirmative action, or
fail to take any reasonable action within their or its control, as a result of
which any of the changes or events listed in Section 3.9 is likely to
occur.

 

(c)                Between the date
of signing this Agreement and the Closing Date, Seller will not, and Seller
will cause Sea Coast and its ERISA Affiliates not to, without the prior consent
of Buyer, take any affirmative action, or fail to take any reasonable action
within their or its control, as a result of which any of the following is
likely to occur:  any termination of an
employee pension benefit plan subject to Title IV of ERISA and sponsored,
maintained or contributed to by any ERISA Affiliate, any complete or partial
withdrawal from a multiemployer pension plan (as defined in Section 3(37)
of ERISA) contributed to by any ERISA Affiliate or the assertion of any
withdrawal liability by the trustees of any multiemployer pension plan against
any ERISA Affiliate.

 

Section 5.3                                      Access.

 

(a)                Sea Coast will,
and Seller will cause Sea Coast to, afford Buyer’s officers, attorneys,
accountants and other representatives reasonable access during normal business
hours to the offices, personnel, plants, properties, equipment and records of
Sea Coast for the purpose of conducting an investigation thereof.  Buyer shall not contact clients, charterers,
customers or suppliers of Sea Coast without the prior consent of Seller’s
President (which consent shall not be unreasonably withheld or delayed without
good reason).  Seller will furnish to
Buyer such financial and operating data and other information as Buyer may
reasonably request to the extent it is available to Seller at the time of such
request; provided, however, that the confidentiality of any data or information
so acquired shall be maintained by Buyer and its representatives in accordance
with the terms of the Confidentiality Agreement dated April 11, 2005
between Partnership and Sea Coast.

 

(b)               Buyer agrees that
for a period of five years after the Closing Seller and its authorized
representatives shall upon reasonable notice be entitled to inspect documents
of Sea Coast during normal business hours for reasonable purposes related to
preparation of Tax Returns or financial statements and make such copies as may
reasonably be requested, at Seller’s expense.  After the Closing and for so long as Seller
has an indemnity obligation 

 

26

 

under this Agreement, Buyer shall make reasonable efforts to afford
Seller and its authorized representatives reasonable access to Sea Coast and
its employees upon reasonable notice during normal business hours for
appropriate purposes relating to the defense of legal proceedings subject to
indemnity obligations under Article VI (excluding any such dispute in
which Sea Coast, Buyer or any of their Affiliates may be an adverse party) and
the preparation of Tax Returns.  Any such access shall be at the sole cost and
expense of the Seller.

 

Section 5.4                                      Termination of Guarantees and Settlement of Intercompany Amounts.   Seller shall cause the guarantees referred to
in Section 3.12(e) and any intercompany transaction described in Schedule 3.12(f) (except
as contemplated under Section 7.2(k)) to be terminated or settled at or
prior to the Closing at no cost to Sea Coast or to Buyer.

 

Section 5.5                                      Covenant Against Competition.

 

(a)                As an essential
consideration for the obligations of Buyer under this Agreement, Seller and
Saltchuk (each a “Restricted Party”) hereby agrees and covenants that:

 

(i)                                     for
a period of four years following the Closing Date, neither the Restricted Party
nor any Affiliate thereof shall, for whatever reason and with or without cause,
either individually or in partnership or jointly or in conjunction with any
Person or Persons as principal, agent, employee, shareholder (other than
holding Common Units or shares of other companies listed on a United States
stock exchange or automated quotation system that do not exceed five (5%)
percent of the outstanding shares so listed), owner, investor, partner or in
any other manner whatsoever, directly or indirectly, engage in any manner in
the Restricted Businesses in the Restricted Territory; and

 

(ii)                                  for
a period of two years following the Closing Date, (A) knowingly induce or
attempt to induce any Person known to the Restricted Party to be a customer of
Buyer or its Affiliates to cease doing Restricted Business with Buyer or any of
its Affiliates in the Restricted Territory, or (B) solicit Restricted
Business from, or provide such services to, any of the customers or accounts of
Buyer or any of its Affiliates.

 

(b)               If Buyer believes
that any Restricted Party or any Affiliate of the Restricted Party has violated
the provisions of this Section 5.5, Buyer shall have the right to seek
relief from any court of competent jurisdiction against such party.  Each Restricted Party acknowledges that money
damages alone shall not adequately compensate Buyer in the event of a breach of
the covenants of this Section 5.5. 
Therefore, each Restricted Party agrees that in addition to all remedies
available at law, in equity or under this Agreement, Buyer shall be entitled to
injunctive relief for the enforcement of this covenant.

 

(c)                Each Restricted
Party agrees that the covenants in this Section 5.5 are reasonable with
respect to their duration, scope and geographical area.

 

(d)               The covenants in
this Section 5.5 are severable and separate, and the unenforceability of
any specific covenant in this Section 5.5 is not intended by any party 

 

27

 

hereto to, and shall not, affect the provisions of any other covenant
in this Section 5.5.  If any court
of competent jurisdiction determines that the scope, time or territorial
restrictions Section 5.5(a) sets forth are unreasonable as applied to
a Restricted Party, the parties hereto, including each Restricted Party,
acknowledge their mutual intention and agreement that those restrictions be
enforced to the fullest extent the court deems reasonable, and thereby shall be
reformed to that extent.

 

(e)                All the covenants in
this Section 5.5 are intended by each party hereto to, and shall, be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Restricted Party
against Buyer, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Buyer of any covenant in this Section 5.5.  It is specifically agreed that the period
specified in Section 5.5 shall be computed in the case of each Restricted
Party by excluding from that computation any time during which the Restricted
Party is in violation of any provision of Section 5.5.  The covenants contained in this Section 5.5
shall not be affected by any breach of any other provision hereof by any party
hereto.

 

(f)                  Buyer and each
Restricted Party hereby agree that this Section 5.5 is a material and
substantial part of the transactions contemplated by this Agreement.

 

Section 5.6                                      Further Assurances. 
Seller shall execute, acknowledge and deliver or cause to be executed,
acknowledged and delivered to the Buyer or its Affiliates such assignments or
other instruments of transfer, assignment and conveyance, in form and substance
reasonably satisfactory to Buyer, as shall be necessary to vest in Buyer (or
its permitted assignees) all of the right, title and interest in and to the
Membership Interests sold to Buyer by Seller pursuant to this Agreement, free
and clear of all Liens, and any other document reasonably requested by Buyer in
connection with this Agreement.

 

Section 5.7                                      Governmental Filings. 
As promptly as practicable after the execution of this Agreement, each
party shall, in cooperation with the other, file any reports or notifications
that may be required to be filed by it under applicable law.

 

Section 5.8                                      Consents.  After the
Closing, Seller shall use its best efforts to obtain any consents or approvals
or assist in any filings required in connection with the transactions
contemplated hereby that are requested by Buyer and that have not been
previously obtained or made.

 

Section 5.9                                      Public Announcements. 
Neither party shall, without the prior approval of the other party,
issue, or permit any of its partners, stockholders, directors, officers,
employees, agents or Affiliates to issue, any press release or other public
announcement with respect to this Agreement or the transactions contemplated
hereby, except as may be required by Law.

 

Section 5.10                                Tax Matters.

 

(a)                As to the federal
income Tax (and related state income Tax) matters identified in this Section 5.10(a),
including the manner in which the transactions contemplated by this Agreement
will be reported by Saltchuk, Seller, Buyer and the Partnership for income 

 

28

 

tax purposes (on Tax Returns or otherwise), Saltchuk, Seller, Buyer and
the Partnership agree as follows:

 

(i)                                     In
the event Seller elects to sell certain vessels to Buyer pursuant to the Vessel
Purchase Agreement as described in Section 5.19, Seller intends to report
such sale as part of a tax-deferred exchange involving multiple parties, in
accordance with Code Section 1031. In such case, the parties hereto agree
that (A) the total purchase price for the vessels identified in the Vessel
Purchase Agreement shall equal the fair market value of such vessels, as
determined under Schedule 5.10(a) (the “1031 Value”); and (B) the
total amount of consideration attributed to the Taxable Sale (as defined in Section 5.10(a)(ii)),
and the amount of consideration to be allocated for the purchase price allocation
on IRS Form 8594, shall be reduced by the 1031 Value.  In the event Seller elects not to sell any
vessels to Buyer under the Vessel Purchase Agreement, then the 1031 Value shall
equal zero. Each party agrees not to assert in connection with any Tax Return,
tax audit or similar proceeding, any position inconsistent with this Section 5.10(a)(i).

 

(ii)                                  Because
the separate existence of Sea Coast and Sea Coast LLC apart from Saltchuk and
Seller and the separate existence of Buyer apart from the Partnership are
disregarded for federal Tax purposes, the transactions pursuant to this
Agreement shall be reported as a transfer of the assets of Sea Coast LLC
directly from Saltchuk to the Partnership for federal income tax purposes (A) in
a taxable sale or exchange, to the extent attributable to the cash portion of
the purchase price and any allocable liabilities and adjustments (the “Taxable
Sale”) and (B) in a contribution to a partnership governed by Section 721
of the Code to the extent attributable to the portion of the purchase price
paid in Common Units and any allocable adjustments (the “Contribution”).  Schedule 5.10(a) sets
forth how the parties shall report (A) which portion of Sea Coast LLC’s
assets is allocable to the Taxable Sale and which is allocable to the
Contribution, (B) which liabilities and adjustments are allocable to the
Taxable Sale, (C) the allocation of the cash, liabilities and adjustments
allocable to the Taxable Sale among Sea Coast LLC’s assets and the covenant not
to compete contained in Section 5.5 and (D) the tax consequences of
the liabilities that are not allocable to the Taxable Sale. Each party agrees
not to assert, in connection with any Tax Return, tax audit or similar
proceeding, any position inconsistent with the allocations and determinations
described in Schedule 5.10(a).

 

(iii)                               As soon as practicable
after the Closing Date, Seller and Buyer shall jointly prepare IRS Form 8594
to report the allocation of the purchase price and liabilities attributable to
the Taxable Sale. For this purpose, the fair market value of the assets held by
Sea Coast LLC and any vessels transferred pursuant to the Vessel Purchase
Agreement shall be determined in accordance with the valuation method described
in Schedule 5.10(a).

 

(iv)                              Differences
between the fair market value and the basis of Sea Coast LLC’s assets allocable
to the Contribution shall be taken into account in the 

 

29

 

manner required by Section 704(c) of the Code.  The Partnership will elect the remedial
method of Treas. Reg. §1.704-3(d) as to all such assets.  All other determinations regarding the
application of Section 704(c), the determination and maintenance of
capital accounts and other Tax matters relating to the Contribution and the
assets allocable thereto shall be made in the discretion of the Partnership in
a manner consistent with the Partnership Agreement.

 

(b)               Seller will
indemnify and hold Sea Coast, Sea Coast LLC, Buyer and the Partnership harmless
from (i) any liability for Taxes with respect to Sea Coast Items (and any
other liability of Sea Coast or Sea Coast LLC for Taxes) for events, and for
Tax periods (or portions thereof) ending, on or before the Closing Date, and (ii) any
liability of Sea Coast or Sea Coast LLC or any other entity for which Sea Coast
or Sea Coast LLC could be held liable after the Closing under Treas. Reg.
§1.1361-4(a)(6), Treas. Reg. §1.1502-6, Treas. Reg. §301.7701-2(c)(2)(iii) or
similar principles (including, without limitation, the items listed on Schedule 3.26(e)).  The parties acknowledge and agree that the
items scheduled as exceptions to Section 3.26 shall have no impact on the
indemnification obligations under this Section 5.10(b) and that such
items are within the scope of the indemnity provided by Seller hereunder.

 

(c)                Any transfer,
documentary, sales, use, registration, real estate transfer or gain or similar
or related Tax (collectively, the “State Taxes”) incurred in connection with
this agreement and the transactions contemplated hereby shall be paid by
Seller, and Seller and Buyer shall cooperate in timely making all Tax Returns
as may be required to comply with the provisions of such Tax laws.  Notwithstanding the foregoing, Buyer shall
indemnify Seller for up to an aggregate of $200,000 of State Taxes in the
States of Delaware, New York and New Jersey to the extent, but only to the
extent, that such taxes are incurred by Seller as a result (and only as a
result) of the Pre-Closing Merger, provided that Seller shall make all necessary
filings and otherwise comply with Tax laws related to such merger in Delaware,
New York and New Jersey in such a manner as to avoid or minimize such taxes. In
the event Seller elects to sell certain vessels to Buyer pursuant to the Vessel
Purchase Agreement under Section 5.19, Buyer agrees to execute and deliver
to Seller an exemption certificate for the State of Washington, as described in
paragraph 8 of such Vessel Purchase Agreement.

 

(d)               Saltchuk shall
cause the provisions of any Tax sharing agreement between Saltchuk and any of
its Affiliates (other than Sea Coast), on the one hand, and Sea Coast, on the
other hand, to be terminated on or before the Closing Date, and no further
payments shall be made thereunder.

 

Section 5.11                                Restrictions on Transfer; Legends.

 

(a)                Seller shall not
transfer (whether by sale, assignment, pledge or otherwise) any Closing Common
Units to any Person unless such Person is a citizen of the United States within
the meaning of Section 2 of the Shipping Act, 1916, as amended, for the
purpose of operating vessels in the coastwise trade of the United States and
unless such Person otherwise complies with this Section 5.11.

 

30

 

(b)               Prior to any
proposed transfer (whether by sale, assignment, pledge or otherwise) of the
Closing Common Units, the proposed transferor (the “Transferor”) will give
written notice to the Partnership of its intention to effect such
transfer.  Each such notice shall
describe the manner and circumstances of the proposed transfer in sufficient
detail, contain evidence of citizenship of the proposed transferee and shall be
accompanied by a written opinion of legal counsel who shall be reasonably
satisfactory to the Partnership, addressed to the Partnership, to the effect
that (i) the proposed transfer of the securities in question may be
effected without registration under the Securities Act, (ii) such proposed
transfer does not call into question the exemption from registration under
which such Closing Common Units were initially issued by the Partnership to
Seller and (iii) the proposed transferee is a citizen of the United States
within the meaning of Section 2 of the Shipping Act, 1916, as amended, for
the purpose of operating vessels in the coastwise trade of the United
States.  Any such legal opinion must be
reasonably satisfactory to the Partnership and must state that it may also be
relied upon by any applicable transfer agent or stock exchange or counsel to
the Partnership.  The Partnership may
also require a certificate of the Transferor that certifies as to matters that
assist the Partnership in establishing compliance with securities laws as at
the time of the proposed transfer (including, without limitation,
representations relating to the proposed transfer and the transferee of the
type set forth in Section 3.31 hereto).

 

(c)                Upon compliance
with the terms hereof to the reasonable satisfaction of the Partnership, the
Transferor shall be entitled to transfer such securities in accordance with the
terms of the notice delivered by the Transferor to the Partnership.  Each certificate evidencing the Closing
Common Units so transferred shall bear an appropriate restrictive legend
reasonably deemed appropriate by the Partnership, including any appropriate
legend relating to the restrictions and obligations set forth in this Section 5.11
and in Section 3.31 hereto.

 

(d)               The Transferor
will, prior to any transfer (unless such transfer is made pursuant to Rule 144
or an effective registration statement under the Securities Act), cause any
transferee of the Closing Common Units to enter into an agreement with the
Partnership that the transferee will take and hold such securities subject to
the provisions and upon the conditions specified in this Section 5.11 and
in Section 3.31 hereto.

 

(e)                The Partnership
may issue stop transfer instructions to any transfer agent for the Common Units
in order to implement any restriction on transfer contemplated by this Section 5.11
or Section 3.31 hereto.  The Closing
Common Units shall contain the following legend:

 

THE UNITS REPRESENTED BY
THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW.  SUCH UNITS MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE PARTNERSHIP AS TO THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT ANY
PROSPECTUS DELIVERY REQUIREMENTS ARE NOT 

 

31

 

APPLICABLE.  THE UNITS WERE ISSUED PURSUANT TO AN
AGREEMENT WHICH INCLUDES ADDITIONAL RESTRICTIONS ON THEIR TRANSFER AND COPIES
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE PARTNERSHIP AT
THE PRINCIPAL EXECUTIVE OFFICES OF THE PARTNERSHIP.

 

(f)                  Without limiting
the generality of any other provision hereof, the provisions of this Section shall
be binding on successive transferees. 
The Partnership shall have no obligation to effect any transfer on its
books and records (and no such attempted transfer shall be effective) unless
such transfer is made in accordance with the terms of this Section 5.11.

 

(g)               The provisions of
subsections (a) - (d) of this Section 5.11 shall not apply to
any transfer effected on the New York Stock Exchange pursuant to an effective
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act.

 

Section 5.12                                Matters Related to the Pre-Closing Merger.  For purposes of this Agreement, from and
after the effective time of the Pre-Closing Merger, references herein to Sea
Coast shall be deemed include Sea Coast LLC as successor by merger to Sea
Coast.  Provided, however, that neither
Seller nor Saltchuk shall be deemed to have breached any representation or
warranty in this Agreement to the extent, and only to the extent, that such
breach is deemed to have occurred solely by virtue of the Pre-Closing Merger
and would not have occurred as a result of any other reason, including without
limitation, the sale of Membership Interests of Sea Coast LLC to Buyer or, if
the transaction had been structured as a sale of Shares of Sea Coast, the sale
of such shares to Buyer.  Buyer agrees to
prepare all necessary merger and vessel documentation to effect the Pre-Closing
Merger.  Seller and Sea Coast shall
execute, acknowledge and deliver or cause to be executed, acknowledged and
delivered to the Buyer or its Affiliates any and all documents or instruments
deemed necessary by Buyer in connection with the Pre-Closing Merger and the
redocumentation of Sea Coast’s Vessels in connection therewith.

 

Section 5.13                                [Reserved].

 

Section 5.14                                Seller Post-Closing Net Worth.  Until the third anniversary of the Closing
Date, Seller shall not take any action if the effect of such action would cause
its net worth (excluding accumulated other comprehensive income), as calculated
under GAAP on a consolidated basis (its “Net Worth”), to be less than
$82,000,000.  Seller shall promptly
notify Buyer if at any time prior to the third anniversary of the Closing Date
the Net Worth of Seller falls below $82,000,000.

 

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Section 5.15                                Employees.

 

(a)                For a period of
one year after the Closing, none of Buyer or its Affiliates, on the one hand,
nor Seller or its Affiliates, on the other hand, shall, directly or indirectly,
either for itself or any other Person, (i) induce or attempt to induce any
employee of the other party to leave the employ of such other party (unless
such employment is solicited by the employee in response to a general
solicitation of applications for employment), (ii) in any way interfere
with the relationship between such other party and any employee of such other
party (provided that no party shall be deemed to be interfering with such
relationship if it hires a former employee of the other party who has been
terminated by the other party or has resigned from the employment of such other
party and the provisions of clause (i) hereof have not been violated by
the hiring party), or (iii) employ, or otherwise engage as an employee,
independent contractor or otherwise, any employee of the other party (unless
such employment is solicited by the employee in response to a general
solicitation of applications for employment). 
For purposes of this Section 5.15, employees of Sea Coast
immediately prior to the Closing shall be deemed to be employees of Buyer and
its Affiliates and not employees of Seller and its Affiliates.

 

(b)               For a period of at
least twelve months after the Closing, Buyer shall provide, or cause Sea Coast
or an Affiliate of Buyer to provide, all retained employees of Sea Coast in
connection with their service as employees of Sea Coast after the Closing (or
of Buyer or its Affiliates), employee benefits that are substantially similar
in the aggregate to the employee benefits that are provided to similarly
situated employees of Buyer and its Affiliates or, to the extent less
favorable, the employee benefits provided to employees of Sea Coast immediately
prior to the Closing Date.  Buyer shall
credit or continue to credit or cause Sea Coast to credit and continue to
credit such employees for all service with Sea Coast prior to the Closing Date
for eligibility purposes under such benefit plans and for any other purpose to
the extent required by law.

 

(c)                Prior to the
Closing Date, Sea Coast shall terminate participation in each of the Plans and
agreements set forth on Schedule 5.15(c) (the “Terminated
Plans”), and Saltchuk shall take all actions reasonably necessary to ensure
that all liabilities arising under the Terminated Plans are either satisfied
prior to the Closing or assumed by Saltchuk or another affiliate.  Each “phantom stock plan” or similar
arrangement which has been communicated orally or in writing to any Sea Coast
employee shall be terminated with respect to such Sea Coast employee prior to
the Closing Date, and Saltchuk shall pay each such employee a cash payment  (which may be made in one or more
installments) in exchange for execution of a release of claims against Sea
Coast, Buyer and their affiliates in the form attached hereto as Exhibit C.

 

(d)               Prior to the
Closing Date, Sea Coast shall pay retention bonuses to the employees of Sea
Coast set forth on Schedule 5.15(d)(1) in an aggregate amount
not to exceed $170,000 and shall make any change-in-control, severance or
similar payments to the Persons set forth Schedule 5.15(d)(2) that
would result from the sale of the capital stock of Sea Coast, and none of Sea
Coast, Buyer or Buyer’s Affiliates shall have any responsibility or liability
therefor from and after the Closing.  In
connection with making the payments set forth in 

 

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Schedule 5.15(d)(2), Sea Coast
shall obtain releases from the recipients of such funds in the form attached
hereto as Exhibit C.

 

Section 5.16                                Insurance.  Seller
will cooperate with Buyer to arrange for new insurance coverages for Sea Coast
effective upon and after the Closing.

 

Section 5.17                                Right of First Refusal. 
If a Restricted Party shall at any time or times within four years after
the Closing Date acquire a Permitted Restricted Business, and thereafter but
within four years after the Closing Date shall determine to sell all or a part
of such business, then such Restricted Party shall first submit to Buyer a
written notice (an “Offering Notice”) specifying (i) the proposed sale
price of the Permitted Restricted Business (or portion thereof), (ii) the
name and address of the prospective purchaser, if applicable; and (iii) other
terms and conditions of the proposed sale. 
Within twenty days after its receipt of an Offering Notice, Buyer shall
give written notice (a “Response Notice”) to the Restricted Party as to whether
it elects to purchase the Permitted Restricted Business (or portion thereof) on
the terms and conditions set forth in the Offering Notice.  If Buyer does not elect to purchase the
Permitted Restricted Business (or portion thereof), the Restricted Party shall
be entitled to sell all, but not less than all, of the Permitted Restricted
Business (or portion thereof) subject to the 
Offering Notice on the terms and subject to the conditions set forth in
the Offering Notice during the period commencing on receipt of the Response
Notice and continuing until sixty days after the date of such receipt, after
which time the sale of the Permitted Restricted Business (or portion thereof)
shall once again be subject to the terms and conditions of this Section 5.17.  If Buyer elects to purchase the Permitted
Restricted Business (or portion thereof), the Response Notice shall specify a
date and time for the closing of the purchase, which date shall be not less
than thirty nor more than sixty days after the giving of such Response
Notice.  In the event Buyer elects to
purchase the Permitted Restricted Business (or portion thereof), the parties
shall enter into a purchase agreement on terms and conditions mutually agreed
upon.  If the parties are unable to agree
upon such terms and conditions within a reasonable period of time, the parties
agree to undertake mediation in accordance with the commercial mediation rules of
the American Arbitration Association in order to arrive at an agreement
regarding such terms and conditions.

 

Section 5.18                                Misdirected Payments. 
To the extent Seller, Saltchuk or any of their respective Affiliates
receive payments from Sea Coast’s customers after the Closing with respect to
services rendered by Sea Coast, then the receiving party shall promptly remit
such payments to Sea Coast.

 

Section 5.19                                Vessel Purchase Agreement. 
Prior to the Closing Date, Seller may cause to be transferred, conveyed,
assigned and delivered from Sea Coast to Seller up to four tugs currently owned
by Sea Coast.  In the event Seller
consummates such a transfer, Seller and Buyer shall execute a vessel purchase
agreement substantially in the form attached hereto as Exhibit D
with respect to the transferred vessels, and the amount set forth in Section 2.2(a) shall
be reduced by the purchase price of the transferred vessels under such vessel
purchase agreement, which price shall be mutually agreed between Buyer and
Seller.

 

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ARTICLE VI

INDEMNIFICATION

 

Section 6.1                                      Seller’s Indemnity Obligations.  Seller shall indemnify each Buyer Indemnified
Party against, and hold each Buyer Indemnified Party harmless from and against,
any Indemnified Amounts that arise from, are based on or relate or otherwise
are attributable to (a) any error, inaccuracy, breach or misrepresentation
in any of the representations and warranties made by or on behalf of Seller in
this Agreement (provided that Sections 3.7, 3.20(c), 3.21, 3.22(a) and
3.22(c) shall be read as if no materiality qualifiers were contained
therein and Section 3.22(a) shall be read as if there was no schedule of
exceptions thereto), (b) any violation or breach by Seller of or default
by Seller under the terms of this Agreement, (c) any claim by any Person
for brokerage or finder’s fees or commissions or similar payments based upon
any agreement or understanding alleged to have been made by any such Person
with either Seller or Sea Coast (or any Person acting on their behalf) in
connection with any of the transactions contemplated by this Agreement, (d) any
claim by any Person under ERISA or other applicable law relating to an “employee
pension benefit plan” sponsored, maintained or contributed to by an ERISA
Affiliate and subject to Title IV of ERISA or the minimum funding requirements
of Code section 412, (e) any claim by Theodore G. Myers for
disability or other injury, including, without limitation, claims arising under
that certain lawsuit styled Theodore G. Myers v. Sea Coast Towing/Eagle
Pacific Ins. Co./Alaska National Insurance Co. (U.S. DOL OWCP Cause No. 2005-LHC-01566
(14-137203); No. 2005-LHC-01567 (14-138004); and No. 2005-LHC-01568
(14-138910)); (f) any claim relating to the 520 Bridge matter, including,
without limitation, claims arising under that certain lawsuit styled Washington
Dep’t Transp. v. Sea Coast (W.D. Wash. No. 2003-CV-00166-TSZ); (g) any
claims related to the improper classification of employees for purposes of the
Fair Labor Standards Act or other applicable law during any period prior to
Closing; (h) any claim related to Seller’s effecting a tax-deferred
exchange in accordance with Code Section 1031 as contemplated by the
Vessel Purchase Agreement; and (i) any claim involving any dispute among
Sea Coast, Seller, Saltchuk, Robert C. Dorn, Wayne Sundberg, Jane Doe Sundberg,
Sirius Maritime, LLC, James H. Bauer or Bauer Moynihan & Johnson,
LLP.  Buyer shall be entitled to recover
its reasonable and necessary attorneys’ fees and litigation expenses incurred
in connection with successful enforcement of its rights under this Section 6.1.  Notwithstanding the foregoing, Seller shall
not be required to indemnify or hold harmless the Buyer Indemnified Parties on
account of any Indemnified Amounts arising under Section 6.1(a) (other
than with respect to breaches of representations and warranties contained in
Sections 3.1, 3.3, 3.8, 3.14(d), 3.26 and 3.30 as to which the Threshold Amount
shall not apply) or arising under Sections 6.1(e), (f) or (g) unless
the aggregate liability of Seller in respect of all Indemnified Amounts exceeds
the Threshold Amount and then only for the amount in excess of the Threshold
Amount.  In no event shall Seller’s
liability to the Buyer Indemnified Parties under Section 6.1(a) exceed
the Ceiling Amount (other than with respect to breaches of representations and
warranties contained in Sections 3.1, 3.3, 3.8, 3.14(d), 3.22, 3.26 and 3.30 as
to which the Ceiling Amount shall not apply).

 

Section 6.2                                      Buyer’s Indemnity Obligations.  Buyer shall indemnify each Seller Indemnified
Party against, and hold each Seller Indemnified Party harmless from and
against, any and all Indemnified Amounts that arise from, are based on or
relate or otherwise are attributable to (a) any error, inaccuracy, breach
or misrepresentation in any of the representations and warranties made by or on
behalf of Buyer in this Agreement, (b) any violation or breach by 

 

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Buyer of or default by
Buyer under the terms of this Agreement, or (c) any claim by any Person
for brokerage or finder’s fees or commissions or similar payments based on any
agreement or understanding alleged to have been made by any such Person with
either Buyer or the Partnership (or any Person acting on their behalf) in
connection with any of the transactions contemplated by this Agreement.  The failure of Buyer to cure, remediate or
otherwise repair any condition or circumstance existing at the Closing or
caused by Seller shall not be deemed an “omission” for purposes hereof.  Seller shall be entitled to recover its
reasonable and necessary attorneys’ fees and litigation expenses incurred in
connection with successful enforcement of their rights under this Section 6.2.  Notwithstanding the foregoing, Buyer shall
not be required to indemnify or hold harmless the Seller Indemnified Parties on
account of any Indemnified Amounts arising under Section 6.2(a) unless
the aggregate liability of Buyer in respect of all Indemnified Amounts exceeds
the Threshold Amount and then only for the amount in excess of the Threshold
Amount.  In no event shall the Buyer’s
aggregate liability to the Seller Indemnified Parties under this Section 6.2(a) exceed
the Ceiling Amount.

 

Section 6.3                                      Survival.  All the
provisions of this Agreement shall survive the Closing, notwithstanding any
investigation at any time made by or on behalf of any party hereto, provided
that the representations and warranties set forth in Articles III and IV and in
any certificate delivered in connection herewith with respect to any of those
representations and warranties shall terminate and expire on the third
anniversary of the Closing Date, except (a) the representations and
warranties of Seller set forth in Sections 3.7, 3.20, 3.22 and 3.26 shall
survive until the expiration of the applicable statutes of limitations
(including all periods of extension and tolling) and (b) the
representations and warranties of Seller set forth in Sections 3.1, 3.3, 3.8
and 3.14(d) shall survive forever. 
After a representation and warranty has terminated and expired, no
indemnification shall or may be sought pursuant to this Article VI on the
basis of that representation and warranty by any Person who would have been
entitled pursuant to this Article VI to indemnification on the basis of
that representation and warranty prior to its termination and expiration,
provided that in the case of each representation and warranty that shall
terminate and expire as provided in this Section 6.3, no claim presented
in writing for indemnification pursuant to this Article VI on the basis of
that representation and warranty prior to its termination and expiration shall
be affected in any way by that termination and expiration.  The indemnification obligations under this Article VI
or elsewhere in this Agreement shall apply regardless of whether any suit or
action results solely or in part from the active, passive or concurrent
negligence or strict liability of the Indemnified Party.  The covenants and agreements entered into
pursuant to this Agreement to be performed after the Closing shall survive the
Closing.

 

Section 6.4                                      Indemnification Procedures. 
All claims for indemnification under this Agreement shall be asserted
and resolved as follows:

 

(a)                                  Promptly
after receipt by a Person entitled to indemnity under Section 6.1 or 6.2
(an “Indemnified Party”) of notice of the assertion of a claim against an
Indemnified Party by a Person that is not a party to this Agreement (a “Third-Party
Claim), such Indemnified Party shall give notice to the Person obligated to
indemnify under such Section (an “Indemnifying Party”) of the assertion of
such Third-Party Claim, provided that the failure to notify the Indemnifying
Party will not relieve the Indemnifying Party of any liability that it may have
to any Indemnified Party, except to the extent that the Indemnifying Party
demonstrates 

 

36

 

that the defense of such Third-Party Claim is
prejudiced by the Indemnified Party’s failure to give such notice.

 

If an Indemnified Party
gives notice to the Indemnifying Party pursuant to the preceding paragraph of
the assertion of a Third-Party Claim, the Indemnifying Party shall be entitled
to participate in the defense of such Third-Party Claim and, to the extent that
it wishes (unless (i) the Indemnifying Party is also a Person against whom
the Third-Party Claim is made and the Indemnified Party determines in good
faith that joint representation would be inappropriate or (ii) the
Indemnifying Party fails to provide reasonable assurance to the Indemnified
Party of its financial capacity to defend such Third-Party Claim and provide
indemnification with respect to such Third-Party Claim), to assume the defense
of such Third-Party Claim with counsel reasonably satisfactory to the
Indemnified Party.  After notice from the
Indemnifying Party the Indemnified Party of its election to assume the defense
of such Third-Party Claim, the Indemnifying Party shall not, so long as it
diligently conducts such defense, be liable to the Indemnified Party under this
Article VI for any fees of other counsel or any other expenses with
respect to the defense of such Third-Party Claim, in each case subsequently
incurred by the Indemnified Party in connection with the defense of such
Third-Party Claim, other than reasonable costs of investigation.  If the Indemnifying Party assumes the defense
of a Third-Party Claim, (i) such assumption will conclusively establish
for purposes of this Agreement that the claims made in that Third-Party Claim
are within the scope of and subject to indemnification, and (ii) no
compromise or settlement of such Third-Party Claims may be effected by the
Indemnifying Party without the Indemnified Party’s consent (which shall not be
unreasonably withheld) unless (A) there is no finding or admission of any
violation of Law or any violation of the rights of any Person; (B) the
sole relief provided is monetary damages that are paid in full by the
Indemnifying Party; and (C) the Indemnified Party shall have no liability
with respect to any compromise or settlement of such Third-Party Claims
effected without its consent.  If notice
is given to an Indemnifying Party of the assertion of any Third-Party Claim and
the Indemnifying Party does not, within ninety days
after the Indemnified Party’s notice is given, give notice to the Indemnified
Party of its election to assume the defense of such Third-Party Claim, the
Indemnifying Party will be bound by any determination made in such Third-Party
Claim or any compromise or settlement effected by the Indemnified Party.

 

Notwithstanding the
foregoing, if an Indemnified Party determines in good faith that there is a
reasonable probability that a Third-Party Claim may adversely affect it or its
Affiliates other than as a result of monetary damages for which it would be entitled
to indemnification under this Agreement, the Indemnified Party may, by notice
to the Indemnifying Party, assume the exclusive right to defend, compromise or
settle such Third-Party Claim, but the Indemnifying Party will not be bound by
any determination of any Third-Party Claim so defended for the purposes of this
Agreement or any compromise or settlement effected without its consent (which
may not be unreasonably withheld).

 

Notwithstanding the
provisions of Section 9.9, Seller hereby consents to the nonexclusive
jurisdiction of any court in which a proceeding in respect of a Third-Party
Claim is brought against any Buyer Indemnified Party for purposes of any claim
that a Buyer Indemnified Party may have under this Agreement with respect to
such proceeding or the matters alleged therein and agree that process may be
served on Seller with respect to such a claim anywhere in the world.

 

37

 

With respect to any
Third-Party Claim subject to indemnification under this Article VI: (i) both
the Indemnified Party and the Indemnifying Party, as the case may be, shall
keep the other Person fully informed of the status of such Third-Party Claim
and any related proceedings at all stages thereof where such Person is not
represented by its own counsel, and (ii) the parties agree (each at its
own expense) to render to each other such assistance as they may reasonably
require of each other and to cooperate in good faith with each other in order
to ensure the proper and adequate defense of any Third-Party Claim.

 

With respect to any
Third-Party Claim subject to indemnification under this Article VI, the
parties agree to cooperate in such a manner as to preserve in full (to the
extent possible) the confidentiality of all Confidential Information (as
defined below) and the attorney-client and work-product privileges.  In connection therewith, each party agrees
that: (i) it will use its best efforts, in respect of any Third-Party
Claim in which it has assumed or participated in the defense, to avoid
production of Confidential Information (consistent with applicable law and rules of
procedure), and (ii) all communications between any party hereto and
counsel responsible for or participating in the defense of any Third-Party
Claim shall, to the extent possible, be made so as to preserve any applicable
attorney-client or work-product privilege.

 

(b)                           If any
Indemnified Party should have a claim against any Indemnifying Party hereunder
that does not involve a Third Party Claim, the Indemnified Party shall transmit
to the Indemnifying Party a written notice (the “Indemnity Notice”) describing
in reasonable detail the nature of the claim, an estimate of the amount of
damages attributable to such claim to the extent feasible (which estimate shall
not be conclusive of the final amount of such claim) and the basis of the
Indemnified Party’s request for indemnification under this Agreement.  If the Indemnifying Party does not notify the
Indemnified Party within ninety days from its
receipt of the Indemnity Notice that the Indemnifying Party disputes such
claim, the claim specified by the Indemnified Party in the Indemnity Notice
shall be deemed a liability of the Indemnifying Party hereunder.  If the Indemnifying Party does not dispute
such claim, then the Indemnifying Party shall have the right to remediate the
condition or conditions giving rise to such claim to the extent the same remain
unremediated, provided such remediation by the Indemnifying Party is commenced
within forty days from the Indemnifying Party’s receipt of the Indemnity Notice
and such remediation is pursued with due diligence and dispatch in a manner
that does not interfere with the business of the Indemnified Party.  Notwithstanding the foregoing, nothing in
this Section 6.4(b) shall limit the Indemnified Party’s rights under
this Article VI to be indemnified and held harmless for any Indemnified
Amounts.

 

Section 6.5                                      General.  The
indemnification obligations under this Article VI shall apply regardless
of whether any suit or action results solely or in part from the active,
passive or concurrent negligence or strict liability of the Indemnified
Party.  The rights of the parties to
indemnification under this Article VI shall not be limited due to any
investigations heretofore or hereafter made by such parties or their
representatives, regardless of negligence in the conduct of any such
investigations.  All representations,
warranties, covenants and agreements made by the parties shall not be deemed
merged into any instruments or agreements delivered in connection with the
Closing or otherwise in connection with the transactions contemplated hereby.

 

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Section 6.6                                      Exclusivity.  The
indemnification rights in Section 5.10 and this Article VI shall be
the exclusive remedies of the Indemnified Parties for any Indemnified Amounts
arising out of or resulting from any breach of the representations and
warranties in this Agreement (other than any claim for Indemnified Amounts
arising out of or based on fraud).

 

ARTICLE VII

CONDITIONS TO CLOSING

 

Section 7.1                                      Conditions to Obligations of Buyer.  The obligations of Buyer to consummate the
transactions contemplated herein are subject, at the option of Buyer, to
satisfaction of the following conditions:

 

(a)                Compliance.  Seller
shall have complied with its covenants and agreements contained herein, and the
representations and warranties contained in Article III hereof shall be
true and correct on the date hereof and true and correct in all material
respects as of the Closing Date (except those representations and warranties
qualified by materiality, which shall be true and correct in all respects as so
qualified).

 

(b)               Officer’s Certificate. 
Buyer shall have received a certificate, dated as of the Closing Date,
of an executive officer of Seller certifying as to the matters specified in
Sections 7.1(a) hereof.

 

(c)                Seller’s Resolutions. 
Seller shall deliver to Buyer a certified copy of resolutions duly
adopted by the board of directors and stockholders of Seller and authorizing
and approving the execution and delivery of this Agreement, including the
exhibits and schedules hereto, and the consummation of the transactions
contemplated herein.

 

(d)               Membership Interest Certificates.  Seller shall deliver certificates evidencing
the Membership Interests, each endorsed in blank, or accompanied by stock
powers in blank duly executed by Seller.

 

(e)                HSR Act.  Any waiting
period applicable to the consummation of the transactions contemplated by this
Agreement under the HSR Act shall have expired or been terminated.

 

(f)                  Delivery of Financial Statements.  Buyer shall have received the audited and
unaudited financial statements with respect to Sea Coast that are required by Rule 3-05
of Regulation S-X of the Securities Exchange Act of 1934, as amended, at least
twenty business days prior to the Closing Date. 
The audited financial statements shall be free of any
qualifications.  Both the audited and
unaudited financial statements shall conform in all material respects to the
Unaudited Annual Financial Statements and the Unaudited Interim Financial
Statements, as applicable.

 

(g)               No Material Adverse Change. 
No material adverse change in the value of the Shares or the Membership
Interests or in the business or in the financial condition of Sea Coast shall
have occurred since the date hereof, and no event shall have occurred since the
date hereof which could be expected to lead to or cause such a material adverse
change.

 

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(h)               Certified Abstracts. 
Seller shall deliver certified abstracts of title for each of the
Vessels issued by the U.S. Coast Guard at the National Vessel Documentation
Center dated no earlier than seven days prior to the date of the Closing showing
that Sea Coast is the owner of such Vessels and that such Vessels are free and
clear of all Liens.

 

(i)                   Confirmation of Class Certificates.  Seller shall deliver confirmation of class
certificates for each of the Vessels where applicable (free from recommendations)
issued by the American Bureau of Shipping issued no earlier than seven days
prior to the date of the Closing.

 

(j)                   Orders, Etc.  No
action, suit or proceeding shall have been commenced or shall be pending or
threatened, and no statute, rule, regulation or order shall have been enacted,
promulgated, issued or deemed applicable to the transactions contemplated by
this Agreement, by any Governmental Body or court that reasonably may be
expected to (i) prohibit Buyer’s ownership or operation of all or a
material portion of the assets of Sea Coast or the Membership Interests, or
compel Buyer to dispose of or hold separate all or a material portion of Buyer’s
or Sea Coast’s business or assets, as a result of the transactions contemplated
by this Agreement or (ii) prohibit consummation of the transactions
contemplated by this Agreement.

 

(k)                Removal of Liens. 
Seller shall have caused any and all Liens on the assets of Sea Coast to
be released and shall have provided Buyer with documentary evidence to such
effect.

 

(l)                   FIRPTA Affidavit. 
Saltchuk shall deliver a non-foreign affidavit, as such affidavit is
referred to in Section 1445(b)(2) of the Code, substantially in the
form set forth in Treas. Reg. § 1.1445-2(b)(2)(iv)(B), dated as of the
Closing Date.

 

(m)             Resignations.  Each director and officer of Sea Coast shall
deliver a notice of resignation in the form previously approved by Buyer.

 

(n)               Releases.  Each
director and officer of Sea Coast, and each person to whom a “phantom stock
plan” or similar arrangement or benefit has been promised, shall have executed
and delivered a release to Buyer in the form attached hereto as Exhibit C.

 

(o)               Officer’s Net Worth Certificate.  Buyer shall have received a certificate,
dated as of the Closing Date, of an executive officer of Seller certifying that
the Net Worth of Seller as of the Closing Date is not less than $82,00,000.

 

(p)               Escrow Agreement. 
Seller and Buyer shall have executed and delivered an escrow agreement
substantially in the form attached hereto as Exhibit B.

 

(q)               Redocumentation, etc.. 
In connection with the Pre-Closing Merger, all redocumentation of Seller’s
vessels shall have occurred, Sea Coast LLC shall possess all licenses, permits
and approvals to operate the business of Sea Coast as currently conducted and
all necessary consents and approvals under any contracts, agreements or other
instruments of Sea Coast shall have been obtained.

 

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(r)                  Certificates of Merger. 
One or more certificates of merger (as applicable) with respect to the
Pre-Closing Merger shall have been filed with the appropriate state regulatory
authorities.

 

(s)                Lease Arrangements for Anchorage, Alaska Facility.  Sea Coast and Delta Western shall have
entered into a sublease agreement with respect to Sea Coast’s use of Delta
Western’s facilities in Anchorage, Alaska, on terms reasonably acceptable to
Buyer.

 

(t)                  Other Documents. 
Seller shall deliver to Buyer such other documents, instruments and
certificates as may be reasonably requested by Buyer, including, without
limitation, the original stock book and stock ledger, minute books and seal (if
any) of Sea Coast.

 

(u)               Consents.  All
consents and approvals required in connection with the execution, delivery and
performance of this Agreement shall have been obtained.

 

(v)               Vessel Purchase Agreement. 
If vessels have been transferred from Sea Coast to Seller prior to the
Closing Date as contemplated by Section 5.19, Seller shall execute and
deliver a vessel purchase agreement in substantially the form attached hereto
as Exhibit D.

 

(w)             Agreements
with Affiliates.  Sea Coast
and certain Affiliates of Seller shall have entered into contracts
substantially in the form attached hereto as Exhibit F.

 

Section 7.2                                      Conditions to Obligations of Seller.  The obligations of Seller to consummate the
transactions contemplated herein are subject, at the option of Seller, to
satisfaction of the following conditions:

 

(a)                                  Compliance.  Buyer
shall have complied with its covenants and agreements contained herein, and the
representations and warranties contained in Article IV hereof shall be
true and correct on the date hereof and true and correct in all material
respects as of the Closing Date (except those representations and warranties
qualified by materiality, which shall be true and correct in all respects as so
qualified).

 

(b)                                 Officer’s Certificate. 
Seller shall have received a certificate, dated as of the Closing Date,
of an executive officer of the general partner of Buyer certifying as to the matters
specified in Section 7.2(a) hereof.

 

(c)                                  Buyer and Partnership Resolutions.  Buyer and the Partnership shall deliver to
Seller a certified copy of resolutions duly adopted by the board of directors
of the general partner of each of Buyer and the Partnership authorizing and
approving the execution and delivery of this Agreement, including the exhibits
and schedules hereto, and the consummation of the transactions contemplated
herein.

 

(d)                                 HSR Act.  Any waiting
period applicable to the consummation of the transactions contemplated by this
Agreement under the HSR Act shall have expired or been terminated.

 

41

 

(e)                                  Orders, Etc.  No
action, suit or proceeding shall have been commenced or shall be pending or threatened,
and no statute, rule, regulation or order shall have been enacted, promulgated,
issued or deemed applicable to the transactions contemplated by this Agreement,
by any Governmental Body or court that reasonably may be expected to (i) prohibit
Buyer’s ownership or operation of all or a material portion of the assets of
Sea Coast or the Membership Interests, or compel Seller to dispose of or hold
separate all or a material portion of Sea Coast’s business or assets, as a
result of the transactions contemplated by this Agreement or (ii) prohibit
consummation of the transactions contemplated by this Agreement.

 

(f)                                    Other Documents.  Each
of Buyer and the Partnership shall deliver to Sellers such other documents,
instruments and certificates as may be reasonably requested by Sellers.

 

(g)                                 Consents.  All
consents and approvals required in connection with the execution, delivery and
performance of this Agreement shall have been obtained.

 

(h)                                 Registration Rights Agreement.  The Partnership shall have executed and
delivered a registration rights agreement substantially in the form attached
hereto as Exhibit E.

 

(i)                                     Purchase Price.  Buyer
shall have delivered the Purchase Price to the Escrow Agent pursuant to Section 2.3(b).

 

(j)                                     Escrow Agreement. 
Seller and Buyer shall have executed and delivered an escrow agreement
substantially in the form attached hereto as Exhibit B.

 

(k)                                  Agreements with Affiliates. 
Sea Coast and certain Affiliates of Seller shall have entered into
contracts substantially in the form attached hereto as Exhibit F.

 

(l)                                     Vessel Purchase Agreement. 
If vessels have been transferred from Sea Coast to Seller prior to the
Closing Date as contemplated by Section 5.19, Buyer shall execute and
deliver a vessel purchase agreement in substantially the form attached hereto
as Exhibit D.

 

ARTICLE VIII

TERMINATION

 

Section 8.1                                      Grounds for Termination. 
This Agreement may be terminated at any time prior to the Closing Date:

 

(a)                By the mutual
written agreement of Buyer and Seller;

 

(b)               By Buyer if any of the
conditions set forth in Section 7.1 hereof shall have become incapable of
fulfillment and shall not have been waived by Buyer;

 

(c)                By Seller if any
of the conditions set forth in Section 7.2 hereof shall have become
incapable of fulfillment and shall not have been waived by Seller;

 

42

 

(d)               By either party by
written notice thereof to the other, if the transactions contemplated hereby
shall not have been consummated on or before November 30, 2005, or such
other date, if any, as Buyer and Seller shall agree upon in writing; or

 

(e)                By Buyer or Seller
if the consummation of the transactions contemplated hereby would violate any
nonappealable final order, decree or judgment of any court or Governmental Body
having competent jurisdiction enjoining, restraining or otherwise preventing,
or awarding substantial damages in connection with, or imposing a material
adverse condition upon, the consummation of this Agreement or the transactions
contemplated hereby;

 

provided, however, that a party
shall not be allowed to exercise any right of termination pursuant to this Section 8.1
if the event giving rise to such termination right shall be due to the
negligent or willful failure of the party seeking to terminate this Agreement
to perform or observe in any material respect any of the covenants or
agreements set forth herein to be performed or observed by such party.

 

Section 8.2                                      Effect of Termination. 
The following provisions shall apply in the event of a termination of
this Agreement:

 

(a)                Each party’s right
of termination pursuant to Section 8.1 hereof is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of such
right of termination will not be an election of remedies.  If this Agreement is terminated pursuant to Section 8.1,
all obligations of the parties under this Agreement will terminate except as
set forth in Section 8.2(b) hereof. 
Provided, however, that (i) if this Agreement is terminated by
Buyer because of the breach of this Agreement by Seller or because one or more
of the conditions to Buyer’s obligations under this Agreement is not satisfied
as a result of Seller’s failure to comply with its obligations under this
Agreement, Buyer’s right to pursue all legal remedies will survive such
termination unimpaired, and (ii) if this Agreement is terminated by Seller
because of the breach of this Agreement by Buyer or because one or more of the
conditions to Seller’s obligations under this Agreement is not satisfied as a result
of Buyer’s failure to comply with its obligations under this Agreement, Seller’s
right to pursue all legal remedies will survive such termination unimpaired.

 

(b)               The parties hereto
hereby agree that the provisions of Sections 8.2, 9.3, 9.4, 9.5, 9.9 and 9.10
hereof shall survive any termination of this Agreement.

 

ARTICLE IX

GENERAL PROVISIONS

 

Section 9.1                                      Release.  Subject to
the limitations set forth in the last sentence in this Section 9.1, Seller
and Saltchuk, for and on behalf of themselves and their respective controlled
Affiliates (the “Releasing Parties”) hereby unconditionally and irrevocably
release and forever discharge, effective as of and forever after the Closing
Date, to the fullest extent permitted by applicable law, Sea Coast and all past,
present and future Buyer Indemnified Parties (collectively, the “Released
Parties”) from any and all debts, liabilities, obligations, claims, demands,
actions or causes of action, suits, judgments or controversies of any kind
whatsoever 

 

43

 

(collectively, “Pre-Acquisition
Claims”) against Sea Coast that arise out of or are based on any agreement or
understanding or act or failure to act (including any act or
failure to act that constitutes ordinary or gross negligence or reckless or
willful, wanton misconduct), misrepresentation, omission,
transaction, fact, event or other matter occurring contemporaneously with or
prior to the Closing Date or on account of or arising out of any matter, cause
or event occurring contemporaneously with or prior to the Closing Date (whether
based on any governmental requirement or right of action, at law or in equity
or otherwise, foreseen or unforeseen, matured or unmatured, known or unknown,
accrued or not accrued) (collectively, “Pre-Acquisition Matters”), including
without limitation: (a) claims by a Releasing Party with respect to
repayment of loans or indebtedness; (b) any rights, titles and interests
in, to or under any agreements, arrangements or understandings to which a
Releasing Party is a party; and (c) claims by a Releasing Party with
respect to dividends or violation of preemptive rights.  Each Releasing Party further agrees not to
file or bring any litigation before any Governmental Authority on the basis of
or respecting any Pre-Acquisition Claim concerning any Pre-Acquisition Matter
against any Released Party.  Each
Releasing Party (a) acknowledges that such Releasing Party fully
comprehends and understands all the terms of this Section 9.1 and their
legal effects and (b) expressly represents and warrants that (i) such
Releasing Party is competent to effect the release made in this Section 9.1
knowingly and voluntarily and without reliance on any statement or
representation of any Released Party or its Representatives and (ii) such
Releasing Party had the opportunity to consult with an attorney of its choice
regarding this Section 9.1.  This Section 9.1
shall not affect the rights of any Releasing Party under this Agreement.

 

Section 9.2                                      Arbitration.

 

(a)                Disputes Covered. 
Except for matters arising under Section 5.5, any dispute,
controversy, difference or claim arising out of or in connection with this
Agreement, or the breach, termination or validity thereof, which cannot be
amicably resolved by the parties within thirty days after receipt by a party of
written notice from any other party that such a dispute, controversy,
difference or claim exists, shall be settled by final and binding arbitration.

 

(b)               Forum.  The forum for
the arbitration shall be New York, New York.

 

(c)                Law.  The governing
law for the arbitration shall be the law of the State of New York, without
reference to its conflicts of laws provisions.

 

(d)               Selection.  The
arbitration shall be conducted by three arbitrators, unless the parties are able
to agree on a single arbitrator.  In the
absence of such agreement, within ten days after the initiation of an
arbitration proceeding, Seller shall select one arbitrator and Buyer shall
select one arbitrator, and those two arbitrators shall then select, within ten
days, a third arbitrator.  If those two
arbitrators are unable to select a third arbitrator within such ten-day period,
a third arbitrator shall be appointed by the commercial panel of the American
Arbitration Association.  The decision in
writing of at least two of the three arbitrators shall be final and binding
upon the parties.  All arbitrators shall
be residents of the United States of America.

 

44

 

(e)                Administration.  The
arbitration shall be administered by the American Arbitration Association.

 

(f)                  Rules.  The rules of
arbitration shall be the Commercial Arbitration Rules of the American
Arbitration Association (the “Commercial Arbitration Rules”), as modified by
any other instructions that the parties may agree upon at the time, except that
each party shall have the right to conduct discovery in any manner and to the
extent authorized by the Federal Rules of Civil Procedure as interpreted
by the federal courts in New York.  If
there is any conflict between those Rules and the provisions of this
section, the provisions of this section shall prevail.

 

(g)               Substantive Law.  The
arbitrators shall be bound by and shall strictly enforce the terms of this
Agreement and may not limit, expand or otherwise modify its terms.  The arbitrators shall make a good faith
effort to apply substantive applicable law, but an arbitration decision shall
not be subject to review because of errors of law.  The arbitrators shall be bound to honor
claims of privilege or work-product doctrine recognized at law, but the
arbitrators shall have the discretion to determine whether any such claim of
privilege or work product doctrine applies.

 

(h)               Decision.  The
arbitrators’ decision shall provide a reasoned basis for the resolutions of
each dispute and for any award.  The
arbitrators shall not have power to award damages in connection with any
dispute in excess of actual compensatory damages and shall not multiply actual
damages or award consequential or punitive damages or award any other damages
that are excluded under the provisions of Article VI of this Agreement.

 

(i)                   Expenses.  All costs
of arbitration and enforcement of the arbitration award, including reasonable
attorneys’ fees and court costs, costs of expert witnesses, transportation,
lodging and meal costs of the parties and witnesses, costs of transcript
preparation and other reasonable and necessary direct and incidental costs
shall be apportioned by the arbitrator(s) selected pursuant to Section 9.2(a) hereof
with a view to allocating costs to the party that does not prevail in the
arbitration.

 

(j)                   Payment of Arbitration Award.  The arbitration award shall be made and shall
be payable free of any Tax or any other deduction. The arbitration award shall
include interest, at a rate determined as appropriate by the arbitrators, as of
the date of any breach or other violation of this Agreement to the date when
the arbitration award is paid in full.

 

(k)                Remedies.  The parties
further agree that the arbitration award and any judgment thereon, if
unsatisfied, may be entered in and shall be enforceable by the courts of any
nation having jurisdiction over the person or property of the party against
whom the arbitration award has been rendered.

 

(l)                   Specific Performance; Enforcement of Arbitration Award.  In the event of any breach by a party of the
terms of this Agreement which would cause any nonbreaching party to be
irreparably harmed or for which such nonbreaching party could not be made whole
by monetary damages, then in such circumstances such nonbreaching party, in
addition to any 

 

45

 

other remedy to which it may be entitled at law or in
equity, shall be entitled to compel specific performance of this Agreement in
any action instituted pursuant to this Section 9.2 and in any action
instituted in any court of applicable jurisdiction to enforce any interim or
final arbitration award rendered pursuant to this Section 9.2.

 

(m)             Waiver of
Jury Trial.  EACH PARTY
EXPRESSLY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT OR PROCEEDING RELATING
TO OR ARISING FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.  EACH PARTY ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER THIS AGREEMENT AND EACH PARTY REPRESENTS THAT IT
IS KNOWINGLY AND VOLUNTARILY WAIVING ITS JURY TRIAL RIGHT AFTER CONSULTATION
WITH LEGAL COUNSEL.

 

Section 9.3                                      Confidentiality.

 

(a)                Seller
acknowledges that it has or may have had in the past, currently has and in the
future may have access to Confidential Information (as defined below) of Sea
Coast, Buyer and the Partnership.  Prior
to Closing, the parties agree to abide by the terms of the Confidentiality
Agreement dated April 11, 2005 between Partnership and Sea Coast, which
shall terminate as of the Closing Date. 
From and after the Closing, Seller agrees that it shall keep
confidential all such Confidential Information for five years and, except with
the specific prior written consent of Buyer, shall not disclose such
Confidential Information to any person except (i) the directors, officers,
employees, Affiliates, accountants (including independent certified public
accountants), advisors, attorneys, consultants or other agents (collectively, “Representatives”)
of Buyer and (ii) its own Representatives, provided that those
Representatives agree to the confidentiality provisions of this Section 9.3;
provided, however, that Confidential Information shall not include such
information as (A) becomes known to the public generally through no fault
of Seller or (B) is required to be disclosed by law or the order of any
Governmental Body under color of law, provided, that prior to disclosing any
information pursuant to this clause (B), Seller shall, if possible, give prior
written notice thereof to Buyer and provide Buyer with the opportunity to
contest that disclosure.  “Confidential
Information” means, with respect to any Person, all trade secrets, know how and
other confidential, nonpublic and/or proprietary information of that Person,
including any such information derived from reports, investigations, research,
studies, work in progress, codes, marketing, sales or service programs,
customer lists, records relating to past service provided to customers, capital
expenditure projects, cost summaries, equipment or production system designs or
drawings, pricing formulae, contract analyses, financial information,
projections, present and future business plans, agreements with vendors, joint
venture agreements, confidential filings with any Governmental Body and all
other confidential, nonpublic concepts, methods, techniques or processes of
doing business, ideas, materials or information prepared or performed for, by
or on behalf of that Person.

 

(b)               Because of (i) the
difficulty of measuring economic losses as a result of the breach of the
covenants in Section 9.3(a) and (ii) the immediate and
irreparable damage that would be caused to Buyer for which it would have no
other adequate remedy, in the event of a breach or threatened breach by Seller
of the provisions of this Section 9.3 with respect to any Confidential
Information, Buyer shall be entitled to an injunction restraining Seller from 

 

46

 

disclosing, in whole or in part, that Confidential Information.  Nothing herein shall be construed as
prohibiting Buyer from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.

 

Section 9.4                                      Expenses.  Except as
otherwise provided in this Agreement, Buyer and Seller shall pay their own
respective fees and expenses incurred in connection with the negotiation,
preparation and execution of this Agreement (including the exhibits and
schedules hereto) and the consummation of the transactions contemplated herein
and therein, including all legal, accounting, tax, brokers’ and other advisors’
fees and expenses.  Buyer will pay the
filing fee under the HSR Act and all expenses of obtaining the financial
statements contemplated under Section 7.1(f) and all costs and
expenses (including Vessel documentation expenses) necessary to effect the
Pre-Closing Merger.

 

Section 9.5                                      Entire Agreement. 
This Agreement, including all schedules and exhibits hereto, constitutes
the entire agreement of the parties with respect to the subject matter hereof.  This Agreement may not be modified, amended
or terminated except by a written instrument specifically referring to this
Agreement signed by all the parties hereto.

 

Section 9.6                                      Waivers and Consents. 
All waivers and consents given hereunder shall be in writing.  No waiver by any party hereto of any breach
or anticipated breach of any provision hereof by any other party shall be
deemed a waiver of any other contemporaneous, preceding or succeeding breach or
anticipated breach, whether or not similar. 
Except as provided in this Agreement, no action taken pursuant to this
Agreement, including any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance
with any representations, warranties, covenants or agreements contained in this
Agreement.

 

Section 9.7                                      Notices.  All notices
and other communications hereunder shall be in writing and shall be deemed to
have been received only if and when (a) personally delivered, (b) on
the third day after mailing, by United States mail, first class, postage
prepaid or by certified mail return receipt requested, addressed in each case
as follows (or to such other address as may be specified by like notice) or (c) received
by facsimile at the phone number listed below:

 

(a)                If to Buyer or to
the Partnership to:

 

K-Sea Operating
Partnership L.P.

3245 Richmond Terrace

Staten Island, New York
10303

Attn:  Timothy J. Casey

Fax:  (718) 815-6276

 

47

 

with a
copy to:

 

Baker Botts L.L.P.

One Shell Plaza

910 Louisiana

Houston, Texas 77002

Attn:  Sean T. Wheeler

Fax:  (713) 229-7868

 

(b)               If to Seller or
Saltchuk to:

 

Marine Resources Group, Inc.

1177 Fairview Avenue
North

Seattle, WA  98109-4118

Attn:  Paul Stevens

Fax:  (206) 903-8145

 

with a
copy to:

 

Garvey Schubert Barer

18th Floor

Second & Seneca
Building

1191 Second Avenue

Seattle, Washington
98101-2939

Attn:  Alan P. Sherbrooke

Fax:  (206) 464-0125

 

Section 9.8                                      Assignments, Successors and No Third-Party Rights.  No party may assign any of its rights or
delegate any of its obligations under this Agreement without the prior written
consent of the other parties, except that Buyer may assign any of its rights
and delegate any of its obligations (so long as Buyer remains obligated under Article VI)
under this Agreement to a subsidiary of the Partnership and may collaterally
assign its rights hereunder to any financial institution providing financing in
connection with the transactions contemplated by this Agreement.  Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon and inure to the
benefit of the successors and permitted assigns of the parties.  For a period of ten years after the Closing
Date, in the event Seller sells all or a substantial part of its assets or
Saltchuk sells the capital stock of Seller, then the purchaser (including any
affiliated purchaser) or Saltchuk shall expressly assume the obligations of
Seller under this Agreement as a condition to such sale and purchase.  For a period of ten years after the Closing
Date, in the event Seller is dissolved and the assets of Seller are distributed
to Seller’s shareholders, then such shareholders shall assume the obligations
of Seller under this Agreement as a condition to such dissolution to the extent
of the assets so distributed.  Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy
or claim under or with respect to this Agreement or any provision of this
Agreement, except such rights as shall inure to a successor or permitted
assignee pursuant to this Section 9.8.

 

48

 

Section 9.9                                      Choice of Law.  This
Agreement shall be governed by the internal laws of the State of New York
(without regard to the choice of law provisions thereof).

 

Section 9.10                                Jurisdiction and Venue.  Without
limiting the provisions of Section 6.5 Seller and Buyer hereby consent to
personal jurisdiction in any action brought with respect to this Agreement and
the transactions contemplated hereunder in any federal or state court in New
York City, New York and agree that service of process may be accomplished
pursuant to Section 9.7 above.

 

Section 9.11                                Construction; Section Headings; Table of Contents.  The language used in this Agreement shall be
deemed to be the language the parties hereto have chosen to express their
mutual intent, and no rule of strict construction will be applied against
any party hereto.  The section headings
and any table of contents contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.

 

Section 9.12                                Severability.  Any
term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction.  If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.

 

Section 9.13                                Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original and all of which together shall be deemed to be one
and the same instrument.

 

Section 9.14                                Time of Essence.  With
regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.

 

[Remainder of page intentionally left blank]

 

49

 

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement on the date first above written.

 

	
   

  	
  K-SEA OPERATING PARTNERSHIP
  L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K-Sea OLP GP, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Richard P. Falcinelli

  	
   

  
	
   

  	
  Name:

  	
  Richard P. Falcinelli

  
	
   

  	
  Title:

  	
  Vice President and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  K-SEA TRANSPORTATION PARTNERS
  L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 
  K-Sea General Partner L.P., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 
  K-Sea General Partner GP LLC, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Timothy J. Casey

  	
   

  
	
   

  	
  Name:

  	
  Timothy J. Casey

  
	
   

  	
  Title:

  	
  President and Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MARINE RESOURCES GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Paul E. Stevens

  	
   

  
	
   

  	
  Name:

  	
  Paul E. Stevens

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SALTCHUK RESOURCES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
  /s/ Steven Giese

  	
   

  
	
   

  	
  Name:

  	
  Steven Giese

  
	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
									

 

S-1

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