Document:

Exhibit
10.8

COLLATERAL ASSIGNMENT OF
PROMED ACQUISITION DOCUMENTS

THIS COLLATERAL ASSIGNMENT OF PROMED ACQUISITION
DOCUMENTS (this “Assignment”)
has been executed and delivered as of June 1, 2007, by and between [PROSPECT
MEDICAL HOLDINGS, INC., a Delaware corporation (“Holdings”),
and PROSPECT MEDICAL GROUP, INC., a California professional corporation] (with
Holdings, collectively, “Assignor”),
and BANK OF AMERICA, N.A., a national banking association, as administrative
agent (“Administrative
Agent”), with reference to the following facts:

RECITALS

A.            Assignor is a party to certain
documents pursuant to which, among other things, Assignor acquired or will
acquire the stock and assets of Pomona Calley Medical Group, Inc., ProMed
Health Services Company, ProMed Health Care Administrators and Upland Medical
Group (each a “Professional
Corporation” and collectively, the “Professional Corporations”),
and provides management services to the Professional Corporation.

B.            Pursuant to that certain Credit
Agreement, dated on or about the date hereof (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the “Credit Agreement”),
Administrative Agent and the Lenders (as defined therein) have agreed to extend
credit and other financial accommodations to Assignor and/or certain of
Assignor’s affiliates, and Assignor and the other Loan Parties (as defined
therein and including, without limitation, the Professional Corporations) have
agreed to guarantee the payment and performance of all of the Obligations (as
defined therein) and to grant to Administrative Agent security interests in the
Collateral (as defined therein) to secure payment and performance of all of the
Obligations.

C.            Assignor has agreed to execute and
deliver this Assignment to Administrative Agent in order to supplement the
terms of the Credit Agreement and the Security Agreement (As defined in the
Credit Agreement) with respect to the ProMed Acquisition Documents (as
hereinafter defined).

D.            Assignor acknowledges that Administrative
Agent and the Lenders would not enter into the Credit Agreement absent Assignor’s
agreements hereunder.

AGREEMENT

In consideration of the premises and the mutual
agreements herein set forth, Assignor and Administrative Agent hereby agree as
follows:

1.             Defined Terms.  All initially capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Credit
Agreement.

2.             Assignment.  As additional security for the Obligations,
Assignor hereby collaterally assigns and transfers to Administrative Agent, and
acknowledges that, pursuant to the Security Agreement, Assignor has granted to
Administrative Agent a security interest in:

2.1           ProMed
Acquisition Documents.  All of
Assignor’s right, title and interest in and to the documents set forth on  Exhibit A
attached hereto (collectively, the “ProMed Acquisition Documents”).

2.2           Rights
and Remedies.  All of the
rights, benefits, remedies, privileges and claims of Assignor with respect to
the ProMed Acquisition Documents (collectively, the “Rights And Remedies”),
including, without limitation, (i) all rights to monies or payments owing
to Assignor under the ProMed Acquisition Documents, and any and all security
therefor and for all other obligations owing to Assignor thereunder, (ii) any
right that Assignor may have to indemnification under the ProMed Acquisition
Documents, (iii) all Rights and Remedies of Assignor with respect to any
breach of the representations, warranties and covenants set forth in any of the
ProMed Acquisition Documents, and (iv) the proceeds thereof (the ProMed
Acquisition Documents and the Rights and Remedies are collectively referred to
herein as, the “Collateral”).

3.             Right and Remedies
Generally.  Prior to the
occurrence of an Event of Default under the Credit Agreement or any other Loan
Document (a “Default”),
Assignor will enforce all of its Rights and Remedies diligently and in good
faith.  Effective from and after the
occurrence of a Default, Assignor hereby irrevocably authorizes and empowers
Administrative Agent, in Administrative Agent’s sole discretion, to assert as
Administrative Agent may deem proper, either directly or on behalf of Assignor,
any of the Rights and Remedies which Assignor may from time to time have under
the ProMed Acquisition Documents, and to receive and collect all damages,
awards and other monies resulting therefrom and to apply the same on account of
any of the Obligations.

4.             Termination.  This Assignment shall continue in effect
until all of the Obligations have been paid in full and the Credit Agreement
has been terminated in accordance with the terms thereof, at which time
Administrative Agent shall release to the Assignor Administrative Agent’s
interests in the ProMed Acquisition Documents and the Rights and Remedies and
the other rights assigned to Administrative Agent hereby.

5.             Further Assurances.  At any time or from time to time, upon
Administrative Agent’s written request, Assignor will execute and deliver to
Administrative Agent such further documents and do such other acts and things
as Administrative Agent may request in order to further effect the purposes of
this Assignment or any schedule, amendment or supplement hereto, or a financing
or continuation statement with respect hereto, in accordance with the laws of
any applicable jurisdictions.  Assignor
hereby authorizes Administrative Agent to effect any such filing or recording
statements (or amendments thereto) without the signature of Assignor, and
Administrative Agent’s costs and expenses with respect thereto shall be part of
the Obligations and shall be payable by Assignor on demand.

6.             ProMed Acquisition
Documents.  Concurrent
herewith, Assignor is delivering to Administrative Agent possession of the
original ProMed Acquisition Documents, together with any and all amendments
thereto, as in effect on the date hereof, to hold in accordance with the terms
of the Credit Agreement until the Credit Agreement is terminated in accordance
with its terms.

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7.             Attorney-in-Fact.  Assignor hereby irrevocably makes, constitutes,
and appoints Administrative Agent (and Administrative Agent’s officers,
employees, or agents) as Assignor’s true and lawful agent and attorney-in-fact
for the purposes of enabling Administrative Agent or its agent(s) after the
occurrence of a Default to (a) assert such Rights and Remedies and to
collect such damages, awards and other monies and to apply them in the manner
set forth hereinabove, and (b) to sign the name of Assignor on any
documents which need to be executed, recorded, or filed, and to do any and all
things necessary in the name and on behalf of Assignor in order to protect
Administrative Agent’s interests in the ProMed Acquisition Documents.  Assignor agrees that neither Administrative
Agent, nor any of its designees or attorneys-in-fact, will be liable for any
act of commission or omission, or for any error of judgment or mistake of fact
or law with respect to the exercise of the power of attorney granted under this
Section 7, other than as a
result of its or their gross negligence or wilful misconduct.  The power of attorney granted under this Section 7 is coupled with an interest
and shall be irrevocable until all of the Obligations have been paid in full,
the Credit Agreement and the other Loan Documents terminated, and Assignor’s duties
under this Assignment have been discharged in full.  Assignor will not assign, pledge or otherwise
encumber any of its rights, title or interest under, in or to the ProMed
Acquisition Document or ProMed Acquisition Documents except for the assignment to
Administrative Agent and its successors or assigns as set forth herein.

8.             Modification of
Rights and Remedies.  Assignor
shall keep Administrative Agent informed of all circumstances bearing adversely
upon the Rights and Remedies.  Assignor
shall not waive, amend, alter or modify any of the Rights and Remedies in any
material respect without the prior written consent of Administrative
Agent.  Assignor shall not, without
Administrative Agent’s prior written consent, amend, alter, modify or terminate
any of the ProMed Acquisition Documents, or waive any of the provisions hereof,
or do or permit any act in contravention thereof.

9.             Assignor to Remain
Liable.  Notwithstanding the
foregoing, Assignor expressly acknowledges and agrees that it shall remain liable
under the ProMed Acquisition Documents to observe and perform all of the
conditions and obligations in the ProMed Acquisition Documents which Assignor
is bound to observe and perform, and that neither this Assignment, nor any
action taken pursuant hereto, shall cause Administrative Agent to be under any
obligation or liability in any respect whatsoever to observe or perform any of
the representations, warranties, conditions, covenants, agreements or terms of
the ProMed Acquisition Documents.

10.           Counterparts;
Effectiveness.  This
Assignment may be executed in any number of counterparts, each of which, when
executed and delivered, shall be deemed to be an original.  All of such counterparts, taken together,
shall constitute but one and the same agreement.  This Assignment shall become effective upon
the execution of a counterpart of this Assignment by each of the parties
hereto.

11.           Notices.  All notices, requests and other
communications to any party hereunder shall be sent in accordance with Section
10.02 of the Credit Agreement.

12.           Modifications
and Amendments.  This
Assignment shall not be changed orally but shall be changed only by agreement
in writing signed by Assignor and Administrative Agent.  No course of dealing between the parties, no
usage of trade and no parole or extrinsic evidence 

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of any nature shall be used to supplement or modify
any of the terms or provisions of this Assignment.

13.           Severability.  If any provision of this Assignment is held
to be illegal, invalid or unenforceable under present or future laws, the
legality, validity and enforceability of the remaining provisions of this
Assignment shall not be affected thereby, and this Assignment shall be
liberally construed so as to carry out the intent of the parties to it.

14.           Governing
Law; Successors and Assigns; Entire Agreement.  This Assignment (a) shall be construed
in accordance with and governed by the internal laws of the State of
California, without regard to principles of conflicts of laws; (b) shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; and (c) embodies the entire agreement
and understanding between the parties with respect to the subject matter hereof
and supersedes all prior agreements, consents and understandings relating to
such subject matter.

15.           California Judicial
Reference.  If any action or
proceeding is filed in a court of the State of California by or against any
party hereto in connection with any of the transactions contemplated by this
Assignment, (a) the court shall, and is hereby directed to, make a general
reference pursuant to California Code of Civil Procedure Section 638 to a
referee (who shall be a single active or retired judge) to hear and determine
all of the issues in such action or proceeding (whether of fact or of law) and
to report a statement of decision, provided that at the option of any party to
such proceeding, any such issues pertaining to a “provisional remedy” as
defined in California Code of Civil Procedure Section 1281.8 shall be
heard and determined by the court, and (b) Assignor shall be solely
responsible to pay all fees and expenses of any referee appointed in such
action or proceeding.

 

[Signature Pages Follow]

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EXECUTED as of the date first above written.

	
  

  	
   

  	
  ASSIGNOR:

  
	
   

  	
   

  	
  PROSPECT
  MEDICAL HOLDINGS, INC.

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Jacob Y. Terner, M.D.

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
  PROSPECT
  MEDICAL GROUP, INC.

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Jacob Y. Terner, M.D.

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
  ADMINISTRATIVE
  AGENT:

  
	
   

  	
   

  	
  BANK
  OF AMERICA, N.A.,
  as administrative agent

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

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EXHIBIT
A

PROMED
ACQUISITION DOCUMENTS

 

 6Exhibit 4.1

REGISTRATION
RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS
AGREEMENT (this “Agreement”) is made and entered into as of August 14,
2007, by and among K-SEA TRANSPORTATION PARTNERS L.P., a Delaware limited
partnership (“K-Sea”), RCD MARITIME ENTERPRISES, LLC, a Washington
limited liability company (“RCD”), SMITH MARITIME, LLC, a Washington
limited liability company (“Smith LLC”), ROBERT C. DORN (“Dorn”),
GORDON L.K. SMITH (“Smith” and, together with RCD, Smith LLC and Dorn,
the “Sellers”).

WHEREAS, this Agreement
is made in connection with the closing of the transactions contemplated by that
certain Agreement and Plan of Merger, dated as of June 25, 2007, by and among
Sea Coast Transportation LLC, a Delaware limited liability company (“Sea
Coast”), K-Sea, the Sellers and the other parties signatory thereto (the “Merger
Agreement”) and the issuance and sale of common units representing limited
partner interests in K-Sea (“Common Units”) pursuant to the Merger
Agreement;

WHEREAS, K-Sea has agreed
to provide the registration and other rights set forth in this Agreement for
the benefit of the Sellers pursuant to the Merger Agreement; and

WHEREAS, it is a
condition to the obligations of the Sellers under the Merger Agreement that
this Agreement be executed and delivered.

NOW THEREFORE, in
consideration of the mutual covenants and agreements set forth herein and for
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by each party hereto, the parties hereby agree as follows:

ARTICLE I.

DEFINITIONS

Section 1.1                                      Definitions.  The terms set forth below are used herein as
so defined:

“Affiliate” has
the meaning set forth in the Merger Agreement.

“Closing” has the
meaning set forth in the Merger Agreement.

“Closing Common Units”
means the Common Units received by the Sellers as Unit Consideration pursuant
to the Merger Agreement.

“Closing Date” has
the meaning set forth in the Merger Agreement.

“Commission” means
the United States Securities and Exchange Commission.

“Common Units” has
the meaning set forth in the Merger Agreement.

“Effectiveness Period”
has the meaning specified therefor in Section 2.1(a) of this Agreement.

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“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission promulgated thereunder.

“Holder” means the
record holder of any Registrable Securities.

“K-Sea” has the
meaning specified therefor in the introductory paragraph of this Agreement.

“Losses” has the
meaning specified therefor in Section 2.6(a) of this Agreement.

“Merger Agreement”
has the meaning specified therefor in the Recitals of this Agreement.

“Person” has the
meaning set forth in the Merger Agreement.

“Registrable
Securities” means the Closing Common Units, all of which are subject to the
rights provided herein until such rights terminate pursuant to the provisions
hereof.

“Registration Expenses”
has the meaning specified therefor in Section 2.5 of this Agreement.

“Securities Act”
means the Securities Act of 1933, as amended, and the rules and regulations of
the Commission promulgated thereunder.

“Sellers” has the
meaning specified therefor in the introductory paragraph of this Agreement.

“Selling Expenses”
has the meaning specified therefor in Section 2.5 of this Agreement.

“Selling Holder”
means a Holder who is selling Registrable Securities pursuant to a registration
statement.

“Shelf Registration
Statement” means a registration statement under the Securities Act to
permit the resale of the Registrable Securities from time to time as permitted
by Rule 415 of the Securities Act (or any similar provision then in force under
the Securities Act).

“Unit Consideration”
has the meaning set forth in the Merger Agreement.

Section 1.2                                      Registrable
Securities.  Any Registrable Security
will cease to be a Registrable Security when (a) a registration statement
covering such Registrable Security has been declared effective by the
Commission and such Registrable Security has been sold or disposed of pursuant
to such effective registration statement; (b) such Registrable Security has
been disposed of pursuant to any section of Rule 144 (or any similar provision
then in force under the Securities Act); (c) such Registrable Security is held
by K-Sea or one of its subsidiaries; or (d) such Registrable Security has been
sold in a private transaction in which the transferor’s rights under this
Agreement are not assigned to the transferee of such securities.

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ARTICLE II.

REGISTRATION RIGHTS

Section 2.1                                      Shelf
Registration.

(a)          Shelf Registration.  As soon as practicable following the Closing,
but in any event within 120 days of the Closing, K-Sea shall prepare and file a
Shelf Registration Statement. K-Sea shall use its commercially reasonable
efforts to cause the Shelf Registration Statement to become effective no later
than 240 days after the date of the Closing. 
A Shelf Registration Statement filed pursuant to this Section 2.1(a)
shall be on such appropriate registration form of the Commission as shall be
selected by K-Sea.  K-Sea will use its
commercially reasonable efforts to cause the Shelf Registration Statement filed
pursuant to this Section 2.1(a) to be continuously effective under the
Securities Act until all Registrable Securities covered by the Shelf
Registration Statement have been distributed in the manner set forth and as
contemplated in the Shelf Registration Statement or there are no longer any
Registrable Securities (the “Effectiveness Period”).  The Shelf Registration Statement when
declared effective (including the documents incorporated therein by reference)
will comply as to form with all applicable requirements of the Securities Act
and the Exchange Act and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.  Each Seller’s rights (and any transferee’s
rights pursuant to Section 2.8) under this Section 2.1 shall terminate when
such Registrable Securities become eligible for resale under Rule 144(k) (or
any similar provision then in force under the Securities Act).

(b)         Delay Rights.  Notwithstanding anything to the contrary
contained herein, K-Sea may, upon written notice to any Selling Holder whose
Registrable Securities are included in the Shelf Registration Statement, suspend
such Selling Holder’s use of any prospectus which is a part of the Shelf
Registration Statement (in which event the Selling Holder shall discontinue
sales of the Registrable Securities pursuant to the Shelf Registration
Statement) if (i) K-Sea is pursuing an acquisition, merger, reorganization,
disposition or other similar transaction and K-Sea determines in good faith
that K-Sea’s ability to pursue or consummate such a transaction would be
materially adversely affected by any required disclosure of such transaction in
the Shelf Registration Statement or (ii) K-Sea has experienced some other
material non-public event the disclosure of which at such time, in the good
faith judgment of K-Sea, would materially adversely affect K-Sea; however, in
no event shall any delay pursuant hereto exceed 120 days in any calendar
year.  Upon disclosure of such
information or the termination of the condition described above, K-Sea shall
provide prompt notice to the Selling Holders whose Registrable Securities are
included in the Shelf Registration Statement, and shall promptly terminate any
suspension of sales it has put into effect and shall take such other actions to
permit registered sales of Registrable Securities as contemplated in this
Agreement.

Section 2.2                                      Sale
Procedures.  In connection with its
obligations contained in Section 2.1, K-Sea will, as expeditiously as
possible:

 3
 

(a)          prepare and file with
the Commission such amendments and supplements to the Shelf Registration
Statement and the prospectus used in connection therewith as may be necessary
to keep the Shelf Registration Statement effective for the Effectiveness Period
and as may be necessary to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by the Shelf
Registration Statement;

(b)         furnish to each Selling
Holder (i) as far in advance as reasonably practicable before filing the Shelf
Registration Statement or any amendment thereto, upon request, copies of
reasonably complete drafts of all such documents proposed to be filed
(including exhibits and each document incorporated by reference therein to the
extent then required by the rules and regulations of the Commission), and
provide each such Selling Holder the opportunity to object to any information pertaining
to such Selling Holder and its plan of distribution that is contained therein
and make the corrections reasonably requested by such Selling Holder with
respect to such information prior to filing the Shelf Registration Statement or
such amendment thereto, and (ii) such number of copies of the Shelf
Registration Statement and the prospectus included therein and any supplements
and amendments thereto as such Persons may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities
covered by such Shelf Registration Statement;

(c)          if applicable, use its
commercially reasonable efforts to register or qualify the Registrable
Securities covered by the Shelf Registration Statement under the securities or
blue sky laws of such jurisdictions as the Selling Holders shall reasonably
request, provided that K-Sea will not be required to qualify generally to
transact business in any jurisdiction where it is not then required to so
qualify or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;

(d)         promptly notify each
Selling Holder, at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, of (i) the filing of the Shelf
Registration Statement or any prospectus or prospectus supplement to be used in
connection therewith, or any amendment or supplement thereto, and, with respect
to such Shelf Registration Statement or any post-effective amendment thereto,
when the same has become effective; and (ii) any written comments from the
Commission with respect to any filing referred to in clause (i) and any written
request by the Commission for amendments or supplements to the Shelf
Registration Statement or any prospectus or prospectus supplement thereto;

(e)          promptly notify each
Selling Holder, at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, of (i) the happening of any event as a
result of which the prospectus or prospectus supplement contained in the Shelf
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing; (ii) the issuance or threat of issuance by the
Commission of any stop order suspending the effectiveness of the Shelf
Registration Statement, or the initiation of any proceedings for that purpose;
or (iii) the receipt by K-Sea of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale under
the applicable securities or blue sky laws of any jurisdiction.  Following the provision of such notice, K-Sea
agrees to as promptly as practicable amend or supplement the prospectus or
prospectus supplement or take other appropriate action so that the prospectus
or

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prospectus supplement does not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and to take such
other action as is necessary to remove a stop order, suspension, threat thereof
or proceedings related thereto;

(f)            upon request and
subject to appropriate confidentiality obligations, furnish to each Selling
Holder copies of any and all transmittal letters or other correspondence with
the Commission or any other governmental agency or self-regulatory body or
other body having jurisdiction (including any domestic or foreign securities
exchange) relating to such offering of Registrable Securities;

(g)         otherwise use its
commercially reasonable efforts to comply with all applicable rules and regulations
of the Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
12 months, but not more than 18 months, beginning with the first full calendar
month after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 promulgated thereunder;

(h)         use its commercially
reasonable efforts to cause the Registrable Securities to be registered with or
approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of K-Sea to enable the Selling Holders
to consummate the disposition of such Registrable Securities;

(i)             provide a transfer
agent and registrar for all Registrable Securities covered by such registration
statement not later than the effective date of such registration statement; and

(j)             enter into customary
agreements and take such other actions as are reasonably requested by the
Selling Holders, if any, in order to expedite or facilitate the disposition of
such Registrable Securities.

Each Selling Holder, upon
receipt of notice from K-Sea of the happening of any event of the kind
described in subsection (e) of this Section 2.2, shall forthwith
discontinue disposition of the Registrable Securities until such Selling Holder’s
receipt of the copies of the supplemented or amended prospectus contemplated by
subsection (e) of this Section 2.2 or until it is advised in writing by
K-Sea that the use of the prospectus may be resumed, and has received copies of
any additional or supplemental filings incorporated by reference in the
prospectus, and, if so directed by K-Sea, such Selling Holder will deliver to
K-Sea (at K-Sea’s expense) all copies in their possession or control, other
than permanent file copies then in such Selling Holder’s possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.

Section 2.3                                      Cooperation
by Holders.  K-Sea shall have no
obligation to include in the Shelf Registration Statement units of a Holder who
has failed to timely furnish such information which, in the opinion of counsel
to K-Sea, is reasonably required in order for the registration statement or
prospectus supplement, as applicable, to comply with the Securities Act.

Section 2.4                                      Restrictions
on Public Sale by Holders of Registrable Securities.  Each Holder of Registrable Securities who is
included in the Shelf Registration Statement agrees not

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to effect any public sale or
distribution of the Registrable Securities during the 90 calendar day period
beginning on the date of a prospectus supplement filed with the Commission with
respect to the pricing of an underwritten offering by K-Sea, provided that the
duration of the foregoing restrictions shall be no longer than the duration of
the shortest restriction generally imposed by the underwriters on the officers
or directors of K-Sea.

Section 2.5                                      Expenses.  K-Sea will pay all reasonable Registration
Expenses in connection with the Shelf Registration Statement.  “Registration Expenses” means all
expenses incident to K-Sea’s performance under or compliance with this
Agreement to effect the registration of Registrable Securities in a Shelf
Registration pursuant to Section 2.1, and the disposition of such securities,
including, without limitation, all registration, filing, securities exchange
listing and NYSE fees, all registration, filing, qualification and other fees
and expenses of complying with securities or blue sky laws, fees of the
National Association of Securities Dealers, Inc., transfer taxes and fees of
transfer agents and registrars, all word processing, duplicating and printing
expenses, the fees and disbursements of counsel and independent public
accountants for K-Sea, including the expenses of any special audits or “cold
comfort” letters required by or incident to such performance and
compliance.  Except as otherwise provided
in Section 2.6 hereof, K-Sea shall not be responsible for legal fees
incurred by Holders in connection with the exercise of such Holders’ rights
hereunder.  In addition, K-Sea shall not
be responsible for any “Selling Expenses,” which means all discounts and
selling commissions allocable to the sale of the Registrable Securities.  Each Selling Holder shall pay all Selling
Expenses in connection with any sale of its Registrable Securities.

Section 2.6                                      Indemnification.

(a)          By K-Sea.  In the event of a registration of any
Registrable Securities under the Securities Act pursuant to this Agreement,
K-Sea will indemnify and hold harmless each Selling Holder thereunder, its
directors and officers and each Person, if any, who controls such Selling
Holder within the meaning of the Securities Act and the Exchange Act, against any
losses, claims, damages, expenses or liabilities (including reasonable
attorneys’ fees and expenses) (collectively, “Losses”), joint or
several, to which such Selling Holder or controlling Person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such Losses
(or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Shelf Registration Statement,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading, and will reimburse each such Selling Holder, its directors and
officers and each such controlling Person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Loss or actions or proceedings; provided, however, that
K-Sea will not be liable in any such case if and to the extent that any such
Loss arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by such Selling Holder or such controlling Person in
writing specifically for use in the Shelf Registration Statement, or prospectus
supplement, as applicable. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on

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behalf of such Selling Holder
or any such director, officer or controlling Person, and shall survive the
transfer of such securities by such Selling Holder.

(b)         By Each Selling Holder.  Each Selling Holder agrees severally and not
jointly to indemnify and hold harmless K-Sea, its directors and officers, and
each Person, if any, who controls K-Sea within the meaning of the Securities
Act or of the Exchange Act to the same extent as the foregoing indemnity from
K-Sea to the Selling Holders, but only with respect to information regarding
such Selling Holder furnished in writing by or on behalf of such Selling Holder
expressly for inclusion in the Shelf Registration Statement or prospectus
supplement relating to the Registrable Securities, or any amendment or
supplement thereto; provided, however, that the liability of each
Selling Holder shall not be greater in amount than the dollar amount of the
proceeds (net of any Selling Expenses) received by such Selling Holder from the
sale of the Registrable Securities giving rise to such indemnification.

(c)          Notice.  Promptly after receipt by an indemnified
party hereunder of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party other than under this Section
2.6.  In any action brought against
any indemnified party, it shall notify the indemnifying party of the
commencement thereof.  The indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel reasonably satisfactory
to such indemnified party and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 2.6 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected; provided,
however, that, (i) if the indemnifying party has failed to assume the
defense and employ counsel or (ii) if the defendants in any such action include
both the indemnified party and the indemnifying party and counsel to the
indemnified party shall have concluded that there may be reasonable defenses
available to the indemnified party that are different from or additional to
those available to the indemnifying party, or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of
the indemnifying party, then the indemnified party shall have the right to
select a separate counsel and to assume such legal defense and otherwise to
participate in the defense of such action, with the reasonable expenses and
fees of such separate counsel and other reasonable expenses related to such
participation to be reimbursed by the indemnifying party as incurred.  Notwithstanding any other provision of this
Agreement, no indemnified party shall settle any action brought against it with
respect to which it is entitled to indemnification hereunder without the
consent of the indemnifying party, unless the settlement thereof imposes no
liability or obligation on, and includes a complete and unconditional release
from all liability of, the indemnifying party.

(d)         Contribution.  If the indemnification provided for in this Section
2.6 is held by a court or government agency of competent jurisdiction to be
unavailable to K-Sea or any Selling Holder or is insufficient to hold them
harmless in respect of any Losses, then each such indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses as between K-Sea

 7
 

on the one hand and such
Selling Holder on the other, in such proportion as is appropriate to reflect
the relative fault of K-Sea on the one hand and of such Selling Holder on the
other in connection with the statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations; provided,
however, that in no event shall such Selling Holder be required to
contribute an aggregate amount in excess of the dollar amount of proceeds (net
of Selling Expenses) received by such Selling Holder from the sale of
Registrable Securities giving rise to such indemnification.  The relative fault of K-Sea on the one hand
and each Selling Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact has been made by,
or relates to, information supplied by such party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.  The parties
hereto agree that it would not be just and equitable if contributions pursuant
to this paragraph were to be determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this paragraph.  The amount paid by an indemnified party as a
result of the Losses referred to in the first sentence of this paragraph shall
be deemed to include any legal and other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any Loss which
is the subject of this paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who is not guilty of such
fraudulent misrepresentation.

(e)          Other Indemnification.  The provisions of this Section 2.6
shall be in addition to any other rights to indemnification or contribution
which an indemnified party may have pursuant to law, equity, contract or
otherwise.

Section 2.7                                      Rule
144 Reporting.  With a view to making
available the benefits of certain rules and regulations of the Commission that
may permit the sale of the Registrable Securities to the public without
registration, K-Sea agrees to use its commercially reasonable efforts to:

(a)          Make and keep public
information regarding K-Sea available, as those terms are understood and
defined in Rule 144 of the Securities Act, at all times from and after the date
hereof;

(b)         File with the Commission
in a timely manner all reports and other documents required of K-Sea under the
Securities Act and the Exchange Act at all times from and after the date
hereof; and

(c)          So long as a Holder owns
any Registrable Securities, furnish to such Holder forthwith upon request a
copy of the most recent annual or quarterly report of K-Sea, and such other
reports and documents so filed as such Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing such
Holder to sell any such securities without registration.

Section 2.8                                      Transfer
or Assignment of Registration Rights. 
The rights to cause K-Sea to register Registrable Securities of the
Sellers by K-Sea under this Article II may be transferred or assigned by a
Seller to one or more transferee(s) or assignee(s) of such Registrable
Securities,

 8
 

provided that (a) unless such
transferee is an Affiliate of a Seller, each such transferee or assignee holds
Registrable Securities representing 100% of the number of Closing Common Units
issued to such Seller pursuant to the terms of the Merger Agreement, (b) K-Sea
is given written notice prior to any said transfer or assignment, stating the
name and address of each such transferee and identifying the securities with
respect to which such registration rights are being transferred or assigned,
and (c) each such transferee assumes in writing responsibility for its portion
of the obligations of the assigning Seller under this Agreement.

Section 2.9                                      Lock-Up.  Notwithstanding anything to the contrary in
this Agreement, the Sellers agree not to sell any of the Closing Common Units
prior to the date that is 180 days after the Closing Date.

ARTICLE III.

MISCELLANEOUS

Section 3.1                                      Communications.  All notices and other communications provided
for or permitted hereunder shall be made in writing by facsimile, courier
service or personal delivery:

(a)          if to Sellers, at the
respective addresses set forth below, notice of which is given in accordance
with the provisions of this Section 3.1:

(i)                                     if
to RCD, RCD Maritime Enterprises, LLC, 3259 35th Ave SW, Seattle, Washington
98126;

(ii)                                  if
to Smith LLC, Smith Maritime, LLC, 8440 North Mercer Way, Mercer Island,
Washington 98404; and

(iii)                               if
to WS Maritime, WS Maritime Pacific, LLC, 12014 Via Palazzo Lane, Cypress,
Texas 77429;

(b)         if to a transferee of any
Seller, to such Holder at the address provided pursuant to Section 2.8
above, and

(c)          if to K-Sea, at One
Tower Center Boulevard, 17th Floor, East Brunswick, New Jersey 08816, notice of
which is given in accordance with the provisions of this Section 3.1.

All such notices and
communications shall be deemed to have been received at the time delivered by
hand, if personally delivered; when receipt acknowledged, if sent via facsimile
or sent via Internet electronic mail; and when actually received, if sent by
any other means.

Section 3.2                                      Successor
and Assigns.  This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties, including subsequent Holders of Registrable Securities to the
extent permitted herein.

Section 3.3                                      Assignment
of Rights.  Except as set forth in Section
2.8 hereof, no party may assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of the other
parties.

 9
 

Section 3.4                                      Recapitalization,
Exchanges, etc. Affecting the Common Units. 
The provisions of this Agreement shall apply to the full extent set
forth herein with respect to any and all units of K-Sea or any successor or
assign of K-Sea (whether by merger, consolidation, sale of assets or otherwise)
which may be issued in respect of, in exchange for or in substitution of, the
Registrable Securities, and shall be appropriately adjusted for combinations,
recapitalizations and the like occurring after the date of this Agreement.

Section 3.5                                      Specific
Performance.  Damages in the event of
breach of this Agreement by a party hereto may be difficult, if not impossible,
to ascertain, and it is therefore agreed that each such Person, in addition to
and without limiting any other remedy or right it may have, will have the right
to an injunction or other equitable relief in any court of competent
jurisdiction, enjoining any such breach, and enforcing specifically the terms
and provisions hereof, and each of the parties hereto hereby waives any and all
defenses it may have on the ground of lack of jurisdiction or competence of the
court to grant such an injunction or other equitable relief.  The existence of this right will not preclude
any such Person from pursuing any other rights and remedies at law or in equity
which such Person may have.

Section 3.6                                      Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but
one and the same Agreement.

Section 3.7                                      Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

Section 3.8                                      Governing
Law.  The laws of the State of
Delaware shall govern this Agreement without regard to principles of conflict
of laws.

Section 3.9                                      Severability
of Provisions.  Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting or impairing the validity or enforceability of such provision in any
other jurisdiction.

Section 3.10                                Entire
Agreement.  This Agreement is
intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the rights granted by K-Sea set forth herein.  This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.

 10
 

Section 3.11                                Amendment.  This Agreement may be amended only by means
of a written amendment signed by K-Sea and the Holders of a majority of the
then outstanding Registrable Securities; provided,  however, that
no such amendment shall materially and adversely affect the rights of any
Holder hereunder without the consent of such Holder.

Section 3.12                                No
Presumption.  In the event any claim is made by
a party relating to any conflict, omission, or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be implied by virtue of the
fact that this Agreement was prepared by or at the request of a particular
party or its counsel.

Section 3.13                                Restrictions
in Merger Agreement.  The Sellers hereby acknowledge,
and agree to comply with, the restrictions on transfer contained in Section
6.18 of the Merger Agreement.

[Signature
Page Follows]

 11

IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.

	
  

  	
  K-SEA TRANSPORTATION PARTNERS LP.

  	 

	
   

  	 

	
   

  	
  By:

  	
  K-Sea General Partner L.P.,

  	 

	
   

  	
  its General Partner

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  K-Sea General Partner GP LLC,

  
	
   

  	
  its General Partner

  	 

	
   

  	 

	
   

  	 

	
   

  	
  By:

  	
    /s/ Richard P. Falcinelli

  	
   

  	 

	
   

  	
  Richard P. Falcinelli

  	 

	
   

  	
  VP and Secretary

  	 

	
   

  	 

	
   

  	 

	
   

  	
  RCD MARITIME ENTERPRISES, LLC

  	 

	
   

  	 

	
   

  	 

	
   

  	
  By:

  	
    /s/ Robert C. Dorn

  	
   

  	 

	
   

  	
  Robert C. Dorn

  	 

	
   

  	
  sole member

  	 

	
   

  	 

	
   

  	 

	
   

  	
  SMITH MARITIME, LLC

  	 

	
   

  	 

	
   

  	 

	
   

  	
  By:

  	
    /s/ Gordon L.K. Smith

  	
   

  	 

	
   

  	
  Gordon L.K. Smith

  	 

	
   

  	
  sole member

  	 

	
   

  	 

	
   

  	
        /s/ Robert C.
  Dorn

  	
   

  	 

	
   

  	
  Robert C. Dorn

  	 

	
   

  	 

	
   

  	
        /s/ Gordon L.K.
  Smith 

  	
   

  	 

	
   

  	
  Gordon L.K. Smith

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