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Exhibit 10.6  

I.A.16 

Contract No. MA-13784 

 
  FORM OF RESTATED TITLE XI RESERVE FUND
  AND FINANCIAL AGREEMENT    
    

        THIS RESTATED TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT, dated as of and effective as of January    , 2004 (this "Financial Agreement"), among
K-SEA TRANSPORTATION PARTNERS L.P., a Delaware limited partnership ("K-Sea LP"), K-SEA OPERATING PARTNERSHIP L.P., a Delaware limited partnership
("K-Sea OLP", and collectively with K-Sea LP, the "Partnerships" and each a "Partnership"), K-SEA TRANSPORTATION INC., a Delaware corporation, and the UNITED
STATES OF AMERICA (the "United States"), represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"), pursuant to Title XI of the Merchant Marine
Act, 1936, as amended (the "Act"). 

 
 

RECITALS    
    

        1.    K-Sea Transportation LLC, a Delaware limited liability company ("K-Sea LLC"), EW Holding Corp., a New York corporation
("EW Holding"), K-Sea Transportation Corp., a New York corporation ("K-Sea Transportation"), and K-Sea Acquisition Corp., a Delaware corporation ("K-Sea
Acquisition", and collectively with K-Sea LLC, EW Holding and K-Sea Transportation, the "Original K-Sea Entities"), are parties to that certain Title XI Reserve
Fund and Financial Agreement, Contract No. MA-13784, dated June 7, 2002, as amended by Amendment No. 1 to Title XI Reserve Fund and Financial Agreement
dated June 27, 2003, by and among the Original K-Sea Entities and the Secretary (as so amended by such Amendment No. 1, the "Original Financial Agreement"). 

        2.    K-Sea
LLC and EW Holding previously issued obligations designated "United States Government Guaranteed Ship Financing Obligations, K-Sea
Series 2002-1, 2002-2, 2002-3 and 2002-4" (the "Obligations") in an aggregate principal amount of Forty Million Four Hundred
Forty-One Thousand United States Dollars ($40,441,000) to finance a portion of the cost of construction of DBL 101, O.N. 1119760, DBL 81, O.N. 1132231, DBL 82, O.N. 1137538, and DBL 102
(O.N. 1146491) (the "Vessels" and each, a "Vessel"). 

        3.    In
connection with the initial public offering of common units representing limited partner interests in K-Sea LP on the date hereof and all transactions and
agreements contemplated or incidental thereto, including the execution of the Contribution and Assumption Agreement dated as of the date hereof (the "Contribution Agreement") by and among
K-Sea Investors L.P., a Delaware limited partnership, the Original K-Sea Entities (excluding K-Sea Acquisition) and the Partnerships and the performance of the
terms set forth in the Contribution Agreement (collectively, the "MLP Transaction"), by assumption, merger and operation of law K-Sea LP and K-Sea OLP simultaneously herewith
have succeeded to substantially all of the interests and obligations of the Original K-Sea Entities including, without limitation, the Obligations, the Secretary's Note, the Security
Agreement, the Mortgage and the other documents and instruments related thereto, and all Increased Security, including the Vessels. 

        4.    The
parties hereto desire to amend and restate the Original Financial Agreement in its entirety. 

 

        NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and of other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 

I.     Assumption  

        1.    Assumption of Original Financial Agreement    

        The
Partnerships, jointly and severally, hereby expressly assume all of the respective former, present and future obligations, duties, right, title and interest of the Original
K-Sea Entities in and to the Original Financial Agreement, as amended and restated hereby, together with all documents and instruments evidencing any such obligations, duties, right, title
and interest thereto, and the Partnerships expressly agree, jointly and severally, specifically to perform all of the respective agreements and obligations of the Original K-Sea Entities
under the Original Financial Agreement as amended and restated hereby. 

II.    Amendments and Restatement.  

        The Original Financial Agreement is hereby amended and restated in its entirety as follows: 

        SECTION 1. (a)    Granting Clause.    Each Partnership hereby sells,
grants, conveys, mortgages, assigns, transfers, pledges, confirms and sets over to the Secretary a continuing security interest in all of such Partnership's right, title and interest in and to
(1) the Title XI Reserve Fund, and (2) all sums, moneys, securities, and proceeds thereof currently on deposit, or hereafter deposited, in the Title XI Reserve Fund. 

        (b)    Definitions.    For all purposes of this Financial Agreement, unless otherwise expressly provided or unless the
context otherwise requires, the capitalized terms used herein shall have the meaning specified in Schedule X to the Security Agreement, Contract No. MA-13781, as amended and
restated on the date hereof, by and among K-Sea LP and K-Sea OLP and the Secretary, (the "Security Agreement"), 

        SECTION 2.    Title XI Reserve Fund.    (a) The Secretary has established a Deposit
Fund with the U.S. Department of Treasury pursuant to Section 1109 of the Act and in accordance with the terms and conditions of the Depository Agreement (herein called the "Title XI Reserve
Fund"). 

        (b)(1)    Within
one hundred and five (105) days after the end of each fiscal year of K-Sea LP (each, a "Fiscal Year"), K-Sea LP shall compute
the consolidated net income of K-Sea LP, K-Sea OLP and their respective consolidated subsidiaries (the "Consolidated Group") attributable to the operation of the Vessels
("Title XI Reserve Fund Net Income"). This computation requires the multiplication of the Consolidated Group's Adjusted Net Income After Taxes by a fraction with a numerator composed of the total
original capitalized cost of the Vessels (prorated if any such Vessel has been operated for a period of less than a full year) and a
denominator composed of the total original capitalized cost of all the Consolidated Group's fixed assets. "Adjusted Net Income After Taxes", for the purposes hereof, shall mean consolidated net income
after taxes computed in accordance with generally accepted accounting principles, adjusted as follows: 

        (A)    The
depreciation expense applicable to the accounting year shall be added back; 

        (B)    There
shall be subtracted an amount equal to the required major maintenance (shipyard) expenditures actually paid by the Consolidated Group during the year, to the
extent such expenditures have not already been expensed by the Consolidated Group for financial reporting purposes; 

        (C)    There
shall be subtracted an amount equal to the principal amount of debt required to be paid or redeemed, and actually paid or redeemed by the Consolidated Group during
the year; 

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and
the principal amount of Obligations Retired or Paid, prepaid or redeemed, in excess of the required Redemptions or payments which may be used by the Consolidated Group as a credit against future
required Redemptions or other required payments with respect to the Obligations, but excluding payments from the Title XI Reserve Fund and the Title XI Escrow Fund. 

        (2)    Promptly
after the computation of the Title XI Reserve Fund Net Income by the Consolidated Group: 

        (A)    For
each Vessel owned by the Consolidated Group, then from the Title XI Reserve Fund Net Income for such Vessel there shall be deducted, annually, an amount (pro rated
for a period of less than a full Fiscal Year) which is ten percent (10%) of the Consolidated Group's aggregate original equity investment in such Vessel, as specified in Attachment A; 

        (B)    The
Partnerships shall, unless otherwise approved by the Secretary in writing, transmit to the Secretary for the Secretary's prompt deposit into the Title XI Reserve
Fund an amount equal to fifty percent (50%) of the balance of the Title XI Reserve Fund Net Income remaining after the above deductions; 

        (C)    Irrespective
of the Partnerships' deposit requirements for the Title XI Reserve Fund, the Partnerships shall not be required to make any deposits in the Title XI Reserve
Fund if (i) the Obligations and the related Secretary's Note with respect to the Vessels shall have been satisfied and discharged and if the Partnerships shall have paid or caused to be paid
all other sums secured under
the Security Agreement or the Mortgage, (ii) all of the Guarantees on the Outstanding Obligations shall have been terminated pursuant to the Security Agreement, or (iii) the amount
(including any securities at current market value) in the Title XI Reserve Fund is equal to, or in excess of fifty percent (50%) of the principal amount of the Outstanding Obligations of each Series; 

        (D)    The
Partnerships shall deliver to the Secretary at the time of each deposit for the Title XI Reserve Fund pursuant to Section 2(b)(2)(B), and any deposits
required under the Security Agreement, a statement of an independent certified public accountant (who may be the regular auditors for either of the Partnerships) stating that such deposit has been
computed in accordance with Section 2(b)(2)(B), (and the Security Agreement, if applicable) and showing the pertinent calculations; 

        (E)    In
addition, the Partnerships shall deliver to the Secretary, within one hundred and five (105) days after the end of each Fiscal Year of the Partnerships, a
statement by such certified public accountant stating (i) the total amount of all deposits which were required to be so deposited into the Title XI Reserve Fund for such Fiscal Year (and
showing the pertinent calculations), or (ii) that no such deposit was required to be made for such Fiscal Year (and showing the pertinent calculations) and that at the end of such Fiscal Year
no adjustments pursuant to Section 2(b)(2)(F) were required to be made (and, if such adjustments were required to be made, stating the reasons therefor); 

        (F)    The
computation of all deposits required by this Section 2 shall be made on the basis of information available to the Partnerships at the time of each such
deposit. Each such deposit shall be subject to adjustments from time to time in the event and to the extent that the same would be required or permitted by mistakes or omissions, additional
information becoming available to the Partnerships, or judicial or administrative determinations made subsequent to the making of such deposits. 

        (3)    Notwithstanding
the foregoing, the Partnerships shall not be required to make any deposits into the Title XI Reserve Fund if the income of the Vessels (which would cause
such deposit under Section 2(b)(2) above) is earned during the Partnerships' Fiscal Year at the end of which the 

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Partnerships
are in compliance with the financial requirements indicated in Section 8(b)(i), (ii) and (iii) hereof. 

        SECTION 3.    Withdrawals from the Title XI Reserve Fund.    (a) From time to time,
moneys in the Title XI Reserve Fund shall be subject to withdrawal by delivery by K-Sea LP to the Secretary of a Request for Payment (specifying the Person or Persons to be paid and the
amount of such payment) executed by K-Sea LP, together with an Officer's Certificate of K-Sea LP stating the reasons and purpose for the withdrawal. 

        (b)    If
the Secretary approves the Request, the Secretary shall promptly withdraw the moneys from the applicable Deposit Fund and make payment in accordance with the terms of
the Request. 

        (c)    Withdrawals
of Additional Deposits and Obligation Deposits (as each term is defined in Section 6 below) shall be made in accordance with the terms of
Section 6 below. 

        SECTION 4.    Termination of the Title XI Reserve Fund.  

        (a)    The Title XI Reserve Fund shall terminate at such time as the Secretary's Note shall have been satisfied and discharged and the Partnerships
shall have paid or caused to be paid all sums secured under the Security Agreement and the Mortgage. 

        (b)    Upon
the termination of the Title XI Reserve Fund, pursuant to Section 4(a), the moneys remaining in the Title XI Reserve Fund shall be subject to withdrawal and
payment into the general funds of K-Sea LP. 

        (c)    Upon
payment by the Secretary to the Indenture Trustee of the Guarantees pursuant to the Indenture, the Title XI Reserve Fund shall be terminated and the balance
remaining in the Title XI Reserve Fund shall be paid to the Secretary and the Partnerships as determined by the Secretary. 

        (d)    Any
withdrawal from the Title XI Reserve Fund pursuant to this Section 4 shall not effect a discharge of or diminish any obligations of the Partnerships under the
Security Agreement, Mortgage or any other agreement as the case may be except to the extent that the amount withdrawn is applied to payments required to be made by the Partnerships under the Security
Agreement, Mortgage or any other agreement. 

        SECTION 5.    Eligible Investments; Form of Deposits.    (a) Moneys in the Title XI
Reserve Fund shall be invested by the Secretary in direct obligations of the United States or any agency of the United States ("Eligible Investments"). 

        (b)    In
any case where either Partnership is required to deposit or redeposit sums into the Title XI Reserve Fund, such Partnership shall make the required deposit in cash. 

        (c)    Cash
held in the Title XI Reserve Fund will be held by the U.S. Department of Treasury pursuant to the terms and conditions of the Depository Agreement. 

        SECTION 6.    Additional Availability of Funds.    (a) On the date hereof and, unless
otherwise provided in this Section 6, throughout the duration of the term of the Obligations, the Partnerships shall cause to be issued and maintained in favor of the Secretary funds in the
aggregate sum of Eight Million Dollars ($8,000,000) (the "Additional Availability of Funds"), in the form of one or more Letters of Credit and/or additional cash deposits to the Title XI Reserve Fund
(such additional cash deposits defined as "Additional Deposits"). All Letters of Credit delivered from time to time to the Secretary in satisfaction of this Section 6(a) shall meet the
requirements of Section 6(a)(5) below. The Partnerships agree that the Additional Availability of Funds in the form of Letters of Credit and/or the Additional Deposits shall not be in lieu of
any other deposits, in whole or in part, that the Partnerships are required to make into the Title XI Reserve Fund in accordance with the terms hereof or any other document providing security to the
Secretary for the Title XI Financing. The Partnerships shall have thirty (30) days after receiving written notice from the Secretary of any inadequacy of the Additional 

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Availability
of Funds to provide additional Letters of Credit and/or Additional Deposits to maintain an aggregate sum of Eight Million Dollars ($8,000,000). To the extent that at any time the
Additional Availability of Funds, including the Letters of Credit, Additional Deposits, and any accrued earnings thereon, but excluding Obligations Deposits made in accordance with Section 6(b)
below, exceeds Eight Million Dollars ($8,000,000), the Secretary shall approve any Request by K-Sea LP to withdraw from Additional Deposits an amount equal to or less than such excess
amount, provided that no Security Default or Payment Default exists at such time. The following provisions also shall apply to the Additional Availability of Funds: 

        (1)    The
cash amounts of the Additional Deposits shall at all times be maintained at a minimum of One Million Five Hundred Eighteen Thousand Eight Hundred
Seventy-Five Dollars ($1,518,875), which amount is on deposit as of the date hereof in the Title XI Reserve Fund. At the sole discretion of the Partnerships, from
time-to-time the cash amount of the Additional Deposits may be increased with a corresponding decrease in the drawable amount of the Letters of Credit, but at all times the
Additional Deposits shall not be less than One Million Five Hundred Eighteen Thousand Eight Hundred Seventy-Five Dollars ($1,518,875); 

        (2)    The
Additional Deposits are subject to a first security interest in favor of the Secretary in accordance with the terms hereof; 

        (3)    The
Secretary agrees that the Secretary shall not draw on any Letter of Credit or withdraw any Additional Deposits unless (i) there shall have occurred and be
continuing a Default (ii) the Secretary has assumed any of the Obligations or (iii) the circumstances set forth in the next following sentence occur. Within not less than thirty
(30) days prior to the expiration of any Letter of Credit, unless an outstanding Letter of Credit is replaced by Additional Deposits or a new Letter of Credit meeting the requirements hereof
for Additional Availability of Funds, the Secretary shall be entitled to draw down such expiring Letter of Credit and deposit the proceeds thereof in the Title XI Reserve Fund as Additional Deposits.
The Secretary may agree to any increase or decrease in the amount of the Letter of Credit, if and when K-Sea LP makes such Request, to the extent that the Partnerships shall have otherwise
satisfied the requirements hereunder, including without limitation
requirements under Section 6(a), with respect to the Additional Availability of Funds. Except as specifically otherwise set forth in this Section 6(a)(3), any amounts drawn under a
Letter of Credit or withdrawn from Additional Deposits shall be applied by the Secretary in accordance with the terms of Section 6.05 of the Security Agreement; 

        (4)    The
Partnerships agree that if, for whatever reason, the aggregate Additional Availability of Funds is less than Two Million Dollars ($2,000,000), then the Partnerships
promptly shall refinance all the Outstanding Obligations prior to the next scheduled debt service payment of any of the Obligations, provided however that nothing herein shall constitute a waiver of
the requirement to maintain the $8,000,000 Additional Availability of Funds contained in Section 6(a); and 

        (5)    Any
Letter of Credit delivered to the Secretary under this Section 6 shall (i) be issued in accordance with the terms of the International Standby
Practices (ISP 98) issued by the International Chamber of Commerce, as the same may be amended from time-to-time, and (ii) be issued by KeyBank or another United
States bank or United States financial institution with a branch office located in the United States satisfactory to the Secretary. In addition to the criteria described in the preceding sentence, all
Letters of Credit shall be satisfactory in form and substance to the Secretary. 

        (b)    In
addition to the Additional Availability of Funds, on the first Business Day of each month the Partnerships agree to make a deposit (the "Obligations Deposit") to the
Title XI Reserve Fund in the amount of one-sixth (1/6) of the amount of the next semi-annual payment of principal and interest due respecting the Obligations.
The Partnerships shall be entitled to timely request, and the Secretary, 

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provided
that no Payment Default exists at such time, shall give its written consent to, the timely withdrawal of the Obligations Deposit to make the next due payment of principal of, and interest on,
the Obligations to assure timely semi-annual payments of the Obligations without reducing the Additional Availability of Funds below Eight Million Dollars ($8,000,000). 

        SECTION 7.    Additional Mortgage.    (a) K-Sea OLP agrees to and shall
execute the Additional Mortgage and the Additional Assignment of Insurance in favor of the Secretary as collateral to secure the obligations of the Partnerships hereunder and under the other
Documents. The Partnerships and the Secretary agree that: 

        (1)    The
Additional Mortgage, as originally executed, shall cover the Additional Vessels with an aggregate Orderly Liquidation Value equal to or exceeding Ten Million Dollars
($10,000,000), which shall be maintained for the duration of the Additional Mortgage specified below. If the Orderly Liquidation Value of the Additional Vessels drops below $10,000,000, then upon
receiving written notice from the Secretary the Partnership shall promptly add additional collateral in favor of the
Secretary such that the aggregate of the Additional Vessels and such new collateral equals at least $10,000,000; 

        (2)    The
Additional Mortgage may be supplemented from time to time, and the Secretary shall provide its consent as mortgagee when requested, to replace, remove or otherwise
change any Additional Vessel covered under the Additional Mortgage with a different vessel or vessels that satisfy the requirements of Additional Vessel as set forth in the definition of Additional
Vessel in Attachment A herein, provided, that, the aggregate Orderly Liquidation Value of the Additional Vessels under the Additional Mortgage, as
supplemented, equals or exceeds Ten Million Dollars ($10,000,000); 

        (3)    No
hire, freights, or earnings or any other revenue relating to any additional Vessel shall be assigned or pledged by the Partnerships to any entity; and 

        (b)    The
Additional Mortgage shall terminate on December 31, 2008 if, at such time, (i) there is no default under the Security Agreement that is continuing and
(ii) the Consolidated Group meets the requirements with respect to Fixed Charge Coverage Ratio, Net Worth and Long Term Debt as set forth in Section 8(b)(i), (ii) and
(iii) herein based on the Consolidated Group's financial statements dated December 31, 2007, June 30, 2008 and December 31, 2008. If the Consolidated Group is not in
compliance with the requirements with respect to Fixed Charge Coverage Ratio, Net Worth and Long Term Debt as set forth in Section 8(b)(i), (ii) and (iii) herein on
December 31, 2008, the Additional Mortgage shall terminate upon the receipt of four consecutive semi-annual financial statements that demonstrate compliance provided there is no
default under the Security Agreement that is continuing. 

        SECTION 8.    Financial Requirements of the Partnerships.  

        (a)    Primary Covenants. The Consolidated Group shall not without the Secretary's prior written consent: 

        (1)    Except
as consented to in writing by the Secretary on or before the date hereof, enter or permit any member of the Consolidated Group to enter into any service,
management or operating agreement for the operation of the Vessels (excluding husbanding type agreements), or appoint or designate a managing or operating agent for the operation of the Vessels
(excluding husbanding agents) unless approved by the Secretary; 

        (2)    Except
as consented to in writing by the Secretary on or before the date hereof and except as permitted in subsection 8(a)(6) below: sell, mortgage, transfer, lease or
demise charter, or permit any member of the Consolidated Group to sell, mortgage, transfer, lease or demise charter, any Vessel or any assets related to the Security or the Increased Security to any
non Related Party or to a Related Party, unless such transaction is (i) at a fair market value as 

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determined
by an independent appraiser acceptable to the Secretary, and (ii) a total cash transaction or, in the case of demise charter or lease, the charter payments are cash payments;
provided, however, that this subsection 8(a)(2) shall not apply to any sale, lease or disposition of any asset (excluding any Vessel) in the ordinary course of business if such asset has a fair market
value of less than $1,000,000; 

        (3)    Enter
or permit any member of the Consolidated Group to enter into any agreement for both (A) sale and (B) leaseback of the same assets so sold unless the
proceeds from such sale are at least equal to the fair market value of the property sold; 

        (4)    Guarantee
or permit any member of the Consolidated Group to guarantee, or otherwise become liable for the obligations of any Person (other than its direct or indirectly
wholly owned subsidiaries or any other member of the Consolidated Group with respect to obligations reflected on the balance sheet of the Consolidated Group on the date hereof), except in respect of
any undertakings as to the fees and expenses of the Indenture Trustee, except endorsement for deposit of checks and other negotiable instruments acquired in the ordinary course of business except to
KeyBank and CIT in connection with the Revolving Credit Facility defined in Section 8(b)(ii) and except as otherwise permitted in Section 8(b); 

7

   
        (5)   Directly or indirectly embark or permit any member of the Consolidated Group to embark on any new enterprise or business activity not directly connected with the
business of waterborne transportation or other activity in which any member of the Consolidated Group are actively engaged; 

        (6)   Except
as consented to in writing by the Secretary on or before the date hereof, enter or permit any member of the Consolidated Group to enter into any merger or
consolidation or convey, sell, demise charter to a Person not a member of the Consolidated Group or otherwise transfer, or dispose of any portion of its properties or assets (any and all of which acts
are encompassed within the words "sale" or "sold" as used herein), provided that, any member of the Consolidated Group shall not be deemed to have sold
such properties or assets if (A) the Net Book Value (defined as the original book value of an asset less depreciation calculated on a straight line basis over its useful life) of the aggregate
of all the assets sold by the Consolidated Group during any period of twelve (12) consecutive calendar months does not exceed ten percent (10%) of the total Net Book Value of all of the
Consolidated Group's assets (the assets which are the basis for the calculation of the ten percent (10%) of the Net Book Value are those indicated on the most recent audited annual financial statement
required to be submitted pursuant to Section 9 hereof prior to the date of the sale); and (B) the Consolidated Group retains the proceeds of the sale of such assets for use in accordance
with the Consolidated Group's regular business activities. Notwithstanding any other provision of this subsection, the Consolidated Group may not consummate any such sale without the Secretary's prior
written consent if the Consolidated Group has not, prior to the time of such sale, submitted to the Secretary the financial statement described in clause (A) of this subsection, and any attempt
to consummate a sale absent such approval shall be null and void ab initio. Notwithstanding any other provision of this Financial Agreement, the
Consolidated Group may demise charter its vessels other than the Vessels so long as such demise charters (a) have terms and conditions, including charter rates, consistent with the market for
such charters, (b) are for periods of less than five years, and (c) are each with a citizen of the United States as such is defined in 46 CFR 221-3. In addition, the
Consolidated Group may not have more than fifty percent (50%) of the vessels in its fleet operate pursuant to demise charters; and 

        (7)   Make
any payment in relation to the indemnity granted to K-Sea LLC, K-Sea Acquisition, EW Holding and K-Sea Transportation under
Section 3.2 of the Omnibus Agreement ("Indemnity Payment") unless (i) such Indemnity Payment is made exclusively to or for the benefit of a third party unrelated to any entity that
executed the Omnibus Agreement, (ii) such Indemnity Payment is made only from Available Cash, (iii) the total aggregate amount of all such Indemnity Payments made, including such
Indemnity Payment, does not exceed One Million Dollars ($1,000,000), and (iv) K-Sea LP is permitted to make distributions under Section 8(c) at the time such Indemnity
Payment is made, provided, any Indemnity Payment which is due but is not be paid in whole or part due to the application of this Paragraph 8(a)(7) and in the absence of the Secretary's consent
(which may be withheld in the Secretary's sole discretion), may accrue so long as it is fully subordinated to the Obligations. 

        (b)   Supplemental Covenants.    Unless, (i) on the last day of the most recent Fiscal Year quarter, the
Consolidated Group's Fixed Charge Coverage Ratio (as defined in Attachment A hereto) is at least 3.0 : 1.0 (ii) after giving effect to such transaction or
transactions, the Consolidated Group's Long Term Debt does not exceed the Consolidated Group's Net Worth, and (iii) after giving effect to such transaction or transactions, the Consolidated
Group's Net Worth is at least the amount specified in Attachment A hereto, except as consented to in writing by the Secretary on or before the date hereof or with respect to intra-group transactions
among members of the Consolidated Group, the Consolidated Group shall not, without the Secretary's prior written consent: 

        (1)   Withdraw
any capital; 

        (2)   Redeem
any partnership interest or convert any of the same into debt; 

        (3)   Except
as permitted by Section 8(c), make any distribution respecting any partnership interest; 

8

 

        (4)   Make
any loan or advance (except advances to cover current expenses of any member of the Consolidated Group), either directly or indirectly, to (x) any partner or
shareholder of any member of the Consolidated Group, or (y) any director, officer, or employee of the Consolidated Group or any Related Party or (z) to any Related Party; or make any
reimbursement to the General Partner for any bonuses or incentive payments; 

        (5)   Make
any investments in the securities of any Related Party; 

        (6)   Prepay
in whole or in part any indebtedness to (x) any partner or shareholder of any member of the Consolidated Group, or (y) any director, officer or
employee of the Consolidated Group or any Related Party or (z) to any Related Party; 

        (7)   Increase
any direct employee compensation (as hereinafter defined) paid to any employee in excess of One Hundred Thousand United States Dollars ($100,000) per annum; nor
increase any direct employee compensation which is already in excess of One Hundred Thousand United States Dollars ($100,000) per annum; nor initially employ or re-employ any person at a
direct employee compensation rate in excess of One Hundred Thousand United States Dollars ($100,000) per annum; provided, however, that beginning with January 1, 2000, the One Hundred Thousand
United States Dollars ($100,000) limit may be increased annually based on the previous year's closing CPI-U (Consumer Price Index for All Urban Consumers published by the Bureau of Labor
Statistics). For the purpose of this section the term "direct employee compensation" is the total amount of any wage, salary, bonus, commission, or other form of direct payment to any employee of the
Consolidated Group or any employee of any Affiliate of any member of the Consolidated Group whose compensation is reimbursed by the Consolidated Group with guarantees under Title XI of the Act as
reported to the Internal Revenue Service for any Fiscal Year; provided, however, that direct employee compensation shall not include any dividend or
distribution by any member of the Consolidated Group to its partners or shareholders generally; 

        (8)   Acquire
any fixed assets other than those required for the maintenance of the Consolidated Group's existing assets, including the normal maintenance and operation of any
vessel or vessels owned or chartered by the Consolidated Group; 

        (9)   Either
enter into or become liable (directly or indirectly) under charters and leases (having a term of six months or more) for the payment of charter hire and rent on
all such charters and leases which have annual payments aggregating in excess of Five Hundred Thousand United States Dollars ($500,000); 

        (10) Pay
any indebtedness subordinated to the Obligations or to any other Title XI obligations; 

        (11) Create,
assume, incur, or in any manner become liable for any indebtedness, except current liabilities, short term loans or revolving credit lines, incurred or assumed
in the ordinary course of the waterborne transportation business of the Consolidated Group including, without limitation, the Participation and Loan and Security Agreement dated as of the date hereof
(the "Revolving Credit Facility") by and among K-Sea OLP, KeyBank and CIT; 

        (12) Make
any investment, whether by acquisition of stock or indebtedness, or by loan, advance, transfer of property, capital contribution, guarantee of indebtedness or
otherwise, in any Person, other than obligations of the United States, bank deposits or investments in securities of the character permitted for moneys in the Title XI Reserve Fund; 

        (13) Create,
assume, permit or suffer to exist or continue any mortgage, lien, charge or encumbrance upon, or pledge of, or subject to the prior payment of any indebtedness,
any of its property or assets, real or personal, tangible or intangible, whether now owned or hereafter acquired, or own or acquire, or agree to acquire, title to any property of any kind subject to
or upon a chattel mortgage or conditional sales agreement or other title retention agreement, except (i) loans, mortgages 

9

 

and
indebtedness guaranteed by the Secretary under Title XI of the Act or related to the construction of a vessel approved for Title XI by the Secretary, (ii) liens incurred in the ordinary
course of the waterborne transportation business of the Consolidated Group, and (iii) mortgages, liens, charges, encumbrances or pledges granted to secure the Revolving Credit Facility,
provided, however, that no such mortgages, liens, charges, encumbrances or pledges shall encumber the Secretary's Increased Security. 

        (c)   Distribution Covenants.    K-Sea OLP shall not be restricted from making distributions to
K-Sea LP. K-Sea LP may, at any time, make any distribution of the Consolidated Group's Available Cash (as defined in Attachment A), provided,
that, upon the event of any of (i) through (vi) below, no distributions of Available Cash shall be permitted unless the Secretary provides its written consent for
such distributions of Available Cash: 

	(i)
	The
occurrence of an event that with time or notice would become a Payment Default;

	(ii)
	The
occurrence and continuance of an event that with time or notice would become a Security Default, including without limitation any default in the observance and
performance of any provision related to the Additional Availability of Funds (in the amount of $8,000,000 as provided in Section 6 above);

	(iii)
	The
occurrence and continuance of an event that with time or notice would become a Security Default with respect to the observance and performance of any provision
related to the Additional Mortgage (as provided in Section 7 above) (if not cured within the period of time permissible for such Security Default as set forth in the Security Agreement);

	(iv)
	Any
member of the Consolidated Group becomes insolvent or bankrupt, or has dissolved or shall, by a court of competent jurisdiction, be adjudged a bankrupt, or files a
petition of reorganization under the United States Bankruptcy Code, or such petition be filed by creditors and the same shall be approved by a court of competent jurisdiction;

	(v)
	K-Sea
LP has outstanding indebtedness exceeding Five Million Dollars ($5,000,000) incurred for the purpose of making distributions or indemnity payments
under Section 8(a)(7); or

	(vi)
	The
occurrence and continuance of an event that with time or notice would become a Security Default with respect to the observance and performance of any provision
related to the Obligations Deposit (as provided in Section 6(b) above). 

        SECTION 9.    Reporting Requirements.    (a) K-Sea
LP shall furnish to the Secretary, in duplicate, (1) within one hundred and five (105) days after the end of each Fiscal Year, commencing with the first Fiscal Year ending after the date
of the date hereof, the Audited Financial Statements of the Consolidated Group including cash flow statement, balance sheet and income statement for such Fiscal Year along with a completed M.A.
Form 172 or such other form approved by the Secretary, and (2) within forty-five (45) days after the expiration of each quarterly period of the Consolidated Group's
Fiscal Year commencing with the first such quarterly period ending after the date hereof, the Consolidated Group's quarterly financial statements including cash flow statement, balance sheet and
income statement for such quarterly period together with a completed M.A. Form 172 or such other form approved by the Secretary for such quarterly period together with an Officer's Certificate
of K-Sea LP certifying as to the accuracy of such quarterly statements. During any period when either Partnership is in bankruptcy, K-Sea LP shall furnish to the Secretary,
within thirty (30) days after the first of each month commencing with the first such monthly period ending after the date of such Partnership's bankruptcy, the Consolidated Group's monthly
financial statements including cash flow statement, balance sheet and income statement for such monthly period, together with a completed M.A. Form 172 or such other form approved by the
Secretary for such monthly period along with an Officer's Certificate of K-Sea LP certifying as to the accuracy of such monthly financial statement. 

10

 

        (b)   Together
with the Audited Financial Statements and quarterly financial statements delivered in accordance with the terms of Section 9(a), K-Sea LP
shall furnish to the Secretary, an Officer's Certificate dated as of the same date stating (x) whether or not the Partnerships are in default in the performance of or in default in the
compliance with any covenant, agreement or condition contained herein or in the Mortgage or the Security Agreement and if so, specifying each such default and stating the nature thereof and
(y) confirming that the Partnerships are in compliance with the financial covenants of Section 8(b) hereof and, if not, stating the nature of the non-compliance and showing
the pertinent calculations. 

        (c)   K-Sea
LP shall furnish to the Secretary, as soon as practicable but in any case within five (5) Business Days following each quarterly determination
of the level of distributions of the Consolidated Group's Available Cash (as defined in Attachment A), a written notice of such determination, which may be in the form of a copy of an 8-K
filing with the U.S. Securities and Exchange Commission or a press release that relates to such determination, together with an Officer's Certificate of K-Sea LP certifying as to the
accuracy of such determination. 

        (d)   In
the event any material information, circumstances, or accounting rule reflected in any periodic financial report provided by the Consolidated Group to the Secretary
pursuant to this Section 9 is subsequently materially changed, the next subsequent report provided to the Secretary by the Consolidated Group following such material change, or another
appropriate report to the Secretary such as a press release or 8-K filing, shall inform the Secretary of such material change. 

        SECTION 10.    Qualifying Financial Requirements of the Partnership and Collateral
Assurance.    Immediately after the consummation of the MLP Transaction, the Consolidated Group shall meet the requirements with respect to Fixed Charge Coverage
Ratio, Net Worth and Long Term Debt as set forth in Section 8(b)(i), (ii) and (iii) above. If at any time the Partnerships are not in compliance with the requirements with respect
to Fixed Charge Coverage Ratio, Net Worth and Long Term Debt as set forth in Section 8(b)(i), (ii) and (iii) above based on the Consolidated Group's Audited Financial Statements,
at the Partnerships' expense, the Secretary may conduct an annual inspection of the Vessels during the period of such non-compliance. Any inspection shall be on reasonable notice to the
Partnerships and shall not interfere with the operation of any Vessel. 

        SECTION 11.    Fund in Lieu of Title XI Reserve Fund.    In the event
any Vessel is subject to a capital construction fund established by the Partnerships, as provided in Section 607 of the Act, whether interim or permanent (herein called the "Capital
Construction Fund"), at any time when deposits would otherwise be required to be made into the Title XI Reserve Fund in accordance with the terms of Section 2 hereof, and the Partnerships elect
to deposit such funds into the Capital Construction Fund, then the Partnerships shall enter into an agreement satisfactory in form and substance to the Secretary to the effect that (a) the
Capital Construction Fund and all assets so deposited therein shall be and constitute security to the United States in lieu of the Title XI Reserve Fund as described in Section 2 hereof, and
the deposit requirements of Section 2 of this Financial Agreement shall be deemed satisfied by deposits of equal amounts in the Capital Construction Fund and (b) the Partnerships and the
Secretary may execute such further agreements or documents and take such other actions as may be deemed necessary by the Secretary to perfect the pledge of the security of the Capital Construction
Fund. 

        SECTION 12.    Notices.    Except as otherwise provided in this
Financial Agreement, notices, requests, directions, instructions, waivers, approvals or other communication may be made or delivered in person or by registered or certified mail, postage prepaid,
addressed to the party as provided below, or to such other address as such party may hereafter specify in a written notice to the other parties named herein, and all notices or other communications
shall be in writing so addressed and shall be effective upon receipt by the addressee thereof: 

11

 

	 	 	The Secretary as:	 	SECRETARY OF TRANSPORTATION

c/o Maritime Administrator

Maritime Administration

400 Seventh Street, S.W.

Washington, D.C. 20590
	

 	
 	

The Partnerships as:	
 	

K-Sea Transportation Partners L.P.

K-Sea Operating Partnership L.P.

3245 Richmond Terrace

Staten Island, NY 10303

Attn: Chief Financial Officer

        SECTION 13.    Amendments and Supplements.    No agreement shall be
effective to amend, supplement, or discharge in whole or in part this Financial Agreement unless such agreement is in writing signed by the parties hereto. Any amendments, additions, deletions,
substitutions or other changes not made in accordance with this provision shall be invalid and of no effect. 

        SECTION 14.    Counterparts.    This Financial Agreement may be executed in any number of counterparts. All such
counterparts shall be deemed to be originals, and shall together constitute but one and the same instrument. 

        SECTION 15.    GOVERNING LAW.    THIS FINANCIAL AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA, BUT IF THEY ARE INAPPLICABLE, THEN IN ACCORDANCE
WITH THE LAWS OF THE DISTRICT OF COLUMBIA. 

[signatures on next page]

12

 

        IN WITNESS WHEREOF, this Restated Title XI Reserve Fund and Financial Agreement has been executed by the parties hereto as of the day and
year first above written. 

	 	 	K-SEA TRANSPORTATION

PARTNERS L.P., BY ITS GENERAL PARTNER

K-SEA GENERAL PARTNER L.P., BY ITS GENERAL

PARTNER K-SEA GENERAL PARTNER GP LLC
	

(Seal)	
 	

 	

 
	

 Attest:	
 	

By:	

 
	 	 	 	
 Name:  John J. Nicola

Title:    Chief Financial Officer
	

 	
 	
K-SEA OPERATING PARTNERSHIP L.P.,

BY ITS GENERAL PARTNER K-SEA OLP GP, LLC
	

(Seal)	
 	

 	

 
	

 Attest:	
 	

By:	

 
	 	 	 	
 Name:  John J. Nicola

Title:    Chief Financial Officer
	

 	
 	
K-SEA TRANSPORTATION INC.
	

(Seal)	
 	

 	

 
	

 Attest:	
 	

By:	

 
	 	 	 	
 Name:  John J. Nicola

Title:    Chief Financial Officer
	

 	
 	
UNITED STATES OF AMERICA

SECRETARY OF TRANSPORTATION
	

 	
 	

MARITIME ADMINISTRATOR
	

(Seal)	
 	

 	

 
	

 Attest:	
 	

By:	

 
	 	 	 	
 Secretary

Maritime Administration

13

  

 
 

ATTACHMENT A TO
  RESTATED TITLE XI RESERVE FUND
  AND FINANCIAL AGREEMENT
  (Contract No. MA—13784)    
    

	1.
	This
Financial Agreement shall apply to the following Vessels: (a) DBL 101, O.N. 1119760, (b) DBL 81, O.N. 1132231, (c) DBL 82, O.N. 1137538, and (d) DBL
102, O.N. 1146491.

	2.
	The
Partnerships' aggregate original equity investment for use in Section 2 for: 

(a)
DBL 101, O.N. 1119760 is One Million Five Hundred Fifty-Eight Thousand Five Hundred Thirty-Five United States Dollars ($1,558,535); 

(b)
DBL 81, O.N. 1132231 is One Million Three Hundred Seventy-Six Thousand Two Hundred Thirty-Two United States Dollars ($1,376,232); 

(c)
DBL 82, O.N. 1137538 is One Million Three Hundred Thirty-Nine Thousand Nine Hundred Sixty-One United States Dollars ($1,339,961); and 

(d)
DBL 102, O.N. 1146491 is One Million Five Hundred and Four Thousand Eight Hundred Eighty-Eight United States Dollars ($1,504,888). 

	3.
	Definitions 

"Available
Cash" as used in Section 8(c) means as follows: with respect to any Quarter ending prior to the Liquidation Date: (a) the sum of (i) all cash and cash equivalents of
the Partnership Group on hand at the end of such Quarter, and (ii) all additional cash and cash equivalents of the Partnership Group on hand on the date of determination of Available Cash with
respect to such Quarter resulting from Working Capital Borrowings made subsequent to the end of such Quarter, less (b) the amount of any cash reserves that are necessary or appropriate in the
reasonable discretion of the General Partner to (i) provide for the proper conduct of the business of the Partnership Group (including reserves for future capital expenditures and for
anticipated future credit needs of the Partnership Group) subsequent to such Quarter, (ii) comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or
other agreement or obligation to which any Group Member is a party or by which it is bound or its assets are subject and (iii) provide funds for distributions under Section 6.4 or 6.5 of
the K-Sea Partnership Agreement as on the MLP Closing Date in respect of any one or more of the next four Quarters; provided, however, that the General Partner may not establish cash
reserves pursuant to (iii) above if the effect of such reserves would be that the Partnership is unable to distribute the Minimum Quarterly Distribution on all Common Units, plus any Cumulative
Common Unit Arrearage on all Common Units, with respect to such Quarter; and, provided further, that disbursements made by a Group Member or cash reserves established, increased or reduced after the
end of such Quarter but on or before the date of determination of Available Cash with respect to such Quarter shall be deemed to have been made established, increased or reduced, for purposes of
determining Available Cash, within such Quarter if the General Partner so determines. 

"Common
Unit" means any class or series of equity interest in K-Sea LP representing a fractional part of the interest of all limited partners and their assignees, and having the rights and
obligations specified with respect to Common Units in the K-Sea LP Partnership Agreement. 

"Cumulative
Common Unit Arrearage" means, with respect to any Common Unit, whenever issued, and as of the end of any Quarter, the excess, if any, of (a) the sum resulting from adding together
with Common Unit Arrearage as to a Common Unit sold in the initial public offering of Common Units for each of the Quarters within the subordination period provided in the K-Sea LP
Partnership Agreement, ending on or before the last day of such Quarter over (b) the sum of any distributions theretofore made pursuant to Section 6.4(a)(ii) of the
K-Sea LP Partnership 

14

 

Agreement,
and the second sentence of Section 6.5 of the K-Sea LP Partnership Agreement, with respect to a Common Unit sold in the initial public offering of Common Units (including
any distributions to be made in respect of the last of such Quarters). 

"EBITDA"
means, earnings before interest, taxes, depreciation, amortization and net (gain) in reduction of debt (prepayment penalties), all as shown on the Consolidated K-Sea Group's most
recent financial statements. 

"Fixed
Charge Coverage Ratio" means a fraction whereby the numerator is EBITDA less shipyard expenditures for the previous 12 months; and the denominator comprises regularly scheduled payments
of Long Term Debt and interest thereon plus the current portion of minimum rental payments under operating leases, for the previous 12 months. For all periods prior to the MLP Closing Date
which may be included in the calculation of this ratio, all amounts used in the numerator and denominator shall be, those of the Original K-Sea Entities on a consolidated basis, except
that payments of Long Term Debt and interest thereon shall exclude all amounts related to debt obligations which were repaid with proceeds from the initial public offering of limited partner interests
in K-Sea LP. 

"Group
Member" means a member of the Partnership Group. 

"K-Sea
GP" means K-Sea General Partner GP LLC, a Delaware limited liability company, and its successors and permitted assigns. 

"K-Sea
LP Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of K-Sea LP, as amended, supplemented or restated, from time to time. 

"Liquidation
Date" means (a) in the case of an event giving rise to the dissolution of K-Sea LP of the type described in clauses (a) and (b) of the first sentence of
Section 12.2 of the K-Sea LP Partnership Agreement as on the Closing Date, the date on which the applicable time period during which the holders of outstanding units have the right
to elect to reconstitute K-Sea LP and continue its business has expired without such an election being made, and (b) in the case of any other event giving rise to the dissolution of
K-Sea LP, the date on which such event occurs. 

"Minimum
Quarterly Distribution" means $0.50 per unit per Quarter (or with respect to the period commencing on the MLP Closing Date and ending on March 31, 2004, it means the product of $0.50
multiplied by a fraction of which the numerator is the number of days in such period and of which the denominator is 91), subject to adjustment in accordance with Section 6.6 and 6.9 of the
K-Sea LP Partnership Agreement. 

"Omnibus
Agreement" means the Omnibus Agreement by and among among K-Sea Investors L.P., a Delaware limited partnership, K-Sea LLC, K-Sea Acquisition, EW Holding
Corp., a Delaware corporation, K-Sea Transportation Corp., a Delaware corporation, K-Sea LP, the General Partner, K-Sea GP, K-Sea OLP, and
K-Sea OLP GP, LLC, a Delaware limited liability company. 

"Orderly
Liquidation Value" means, with respect to any Vessel, the net proceeds anticipated at a sale other than a forced sale upon foreclosure, as determined by the Secretary or by independent
appraisers appointed by the Secretary at the expense of the Partnerships. 

"Partnership
Group" means the Consolidated Group. 

"Quarter"
means a fiscal quarter consisting of three months ending on March 31, June 30, September 30 and December 31, or, with respect to the first fiscal quarter after
the MLP Closing Date, the portion of such fiscal quarter after the MLP Closing Date, of K-Sea LP. 

"Working
Capital Borrowings" means borrowings used for working capital purposes or to pay distributions to K-Sea LP's partners made pursuant to a credit facility or other arrangement to
the extent all such borrowings are required to be reduced to zero (or for the year in which the initial 

15

 

offering
and sale of Common Units to the public is consummated, the 12-month period beginning on the MLP Closing Date) for a period of 15 days. 

	4.
	The
Consolidated Group's initial Net Worth for use in Section 8(b) is $110,000,000.00 as of the date hereof and in each succeeding Fiscal Year shall be at least ninety percent
(90%) of the Consolidated Group's Net Worth as of the last day of the immediately preceding Fiscal Year, as set forth in the Audited Financial Statements of the Consolidated Group. The Consolidated
Group's Net Worth for purposes of Section 8(b) hereof shall not be lower than $90,000,000.00. 

16

QuickLinks

FORM OF RESTATED TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT

RECITALS

ATTACHMENT A TO RESTATED TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT (Contract No. MA—13784)Exhibit 10.16

FORM OF
INDEMNIFICATION AGREEMENT

THIS
INDEMNIFICATION AGREEMENT (this “Agreement”) is made as of                      , 2004 by and among
K-Sea General Partner GP, LLC, a Delaware limited liability company (the
“Company”), K-Sea General Partner, L.P., a Delaware limited partnership (the
“General Partner”), K-Sea Transportation Partners L.P., a Delaware limited
partnership (the “Partnership”), and                                  (“Indemnitee”).

PRELIMINARY STATEMENT

WHEREAS, qualified
persons are reluctant to serve organizations as directors or officers or in
other capacities unless they are provided with adequate protection against
inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of such organizations;

WHEREAS, the
parties hereto recognize that the legal risks and potential liabilities, and
the threat thereof, associated with lawsuits filed against persons serving the
Company, the General Partner, the Partnership and/or their respective
subsidiaries, and the resultant substantial time, expense and anxiety spent and
endured in defending lawsuits bears no reasonable relationship to the
compensation received by such persons, and thus poses a significant deterrent
and increased reluctance on the part of experienced and capable individuals to
serve the Company, the General Partner, the Partnership and/or their respective
subsidiaries;

WHEREAS, the
uncertainties related to obtaining adequate insurance and indemnification have
increased the difficulty of attracting and retaining such persons;

WHEREAS, it is
reasonable, prudent and necessary for the Company, the General Partners and the
Partnership to contractually agree to indemnify such persons to the fullest
extent permitted by law, so that such persons will serve or continue to serve
the Company, the General Partner, the Partnership and/or their respective
subsidiaries free from undue concern that they will not be adequately
indemnified; and

WHEREAS, the
Indemnitee is willing to serve, continue to serve and to take on additional
service for an on behalf of the Company, the General Partner and the
Partnership on the condition that the Indemnitee is indemnified according to
the terms of this Agreement;

NOW, THEREFORE, in
consideration of the premises and the covenants herein, the parties to this
Agreement agree as follows:

Section 1.  Services by Indemnitee.  Indemnitee will serve, or continue to serve,
as a Functionary of the Company and, as Indemnitee and the Company may agree,
as a Functionary of one or more Related Enterprises.  Indemnitee may at any time and for any reason resign from any
such service, subject to any other contractual obligation or any obligation
applicable law imposes.  This Agreement
is not and is not to be construed as an employment contract by the Company or
any other Related Enterprise with Indemnitee or as otherwise affecting
Indemnitee’s status, if any, as an employee of the Company or any Related
Enterprise.

 

Section 2.  Indemnification.  (a) 
If and whenever:

(1)           Indemnitee was or
is, or is threatened to be made, a party to any Proceeding by reason of:

(A)          the fact that
Indemnitee serves or served as (1) a Functionary of the Company or, at the
request of the Company, (2) a Functionary of a Related Enterprise; or

(B)           the actual or
alleged service or conduct of Indemnitee in Indemnitee’s capacity as that
Functionary, including any act actually or allegedly done or not done by
Indemnitee;

and

(2)           Indemnitee (A)
engaged in the service or conduct at issue in that Proceeding in good faith and
in a manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company and, in the event that Proceeding was or is a criminal
action or proceeding involving Indemnitee’s conduct, (B) had no reasonable cause
to believe that that conduct was unlawful,

the Partnership will, or
will cause another Partnership Entity to, indemnify Indemnitee against, and
hold Indemnitee harmless from and in respect of:

(1)           in the case of each
Claim in that Proceeding, other than a Company Claim, all liabilities and
losses, including the amounts of all judgments, penalties and fines, including
excise taxes, and amounts paid in settlement, Indemnitee has suffered or will
suffer, and all Expenses Indemnitee reasonably has incurred or will incur, as a
result of or in connection with that Claim; and

(2)           in the case of each
Company Claim in that Proceeding, all Expenses Indemnitee reasonably has
incurred or will incur as a result of or in connection with that Company Claim;
provided, however, that the Partnership will not have any obligation under this
clause (2) to, or to cause another Partnership Entity to, indemnify
Indemnitee  against, or hold Indemnitee
harmless from or in respect of, any Company Claim as to which Indemnitee was or
is adjudged to be liable to the Company or any Related Enterprise unless, and
only to the extent that, the Court of Chancery or the court in which that
Company Claim was or is brought determines on application that, despite the
adjudication of liability, but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such of those
Expenses as the Court of Chancery or that other court shall deem proper.

(b)           If and whenever Indemnitee was or is,
or is threatened to be made, a party to any Proceeding of any type to which
Section 2(a) refers and has been successful, on the merits or otherwise, in
defense of that Proceeding, or in defense of any Claim therein, the Partnership
will, or will cause another Partnership Entity to, indemnify Indemnitee
against, and hold Indemnitee harmless from and in respect of, all Expenses
Indemnitee reasonably has incurred in connection 

 

2

 

therewith.  The rights of Indemnitee under this Section
2(b) are in addition to, and independent of, the rights of Indemnitee under
Sections 2(a) or 2(c).

(c)           If and whenever Indemnitee was, or
reasonably could have been expected to have been, or is, or reasonably could be
expected to be, by reason of the knowledge of facts Indemnitee actually or
allegedly has obtained in the course of his service as (1) a Functionary of the
Company or, at the request of the Company, (2) a Functionary of a Related
Enterprise, a witness in or a deponent in connection with any Proceeding to
which Indemnitee was or is not a party, the Partnership will, or will cause
another Partnership Entity to, indemnify Indemnitee against, and hold
Indemnitee harmless from and in respect of, all Expenses Indemnitee reasonably
has incurred or will incur in connection therewith.  The rights of Indemnitee under this Section 2(c) are in addition
to, and independent of, the rights of Indemnitee under Sections 2(b) or
2(c).

Section 3.  Advancement of Expenses. (a) If and
whenever Indemnitee is, or is threatened to be made, a party to any Proceeding
that may give rise to a right of Indemnitee to indemnification under Section
2(a), the Partnership will, or will cause another Partnership Entity to,
advance all Expenses reasonably incurred by or on behalf of Indemnitee in
connection with that Proceeding within 10 days after the Company receives a
statement or statements from Indemnitee requesting the advance or advances from
time to time, whether prior to or after final disposition of that Proceeding.  Each such statement must reasonably evidence
the Expenses incurred by or on behalf of Indemnitee and include or be preceded
or accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it ultimately is determined that Indemnitee is not
entitled to be indemnified by the Company under Section 2(a) against those
Expenses.  The Partnership will accept
any such undertaking without reference to the financial ability of Indemnitee
to make repayment.  If the Partnership or
another Partnership Entity advances Expenses in connection with any Claim as to
which Indemnitee has requested or may request indemnification under Section
2(a) and a determination is made under Section 5(c) that Indemnitee is not
entitled to that indemnification, Indemnitee will not be required to reimburse
the Partnership or that other Partnership Entity for those advances until the
180th day following the date of that determination; provided, however, that if
Indemnitee timely commences and thereafter prosecutes in good faith a judicial
proceeding or arbitration under Section 7(a) or otherwise to obtain that
indemnification, Indemnitee will not be required to reimburse the Partnership
or that other Partnership Entity for those Expenses until a determination in
that proceeding or arbitration that Indemnitee is not entitled to that
indemnification has become final and nonappealable.

(b)           The Partnership or another
Partnership Entity may advance Expenses under Section 3(a) to Indemnitee or, at
the Company’s option, directly to the Person to which those Expenses are owed,
and Indemnitee hereby consents to any such direct payment, to Indemnitee’s
legal counsel or any other Person.

(c)           For the avoidance of doubt, the
parties agree that the provisions of this Section 3 shall be applicable during
the pendancy of any determination of the right of the Indemnitee to
indemnification under Section 2(a), including the pendancy of any court or
arbitration proceeding contemplated by Section 7.

 

3

 

Section 4.  Notification and Defense of Claims.  (a) 
If Indemnitee receives notice, otherwise than from the Company, that
Indemnitee is or will be made, or is threatened to be made, a party to any
Proceeding in respect of which Indemnitee intends to seek indemnification
hereunder, Indemnitee must promptly notify the Company in writing of the nature
and, to Indemnitee’s knowledge, status of that Proceeding.  If this Section 4(a) requires Indemnitee to
give such a notice, but Indemnitee fails to do so, that failure will not
relieve the Company from, or otherwise affect, the obligations the Partnership
may have to indemnify Indemnitee under this Agreement, unless the Company can
establish that the failure has resulted in actual prejudice to the Company.

(b)           Except as this Section 4(b) otherwise
provides below, in the case of any Proceeding in respect of which Indemnitee
seeks indemnification hereunder:

(1)           the Company and any
Related Enterprise that also may be obligated to indemnify Indemnitee in
respect of that Proceeding will be entitled to participate at its own expense
in that Proceeding;

(2)           the Company or that
Related Enterprise, or either of them, will be entitled to assume the defense
of all Claims, other than (A) Company Claims, if any, and (B) other Claims, if
any, as to which Indemnitee shall reasonably reach the conclusion
clause (3) of the next sentence describes, in that Proceeding against
Indemnitee by prompt written notice of that election to Indemnitee; and

(3)           if clause (2) above
entitles the Company or that Related Enterprise to assume the defense of any of
those Claims and it delivers to Indemnitee notice of that assumption under
clause (2), the Company will not be liable to Indemnitee hereunder for any fees
or expenses of legal counsel for Indemnitee which Indemnitee incurs after
Indemnitee receives that notice.

Indemnitee will have the
right to employ Indemnitee’s own legal counsel in that Proceeding, but, as
clause (3) of the preceding sentence provides, will bear the fees and expenses
of that counsel unless:

(1)           the Company has
authorized Indemnitee in writing to retain that counsel;

(2)           the Company shall
not within a reasonable period of time actually have employed counsel to assume
the defense of those Claims; or

(3)           Indemnitee shall
have (A) reasonably concluded that a conflict of interest may exist between
Indemnitee and the Company as to the defense of one or more of those Claims and
(B) communicated that conclusion to the Company in writing.

(c)           The Partnership will not be obligated
hereunder to, or to cause another Partnership Entity to, indemnify Indemnitee
against or hold Indemnitee harmless from and in respect of any amounts paid, or
agreed to be paid, by Indemnitee in settlement of any Claim against Indemnitee
which Indemnitee effects without the Company’s prior written consent.  The Company will not settle any Claim
against Indemnitee in any manner that would impose any penalty or limitation on
Indemnitee without Indemnitee’s prior written consent.  Neither the 

 

4

 

Company nor Indemnitee
will unreasonably delay or withhold consent to any such settlement the other
party proposes to effect.

Section 5.  Procedure for Determination of Entitlement to
Indemnification.  (a)  To obtain indemnification under this
Agreement, Indemnitee must submit to the Company a written request therefor
which includes, or is accompanied by, such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to that indemnification.  Indemnitee may request indemnification
hereunder at any time and from time to time as Indemnitee deems appropriate in Indemnitee’s
sole discretion.  In the case of any
request for indemnification under Section 2(a) as to any Claim which is pending
or threatened at the time Indemnitee delivers that request to the Company and
would not be resolved with finality, whether by judgment, order, settlement or
otherwise, on payment of the indemnification requested, the Company may defer
the determination under Section 5(c) of Indemnitee’s entitlement to that
indemnification to a date that is no later than 45 days after the effective
date of that final resolution if the Board concludes in good faith that an
earlier determination would be materially prejudicial to the Company or a
Related Enterprise.

(b)           On written request by Indemnitee
under Section 5(a) for indemnification under Section 2(a), the determination of
Indemnitee’s entitlement to that indemnification will be made:

(1)           if Indemnitee will
be a director or officer of the Company at the time that determination is made,
under Section 5(c) in each case; or

(2)           if Indemnitee will
not be a director or officer of the Company at the time that determination is
made, under Section 5(c) in any case, if so requested in writing by Indemnitee
or so directed by the Board, or, in the absence of that request and direction,
as the Board shall duly authorize or direct.

(c)           Each determination of Indemnitee’s
entitlement to indemnification under Section 2(a) to which this Section 5(c)
applies will be made as follows:

(1)           by a majority vote
of the Disinterested Directors, even though less than a quorum; or

(2)           by a committee of
Disinterested Directors designated by a majority vote of the Disinterested
Directors, even though less than a quorum; or

(3)           if (A) there are no
Disinterested Directors or (B) a majority vote of the Disinterested Directors
so directs, by an Independent Counsel in a written opinion to the Board, a copy
of which the Company will deliver to Indemnitee;

provided, however, that
if Indemnitee has so requested in Indemnitee’s request for indemnification, an
Independent Counsel will make that determination in a written opinion to the
Board, a copy of which the Company will deliver to Indemnitee.

 

5

 

(d)           If it is determined that Indemnitee
is entitled to indemnification under Section 2(a), the Partnership will, or
will cause another Partnership Entity to, subject to the provisions of Section
5(f):

(1)           within 10 days after
that determination pay to Indemnitee all amounts (A) theretofore incurred by or
on behalf of Indemnitee in respect of which Indemnitee is entitled to that
indemnification by reason of that determination and (B) requested from the
Company in writing by Indemnitee; and

(2)           thereafter on
written request by Indemnitee, pay to Indemnitee within 10 days after that
request such additional amounts theretofore incurred by or on behalf of
Indemnitee in respect of which Indemnitee is entitled to that indemnification
by reason of that determination.

Indemnitee will cooperate
with the person, persons or entity making the determination under Section 5(c)
with respect to Indemnitee’s entitlement to indemnification under Section 2(a),
including providing to such person, persons or entity, on reasonable advance
request, any documentation or information that is:

(1)           not privileged or
otherwise protected from disclosure;

(2)           reasonably available
to Indemnitee; and

(3)           reasonably necessary
to that determination.

(e)           If an Independent Counsel is to make
a determination under Section 5(c) of entitlement to indemnification under
Section 2(a), it will be selected by the Company with the consent of the
Indemnitee (which consent shall not be unreasonably withheld).  The Partnership will pay any and all
reasonable fees and expenses the Independent Counsel incurs in connection with
acting under Section 5(c), and the Partnership will pay all reasonable fees and
expenses incident to the procedures this Section 5(e) sets forth, regardless of
the manner in which the Independent Counsel is selected or appointed.  If Indemnitee becomes entitled to, and does,
initiate any judicial proceeding or arbitration under Section 7, the Company
will terminate its engagement of the person or firm acting as Independent
Counsel, whereupon that person or firm will be, subject to the applicable
standards of professional conduct then prevailing, relieved of any further
responsibility in the capacity of Independent Counsel.

(f)            The amount of any indemnification
against Expenses to which Indemnitee becomes entitled under any provision
hereof, including Section 2(a), will be determined subject to the provisions of
this Section 5(f).  Indemnitee will have
the burden of showing that Indemnitee actually has incurred the Expenses for
which Indemnitee requests indemnification. 
If the Partnership or a Partnership Entity has made any advance in
respect of any Expense incurred by Indemnitee without objecting in writing to
Indemnitee at the time of the advance to the reasonableness thereof, the
incurrence of that Expense by Indemnitee will be deemed for all purposes hereof
to have been reasonable.  In the case of
any Expense as to which such an objection has been made, or any Expense for
which no advance has been made, the incurrence of that Expense will be presumed
to have been reasonable, and the Company will have the burden of proof to
overcome that presumption.

 

6

 

Subject to the
provisions of the preceding paragraph, the advancement of Expenses to
Indemnitee under Section 3 will not, of itself, create a presumption that the
Proceeding or Claim therein to which those Expenses relate is a Proceeding or
Claim of the type to which Section 2(a) applies.  If the Company, prior to or in connection with the making any
advance of Expenses under Section 3 to or for the benefit of Indemnitee,
notifies Indemnitee in writing that the Proceeding or any Claim therein is or
reasonably could be expected to be in whole or in any specified part not one to
which Section 2(a) applies, Indemnitee will, to the extent those Expenses are
reasonably allocable among the claims, issues and matters involved in that
Proceeding, cause Indemnitee’s counsel and other service providers to effect
that allocation.

Section 6.  Presumptions and Effect of Certain Proceedings.  (a) 
In making a determination under Section 5(c) with respect to entitlement
to indemnification under Section 2(a), the person, persons or entity
making that determination must presume that Indemnitee is entitled to that
indemnification if Indemnitee has submitted a request for indemnification in
accordance with Section 5(a), and the Company will have the burden of
proof to overcome that presumption in connection with the making by any person,
persons or entity of any determination contrary to that presumption.

(b)           The termination of any Proceeding or
of any Claim therein, by judgment, order, settlement or conviction, or on a
plea of nolo contendere or its equivalent, will not, except as this Agreement
otherwise expressly provides, of itself adversely affect the right of
Indemnitee to indemnification hereunder or, in the case of any determination
under Section 5(c) of Indemnitee’s entitlement to indemnification under Section
2(a), create a presumption that Indemnitee did not act in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company or, with respect to any criminal action or proceeding,
that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was
unlawful.

(c)           Any service of Indemnitee as a
Functionary of the Company or any Related Enterprise which imposes duties on,
or involves services by, Indemnitee with respect to any Related Enterprise that
is an employee benefit or welfare plan or related trust, if any, or the
participants or beneficiaries of that plan or trust will be deemed for all
purposes hereof as service at the request of the Company.  Any action Indemnitee takes or omits to take
in connection with any such plan or trust will, if taken or omitted in good
faith by Indemnitee and in a manner Indemnitee reasonably believed to be in the
interest of the participants in or beneficiaries of that plan or trust, be
deemed to have been taken or omitted in a manner “not opposed to the best
interests of the Company” for all purposes hereof.

Service by a
person as an agent or representative of an Enterprise means service on behalf
of that Enterprise in its relations with persons and entities other than the
Affiliates and Functionaries of that Enterprise.

(d)           For purposes of any determination
hereunder as to whether Indemnitee has performed services or engaged in conduct
on behalf of any Enterprise in good faith, Indemnitee will be deemed to have
acted in good faith if Indemnitee acted in reliance on the records of the
Enterprise or on information, opinions, reports or statements, including
financial statements and 

 

7

 

other financial
information, concerning the Enterprise or any other Person which were prepared
or supplied to Indemnitee by:

(1)           one or more of the
officers or employees of the Enterprise;

(2)           appraisers,
engineers, investment bankers, legal counsel or other Persons as to matters
Indemnitee reasonably believed were within the professional or expert
competence of those Persons; and

(3)           any committee of the
board of directors or equivalent managing body of the Enterprise of which
Indemnitee is or was, at the relevant time, not a member;

provided, however, that
if Indemnitee has actual knowledge as to any matter that makes any such
reliance unwarranted as to that matter, this Section 6(d) will not entitle
Indemnitee to any presumption that Indemnitee acted in good faith respecting
that matter.

(e)           For purposes of any determination
hereunder as to whether Indemnitee is entitled to indemnification under Section
2(a), neither the knowledge nor the conduct of any other Functionary of the
Company or any Related Enterprise, other than Indemnitee, shall be imputed to
Indemnitee, but Indemnitee will be irrebutably presumed to have read and
understood the Company’s code of business conduct for purposes of any
determination under the Charter Documents or this Agreement as to whether
Indemnitee has performed services or engaged in conduct on behalf of any
Enterprise in good faith.

(f)            Indemnitee will be deemed a party to
a Proceeding for all purposes hereof if Indemnitee is named as a defendant or
respondent in a complaint or petition for relief in that Proceeding, regardless
of whether Indemnitee ever is served with process or makes an appearance in
that Proceeding.

(g)           If Indemnitee serves or served as a
Functionary of a Related Enterprise, that service will be deemed to be “at the
request of the Company” for all purposes hereof notwithstanding that the
request is not evidenced by a writing or shown to have been made orally.  In the event the Company were to extend the
rights of indemnification and advancement of Expenses hereunder to Indemnitee’s
serving at the request of the Company as a Functionary of any Enterprise other
than the Company or a Related Enterprise, Indemnitee must show that the request
was made by the Board or at its authorization.

Section 7.  Remedies of Indemnitee in Certain Cases.  (a) 
If Indemnitee makes a written request in compliance with Section 5(a)
for indemnification under Section 2(a) and either:

(1)           no determination as
to the entitlement of Indemnitee to that indemnification is made before the
last to occur of (A) the close of business on the date, if any, the Company has
specified under Section 5(a) as the outside date for that determination or (B)
the elapse of the 45-day period beginning the day after the date the Company
receives that request; or

 

8

 

(2)           a determination is
made under Section 5(c) that Indemnitee is not entitled to that indemnification
in whole or in any part in respect of any Claim to which that request related,

Indemnitee will be
entitled to an adjudication from the Court of Chancery of Indemnitee’s
entitlement to that indemnification. 
Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in
arbitration to be conducted by a single arbitrator in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.  In the case of any determination under
Section 5(c) that is adverse to Indemnitee, Indemnitee must commence any such
judicial proceeding or arbitration within 180 days following the date on which
Indemnitee first has the right to commence that proceeding under this Section
7(a) or Indemnitee will be bound by that determination for all purposes of this
Agreement.

(b)           If a determination has been made
under Section 5 that Indemnitee is not entitled to indemnification
hereunder, any judicial proceeding or arbitration commenced under this Section
7 will be conducted in all respects as a de novo trial or arbitration on the
merits, and Indemnitee will not be prejudiced by reason of that adverse
determination.  In any judicial
proceeding or arbitration commenced under this Section 7, the Company will have
the burden of proving that Indemnitee is not entitled to indemnification
hereunder, and the Company may not, for any purpose, refer to or introduce into
evidence any determination under Section 5(c) which is adverse to Indemnitee.

(c)           If a determination has been made
under Section 5 that Indemnitee is entitled to indemnification hereunder, the
Company will be bound by that determination in any judicial proceeding or
arbitration Indemnitee thereafter commences under this Section 7 or otherwise,
absent:

(1)            a misstatement by
Indemnitee of a material fact, or an omission by Indemnitee of a material fact
necessary to make Indemnitee’s statements not materially misleading, in
connection with Indemnitee’s request for indemnification; or

(2)           a prohibition of
that indemnification under applicable law.

(d)           If Indemnitee, under this Section 7
or otherwise, seeks a judicial adjudication of or an award in arbitration to
enforce Indemnitee’s rights under this Agreement, Indemnitee will be entitled
to recover from the Partnership, and will be indemnified by the Partnership
against, any and all Expenses reasonably incurred by or on behalf of Indemnitee
in that judicial adjudication or arbitration, but only if Indemnitee prevails
therein.  If it is determined in that
judicial adjudication or arbitration that Indemnitee is entitled to receive
part of, but not all, the indemnification or advancement of expenses sought,
the expenses incurred by Indemnitee in connection with that judicial
adjudication or arbitration will be appropriately prorated between those in
respect of which this Agreement entitles Indemnitee to indemnification and
those Indemnitee must bear.

(e)           In any judicial proceeding or
arbitration under this Section 7, the Company:

 

9

 

(1)           will not, and will
not permit any other Person acting on its behalf to, assert that the procedures
or presumptions this Agreement establishes are not valid, binding and
enforceable; and

(2)           will stipulate that
it is bound by all the provisions hereof.

Section 8.  Non-exclusivity; Survival of Rights; Insurance;
Subrogation.  (a)  The rights to indemnification and
advancement of Expenses and the remedies this Agreement provides are not and
will not be deemed exclusive of any other rights or remedies to which
Indemnitee may at any time be entitled under applicable law, the Company’s
Charter Documents, any agreement, a vote of unitholders of the Partnership or
Disinterested Directors, or otherwise, but each such right or remedy hereunder
will be cumulative with all such other rights and remedies.  No amendment, alteration or termination of
this Agreement or any provision hereof will limit or restrict any right of
Indemnitee hereunder in respect of any action Indemnitee has taken or omitted
in Indemnitee’s capacity as a Functionary of the Company or any Related
Enterprise prior to that amendment, alteration or termination.

(b)           If the Company maintains an insurance
policy or policies providing liability insurance for Functionaries of the
Company or of any Related Enterprise who serve or served in the same capacities
as Indemnitee, Indemnitee will be covered by the policy or policies in
accordance with its or their terms to the maximum extent of the coverage
available for any such Functionary under the policy or policies.  If the Company receives written notice from
any source of a pending Proceeding to which Indemnitee is a party and in
respect of which Indemnitee might be entitled to indemnification under Section
2(a) and the Company then maintains any such policy of which Indemnitee is a
beneficiary, the Company will:

(1)           promptly give notice
of that Proceeding to the relevant insurers in accordance with the applicable
policy procedures; and

(2)           thereafter take all
action necessary to cause those insurers to pay, on behalf of Indemnitee, all
amounts payable in accordance with the applicable policy terms as a result of
that Proceeding;

provided, however that
the Company need not comply with the provisions of this sentence if its failure
to do so would not actually be prejudicial to Indemnitee in any material
respect.

(c)           The Partnership will not be liable
under this Agreement to make or cause to be made any payment of amounts
otherwise indemnifiable hereunder, or to make or cause to be made any advance
this Agreement otherwise requires it to make or cause to be made, to or for the
account of Indemnitee, if and to the extent that Indemnitee has otherwise
actually received or had applied for Indemnitee’s benefit that payment or
advance or obtained the entire benefit therefrom under any insurance policy,
any other contract or agreement or otherwise.

(d)           If the Partnership makes or causes to
be made any payment hereunder, it will be subrogated to the extent of that
payment to all the rights of recovery of Indemnitee, who will execute all
papers required and take all action necessary to secure those rights, including
execution of such documents as are necessary to enable the Company to bring
suit to enforce those rights.

 

10

 

(e)           The Partnership’s obligation to make
or cause to be made any payment or advance hereunder to or for the account of
Indemnitee with respect to Indemnitee’s service at the request of the Company
as a Functionary of any Related Enterprise will be reduced by any amount
Indemnitee has actually received as indemnification or advancement of expenses
from that Related Enterprise.

Section 9.  Duration of Agreement; Binding Effect.  This Agreement will continue until and
terminate on the later of:

(1)           10 years after the
date that Indemnitee has ceased to serve as a Functionary of the Company and each
Related Enterprise that Indemnitee served at the request of the Company; or

(2)           one year after the
final, nonappealable termination of any Proceeding then pending in respect of
which Indemnitee is granted rights of indemnification or advancement of Expenses
hereunder and of any proceeding commenced by Indemnitee under Section 7 or
otherwise.

This Agreement will be
binding on the Company and its successors and assigns and will inure to the
benefit of Indemnitee and his spouse, if Indemnitee resides in Texas or another
community property state, heirs, executors and administrators.

Section 10.  Severability.  If any provision or provisions hereof is or are invalid, illegal
or unenforceable for any reason whatsoever:

(1)           the validity,
legality and enforceability of the remaining provisions hereof, including each
portion of any Section containing any such invalid, illegal or unenforceable
provision which is not itself invalid, illegal or unenforceable, will not in
any way be affected or impaired thereby;

(2)           such provision or
provisions will be deemed reformed to the extent necessary to conform to
applicable law and to give the maximum effect to the intent of the parties
hereto; and

(3)           to the fullest
extent possible, the provisions hereof, including each portion of any Section
containing any such invalid, illegal or unenforceable provision which is not
itself invalid, illegal or unenforceable, will be construed so as to give
effect to the intent manifested thereby.

Section 11.  Exceptions to Right of Indemnification or Advancement
of Expenses.  No provision in
this Agreement will obligate the Partnership to pay or cause to be paid any
indemnity to or for the account of Indemnitee, or to advance or cause to be
advanced Expenses under Section 3, in connection with or as a result of:

(1)           any Claim made
against Indemnitee for an accounting of profits, under Section 16(b) of the
Exchange Act or similar provision of state statutory or common law, from the
purchase and sale, or sale and purchase, by Indemnitee of securities of the
Company or any Related Enterprise;

 

11

 

(2)           any Company Claim
made against Indemnitee for:

(A)          any unauthorized
conversion to personal use, embezzlement or misappropriation of assets of the
Company or any Related Enterprise or any transaction from which Indemnitee
derived an improper personal benefit;

(B)           any forgery or
alteration of negotiable instruments of the Company or any Related Enterprise;

(C)           any falsification of
the records or financial statements of the Company or any Related Enterprise
for personal or other reasons; or

(D)          any breach of a
contractual obligation to pay or repay or otherwise return money to the Company
or any Related Enterprise; or

(3)           except for any Claim
initiated by Indemnitee, whether as a cause of action or as a defense to a
cause of action under Section 7 or otherwise, to enforce or establish, by
declaratory judgment or otherwise, Indemnitee’s rights or remedies hereunder,
any Claim initiated by Indemnitee without the prior authorization of the Board
against the Company or any Related Enterprise or any of their respective
present or former Functionaries.

Section 12.  Identical Counterparts.  This Agreement may be executed in one or
more counterparts, each of which will for all purposes be deemed to be an
original but all of which together will constitute one and the same
agreement.  Only one such counterpart
signed by the party against whom enforceability is sought needs to be produced
to evidence the existence of this Agreement.

Section 13.  Headings. 
The headings of the Sections hereof are inserted for convenience only
and do not and will not be deemed to constitute part of this Agreement or to
affect the construction thereof.

Section 14.  Definitions and Definitional Provisions.  (a) For purposes of this Agreement:

“Affiliate”
has the meaning Exchange Act Rule 12b-2 specifies.

“Board” means the Board of Directors of the
Company.

“Charter
Documents” means, with respect to any corporation or other entity at
any time, in each case as amended, modified and supplemented at that time:

(1)           the articles or
certificate of formation, incorporation or organization, or the equivalent
organizational documents, of that entity;

(2)           the bylaws or
limited liability company agreement or regulations, limited partnership
agreement, or the equivalent governing documents, of that entity; and

 

12

 

(3)           each document
setting forth the designation, amount and relative rights, limitations and preferences
of any class or series of that entity’s capital stock or other equity
interests.

“Claim” means any claim for damages or a
declaratory, equitable or other substantive remedy, or any other issue or
matter, in any Proceeding.

“Company
Claim” means any Claim brought by or in the right of the Company or
a Related Enterprise against Indemnitee.

“Court of
Chancery” means the Court of Chancery of the State of Delaware.

“Disinterested
Director” means a director of the Company who is not and was not a
party to the Proceeding, or any Claim therein, in respect of which
indemnification is sought by Indemnitee hereunder.

“Enterprise” means any business trust, corporation,
joint venture, limited liability company, partnership or other entity or
enterprise, including any operational division of any entity or any operational
group of entities or divisions of entities, or any employee benefit or welfare
plan or related trust.

“Exchange Act”
means the Securities Exchange Act of 1934, as amended.

“Expenses”
include all attorneys’ fees, retainers, court costs, transcript costs, fees of
experts, witness fees, travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, delivery service fees, all other
disbursements or expenses of the types customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend, investigating, being
or preparing to be a witness in, or otherwise participating in, a
Proceeding.  Should any payments by the
Company or a Company Entity to or for the account of Indemnitee under this
Agreement be determined to be subject to any federal, state or local income or
excise tax, “Expenses” also will include such amounts as are necessary to place
Indemnitee in the same after-tax position, after giving effect to all
applicable taxes, Indemnitee would have been in had no such tax been determined
to apply to those payments.

“Functionary” of any Enterprise means any natural
person who is a director, officer, manager, administrator, employee, agent,
representative or other functionary of that Enterprise, including, in the case
of any employee benefit or welfare plan, any member of any committee
administering that plan or any individual to whom the duties of that committee
are delegated.

“Independent
Counsel” means in the case of any determination under Section 5
a law firm, or a member of a law firm that or who is experienced in matters of
corporation law and neither presently is, nor in the past five years has been,
retained to represent:

(1)           the Company or any
of its Affiliates or Indemnitee in any matter material to any such Person; or

 

13

 

(2)           any other party to
the Proceeding giving rise to a claim for indemnification hereunder.

Notwithstanding the
foregoing, the term “Independent Counsel” does not include at any time any
Person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
Company or a Related Enterprise or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.

“Partnership Entity” means any Related Enterprise, other than
an employee benefit or welfare plan or its related trust, if any.

“Person”
means any natural person, sole proprietorship, corporation, partnership,
limited liability company, business trust, unincorporated organization or
association, mutual company, joint stock company, joint venture or any other
entity of any kind having a separate legal status or any estate, trust, union or
employee organization or governmental authority.

“Proceeding”
includes any threatened, pending or completed action, suit, arbitration,
alternate dispute resolution procedure, investigation, inquiry or other
threatened, actual or completed proceeding, whether of a civil, criminal,
administrative, investigative or private nature and irrespective of the
initiator thereof, and any appeal in any such proceeding.

“Related Enterprise” means at any time any Enterprise:

(1)           50% or more of the
outstanding capital stock or other ownership interests of which, or the assets
of which, the Company owns or controls, or previously owned or controlled,
directly or indirectly, at that time;

(2)           50% or more of the
outstanding voting power of the outstanding capital stock or other ownership
interests of which the Company owns or controls, or previously owned or
controlled, directly or indirectly, at that time;

(3)           that is, or
previously was, an Affiliate of the Company which the Company controls, or
previously controlled, by ownership, contract or otherwise and whether alone or
together with another Person, directly or indirectly, at that time; or

(4)           if that Enterprise
is an employee benefit or welfare plan or related trust, whose participants or
beneficiaries are present or former employees of the Company or any other
Related Enterprise.

(b)           This Agreement uses the words
“herein,” “hereof” and “hereunder” and words of similar import to refer to this
Agreement as a whole and not to any provision of this Agreement, and the words
“Section” and “Preliminary Statement” refer to Sections of and the Preliminary
Statement in this Agreement, unless it otherwise specifies.

 

14

 

(c)           Whenever the context so requires, the
singular number includes the plural and vice versa, and a reference to one
gender includes the other gender and the neuter.

(d)           The word “including,” and, with
correlative meaning, the word “include,” means including, without limiting the
generality of any description preceding that word, and the words “shall” and
“will” are used interchangeably and have the same meaning.

(e)           The language this Agreement uses will
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
either party hereto.

Section 15.  Modification and Waiver.  No supplement to or modification or
amendment of this Agreement will be binding unless executed in writing by both
parties hereto.  No waiver of any
provision hereof will be deemed or will constitute a waiver of any other
provision hereof, whether or not similar, nor will any such waiver constitute a
continuing waiver.

Section 16.  Reliance. 
The Company confirms and agrees with Indemnitee that it has entered into
this Agreement and assumed the obligations this Agreement imposes on it in
order to induce Indemnitee to serve, or continue to serve, as a Functionary of
the Company or a Related Enterprise. 
The Company acknowledges that Indemnitee is relying on this Agreement in
so serving.

Section 17.  Notices. 
All notices, requests, demands and other communications  hereunder must be in writing or by
electronic transmission and will be deemed delivered and received:

(1)           if personally
delivered or if delivered by telex, telegram, facsimile, electronic
transmission or courier service, when actually received by the party to whom
the notice or communication is sent; or

(2)           if delivered by
mail, whether actually received or not, at the close of business on the third
business day in the city in which the Company’s principal executive office is
located next following the day when placed in the U.S. mail, postage prepaid,
certified or registered, addressed to the appropriate party at the address of
that party set forth below, or at such other address as that party may
designate by notice in writing or by electronic transmission to the other party
in accordance herewith:

(3)           If to Indemnitee,
to:

 

with a copy, which will
not constitute notice for purposes of this Agreement, to such legal counsel, if
any, as Indemnitee may designate in writing or by electronic transmission; and

(4)           If to the Company,
to:

 

15

 

K-Sea General Partner
G.P., L.L.C.

3245 Richmond Terrace

Staten Island, New York  10303

Attention:  Corporate Secretary

Fax No.:

E-mail:

 

Section 18.  Contribution.  If it is established, under Section 5(c) or otherwise, that
Indemnitee has the right to be indemnified under Section 2(a) in respect of any
claim, but that right is unenforceable by reason of any applicable law or
public policy, then, to the fullest extent applicable law permits, the
Partnership, in lieu of indemnifying or causing the indemnification of
Indemnitee under Section 2(a), will, or will cause a Partnership Entity to,
contribute to the amount Indemnitee has incurred, whether for judgments, fines,
penalties, excise taxes, amounts paid or to be paid in settlement or for
Expenses reasonably incurred, in connection with that Claim, in such proportion
as is deemed fair and reasonable in light of all the circumstances of that
Claim in order to reflect:

(1)           the relative
benefits Indemnitee and the Partnership have received as a result of the
event(s) or transaction(s) giving rise to that Claim; or

(2)           the relative fault
of Indemnitee and of the Partnership and its other Functionaries in connection
with those event(s) or transaction(s).

Section 19.  Governing Law; Submission to Jurisdiction.  This Agreement and the legal relations among
the parties will be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware, without regard to its conflict of laws
rules.  Except with respect to any
arbitration Indemnitee commences under Section 7 or as Section 2(a) expressly
contemplates otherwise, the Company and Indemnitee hereby irrevocably and
unconditionally:

(1)           agree that any
action or proceeding arising out of or in connection with this Agreement will
be brought only in the Court of Chancery and not in any other state or federal
court in the United States of America or any court in any other country;

(2)           consent to submit to
the exclusive jurisdiction of the Court of Chancery for purposes of any action
or proceeding arising out of or in connection with this Agreement;

(3)           waive any objection to
the laying of venue of any such action or proceeding in the Court of Chancery;
and

(4)           waive, and agree not
to plead or to make, any claim that any such action or proceeding brought in
the Court of Chancery has been brought in an improper or otherwise inconvenient
forum.

Section 20.  Entire Agreement.  This Agreement constitutes the entire
agreement and understanding between the Company and Indemnitee, and supersedes
all prior oral, written 

 

16

 

or implied agreements and understandings of the
Company and Indemnitee with respect to the subject matter hereof.

 

17

 

IN WITNESS
WHEREOF, the parties hereto have executed this Agreement effective as of the
day and year first above written.

 

	
  ATTEST:

  	
   

  	
  K-SEA GENERAL PARTNER
  G.P. L.L.C.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  K-SEA GENERAL PARTNER
  L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  K-Sea General Partner
  G.P. L.L.C.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  K-SEA TRANSPORTATION
  PARTNERS, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  K-Sea General Partner,
  L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  K-Sea General Partner
  G.P. L.L.C.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  INDEMNITEE:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
   

  	
   

  	
   

  
											

 

 

18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00059-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00059-of-00352.parquet"}]]