Document:

Exhibit
10.13

 

AMENDMENT NO. 4

TO

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT AND

AMENDMENT TO AMENDMENT LETTER RE COVENANTS 7.01 AND 7.03

 

AMENDMENT NO. 4 TO LOAN AND
SECURITY AGREEMENT AND AMENDMENT TO AMENDMENT LETTER RE COVENANTS 7.01 AND 7.03 (this “Amendment”), dated as of
August 31, 2010, by and among K-SEA OPERATING
PARTNERSHIP L.P. (“Borrower”),
the several financial institutions party hereto (the “Lenders”),
KEYBANK NATIONAL ASSOCIATION, as
Administrative Agent for the Lenders (in such capacity, the “Administrative Agent”) and as
collateral trustee for the Lenders, BANK OF AMERICA, N.A.,
as successor to LaSalle Bank, National Association and CITIBANK,
N.A., as Co-Syndication Agents, and CITIZENS
BANK OF PENNSYLVANIA and HSBC BANK USA, NATIONAL
ASSOCIATION, as Co-Documentation Agents.

 

RECITALS

 

A.            Borrower,
the Lenders, the Co-Syndication Agents, the Co-Documentation Agents and the
Administrative Agent are parties to an Amended and Restated Loan and Security
Agreement, dated as of August 14, 2007 (as heretofore amended and
supplemented, and as it may be further amended, restated, supplemented or
otherwise modified from time to time, the “Loan Agreement”).
Borrower, the Required Lenders and the Administrative Agent are parties to the
Amendment Letter Re Covenants 7.01 and 7.03, dated as of June 30, 2010 (as
heretofore amended and supplemented, and as it may be further amended,
restated, supplemented or otherwise modified from time to time, the “Letter”). Unless otherwise defined
herein, all capitalized terms used herein or in the Acknowledgement and Consent
annexed hereto shall have the meanings ascribed to them in the Loan Agreement.

 

B.            Borrower
has requested that the Administrative Agent and the Lenders amend the Loan
Agreement in certain respects and to extend the “Period” as such term is
defined in the Letter.

 

C.            The
Administrative Agent has advised Borrower that the Lenders party hereto are
willing to agree to its requests to amend the Loan Agreement and the Letter on
the terms and subject to the conditions set forth in this Amendment.

 

Accordingly, in consideration of the foregoing, the
parties hereto hereby agree as follows:

 

1.                                      CHANGE
IN TRANCHE A COMMITMENTS.

 

(a)           Tranche A Commitments.
From and after the Amendment No. 4 Effective Date, the Tranche A
Commitment of each Tranche A Lender shall be the amount set forth opposite such
Tranche A Lender’s name on Schedule 2.01 to the Loan Agreement (as amended
hereby and attached hereto as Exhibit A)
under the caption “Tranche A Commitment” as such amount may be reduced pursuant
to the terms of the Loan Agreement, and such amount (if changed) shall
supersede and be deemed to amend the amount of such Tranche A Lender’s Tranche
A Commitment as set forth on Schedule 2.01 to the Loan Agreement as in effect
immediately prior to the Amendment No. 4 Effective Date.

 

 

(b)           Adjustment of Outstanding
Loans. If any Tranche A Loans are outstanding under the Loan
Agreement on the Amendment No. 4 Effective Date, the Tranche A Lenders
shall on the Amendment No. 4 Effective Date, at the direction of the
Administrative Agent, make appropriate adjustments among themselves in order to
insure that the amount (and type) of the Tranche A Loans outstanding to
Borrower from each Tranche A Lender under the Loan Agreement (as of the
Amendment No. 4 Effective Date) are proportionate to the aggregate amount
of all of the Tranche A Commitments, after giving effect to the decrease in the
Tranche A Maximum Amount and decrease in the amount of the Tranche A
Commitments of each of the Tranche A Lenders. Borrower agrees and consents to
the terms of this Section 1(b).

 

(c)           To the extent that, after giving effect to the decrease in
the Tranche A Maximum Amount and decrease in the amount of the Tranche A
Commitments of each of the Tranche A Lenders, the sum of the Tranche A Credit
Exposures exceeds the Total Tranche A Commitments, Borrower shall, on the
Amendment No. 4 Effective Date, prepay the Tranche A Loans in an amount
sufficient to eliminate such excess.

 

2.             AMENDMENTS TO LOAN AGREEMENT.

 

(a)           Additional Definitions.
Section 1.01 of the Loan Agreement is hereby amended by adding the
following new definitions in the appropriate alphabetical order:

 

“2010
Equity Issuance” means the purchase of newly issued limited
partnership units in K-Sea by KA First Reserve, LLC such that the gross
proceeds received by K-Sea is not less than $85,000,000.

 

“Amendment
No. 4” means Amendment No. 4 to Amended and Restated
Loan and Security Agreement, dated as of August 31, 2010, among Borrower,
the Lenders party thereto and the Administrative Agent.

 

“Amendment
No. 4 Effective Date” means the date on which all the
conditions to effectiveness contained in Section 3 of the Amendment
No. 4 have been met.

 

“Approved Fund”
means a fund that is engaged in making, purchasing, holding or otherwise
investing in bank loans and similar extensions of credit and that is
administered or managed by a Lender or an Affiliate of a Lender.

 

“Eligible Assignee”
means (i) a Lender, (ii) a United States Affiliate of a Lender or an
Approved Fund, and (iii) any other commercial bank, finance company,
insurance company or other financial institution having a long-term unsecured
debt rating or issuer credit rating, as the case may be, from Moody’s Investor
Services, Inc.’s of at least Baal or Standard & Poor’s Ratings
Services’, a division of The McGraw-Hill Companies, Inc., of at least BBB+
or its equivalent, in each case to the extent approved by the Administrative
Agent; provided, however, that neither Borrower nor an Affiliate of a Borrower
shall qualify as an Eligible Assignee. Notwithstanding the foregoing, the
definition of Eligible Assignee shall not include any Person that is either a
direct competitor of the Borrower and its Subsidiaries or any Person that
directly or indirectly owns or controls 10% or more of any class of the voting
or other equity interests of a direct competitor of the Borrower and its
Subsidiaries.

 

2

 

“Financial Consultant” means
MorrisAnderson, or such other financial consultant that the Administrative
Agent designates from time to time.

 

“Growth
CAPEX” means Capital Expenditures the proceeds of which shall be
used for the acquisition or construction of vessels.

 

“Improvement CAPEX” means all
Capital Expenditures other than those that constitute either Growth CAPEX or
Maintenance CAPEX.

 

“May 2010 Budget” means that
certain operating budget delivered by the Borrower to the Administrative Agent
on May 14, 2010.

 

“Nigerian
Vessel Sale” means that certain sale of the following vessels:

 

DBL 70 with an official number of 540401;

DBL 53 with an official number of 500121;

Baltic Sea with an official number of 551908; and

Coral Sea with an official number of 550670;

 

pursuant to the terms and
conditions of that certain Consent, which if approved by all Lenders, shall
include the requirement that the Borrower uses 100% of the net proceeds to
partially prepay the Loans. For the avoidance of doubt, such partial repayment
shall not reduce the Tranche A Commitments.

 

“Unfunded
Growth CAPEX” means Growth CAPEX that is provided from either
(i) operating cash flow of the Borrower or any of its Subsidiaries or
(ii) from any proceeds of the Loans. Such term shall not include Growth
CAPEX that is funded from debt (other than debt associated with the Loans) or
from equity investments that occur after the Amendment No. 4 Effective
Date.

 

“Unfunded
Improvement CAPEX” means Improvement CAPEX that is provided from
either (i) operating cash flow of the Borrower or any of its Subsidiaries
or (ii) from any proceeds of the Loans. Such term shall not include
Improvement CAPEX that is funded from debt (other than debt associated with the
Loans) or from equity investments that occur after the Amendment No. 4
Effective Date.

 

(b)           Amendments to Definitions.

 

(i)            Applicable Margin. Section 1.01
of the Loan Agreement is hereby amended by deleting the definition of “Applicable Margin” in its entirety
and substituting the following therefor:

 

“Applicable
Margin” means, at all times during the applicable periods set
forth below: (a) with respect to Base Rate Loans, during each period set
forth below, the percentage set forth below under the heading “Base Rate

 

3

 

Margin”  with respect to
such period, (b) with respect to LIBOR Loans, during each period set forth
below, the percentage set forth below under the heading “LIBOR Margin”  with respect to such period and
(c) with respect to the Commitment Fees, during each period set forth
below, the percentage set forth below under the heading “Commitment Fee Margin”  with respect to such period:

 

	
  Period

  	
   

  	
  Applicable
  Margin

  	
   

  
	
  When the
  Total

  Funded Debt to

  EBITDA Ratio

  is greater than

  or equal to

  	
   

  	
  And less

  than

  	
   

  	
  Base Rate

  Margin

  	
   

  	
  LIBOR

  Margin

  	
   

  	
  Commitment

  Fee Margin

  	
   

  
	
  6.00 to 1.00

  	
   

  	
   

  	
   

  	
  4.750

  	
  %

  	
  5.750

  	
  %

  	
  0.875

  	
  %

  
	
  5.00 to 1.00

  	
   

  	
  6.00 to 1.00

  	
   

  	
  4.250

  	
  %

  	
  5.250

  	
  %

  	
  0.750

  	
  %

  
	
  4.50 to 1.00

  	
   

  	
  5.00 to 1.00

  	
   

  	
  3.750

  	
  %

  	
  4.750

  	
  %

  	
  0.625

  	
  %

  
	
  3.50 to 1.00

  	
   

  	
  4.50 to 1.00

  	
   

  	
  3.250

  	
  %

  	
  4.250

  	
  %

  	
  0.500

  	
  %

  
	
  2.50 to 1.00

  	
   

  	
  3.50 to 1.00

  	
   

  	
  2.750

  	
  %

  	
  3.750

  	
  %

  	
  0.450

  	
  %

  
	
  1.50 to 1.00

  	
   

  	
  2.50 to 1.00

  	
   

  	
  2.250

  	
  %

  	
  3.250

  	
  %

  	
  0.375

  	
  %

  
	
   

  	
   

  	
  1.50 to 1.00

  	
   

  	
  1.750

  	
  %

  	
  2.750

  	
  %

  	
  0.375

  	
  %

  

 

Provided that commencing on January 1, 2011,
all pricing associated with a ratio in excess of 6.00:1.00 shall increase by
0.500% and shall continue to increase an additional 0.500% for each fiscal
quarter thereafter for each quarter that such ratio exceeds 6.00:1.00.

 

Changes in the Applicable Margin resulting from a
change in the Total Funded Debt to EBITDA Ratio shall be based upon the
certificate most recently delivered under Section 6.01(b) and shall
become effective on the first day of the month immediately succeeding the date
such certificate is required to be delivered to the Administrative Agent
pursuant to Section 6.01(b). Notwithstanding anything to the contrary in
this definition, (i) during the period commencing on the Amendment
No. 4 Effective Date and ending on the date that the certificate to be
delivered under Section 6.01(b) for the fiscal quarter ending
September 30, 2010 is delivered to the Administrative Agent, the
Applicable Margin shall be determined based on a Total Funded Debt to EBITDA
Ratio of greater than or equal to 5.00 to 1.00 and less than 6.00 to 1.00 and
(ii) if Borrower shall fail to deliver to the Administrative Agent such a
certificate on or prior to any date required by Section 6.01(b), the Total
Funded Debt to EBITDA Ratio shall be deemed to be greater than 6.00 to 1.00
from and including such date to the first day of the month immediately
succeeding the date of delivery to the Administrative Agent of such
certificate.

 

4

 

(ii)           Asset
Coverage Ratio. Section 1.01 of the Loan Agreement is hereby
amended by deleting the definition of “Asset Coverage Ratio” in its
entirety and substituting the following therefor:

 

“Asset Coverage Ratio” means, at all
times, the ratio of the Orderly Liquidation Value of all Pool Vessels that are
part of the Collateral divided by the aggregate Revolving Credit Exposure of
all Lenders.

 

(iii)          EBITDA.
Section 1.01 of the Loan Agreement is hereby amended by deleting
the definition of “EBITDA” in its entirety and
substituting the following therefor:

 

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

 

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

 

(2)           to the extent that any of
the items referred to in any of clauses (i) through (viii) below were
deducted in calculating such net income:

 

(i)            Interest Expense of Borrower
for such fiscal period;

 

(ii)           Federal, state, local and
foreign income tax expenses of Borrower for such fiscal period;

 

(iii)          the amount of all
depreciation and amortization for such fiscal period;

 

(iv)          non-cash stock compensation
incurred during such fiscal period;

 

(v)           non-cash goodwill impairment
charges incurred during such fiscal period;

 

(vi)          other non-cash expenses
incurred during such fiscal period that are acceptable to the Administrative
Agent;

 

(vii)         non-recurring losses in an
aggregate amount not to exceed $1,700,000 incurred in connection with the sale
of real property located at 150 South Main Street, Norfolk, Virginia so long as
such property is sold for a gain of not less than $1,700,000 and such sale
occurs before October 15, 2010;

 

5

 

(viii)        non-recurring insurance call
cost in an aggregate amount not to exceed $1,029,000 incurred during the fourth
quarter of the 2010 fiscal year;

 

(ix)          non-recurring costs and
expenses, including, but not limited to, the fees and expenses associated with
(i) the Financial Consultant, incurred in connection with this Amendment
No. 4, or (ii) related to the Financial Consultant’s review as
required under Section 6.23 of this Agreement, or (iii) the 2010
Equity Issuance; and

 

(x)           losses from the sale,
exchange or other disposition of assets incurred during such period; minus

 

(3)           to the extent that any of
the items described in clauses (i) or (ii) below were added in calculating
such net income:

 

(i)            gains from sales, exchanges
and other dispositions of assets not in the ordinary course of business; and

 

(ii)           non-cash gains.

 

(iv)        Liquidity.
Section 1.01 of the Loan Agreement is hereby amended by deleting
the definition of “Liquidity” in its entirety and
substituting the following therefor:

 

“Liquidity” means, as of any date of
determination, the sum of (a) unrestricted cash of Borrower determined on
a consolidated basis as of such date plus (b)(i) the lesser of
(A) the Tranche A Maximum Amount as of such date and (B) the Orderly
Liquidation Value of the Pool Vessels as of such date divided by 1.50 minus
(ii) the aggregate Tranche A Credit Exposure of all of the Lenders as of
such date.

 

(v)           Permitted
Acquisition. Section 1.01 of the Loan Agreement is hereby
amended by deleting the definition of “Permitted Acquisition” in its
entirety and substituting the following therefor:

 

“Permitted Acquisition” means the
purchase, holding or acquisition of (including pursuant to any merger) any
capital stock or other securities (including any option, warrant or other right
to acquire any of the foregoing) of any other Person, or the purchase or
acquisition of (in one transaction or a series of transactions (including
pursuant to any merger)) any assets of any other Person constituting a business
unit, provided that, (i) at the time thereof and immediately after
giving effect thereto no Default shall have occurred and be continuing,
(ii) such Person or business unit, as the case may be, is in a
substantially related business as Borrower, (iii) Borrower shall have
complied with the provisions of Section 6.18 with respect to such Person,
and (iv) the total amount of consideration for all such Permitted
Acquisitions in any fiscal year plus all amounts expended on Growth CAPEX for
such fiscal year shall not exceed $30,000,000.

 

6

 

(vi)          Tranche
A Maximum Amount. Section 1.01 of the Loan Agreement is hereby
amended by deleting the definition of “Tranche A Maximum Amount”
in its entirety and substituting the following therefor:

 

“Tranche A
Maximum Amount” means, with respect to the Tranche A Facility,
One Hundred Fifteen Million Dollars ($115,000,000.00), as such amount may be
decreased in the aggregate in accordance with Section 2.06.

 

(vii)         Fixed
Charge Coverage Ratio. Section 1.01 of the Loan Agreement is
hereby amended by deleting the definition of “Fixed
Charge Coverage Ratio” in its entirety and substituting the
following therefor:

 

“Fixed
Charge Coverage Ratio” means, at any date of determination, the
ratio of (a) EBITDA less (i) Maintenance CAPEX, (ii) Unfunded
Growth CAPEX in excess of the amounts set forth in the May 2010 Budget,
(iii) Unfunded Improvement CAPEX in excess of the amounts set forth in the
May 2010 Budget and (iv) cash Distributions made in the 2011 fiscal
year and each fiscal year thereafter; divided by the sum of (b) Fixed
Charges, in each case for the four fiscal quarter period ending on such date
or, if such date is not the last day of a fiscal quarter, for the immediately
preceding four fiscal quarter period; provided, that, for any such determination,
(i) EBITDA shall be adjusted to include, for the relevant four fiscal
quarter period, pro forma EBITDA, and (ii) the Fixed Charges shall be
adjusted to include the pro forma interest and debt service expenses associated
with any acquired assets or entities, in an amount reasonably acceptable to the
Administrative Agent respecting any vessel or business acquisition for which
debt service is incurred. Additionally, Fixed Charges shall be adjusted to
include the pro forma reduction of Interest Expense associated with the
prepayment of the Tranche A Loans that was funded by the 2010 Equity Issuance
or any subsequent equity investment. For the purposes of calculating such pro
forma reduction of Interest Expense associated with the 2010 Equity Issuance,
such Interest Expense shall be reduced by $4,748,000 for the twelve month
period ending September 30, 2010, by $3,453,000 for the twelve month
period ending December 31, 2010, by $2,158,000 for the twelve month period
March 31, 2011, and by $863,000 for the twelve month period June 30,
2011.

 

(viii)        Scheduled
Principal Payments. Section 1.01 of the Loan Agreement is hereby
amended by deleting the definition of “Scheduled Principal
Payments”  in its entirety and substituting the following
therefor:

 

“Scheduled
Principal Payments” means, with respect to any Person all
scheduled payments of principal on Indebtedness paid by such Person during the
twelve (12) calendar month period immediately preceding such date; provided,
however, that the following shall be excluded in determining Scheduled
Principal Payments (i) any such scheduled payments funded from third party
refinancings or any asset sales or (ii) any such scheduled payments funded
from any equity investments.

 

(c) Commitment Reduction.
Section 2.06(c) to the Loan Agreement is hereby deleted in its
entirety and the following new 2.06(c) is substituted therefor:

 

7

 

(c)           Borrower (i) may at any
time terminate, or from time to time, reduce the Tranche A Commitments; provided
that Borrower shall not terminate or reduce the Tranche A Commitments if, after
giving effect to any concurrent prepayment of the Tranche A Loans in accordance
with Section 2.08, the sum of the Tranche A Credit Exposures would exceed
the total Tranche A Commitments and (ii) after the occurrence of any sale
of Collateral, shall reduce the Tranche A Commitments in an amount equal to
100% of the Orderly Liquidation Value of such Collateral (as determined in
accordance with the most recently delivered Appraisal of the Pool Vessels,
which Appraisal shall be in form and substance satisfactory to the
Administrative Agent.

 

(d)           Commitment Reduction.
Section 2.06(e) to the Loan Agreement is hereby deleted in its
entirety and the following new 2.06(e) is substituted therefor:

 

(e)           Each reduction of the
Commitments hereunder shall be in an amount that is (i) in an integral
multiple of $1,000,000 and not less than $5,000,000 or (ii) with respect
to any sale of Collateral as set forth in subsection (ii) of Section 2.06(c) of
this Agreement (other than Collateral that is sold pursuant to the Nigerian
Vessel Sale), an amount equal to 100% of the Orderly Liquidation Value of such
Collateral, as applicable.

 

(e)           Prepayments Generally. Section 2.13(b) of the Loan Agreement is hereby amended by
deleting the ratio “1.333 to 1.00” each time it appears therein and
substituting “1.50 to 1.00” therefor.

 

(f)            Substitution of Pool Vessel.
Section 3.02 of the Loan Agreement is hereby amended by deleting the ratio
“1.333 to 1.00” each time it appears therein and substituting “1.50 to 1.00”
therefor.

 

(g)           Fair Market Value.
Section 3.03 of the Loan Agreement is hereby amended by deleting the ratio
“1.333 to 1.00” each time it appears therein and substituting “1.50 to 1.00”
therefor.

 

(h)           Financial Information and Other Information. Section 6.01 of the Loan Agreement is hereby amended by adding a
new Section 6.01(f) and a new Section 6.01(g) hereto to
read as follows:

 

(f)     Within ten (10) days of
the first day of each calendar month and immediately prior to the sale of any
assets, Borrower shall deliver to Lenders a borrowing base certificate, in form
and substance satisfactory to the Administrative Agent, certified by a
Financial Officer setting forth a reasonably detailed calculation of the
Borrowing Base and the sum of all outstanding Loans and Letter of Credit
Exposures.

 

(g)     Commencing on Friday,
September 10, 2010 and every other Friday thereafter, Borrower shall
deliver the financial status update to the Administrative Agent that includes
13-week rolling cash flow, monthly earnings, projections, updates on pending
asset sales and any other information that the Administrative Agent requests
from time to time, in form and substance satisfactory to the Administrative
Agent; provided, however, that

 

8

 

after March 31, 2011,
no such financial update shall be required when the Total Funded Debt to EBITDA
ratio is less than 5.00 to 1.00.

 

(i)              Pool Vessel Appraisals.
Section 6.02 of the Loan Agreement is hereby deleted in its entirety and
the following is substituted therefor:

 

Section 6.06 Pool
Vessel Appraisals.

 

The Administrative Agency
shall, in the absence of an Event of Default, conduct, and Borrower shall
cooperate in the conduct of, a visual Appraisal of any or all of the Pool
Vessels at Borrower’s expense at least once every twelve (12) month period of
this Agreement, and upon the Administrative Agent’s request, once every six
(6) month period, and at any time during the continuance of an Event of
Default. The first period will commence on the April 1, 2010, with the
Appraisal to be delivered no later than November 1, 2010; provided
that Borrower will allow access to any Appraiser selected by the Administrative
Agent to attend and appraise any Pool Vessel in drydock at any time on
reasonable notice. Each fiscal year, Borrower shall provide the Administrative
Agent with a drydock schedule and location of drydock. As soon as available
after each Anniversary Date, Borrower shall provide the Administrative Agent
with desktop Appraisals on all Pool Vessels in the Collateral.

 

(j)              Financial Consultant Review.
Article VI of the Loan Agreement is hereby amended by adding a new
Section 6.23 hereto to read as follows:

 

Section 6.23 Financial
Consultant Review.

 

Upon request of the
Administrative Agent, the Borrower will cooperate, and will cause each of its
Subsidiaries to cooperate, with the efforts of the Financial Consultant to
review with the Borrower or any of its Subsidiaries and their officers and
independent accountants, any aspects of the bi-weekly financial status updates
delivered to the Administrative Agent pursuant to Section 6.01(g) of
the Agreement.

 

9

 

(k)           Fixed Charge Coverage Ratio.
Section 7.01 of the Loan Agreement is hereby deleted in its entirety and
the following is substituted therefor:

 

Section 7.01   Fixed
Charge Coverage Ratio.

 

Borrower shall not permit
the Fixed Charge Coverage Ratio as of the end of any fiscal quarter occurring
during any period set forth below to be less than the ratio set forth below
with respect to such period:

 

	
  Period

  	
   

  	
  Ratio

  	
   

  
	
  June 30, 2010

  	
   

  	
  0.75 to 1.00

  	
   

  
	
  September 30, 2010

  	
   

  	
  0.50 to 1.00

  	
   

  
	
  December 31, 2010

  	
   

  	
  0.50 to 1.00

  	
   

  
	
  March 31, 2011

  	
   

  	
  0.60 to 1.00

  	
   

  
	
  June 30, 2011

  	
   

  	
  0.60 to 1.00

  	
   

  
	
  September 30, 2011

  	
   

  	
  0.70 to 1.00

  	
   

  
	
  December 31, 2011

  	
   

  	
  0.70 to 1.00

  	
   

  
	
  March 31, 2012

  	
   

  	
  0.75 to 1.00

  	
   

  
	
  June 30, 2012 and
  thereafter

  	
   

  	
  1.05 to 1.00

  	
   

  

 

10

 

(l)            Total Funded Debt to EBITDA
Ratio. Section 7.03 of the
Loan Agreement is hereby deleted in its entirety and the following is
substituted therefor:

 

Section 7.03   Total
Funded Debt to EBITDA Ratio.

 

Borrower shall not permit
the Total Funded Debt to EBITDA Ratio at any time during each period set forth
below to be greater than the ratio set forth below with respect to such period:

 

	
  Period

  	
   

  	
  Ratio

  	
   

  
	
  June 30, 2010

  	
   

  	
  6.50 to 1.00

  	
   

  
	
  September 30, 2010

  	
   

  	
  6.90 to 1.00

  	
   

  
	
  December 31, 2010

  	
   

  	
  6.90 to 1.00

  	
   

  
	
  March 31, 2011

  	
   

  	
  6.75 to 1.00

  	
   

  
	
  June 30, 2011

  	
   

  	
  6.50 to 1.00

  	
   

  
	
  September 30, 2011

  	
   

  	
  5.75 to 1.00

  	
   

  
	
  December 31, 2011

  	
   

  	
  5.20 to 1.00

  	
   

  
	
  March 31, 2012

  	
   

  	
  4.85 to 1.00

  	
   

  
	
  June 30, 2012 and
  thereafter

  	
   

  	
  4.40 to 1.00

  	
   

  

 

(m)           Asset Coverage Ratio.
Section 7.04 of the Loan Agreement is hereby deleted in its entirety and
the following is substituted therefor:

 

Section 7.04   Asset
Coverage Ratio.

 

Borrower shall not permit
the Asset Coverage Ratio at any time to be less than 1.50 to 1.00.

 

(n)             No Disposition of Assets. Section 7.07
to the Loan Agreement is hereby deleted in its entirety and the following
substituted therefor:

 

Section 7.07   No
Disposition of Assets.

 

Without the prior written
consent of Lenders (which shall not be unreasonably withheld), Borrower shall not,
and shall not permit any Subsidiary Guarantor to, directly or indirectly sell,
lease (other than a charter of a Pool Vessel permitted under the Mortgage),
transfer, assign, abandon, exchange or otherwise relinquish possession or
dispose of any part of the Collateral or any material portion of its other
assets (including, without limitation, any of the Capital Stock of any of the
Subsidiary Guarantors, but

 

11

 

excluding (i) Collateral or other assets that
are obsolete or worn out, or equipment disposed of, if worn out, and replaced
with equipment of the same or better quality and value, in the ordinary course
of business, (ii) sales, leases, transfers, assignments, abandonments,
exchanges, relinquishments of possession or dispossessions of Collateral or
other assets having an aggregate value not to exceed $1,000,000 during the term
hereof), and (iii) with the written consent of the Administrative Agent,
sales of Pool Vessels that constitute Collateral with an aggregate sales price
of up to $40,000,000 (provided the value of the Pool Vessels sold pursuant to
the Nigerian Vessel Sale shall not be included in such calculation) so long as:
(1) the average sale price is greater than or equal to the Orderly Liquidation
Value of such Pool Vessels in the aggregate (as determined by the most recently
delivered Appraisal, which shall be in form and substance satisfactory to the
Administrative Agent), (2) the net proceeds thereof shall be applied to
and used to reduce, on dollar-for-dollar basis, the outstanding Loan balance in
an amount equal to the Orderly Liquidation Value of such Collateral (as
determined by the most recently delivered Appraisal, which shall be in form and
substance satisfactory to the Administrative Agent) and (3) the
outstanding Tranche A Commitment shall be reduced by an amount equal to the
Orderly Liquidation Value of such Collateral (as determined by the most
recently delivered Appraisal, which shall be in form and substance satisfactory
to the Administrative Agent).

 

(o)           Limitations on Advances and
Distributions. Subsection (a) of
Section 7.11 of the Loan Agreement is hereby deleted in its entirety and
the following is substituted therefor:

 

(a)           Borrower shall not, and will
not permit any of the Subsidiaries to, declare or make, or agree to pay for or
make, directly or indirectly, any Distribution, provided that Borrower
and the Subsidiaries may make each of the following: (i) dividends by the
Borrower payable solely in Capital Stock of the Borrower; (ii) dividends
and distributions by any Subsidiary of Borrower payable to Borrower or any
other Subsidiary of Borrower; and (iii) cash Distributions by Borrower for
any purpose; provided, in the case of this sub-clause (iii) that
(A) each of such cash Distributions may not be paid more than once in
respect of any fiscal quarter period (each such period for purposes herein, a “Test Quarter”), (B) such cash
Distributions paid in respect of any Test Quarter shall not exceed the Maximum
Distribution Amount, (C) no such cash Distributions may be paid with
respect to a Test Quarter until such time as the financial statements required
to be delivered pursuant to clause (i) of Section 6.01(a) in
respect of such Test Quarter have been delivered to the Administrative Agent in
accordance with clause (i) of Section 6.01(a) and the
certificate of the Borrower required to be delivered pursuant to
Section 6.01(e) in respect of such Test Quarter has been delivered
pursuant to Section 6.01(e), (D) at the time of the declaration of
any such cash Distribution, both before and after giving effect thereto,
(I) no Default shall have occurred and be continuing or result from any
such declaration, (II) Liquidity shall be not less than $17,500,000,
(III) the Total Funded Debt to EBITDA ratio shall be less than 5.0 to 1.0,
(IV) the Fixed Charge Coverage Ratio (measured on a three month trailing
basis) shall be greater than or equal to 1.0 to 1.0 for each of the two fiscal
quarters immediately preceding the relevant cash Distribution, provided,

 

12

 

however, that in no event
shall such test be performed or any cash Distributions declared prior to the
end of the fiscal quarter ending March 31, 2011, and (V) the
projected Fixed Charge Coverage Ratio (in the good faith estimate of the
Borrower) for the four-quarter fiscal period following the fiscal quarter in
respect of which such cash Distribution is declared shall be greater than or
equal to 1.0 to 1.0; provided, however, the Fixed Charge Coverage Ratio
(measured on a three month basis) for at least three of the four fiscal
quarters of such four-quarter fiscal period shall be greater than or equal to
1.0 to 1.0, and (E) at the time of the payment of any such cash
Distribution, both before and after giving effect to the payment thereof,
(I) no Default shall have occurred and be continuing or result from any
such payment, (II) Liquidity shall be not less than $17,500,000, (III) the
Total Funded Debt to EBITDA ratio shall be less than 5.0 to 1.0, (IV) the
Fixed Charge Coverage Ratio (measured on a three month trailing basis) shall be
greater than or equal to 1.0 to 1.0 for each of the two fiscal quarters
immediately preceding the relevant cash Distribution, provided, however, that
in no event shall such test be performed or any cash Distributions be made
prior to the end of the fiscal quarter ending March 31, 2011, and
(V) the projected Fixed Charge Coverage Ratio (in the good faith estimate
of the Borrower) for the four-quarter fiscal period following the fiscal
quarter in respect of which such cash Distribution is paid shall be greater
than or equal to 1.0 to 1.0; provided, however, the Fixed Charge Coverage Ratio
(measured on a three month basis) for at least three of the four fiscal quarters
of such four-quarter fiscal period shall be greater than or equal to 1.0 to
1.0.

 

(a)           Limitations on Other Indebtedness.
Section 7.12 of the Loan Agreement is hereby deleted in its entirety and
the following is substituted therefor:

 

Section 7.12         Limitations on Other Indebtedness.

 

Borrower
shall not, and will not permit any Subsidiary to, create, incur, assume or
permit to exist any Indebtedness, except:

 

(i)            Indebtedness under the Loan
Documents;

 

(ii)           Indebtedness (including but
not limited to, vessel operating lease agreements) existing on the date hereof,
including any extensions, renewals, refinancings, or replacements of any such
Indebtedness that do not increase the outstanding principal amount thereof. For
the avoidance of doubt that certain operating lease with Mass Mutual Financial
Group (or its Affiliates) respecting DBL 76 may be replaced on terms and
conditions not materially different from those provided by the Borrower to the
Administrative Agent on August 22, 2010;

 

(iii)          Indebtedness of a Subsidiary
to any other Subsidiary and of any Subsidiary to Borrower;

 

(iv)          vessel operating lease
agreements entered into after the date hereof in the ordinary course of
business having a term of one (1) year or less; and

 

13

 

(v)           Indebtedness incurred in
connection with Growth CAPEX and Permitted Acquisitions, in an aggregate amount
not to exceed $30,000,000 in any fiscal year.

 

(p)           Capital
Expenditures. Section 7.17 of the
Loan Agreement is hereby deleted in its entirety and the following is
substituted therefor:

 

Section 7.17 Capital
Expenditures.

 

Borrower shall not make or
become obligated to make, and shall not permit any of its Subsidiaries to make
or become obligated to make:

 

(a)     Improvement CAPEX Capital
Expenditures in respect of any fiscal year in excess of $15,000,000; or

 

(b)     Growth CAPEX Capital
Expenditures and Permitted Acquisitions in the aggregate amount not to exceed
$30,000,000 in any fiscal year, provided however, such Growth CAPEX Capital Expenditures
and Permitted Acquisitions shall be funded entirely from equity investments or
third party debt. Notwithstanding the foregoing, the Borrower and/or its
Subsidiaries may make Capital Expenditures with respect to the construction of
vessels for which Borrower or a Subsidiary became obligated prior to the
Amendment No. 4 Effective Date.

 

(q)           Prepayments
of Indebtedness; Modification of Indebtedness. Section 7.18 of the Loan Agreement is hereby
deleted in its entirety and the following is substituted therefor:

 

Section 7.18         Prepayments
of Indebtedness; Modification of Indebtedness.

 

(a)             Borrower shall not, and
shall not permit any Subsidiary to prepay any Indebtedness, except
(i) Indebtedness under the Loan Documents; (ii) Indebtedness that, in
the good faith determination of the Borrower, is refinanced on terms equal or
more favorable to Borrower than the Indebtedness that is being refinanced; or
(iii) Indebtedness secured by vessels that do not constitute the
Collateral, provided in this case of this subclause (iii) only
(x) such non-Collateral vessels are being sold, (y) the Indebtedness
secured by such vessels is prepaid simultaneously with such sale, and
(z) the Administrative Agent shall have consented to such sale, such consent
not to be withheld unreasonably;

 

(b)           Borrower shall not, and
shall not permit any Subsidiary to, amend or otherwise modify the terms of any
Indebtedness, the effect of which is to increase the principal amount of any
periodic payment thereon or decrease the period in which such payments are to
be made.

 

(r)            Events of
Default. Subsection (c) of
Section 8.01 of the Loan Agreement is hereby deleted in its entirety and
the following is substituted therefor:

 

(c)           Borrower shall fail to
observe or perform any covenant, condition or agreement (i) contained in
Sections 6.01(g), 6.04, 6.05, 6.06(a),

 

14

 

6.08, 6.10, 6.11, 6.12,
6.14, 7.01, 7.02, 7.03, 7.04, 7.10 or 7.18 hereof; provided, however, that the
solely with respect to the covenants, conditions or agreements contained in
Section 6.01(g) the Borrower shall have up to an additional five
(5) Business Days from the date when such reports referenced in
Section 6.01(g) are due to deliver such reports before the failure to
deliver such reports becomes an Event of Default;

 

(s)            Successors
and Assigns. Subsection
(b) of Section 10.07 of the Loan Agreement is hereby deleted in its
entirety and the following is substituted therefor:

 

(b)           Any Lender may assign to one
or more assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans at the
time owing to it); provided that (i) except in the case of an assignment
to a Lender or a Lender Affiliate, each of Borrower and the Administrative
Agent must give its prior written consent to such assignment (which consent
shall not be unreasonably withheld); provided,
further, that if such assignee is an Eligible Assignee, the Borrower’s consent
shall not be required, (ii) except in the case of an assignment
to a Lender or a Lender Affiliate or an assignment of the entire remaining
amount of the assigning Lender’s Commitment, the amount of the Commitment of
the assigning Lender subject to each such assignment (determined as of the date
the Assignment and Acceptance with respect to such assignment is delivered to
the Administrative Agent) shall not be less than $5,000,000.00 and the amount
of the assigning Lender’s Commitment shall not be less than $5,000,000.00 after
the effectiveness of such assignments, unless each of Borrower and the
Administrative Agent otherwise consent, (iii) each partial assignment
shall be made as an assignment of a proportionate part of all the assigning
Lender’s rights and obligations under this Agreement, and (iv) the parties
to each assignment shall execute and deliver to the Administrative Agent an
Assignment and Acceptance, together with a processing and recordation fee of
$3,500.00; provided, further, that any consent of Borrower otherwise required under
this paragraph shall not be required if an Event of Default has occurred and is
continuing. Upon acceptance and recording pursuant to paragraph (d) of
this Section, from and after the effective date specified in each Assignment
and Acceptance, the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Acceptance, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.10, 2,11, 2.12 and 10.06 hereof), provided, however, no
assignee shall be entitled to receive any greater payment under
Section 2.10, 2.12 or 10.06(b) hereof than the assigning Lender would
have been entitled to receive with respect to the interest assigned to such
assignee, unless the assignment to such assignee is -made with Borrower’s prior
written consent, in which Borrower expressly waives such limitation. Any assignment
or transfer by a Lender of rights or obligations under this Agreement that does
not comply with this

 

15

 

paragraph shall be treated
for purposes of this Agreement as a sale by such Lender of a participation in
such rights and obligations in accordance with paragraph (e) of this
Section.

 

(t)            General. All references to “this Agreement” in the Loan Agreement and to “the
Loan Agreement” in the other Loan Documents shall be deemed to refer to the
Loan Agreement as amended hereby.

 

3.             AMENDMENTS TO LETTER.

 

(a)           The first Sentence of the
Third Paragraph of the Letter is hereby deleted in its entirety and the
following sentence is substituted therefor:

 

The Borrower hereby requests
that the Administrative Agent and the Lenders execute this Amendment Letter
(the “Letter”) to evidence their agreement to continue to negotiate changes in
the Relevant Covenants from the date hereof through the earlier of (i) the effective date of that Certain
Amendment No. 4 to Amended and Restated Loan and Security Agreement or
(ii) September 10, 2010, (the “Period”) and, in the event
the Borrower is not in compliance with such Relevant Covenants, to evidence the
temporary waiver thereof during the Period by the Administrative Agent and the
Lenders.

 

4.             CONDITIONS TO EFFECTIVENESS. (i) The
amendments contained in Section 1 and Section 2 shall be effective
upon the satisfaction of each of the following conditions:

 

(a)           The Administrative Agent (or its counsel) shall have
received from Borrower, each Guarantor and the Required Lenders (and solely
with respect to the amendment to Section 7.07, the consent of all Lenders)
either (i) a counterpart of this Amendment signed on behalf of such party
or (ii) written evidence satisfactory to the Administrative Agent (which
may include telecopy transmission of a signed signature page of this
Amendment) that such party has signed a counterpart of this Amendment.

 

(b)           There shall be delivered to the Administrative Agent
a certificate, dated as of the date hereof and signed by the Secretary or an
Assistant Secretary of the Borrower and its Subsidiaries, certifying as
appropriate as to all corporate or equivalent action taken by such party in
connection with this Amendment and the 2010 Equity Issuance together with
resolutions of the Borrower and its Subsidiaries evidencing same.

 

(c)           The Borrower shall have completed the 2010 Equity
Issuance and shall have used 100% of the net proceeds of such 2010 Equity
Issuance to prepay the Loans, and the 2010 Equity Issuance and prepayment shall
occur on or before September 10, 2010.

 

(d)           The Lenders shall be reasonably satisfied that no
material adverse change in the business, assets, operations, properties,
condition (financial or otherwise), liabilities (including contingent
liabilities) or material agreements of K-Sea and its consolidated Affiliates
taken as a whole and its Subsidiaries has occurred since March 31, 2010.

 

(e)           There shall be no injunction, writ, preliminary
restraining order or other order of any nature issued by any Governmental
Authority in any respect affecting the

 

16

 

transactions provided for in this Amendment and no
action or proceeding by or before any Governmental Authority shall have been commenced
and be pending or, to the knowledge of Borrower, threatened, seeking to prevent
or delay the transactions contemplated by this Amendment or challenging any
other terms and provisions hereof or thereof or seeking any damages in
connection herewith or therewith.

 

(f)            The representations and warranties contained in the
Loan Agreement shall be true and correct in all material respects, except to
the extent such representations and warranties relate to an earlier date and,
after giving effect to the amendments set forth herein, no Default or Event of
Default shall exist.

 

(g)           The Administrative Agent shall have received
(i) for the account of each Lender that has executed this Amendment,
payable on the Amendment No. 4 Effective Date, a fee equal to the product
of 0.75% multiplied by such Lender’s Tranche A Commitment and (ii) all
other amounts due and payable on or prior to the Amendment No. 4 Effective
Date, including all fees payable to the Administrative Agent in connection with
this Amendment and, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by Borrower hereunder.

 

(h)           All legal matters with respect to and all legal
documents (including, but not limited to, the Loan Documents) executed in
connection with the transactions contemplated by this Amendment shall be
satisfactory to counsel for the Administrative Agent.

 

(i)            Borrower shall have paid the reasonable fees and
disbursements of the Financial Consultant in connection with its assessment and
review of the operations of the Borrower.

 

(j)            Borrower shall have paid the reasonable fees and
disbursements of counsel to the Administrative Agent in connection with this
Amendment.

 

The Administrative Agent shall notify Borrower and
the Lenders of the Amendment No. 4 Effective Date, and such notice shall
be conclusive and binding.

 

(ii)           The amendments contained in
Section 3 shall be effective upon the Administrative Agent’s (or its
counsel’s) receipt from Borrower, each Guarantor and the Required Lenders
either (i) a counterpart of this Amendment signed on behalf of such party
or (ii) written evidence satisfactory to the Administrative Agent (which
may include telecopy transmission of a signed signature page of this
Amendment) that such party has signed a counterpart of this Amendment.

 

5.             REPRESENTATIONS AND WARRANTIES. Borrower
hereby represents and warrants to the Administrative Agent and the Lenders
that:

 

(a)           The representations and warranties set forth in the
Loan Documents are true and correct in all material respects as of the date
hereof and with the same effect as though made on and as of the date hereof,
except to the extent such representations and warranties relate to an earlier
date.

 

17

 

(b)           No Default or Event of Default and no event or
condition which, with the giving of notice or lapse of time or both, would
constitute such a Default or Event of Default, now exists or would exist after
giving effect to this Amendment.

 

(c)           (i) The execution, delivery and performance by
Borrower of this Amendment is within its organizational powers and have been
duly authorized by all necessary action (corporate or otherwise) on the part of
Borrower, (ii) this Amendment is the legal, valid and binding obligation
of Borrower, enforceable against Borrower in accordance with its terms, and
(iii) neither this Amendment nor the execution, delivery and performance
by Borrower hereof: (A) contravenes the terms of Borrower’s organization
documents, (B) conflicts with or results in any breach or contravention of, or
the creation of any Lien under, any document evidencing any contractual
obligation to which Borrower is a party or any order, injunction, writ or
decree to which Borrower or its property is subject, or (C) violates any
requirement of law.

 

6.             EFFECT;
NO WAIVER.

 

(a)             Borrower hereby
(i) reaffirms and admits the validity and enforceability of the Loan
Documents and all of its obligations thereunder and (ii) agrees and admits
that it has no existing defenses to or offsets against any such obligation.
Except as specifically set forth herein, the Loan Agreement and the other Loan
Documents shall remain in full force and effect in accordance with their terms
and are hereby ratified and confirmed. The execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any existing
or future Default or Event of Default, whether known or unknown or any right,
power or remedy of the Administrative Agent or the Lenders under the Loan
Agreement, nor constitute a waiver of any provision of the Loan Agreement,
except as specifically set forth herein.

 

(b)           Borrower hereby (i) reaffirms all of its
agreements and obligations under the Loan Documents, (ii) reaffirms that
all Obligations of Borrower under or in connection with the Loan Agreement as
amended hereby are “Obligations”
as that term is defined in the Loan Documents and (iii) reaffirms that all
such Obligations continue to be secured by the Loan Documents, which remain in
full force and effect and are hereby ratified and confirmed.

 

7.             MISCELLANEOUS.

 

(a)           Borrower shall pay the Administrative Agent upon
demand for all reasonable expenses, including reasonable attorneys’ fees and
expenses of the Administrative Agent, incurred by the Administrative Agent in
connection with the preparation, negotiation and execution of this Amendment.

 

(b)           THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW
PROVISIONS, BUT INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK) AND DECISIONS OF THE STATE OF NEW YORK.

 

(c)           This Amendment shall be binding upon Borrower, the
Administrative Agent and the Lenders and their respective successors and
assigns, and shall inure to the benefit of Borrower, the Administrative Agent
and the Lenders and the respective successors and assigns of the Administrative
Agent and the Lenders.

 

18

 

(d)           This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.

 

[Signature pages follow.]

 

19

 

AS EVIDENCE of the agreement by the parties hereto
to the terms and conditions herein contained, each such party has caused this
Amendment to be executed on its behalf.

 

 

	
   

  	
  K-SEA OPERATING PARTNERSHIP L.P., as

  Borrower

  
	
   

  	
   

  
	
   

  	
  By: K-Sea OLP GP, LLC, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terrence P. Gill

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Terrence P. Gill

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  

 

 

	
   

  	
  KEYBANK NATIONAL ASSOCIATION, for itself
  as Lender, and as Administrative Agent and as Collateral Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert F.
  Pollis, Jr.

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: Robert F. Pollis, Jr. 

  
	
   

  	
  Title: Senior Vice President

  

 

K-SEA OPERATING PARTNERSHIP
AMENDMENT NO. 4 SIGNATURE PAGE

 

 

	
   

  	
  BANK OF AMERICA, N.A. (successor
  to LaSalle Bank, National Association), as Co-Syndication Agent and Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael J. Hammond

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Michael J. Hammond

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  SVP

  

 

K-SEA OPERATING PARTNERSHIP
AMENDMENT NO. 4 SIGNATURE PAGE

 

 

	
   

  	
  CITIBANK, N.A., as Co-Syndication Agent
  and Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Anthony V. Pantina

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Anthony V. Pantina

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director

  

 

K-SEA OPERATING PARTNERSHIP
AMENDMENT NO. 4 SIGNATURE PAGE

 

 

	
   

  	
  CITIZENS BANK OF PENNSYLVANIA, as
  Co-Documentation Agent and Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert Barnhard

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Robert Barnhard

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Bob Barnhard

  
	
   

  	
   

  	
   

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  	
  Global Restructuring Group

  
	
   

  	
   

  	
   

  	
  Citizens Bank

  
	
   

  	
   

  	
   

  	
  28 State Street, 11th FI MS1100

  
	
   

  	
   

  	
   

  	
  Boston, MA 02109

  
	
   

  	
   

  	
   

  	
  617 994.7389 tel

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  

  	
  ROBERT.BARNHARD@CITIZENSBANK.COM

  
					

 

K-SEA OPERATING PARTNERSHIP
AMENDMENT NO. 4 SIGNATURE PAGE

 

 

	
   

  	
  HSBC BANK USA, NATIONAL ASSOCIATION, as Co-
  Documentation Agent and Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert Moravec

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Robert Moravec

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Senior Relationship Manager and Team Leader

  

 

K-SEA OPERATING PARTNERSHIP
AMENDMENT NO. 4 SIGNATURE PAGE

 

 

	
   

  	
  WELLS FARGO BANK, N.A. (as
  successor-by-merger to Wachovia Bank, National Association)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ D. Paul Hulbert III

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  D. Paul Hulbert III

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director

  

 

K-SEA
OPERATING PARTNERSHIP AMENDMENT NO. 4 SIGNATURE PAGE

 

 

ACKNOWLEDGEMENT
AND CONSENT

 

Each of the undersigned Guarantors hereby
(1) consents to the execution and delivery by Borrower of the foregoing
Amendment No. 4; (2) agrees that the definition of “Obligations” (and any other term
referring to the indebtedness, liabilities and obligations of Borrower to the
Administrative Agent or any of the Lenders) in the Parent Guaranty or its
Subsidiary Guaranty, as the case may be, and the other Loan Documents shall
include the Indebtedness of Borrower under the foregoing Amendment No. 4;
(3) agrees that the definition of “Loan Agreement” in the Parent
Guaranty or its Subsidiary Guaranty, as the case may be, and the other Loan
Documents to which it is a party is hereby amended to mean the Loan Agreement as
amended by the foregoing Amendment No. 4; (4) reaffirms its
continuing liability under the Parent Guaranty or its Subsidiary Guaranty, as
the case may be (as modified hereby); (5) reaffirms all of its agreements
and obligations under the Loan Documents to which it is a party;
(6) reaffirms that all Obligations of Borrower under or in connection with
the Loan Agreement as amended by the foregoing Amendment No. 4 are “Obligations”
as that term is defined in the Parent Guaranty or its Subsidiary Guaranty, as
the case may be; (7) reaffirms that all such Obligations continue to be
secured by the Loan Documents to which it is a party, which remain in full
force and effect and are hereby ratified and confirmed; and (8) confirms
and agrees that it is a Guarantor and that the Parent Guaranty or its
Subsidiary Guaranty, as the case may be, and the other Loan Documents to which
it is a party are, and shall continue to be, in full force and effect in
accordance with their respective terms.

 

	
   

  	
  K-SEA TRANSPORTATION PARTNERS L.P.

  
	
   

  	
   

  
	
   

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

  partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K-Sea General Partner GP LLC, its

  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Terrence P. Gill

  
	
   

  	
   

  	
  Name:

  	
  Terrence P. Gill

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  K-SEA TRANSPORTATION INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terrence P. Gill

  
	
   

  	
  Name:

  	
  Terrence P. Gill

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  K-SEA TRANSPORTATION LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terrence P. Gill

  
	
   

  	
  Name:

  	
  Terrence P. Gill

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  

 

 

	
   

  	
  SMITH MARITIME LLC 

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terrence P. Gill

  
	
   

  	
  Name:

  	
  Terrence P. Gill

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  K-SEA HAWAII INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terrence P. Gill

  
	
   

  	
  Name:

  	
  Terrence P. Gill

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  

 

K-Sea
Amendment No. 4 Acknowledgement and Consent Signature Page

 

 

EXHIBIT A

TO

AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT

 

SCHEDULE
2.01

 

Amendment
No. 4 Effective Date Commitments

 

	
  Lender

  	
   

  	
  Tranche A Commitment

  	
   

  	
  Tranche B Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  KeyBank National
  Association

  	
   

  	
  $

  	
  23,287,500.00

  	
   

  	
  -0-

  	
   

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  22,137,500.00

  	
   

  	
  -0-

  	
   

  
	
  Citibank, N.A.

  	
   

  	
  $

  	
  22,137,500.00

  	
   

  	
  -0-

  	
   

  
	
  Citizens Bank of
  Pennsylvania

  	
   

  	
  $

  	
  16,387,500.00

  	
   

  	
  -0-

  	
   

  
	
  HSBC Bank USA, National
  Association

  	
   

  	
  $

  	
  16,387,500.00

  	
   

  	
  -0-

  	
   

  
	
  Wells Fargo Bank, N.A.

  	
   

  	
  $

  	
  14,662,500.00

  	
   

  	
  -0-

  	
   

  
	
  Aggregate Commitments

  	
   

  	
  $

  	
  115,000,000.00

  	
   

  	
  -0-Exhibit 10.15

 

Execution
Version

 

SECURITIES PURCHASE AGREEMENT

 

among

 

K-SEA TRANSPORTATION PARTNERS L.P.,

 

K-SEA GENERAL PARTNER L.P.

 

and

 

KA FIRST RESERVE, LLC

 

dated as of September 1, 2010

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
  1

  
	
   

  	
   

  
	
  Section 1.01

  	
  Definitions

  	
  1

  
	
  Section 1.02

  	
  Accounting Procedures and Interpretation

  	
  10

  
	
   

  	
   

  
	
  ARTICLE II AGREEMENT TO SELL AND PURCHASE

  	
  10

  
	
   

  	
   

  
	
  Section 2.01

  	
  Sale and Purchase

  	
  10

  
	
  Section 2.02

  	
  Closings

  	
  11

  
	
  Section 2.03

  	
  Conditions of the Parties’ Obligations at the First
  Transaction Closing

  	
  11

  
	
  Section 2.04

  	
  Conditions of the Parties’ Obligations at the Second
  Transaction Closing

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS AND WARRANTIES OF K-SEA

  	
  16

  
	
   

  	
   

  
	
  Section 3.01

  	
  Formation and Qualification; Citizenship

  	
  16

  
	
  Section 3.02

  	
  Ownership of Subsidiaries

  	
  16

  
	
  Section 3.03

  	
  No Other Subsidiaries

  	
  17

  
	
  Section 3.04

  	
  Authorization; Enforceability; Valid Issuance

  	
  17

  
	
  Section 3.05

  	
  No Preemptive Rights, Registration Rights or Options

  	
  18

  
	
  Section 3.06

  	
  Capitalization

  	
  18

  
	
  Section 3.07

  	
  No Breach

  	
  18

  
	
  Section 3.08

  	
  No Approvals

  	
  19

  
	
  Section 3.09

  	
  No Default

  	
  19

  
	
  Section 3.10

  	
  K-Sea SEC Documents; K-Sea Financial Statements

  	
  19

  
	
  Section 3.11

  	
  No Material Adverse Change

  	
  20

  
	
  Section 3.12

  	
  Title to Real Property; Leases

  	
  21

  
	
  Section 3.13

  	
  Insurance

  	
  21

  
	
  Section 3.14

  	
  Litigation

  	
  21

  
	
  Section 3.15

  	
  Employment Related Matters

  	
  21

  
	
  Section 3.16

  	
  Tax Returns

  	
  22

  
	
  Section 3.17

  	
  Employee Benefit Plans

  	
  23

  
	
  Section 3.18

  	
  Environmental Compliance

  	
  24

  
	
  Section 3.19

  	
  Compliance with Laws; Permits

  	
  24

  
	
  Section 3.20

  	
  NYSE Listing

  	
  25

  
	
  Section 3.21

  	
  Investment Company

  	
  25

  
	
  Section 3.22

  	
  MLP Status

  	
  25

  
	
  Section 3.23

  	
  Certain Fees

  	
  25

  
	
  Section 3.24

  	
  Form S-3 Eligibility

  	
  26

  
	
  Section 3.25

  	
  Material Agreements

  	
  26

  
	
  Section 3.26

  	
  Books and Records; Sarbanes-Oxley Compliance

  	
  26

  
	
  Section 3.27

  	
  Foreign Corrupt Practices Act

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

  	
  27

  
	
   

  	
   

  
	
  Section 4.01

  	
  Existence; Citizenship

  	
  27

  

 

i

 

TABLE OF
CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 4.02

  	
  Authorization; Enforceability

  	
  27

  
	
  Section 4.03

  	
  No Breach

  	
  27

  
	
  Section 4.04

  	
  Certain Fees

  	
  28

  
	
  Section 4.05

  	
  Unregistered Securities

  	
  28

  
	
  Section 4.06

  	
  Short Selling

  	
  29

  
	
  Section 4.07

  	
  K-Sea Information

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE V COVENANTS

  	
  30

  
	
   

  	
   

  
	
  Section 5.01

  	
  Transfer Restrictions

  	
  30

  
	
  Section 5.02

  	
  Standstill Obligation

  	
  31

  
	
  Section 5.03

  	
  Further Assurances; NYSE Listing; Citizenship

  	
  32

  
	
  Section 5.04

  	
  Conduct of Business

  	
  32

  
	
  Section 5.05

  	
  Use of Proceeds

  	
  34

  
	
  Section 5.06

  	
  Reasonable Best Efforts

  	
  34

  
	
  Section 5.07

  	
  Short Sales

  	
  35

  
	
  Section 5.08

  	
  Public Disclosure

  	
  35

  
	
  Section 5.09

  	
  Incentive Distribution Rights Option

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI INDEMNIFICATION, COSTS AND EXPENSES

  	
  37

  
	
   

  	
   

  
	
  Section 6.01

  	
  Indemnification by K-Sea

  	
  37

  
	
  Section 6.02

  	
  Indemnification by the Purchaser

  	
  37

  
	
  Section 6.03

  	
  Indemnification Procedure

  	
  38

  
	
  Section 6.04

  	
  Other Matters

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII TERMINATION

  	
  39

  
	
   

  	
   

  
	
  Section 7.01

  	
  Termination

  	
  39

  
	
  Section 7.02

  	
  Effect of Termination

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII MISCELLANEOUS

  	
  40

  
	
   

  	
   

  
	
  Section 8.01

  	
  Interpretation

  	
  40

  
	
  Section 8.02

  	
  Survival of Provisions

  	
  41

  
	
  Section 8.03

  	
  No Waiver; Modifications in Writing

  	
  41

  
	
  Section 8.04

  	
  Binding Effect; Assignment

  	
  42

  
	
  Section 8.05

  	
  Confidentiality

  	
  42

  
	
  Section 8.06

  	
  Communications

  	
  42

  
	
  Section 8.07

  	
  Removal of Legend

  	
  43

  
	
  Section 8.08

  	
  Entire Agreement

  	
  44

  
	
  Section 8.09

  	
  Governing Law; Submission to Jurisdiction

  	
  44

  
	
  Section 8.10

  	
  Waiver of Jury Trial

  	
  44

  
	
  Section 8.11

  	
  Execution in Counterparts

  	
  45

  

 

	
  Schedule
  1.01(a)

  	
  Knowledge

  
	
  Schedule
  1.01(b)

  	
  K-Sea
  Subsidiaries

  
	
  Schedule
  3.09

  	
  No
  Default

  
	
  Schedule
  3.10(a)

  	
  Unaudited
  Financial Statements

  
	
  Schedule
  3.12(a)

  	
  Title
  to Real Property

  

 

ii

 

TABLE OF
CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  

 

	
  Schedule
  3.14

  	
  Litigation

  
	
  Schedule
  3.15

  	
  Employment
  Related Matters

  
	
  Schedule
  3.16

  	
  Tax
  Returns

  
	
  Schedule
  3.17

  	
  Employment
  Benefit Plans

  
	
  Schedule
  3.18

  	
  Environmental
  Compliance

  
	
  Schedule
  3.19(a)

  	
  Compliance
  with Laws

  
	
  Schedule
  3.19(b)

  	
  Permits

  
	
  Schedule
  3.22

  	
  MLP
  Status

  
	
  Schedule
  3.25

  	
  Material
  Agreements

  

 

Exhibit A         Form of
K-Sea Partnership Agreement

 

iii

 

SECURITIES PURCHASE AGREEMENT

 

This
SECURITIES PURCHASE AGREEMENT, dated as of September 1, 2010 (this “Agreement”),
is entered into by and between K-SEA TRANSPORTATION PARTNERS L.P., a Delaware
limited partnership (“K-Sea”), K-SEA GENERAL PARTNER L.P., a Delaware
limited partnership and the general partner of K-Sea (the “General Partner”)
and KA FIRST RESERVE, LLC, a Delaware limited liability company (the “Purchaser”).

 

WHEREAS,
K-Sea desires to sell to the Purchaser, and the Purchaser desires to purchase
from K-Sea, 18,416,206 Series A Preferred Units (as defined below) in two
transactions in accordance with the provisions of this Agreement;

 

WHEREAS,
the net proceeds received by K-Sea in respect of the sale of Series A
Preferred Units pursuant to this Agreement shall be used to repay certain
indebtedness of K-Sea and its Affiliates pursuant to the Debt Agreements (as
defined below);

 

WHEREAS,
the Purchaser (or its designated Affiliate), K-Sea, the General Partner, GP LLC
and certain other holders of interests in GP LLC desire to enter into the
Director Designation Agreement to provide the Purchaser with certain rights and
obligations with respect to the management of K-Sea; and

 

WHEREAS,
K-Sea has agreed to provide the Purchaser with certain registration rights with
respect to the Conversion Units (as defined below) underlying the Series A
Preferred Units acquired pursuant to this Agreement (including Conversion Units
underlying any Series A Preferred Units issued to the Purchaser as payment
in-kind distributions pursuant to the terms of the Series A Preferred
Units).

 

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, the parties hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.01          Definitions.

 

As
used in this Agreement, the following terms have the meanings indicated:

 

“Affiliate”
means, with respect to a specified Person, any other Person, whether now in
existence or hereafter created, directly or indirectly controlling, controlled
by or under direct or indirect common control with such specified Person.  For purposes of this definition, “control”
(including, with correlative meanings, “controlling,” “controlled by” and “under
common control with”) means the power to direct or cause the direction of the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; provided, however,
that “Affiliate” shall not be deemed to include (i) any portfolio company
in which the Purchaser or any of its investment fund Affiliates have made a
debt or equity investment, or (ii) any fund or other investment entity in
which such Person serves as an investment manager or advisor.

 

 

“Agreement”
has the meaning set forth in the introductory paragraph of this Agreement.

 

“Basic
Documents” means, collectively, this Agreement, the Registration Rights
Agreement, the Director Designation Agreement and the K-Sea Partnership
Agreement.

 

“Board”
means the Board of Directors of GP LLC.

 

“Business”
means the business of the K-Sea Entities, as conducted as of the date hereof.

 

“Business
Day” means any day other than a Saturday, Sunday, any federal holiday or
day on which banking institutions in the State of New York or State of Texas
are authorized or required by Law or other governmental action to close.

 

“Closings”
means the First Transaction Closing and the Second Transaction Closing; provided
that, if the Second Transaction Closing has not occurred on or prior to
the Second Transaction Outside Date, then “Closings” shall mean the First
Transaction Closing only; provided  further, that (i) after
the delivery of a Second Transaction Termination Notice, then “Closings” shall
mean the First Transaction Closing only and (ii) in the event that the
closing of the purchase of the Second Transaction Purchased Units occurs after
the Second Transaction Outside Date, then “Closings” shall mean the First
Transaction Closing and the Second Transaction Closing.

 

“Closing
Dates” means the First Transaction Closing Date and the Second Transaction
Closing Date; provided  that, if the Second Transaction Closing
has not occurred on or prior to the Second Transaction Outside Date, then “Closing
Dates” shall mean the First Transaction Closing Date only; provided  further,
that (i) after the delivery of a Second Transaction Termination Notice,
then “Closing Dates” shall mean the First Transaction Closing Date only and (ii) in
the event that the closing of the purchase of the Second Transaction Purchased
Units occurs after the Second Transaction Outside Date, then “Closing Dates”
shall mean the First Transaction Closing Date and the Second Transaction
Closing Date.

 

“Code”
shall have the meaning specified in Section 3.16(c).

 

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

 

“Common
Units” means common units representing limited partner interests in K-Sea.

 

“Competitor”
means any Person that directly, or indirectly through (i) the ownership of
35% or more of any Person and (ii)(A) the right to designate a majority of
the board of directors (or similar governing body) of such Person (or with
respect to a limited partnership, its general partner) or (B) the power to
direct or control the direction of the management and policies of such Person,
whether through ownership of voting securities, by contract or otherwise,
engages in the marine transportation of petroleum products or otherwise
provides similar services or engages in a similar business as K-Sea at any time
during the twelve (12) months preceding a proposed Transfer of Series A
Preferred Units or Conversion Units.

 

“Confidentiality
Agreement” means the Confidentiality Agreement, dated as of May 26,
2010, by and between K-Sea, GP LLC and Kayne Anderson Capital Advisors, L.P.

 

2

 

“Contract”
means any contract, agreement, indenture, note, bond, mortgage, deed of trust,
loan, instrument, lease, license, commitment or other arrangement,
understanding, undertaking, commitment or obligation, whether written or oral.

 

“Continuing
Director” means an individual whose election or nomination to the Board of
Directors of GP LLC was approved by individuals who were members of the Board
of Directors of GP LLC as of the date that is 12 months prior to the First
Transaction Closing, constituting at the time of such election or nomination at
least a majority of the Board of Directors of GP LLC, or (ii) whose election
or nomination to the Board of Directors of GP LLC was approved by individuals
who were members of the Board of Directors of GP LLC as of the date that is 12
months prior to the First Transaction Closing or individuals referred to in
clause (i) above constituting at the time of such election or nomination
at least a majority of the Board of Directors of GP LLC.

 

“Conversion
Units” means the Common Units issuable upon conversion of the Purchased
Units.

 

“Debt
Agreements” means (i) the Amended and Restated Loan and Security
Agreement, dated as of August 14, 2007, as amended as of August 31,
2010, among the Operating Partnership, as borrower, Bank of America, N.A.
(successor to LaSalle Bank, National Association) and Citibank, N.A., as
co-syndication agents, Citizens Bank of Pennsylvania and HSBC Bank USA National
Association, as co-documentation agents, and KeyBank National Association as
administrative agents and collateral trustee, and the lenders party thereto and
(ii) the Secured Term Loan Credit Facility, dated June 4, 2008, as
amended as of August 31, 2010, among the Operating Partnership, as
borrower, DnB NOR Bank ASA, as mandated lead arranger, bookrunner,
administrative agent and security trustee, and the parties thereto.

 

“Delaware
LP Act” shall have the meaning specified in Section 3.02.

 

“Designated
Directors” means the individuals listed in Section 2(b)(i) of the
Director Designation Agreement.

 

“Director
Designation Agreement” means the Director Designation Agreement to be
entered into at the First Transaction Closing, between K-Sea, the General
Partner, GP LLC, the Purchaser and the other parties thereto.

 

“Environmental
Law” means any Law relating to the protection of human health or safety (to
the extent such health or safety relate to exposure to Hazardous Materials),
the environment or natural resources (including Laws relating to the
generation, manufacture, processing, use, storage, treatment, disposal,
release, threatened release, discharge, or emission of Hazardous Materials into
the environment, and any exposure to Hazardous Materials), including the
federal Clean Water Act, Clean Air Act, Comprehensive Environmental Response,
Compensation and Liability Act, Oil Pollution Act, and any similar state Laws.

 

“Environmental
Permits” means all Permits required under any Environmental Law for the
operation of the business of the K-Sea Entities.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.

 

3

 

“ERISA
Affiliate” shall have the meaning specified in Section 3.17(d).

 

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

 

“First
Transaction Closing” shall have the meaning specified in Section 2.02(a).

 

“First
Transaction Closing Date” shall have the meaning specified in Section 2.02(a).

 

“First
Transaction Purchase Price” means $5.43 per Series A Preferred Unit
acquired at the First Transaction Closing.

 

“First
Transaction Purchased Units” shall have the meaning specified in Section 2.01(a).

 

“GAAP”
means generally accepted accounting principles in the United States of America
as of the date hereof; provided, however, that for the K-Sea
Financial Statements prepared as of a certain date, GAAP referenced therein
shall be GAAP as of the date of such K-Sea Financial Statements.

 

“General
Partner” has the meaning set forth in the introductory paragraph of this
Agreement.

 

“Governmental
Authority” means, with respect to a particular Person, any country, state,
county, city and political subdivision in which such Person or such Person’s
Property is located or which exercises valid jurisdiction over any such Person
or such Person’s Property, and any court, agency, department, commission,
board, bureau or instrumentality of any of them and any monetary authority that
exercises valid jurisdiction over any such Person or such Person’s
Property.  Unless otherwise specified,
all references to Governmental Authority herein with respect to K-Sea means a
Governmental Authority having jurisdiction over K-Sea, its Subsidiaries or any
of their respective Properties.

 

“GP
LLC” means K-Sea General Partner GP LLC, a Delaware limited liability
company and the general partner of the General Partner.

 

“HSR
Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

 

“Hazardous
Material” means any pollutant, contaminant, waste or any hazardous, toxic
or deleterious material or substance, including any material or substance regulated
by or as to which Liability might arise under any applicable Environmental Law
including any:  (i) chemical,
product, material, substance or waste defined as “hazardous substance,” “hazardous
material,” “hazardous waste,” “restricted hazardous waste,” “extremely
hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous substance,”
“toxic substance,” “toxic pollutant,” “contaminant,” “pollutant,” or words of
similar meaning or import found in any applicable Environmental Law; (ii) petroleum
hydrocarbons, petrochemical or petroleum products, petroleum substances,
natural gas and crude oil or any components, fractions or derivatives thereof;
and (iii) asbestos containing materials, polychlorinated biphenyls,
noxious odors, urea formaldehyde foam insulation, or radon gas.

 

4

 

“IDR
Interests” shall have the meaning specified in Section 5.09(a).

 

“Indebtedness”
means any of the following:  (a) the
principal of and accrued interest or premium (if any) and premiums or penalties
that would arise as a result of prepayment of (i) any indebtedness for
borrowed money, (ii) any obligations evidenced by bonds, debentures, notes
or other similar instruments, and (iii) any obligations, contingent or
otherwise, under banker’s acceptance credit, or similar facilities; (b) any
obligations to pay the deferred purchase price of property or services, except
trade accounts payable and other current liabilities arising in the Ordinary
Course of Business; (c) any obligations with respect to hedging, swaps or
similar arrangements; and (d) any guaranty of any of the foregoing.

 

“Incentive
Distribution Rights” shall have the meaning specified in Section 3.06.

 

“Indemnified
Party” shall have the meaning specified in Section 6.03(b).

 

“Indemnifying
Party” shall have the meaning specified in Section 6.03(b).

 

“IRS”
means the United States Internal Revenue Service.

 

“Jones
Act” means Section 27 of the Merchant Marine Act of 1920, as amended,
including any implementing regulations, and related U.S. maritime citizenship
laws including section 2 of the Shipping Act, 1916, as amended.

 

“Knowledge
of K-Sea” shall mean the knowledge of the individuals listed on Schedule 1.01(a) after
reasonable inquiry.

 

“K-Sea”
has the meaning set forth in the introductory paragraph of this Agreement.

 

“K-Sea
Entities” means, collectively, K-Sea and the K-Sea Subsidiaries.

 

“K-Sea
Entity Operating Agreements” means the certificate of incorporation,
certificate of formation, bylaws, limited liability company agreement, limited
partnership agreement or other organizational documents, as applicable, of the
K-Sea Entities (excluding K-Sea).

 

“K-Sea
Financial Statements” shall have the meaning specified in Section 3.10(a).

 

“K-Sea
IDR Holdings” means K-Sea IDR Holdings LLC, a Delaware limited liability
company.

 

“K-Sea
Material Adverse Effect” means any material and adverse effect on (a) the
assets, liabilities, financial condition, business, results of operations or
affairs of the K-Sea Entities taken as a whole; (b) the ability of the
K-Sea Entities, taken as a whole, to carry on their business as such business
is conducted as of the date hereof or to meet their obligations under the Basic
Documents on a timely basis; or (c) the ability of K-Sea to consummate the
transactions under any Basic Document to which it is a party; provided, however,
that a K-Sea Material Adverse Effect shall not include any material and adverse
effect on the foregoing to the extent such material and adverse effect results
from, arises out of, or is attributable to (v) a general deterioration in
the economy or changes in the general state of the industries in which the
K-Sea 

 

5

 

Entities
operate, except to the extent that the K-Sea Entities, taken as a whole, are
adversely affected in a materially disproportionate manner as compared to other
industry participants, (w) any failure by K-Sea to meet any published
analyst estimates or expectations of K-Sea’s revenue, earnings or other
financial performance or results of operations for any period, in and of
itself, or any failure by K-Sea to meet its internal budgets, plans or
forecasts of its revenues, earnings or other financial performance or results
of operations, in and of itself (it being understood that the facts or
occurrences giving rise or contributing to such failure that are not otherwise
excluded from the definition of a “K-Sea Material Adverse Effect” may be taken
into account), or (x) the outbreak or escalation of hostilities involving
the United States, the declaration by the United States of a national emergency
or war or the occurrence of any other calamity or crisis affecting the national
economy as a whole, including acts of terrorism, or (y) general legal,
tax, economic, political and/or regulatory conditions (or changes therein;
excluding any amendments to, or changes in the interpretation of, the Jones
Act, as in effect as of the date hereof), except to the extent that the K-Sea
Entities, taken as a whole, are adversely affected in a materially
disproportionate manner as compared to other industry participants.

 

“K-Sea
Partnership Agreement” means the Fourth Amended and Restated Agreement of
Limited Partnership of K-Sea to be entered into at the First Transaction
Closing by the General Partner.

 

“K-Sea
Related Parties” shall have the meaning specified in Section 6.02.

 

“K-Sea
SEC Financial Statements” shall have the meaning specified in Section 3.10(a).

 

“K-Sea
SEC Documents” shall have the meaning specified in Section 3.10(a).

 

“K-Sea
Subsidiaries” means, collectively, the entities listed on Schedule 1.01(b) to
this Agreement.

 

“K-Sea
Vessels” means all seagoing vessels used in connection with the Business.

 

“Law”
means any applicable federal, state, local or foreign order, writ, injunction,
judgment, settlement, award, decree, statute, law, rule, rule of common
law or regulation promulgated by a Governmental Authority.

 

“Liabilities”
means any and all Indebtedness, liabilities, commitments, damages, fines, fees,
penalties, settlements and obligations of any kind, whether fixed, contingent
or absolute, matured or unmatured, liquidated or unliquidated, accrued or not
accrued, asserted or not asserted, known or unknown, determined, determinable
or otherwise, whenever or however arising (including, whether arising out of
any contract or tort based on negligence or strict liability).

 

“Lien”
means any interest in Property securing an obligation owed to, or a claim by, a
Person other than the owner of the Property, whether such interest is based on
the common law, statute or contract, and whether such obligation or claim is
fixed or contingent, and including but not limited to the lien or security
interest arising from a mortgage, encumbrance, pledge, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes.

 

6

 

“LTIP”
shall have the meaning specified in Section 3.05.

 

“Material
Agreements” shall have the meaning specified in Section 3.25.

 

“Nigerian
Vessel Sale Agreement” means the Vessel Purchase and Sale Agreement, dated July 26,
2010 and in effect as of the date hereof, by and between the Operating
Partnership and Pheranzy Gas Limited, a Nigerian registered company, pursuant
to which Pheranzy Gas Limited shall purchase, and the Operating Company shall
sell, vessels DBL 70 with an official number of 540401, DBL 53 with an official
number of 500121, Baltic Sea with an official number of 551908, and Coral Sea
with an official number of 550670.

 

“NYSE”
means the New York Stock Exchange.

 

“Operating
Agreements” means, collectively, the K-Sea Entity Operating Agreements, the
K-Sea Partnership Agreement and the Certificate of Limited Partnership of
K-Sea, each as amended to date.

 

“Operating
Partnership” means K-Sea Operating Partnership L.P., a Delaware limited
partnership and wholly-owned subsidiary of K-Sea.

 

“Option”
shall have the meaning specified in Section 5.09(a).

 

“Option
Period” means the period commencing on the First Transaction Closing Date
and ending on the first anniversary thereof.

 

“Ordinary
Course” or “Ordinary Course of Business” means the conduct of the
business of the K-Sea Entities in accordance with such K-Sea Entity’s normal
day-to-day customs, practices and procedures, conducted in accordance with past
practice.

 

“Outside
Date” shall have the meaning specified in Section 7.01(b).

 

“Permits”
shall have the meaning specified in Section 3.19(b).

 

“Person”
means any individual, corporation, company, voluntary association, partnership,
joint venture, trust, limited liability company, unincorporated organization,
Governmental Authority or any agency, instrumentality or political subdivision
thereof or any other form of entity.

 

“Placement
Agent” means UBS, as exclusive placement agent to K-Sea.

 

“Plans” means any employee benefit plans
(within the meaning of Section 3(3) of ERISA) and all bonus, incentive,
unit option, unit purchase, restricted unit, phantom unit, or other
equity-based compensation, deferred compensation, retiree medical or life
insurance, supplemental executive retirement, severance or other benefit plans,
programs, policies, agreements or arrangements, and all employment, consulting,
termination, severance, retention, change in control, transaction bonus,
compensation or other contracts or agreements (x) to which K-Sea or any of
its Affiliates is a party or which are sponsored, maintained or contributed to
by K-Sea or any of its Affiliates, in each case, for the benefit of any current
or former employee, 

 

7

 

officer,
director or independent contractor of any of the K-Sea Entities or (y) under
which any of the K-Sea Entities has had or has any present or future liability.

 

“Property”
or “Properties” means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible (including
intellectual property rights), including, for the avoidance of doubt the K-Sea
Vessels.

 

“Purchase
Price” means the aggregate amount paid by the Purchaser in respect of the
First Transaction Purchased Units and the Second Transaction Purchased Units; provided
that, (i) prior to the occurrence of the Second Transaction
Closing, and (ii) in the event that the Second Transaction Closing does
not occur by the Second Transaction Outside Date, “Purchase Price” shall mean
the aggregate amount paid by the Purchaser in respect of the First Transaction
Purchased Units only; provided  further, that (i) after the
delivery of a Second Transaction Termination Notice, then “Purchase Price”
shall mean the amount paid by the Purchaser in respect of the First Transaction
Purchased Units only and (ii) in the event that the closing of the
purchase of the Second Transaction Purchased Units occurs after the Second
Transaction Outside Date, then “Purchase Price” shall mean the aggregate amount
paid by the Purchaser in respect of the First Transaction Purchased Units and
the Second Transaction Purchased Units.

 

“Purchased
Units” shall mean the First Transaction Purchased Units and the Second
Transaction Purchased Units; provided  that, if the Second
Transaction Closing has not occurred on or prior to the Second Transaction
Outside Date, then “Purchased Units” shall mean the First Transaction Purchased
Units only; provided  further, that (i) after the delivery of
a Second Transaction Termination Notice, then “Purchased Units” shall mean the
First Transaction Purchased Units only and (ii) in the event that the
closing of the purchase of the Second Transaction Purchased Units occurs after
the Second Transaction Outside Date, then “Purchased Units” shall mean the
First Transaction Purchased Units and the Second Transaction Purchased Units.

 

“Purchaser”
has the meaning set forth in the introductory paragraph of this Agreement.

 

“Purchaser
Related Parties” has the meaning specified in Section 6.01.

 

“Registration
Rights Agreement” means the Registration Rights Agreement, to be entered
into at the First Transaction Closing, between K-Sea and the Purchaser.

 

“Representatives”
means, with respect to a specified Person, the officers, directors, managers,
employees, agents, counsel, accountants, investment bankers, and other
representatives of such Person and, when used with respect to the Purchaser,
also includes the Purchaser’s direct and indirect stockholders, partners,
members, subsidiaries, parent companies and other Affiliates.

 

“Sales
Transaction” shall have the meaning specified in Section 5.02(b).

 

“Second
Transaction Closing” shall have the meaning specified in Section 2.02(b).

 

“Second
Transaction Closing Date” shall have the meaning specified in Section 2.02(b).

 

8

 

“Second
Transaction Outside Date” shall have the meaning specified in Section 2.01(b).

 

“Second
Transaction Purchase Price” means $5.43 per Series A Preferred Unit
acquired at the Second Transaction Closing.

 

“Second
Transaction Purchased Units” shall have the meaning specified in Section 2.01(b).

 

“Second
Transaction Termination Notice” shall have the meaning specified in Section 2.01(b).

 

“Securities”
shall have the meaning specified in Section 5.02(a)(i).

 

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

 

“Series A
Preferred Units” means K-Sea’s Series A Preferred Units.

 

“Short
Sales” means, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act, whether or not against
the box, and forward sale contracts, options, puts, calls, short sales, “put
equivalent positions” (as defined in Rule 16a-1(h) under the Exchange
Act) and similar arrangements, and sales and other transactions through
non-U.S. broker dealers or foreign regulated brokers.

 

“Significant
Event” means the entry by K-Sea into an agreement providing for a sale of
all or substantially all of K-Sea’s assets or a merger or other business
combination transaction that will result in K-Sea’s then current Unitholders
owning less than 50% of the outstanding equity securities of the combined
Person following such sale, merger or other business combination transaction.

 

“Standstill
Termination Date” shall have the meaning specified in Section 5.02(a).

 

“Subsidiary”
means, as to any Person, any corporation or other entity of which: (i) such
Person or a Subsidiary of such Person is a general partner or manager; (ii) at
least a majority of the outstanding equity interest having by the terms thereof
ordinary voting power to elect a majority of the board of directors or similar
governing body of such corporation or other entity (irrespective of whether or
not at the time any equity interest of any other class or classes of such
corporation or other entity shall have or might have voting power by reason of
the happening of any contingency) is at the time directly or indirectly owned
or controlled by such Person or one or more of its Subsidiaries; or (iii) any
corporation or other entity as to which such Person consolidates for accounting
purposes.

 

“Tax”
or “Taxes” means any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add on minimum, ad valorem, transfer or excise tax,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty, imposed
by any Governmental Authority.

 

9

 

“Tax
Return” means any return, declaration, report or similar statement required
to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund,
amended return or declaration of estimated Tax.

 

“TD
Equipment Finance” means TD Equipment Finance, Inc., a Maine
corporation.

 

“TD
Equipment Finance Agreements” means, collectively, (i) the Bareboat
Charter Agreement, dated June 30, 2009, between TD Equipment Finance and
the Operating Partnership in respect of DBL 24, and (ii) the Bareboat
Charter Agreement, dated June 30, 2009, between TD Equipment Finance and
the Operating Partnership in respect of DBL 77.

 

“Third
Party Claim” shall have the meaning specified in Section 6.03(b).

 

“Transfer”
shall have the meaning specified in Section 5.01(a).

 

“UBS”
means UBS Securities LLC.

 

Section 1.02          Accounting Procedures and
Interpretation.

 

Unless
otherwise specified in this Agreement, all accounting terms used herein shall
be interpreted, all determinations with respect to accounting matters under
this Agreement shall be made, and all financial statements and certificates and
reports as to financial matters required to be furnished to the Purchaser under
this Agreement shall be prepared, in accordance with GAAP applied on a
consistent basis during the periods involved (except, in the case of unaudited
financial statements, as permitted by Form 10-Q promulgated by the
Commission) and in compliance as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereto.

 

ARTICLE II

AGREEMENT TO SELL AND PURCHASE

 

Section 2.01          Sale and Purchase.

 

(a)           Pursuant to the terms and subject to the conditions of
this Agreement, at the First Transaction Closing (i) K-Sea hereby agrees
to issue and sell to the Purchaser, and the Purchaser hereby agrees to purchase
from K-Sea, 15,653,775 Series A Preferred Units (the “First Transaction
Purchased Units”), and (ii) as consideration for the issuance and sale
of the First Transaction Purchased Units to the Purchaser, the Purchaser hereby
agrees to pay K-Sea the First Transaction Purchase Price.

 

(b)           Pursuant to the terms and subject to the conditions of
this Agreement, at the Second Transaction Closing (i) K-Sea hereby agrees
to issue and sell to the Purchaser, and the Purchaser hereby agrees to purchase
from K-Sea, 2,762,431 Series A Preferred Units (the “Second Transaction
Purchased Units”), and (ii) as consideration for the issuance and sale
of the Second Transaction Purchased Units to the Purchaser, the Purchaser
hereby agrees to pay K-Sea the Second Transaction Purchase Price; provided
that, if the Second Transaction Closing has not occurred by October 31,
2010 (the “Second Transaction Outside Date”), the Purchaser shall have
no obligation to purchase, and K-Sea shall have no obligation to issue and
sell, the Second 

 

10

 

Transaction Purchased Units; provided, however,
that if the Second Transaction Closing has not occurred by the Second
Transaction Outside Date and the failure to take any action required to fulfill
any of a party’s obligations under this Agreement has been the cause of, or
resulted in, the failure of the Second Transaction Closing to occur prior to
the Second Transaction Outside Date, such party whose action or failure to take
an action caused the Second Transaction Closing not to occur by the Second Transaction
Outside Date shall continue to have the obligation to close the transactions
contemplated by the Second Transaction Closing until such time that such other
party provides written notice that it does not intend to complete the
transactions contemplated by the Second Transaction Closing (the “Second
Transaction Termination Notice”).

 

Section 2.02          Closings.

 

(a)           Pursuant to the terms and subject to the conditions of
this Agreement, the consummation of the purchase and sale of the First
Transaction Purchased Units hereunder (the “First Transaction Closing”)
shall take place on (i) the date that is 2 Business Days following the
date on which the conditions set forth in Section 2.03 (other than
those conditions that by their nature are to be satisfied at the First
Transaction Closing but subject to the fulfillment or waiver of those
conditions) have been satisfied or waived, but in no event earlier than September 10,
2010; or (ii) at such other time as the parties hereto may mutually agree
(the “First Transaction Closing Date”).

 

(b)           Pursuant to the terms and subject to the conditions of
this Agreement, the consummation of the purchase and sale of the Second
Transaction Purchased Units hereunder (the “Second Transaction Closing”)
shall take place on (i) the date that is 2 Business Days following the
date on which the conditions set forth in Section 2.04 (other than
those conditions that by their nature are to be satisfied at the Second
Transaction Closing but subject to the fulfillment or waiver of those conditions)
have been satisfied or waived, or (ii) at such other time as the parties
hereto may mutually agree (the “Second Transaction Closing Date”).

 

(c)           The Closings under this Agreement shall take place at the
offices of Latham & Watkins LLP, 717 Texas Avenue, 16th Floor,
Houston, Texas 77002.  The parties agree
that the Closings may occur via delivery of facsimiles or photocopies of this
Agreement and cross-receipts; provided that the originals of such documents are
sent via overnight delivery to be received by the other party (or designee of
such other party) on the first Business Day immediately following the Closings.

 

Section 2.03          Conditions of the Parties’ Obligations
at the First Transaction Closing.

 

(a)           Mutual Conditions.  The respective obligations of each party to
consummate the purchase and issuance and sale of the First Transaction
Purchased Units shall be subject to the satisfaction on or prior to the First
Transaction Closing Date of each of the following conditions (any or all of
which may be waived by a particular party on behalf of itself in writing, in
whole or in part, to the extent permitted by applicable Law):

 

(i)            No statute, rule, order, decree or regulation shall have
been enacted or promulgated, and no action shall have been taken, by any
Governmental Authority which temporarily, preliminarily or permanently
restrains, precludes, enjoins or otherwise 

 

11

 

prohibits the consummation of the transactions
contemplated hereby or makes the transactions contemplated hereby illegal; and

 

(ii)           There shall not be pending any suit, action or proceeding
by any Governmental Authority seeking to restrain, preclude, enjoin or prohibit
the transactions contemplated by this Agreement.

 

(b)           Conditions to the
Purchaser’s Obligations at the First Transaction Closing.  The obligation of the Purchaser to consummate
the purchase of the First Transaction Purchased Units is subject to the
satisfaction (or waiver by the Purchaser) on or prior to the First Transaction
Closing of the following conditions:

 

(i)            All of the representations and warranties of K-Sea
contained in this Agreement shall be true and correct as of the First
Transaction Closing as if made on the First Transaction Closing Date (other
than the representations and warranties as of a specified date, which shall be
true and correct on and as of such date) without giving effect to any
limitation as to materiality or K-Sea Material Adverse Effect set forth
therein, except to the extent that any breaches of such representations and
warranties, individually or in the aggregate, have not had, or would not
reasonably be expected to have, a K-Sea Material Adverse Effect; provided
that, the representations and warranties of K-Sea set forth (x) in
the first sentence of Section 3.01 (Formation and Qualification;
Citizenship), Section 3.02 (Ownership of Subsidiaries), Section 3.04
(Authorization; Enforceability, Valid Issuance), Section 3.05
(No Preemptive Rights, Registration Rights or Options), and Section 3.06
(Capitalization) shall be true and correct in all respects, and (y) in
Section 3.11 (No Material Adverse Change) shall be true and
correct in all respects (without disregarding the references to materiality or
K-Sea Material Adverse Effect therein).

 

(ii)           Each of the K-Sea Entities shall have performed in all
material respects all of the covenants required to be performed by it hereunder
prior to the First Transaction Closing.

 

(iii)          The General Partner shall have entered into the K-Sea
Partnership Agreement in the form attached hereto as Exhibit A, and
the K-Sea Partnership Agreement, as amended, shall be in full force and effect.

 

(iv)          The Debt Agreements shall be in full force and effect, with
only such amendments thereto after the date hereof as are approved by the
Purchaser in accordance with Section 5.04(b) hereof, and no
defaults shall have occurred and be continuing thereunder.

 

(v)           Each of the initial Designated Directors shall be
nominated and approved as members of the Board of Directors of GP LLC,
effective as of the First Transaction Closing, and shall each be a Continuing
Director.

 

(vi)          The transactions contemplated by the Nigerian Vessel Sale
Agreement shall have closed and the Operating Partnership or its Affiliates
shall have received the entire consideration thereunder.

 

12

 

(vii)         The limited liability company agreement of K-Sea IDR
Holdings shall have been amended to include the provisions of Section 5.09(c) hereof
and shall be in a form reasonably acceptable to the Purchaser.

 

(viii)        The Operating Partnership or its
Affiliates shall have amended the TD Equipment Finance Agreements on terms
reasonably satisfactory to the Purchaser such that the covenants set forth
therein, taking into account such amendments, shall be no more restrictive on
K-Sea or any of its Affiliates than such covenants as set forth in the Debt
Agreements and TD Equipment Finance shall have consented to the amendments to
the Debt Agreements entered into as of the date hereof.

 

(ix)          The delivery by K-Sea of all of the following:

 

(1)           a certificate or certificates (bearing the legend set
forth in Section 4.05(d) of this Agreement) representing the
First Transaction Purchased Units and meeting the requirements of the K-Sea
Partnership Agreement, registered in such name(s) as the Purchaser has
designated (which shall be limited to Purchaser and its Affiliates);

 

(2)           a certificate of the Secretary or Assistant Secretary of
GP LLC, on behalf of K-Sea, certifying as to and attaching: (i) the K-Sea
Partnership Agreement, (ii) the resolutions of the Board authorizing the
execution and delivery of the Basic Documents and the transactions contemplated
thereby, including the issuance of the Purchased Units and (iii) the
incumbency of the officers authorized to execute the Basic Documents on behalf
of K-Sea;

 

(3)           copies of (i) the Certificate of Limited Partnership
of K-Sea and all amendments thereto, (ii) the Certificate of Limited
Partnership of the General Partner and all amendments thereto and (iii) the
Certificate of Formation of GP LLC and all amendments thereto, each certified
by the Secretary of State (or corresponding state official) of its state of
formation and dated as of a recent date;

 

(4)           certificates from the Secretary of State (or corresponding
state official) of the state of formation of each of  K-Sea, the General Partner and GP LLC
evidencing that each such entity is in good standing in their respective
jurisdiction of incorporation or formation;

 

(5)           a certificate of the Secretary of State (or corresponding
official) of each of the jurisdictions listed on Schedule 1.01(b) hereto,
dated as of a recent date, evidencing the qualification and good standing of
each of the K-Sea Entities as a 

 

13

 

foreign limited liability company, foreign limited
partnership or foreign corporation, as the case may be;

 

(6)           a cross-receipt executed by K-Sea and delivered to the
Purchaser certifying that it has received the First Transaction Purchase Price
as of the Closing;

 

(7)           the K-Sea Partnership Agreement, which shall have been
duly executed by the General Partner;

 

(8)           the Director Designation Agreement, which shall have been
duly executed by K-Sea;

 

(9)           the Registration Rights Agreement, which shall have been
duly executed by K-Sea;

 

(10)         a certificate, signed by a duly authorized officer of K-Sea
and dated the First Transaction Closing Date, to the effect that the conditions
set forth in Section 2.03(b)(i) and Section 2.03(b)(ii) have
been satisfied or waived; and

 

(11)         all other documents, instruments and writings required to be
delivered by K-Sea at the First Transaction Closing under the Basic Documents.

 

(c)           Conditions to K-Sea’s
Obligations at the First Transaction Closing.  The obligation of K-Sea to issue and sell the
First Transaction Purchased Units is subject to the satisfaction (or waiver by
the Purchaser) on or prior to the First Transaction Closing of the following
conditions:

 

(i)            All of the representations and warranties of the Purchaser
contained in this Agreement shall be true and correct as of the First
Transaction Closing as if made on the First Transaction Closing Date (other
than the representations and warranties as of a specified date, which shall be
true and correct on and as of such date) without giving effect to any
limitation as to materiality set forth therein, except to the extent that any
breaches of such representations and warranties, individually or in the
aggregate, have not or would not reasonably be expected to delay or impair the
Purchaser’s ability to effect the First Transaction Closing or perform its
obligations under this Agreement; provided  that, the
representations and warranties of the Purchaser set forth in the first sentence
of Section 4.01 (Existence; Citizenship) and Section 4.02
(Authorization; Enforceability) shall be true and correct in all
respects.

 

(ii)           The Purchaser shall have performed in all material
respects all of the covenants required to be performed by it hereunder prior to
the First Transaction Closing.

 

(iii)          The delivery by the Purchaser of all of the following:

 

14

 

(1)           the First Transaction Purchase Price, in immediately
available funds;

 

(2)           the Registration Rights Agreement which shall have been
duly executed by the Purchaser;

 

(3)           the Director Designation Agreement, which shall have been
duly executed by the Purchaser;

 

(4)           a cross-receipt executed by the Purchaser and delivered to
K-Sea certifying that it has received the First Transaction Purchased Units;

 

(5)           a certificate, signed by a duly authorized officer of the
Purchaser and dated the First Transaction Closing Date, to the effect that the
conditions set forth in Section 2.03(c)(i) and Section 2.03(c)(ii) have
been satisfied or waived; and

 

(6)           all other documents, instruments and writings required to
be delivered by the Purchaser at the First Transaction Closing under the Basic
Documents

 

Section 2.04          Conditions of the Parties’ Obligations
at the Second Transaction Closing.

 

(a)           Mutual Conditions.  The respective obligations of each party to
consummate the purchase and issuance and sale of the Second Transaction
Purchased Units shall be subject to the satisfaction on or prior to the Second
Transaction Closing Date of each of the following conditions (any or all of
which may be waived by a particular party on behalf of itself in writing, in
whole or in part, to the extent permitted by applicable Law):

 

(i)            No statute, rule, order, decree or regulation shall have
been enacted or promulgated, and no action shall have been taken, by any
Governmental Authority which temporarily, preliminarily or permanently
restrains, precludes, enjoins or otherwise prohibits the consummation of the
transactions contemplated hereby or makes the transactions contemplated hereby
illegal;

 

(ii)           There shall not be pending any suit, action or proceeding
by any Governmental Authority seeking to restrain, preclude, enjoin or prohibit
the transactions contemplated by this Agreement.

 

(iii)          The waiting periods applicable to the consummation of the
Second Transaction Closing under the HSR Act shall have expired or been
terminated; and

 

(iv)          The First Transaction Closing shall have occurred in
accordance with the terms of this Agreement.

 

(b)           Conditions to the Purchaser’s
Obligations at the Second Transaction Closing.  The obligation of the Purchaser to purchase
the Second Transaction Purchased Units is 

 

15

 

subject to the satisfaction (or waiver by the
Purchaser) on or prior to the Second Transaction Closing of all of the
conditions set forth in Section 2.03(b) hereof (other than the
conditions set forth in Section 2.03(b)(iii), Section 2.03(b)(v) and
Sections 2.03(b)(ix)(7)-(9)); provided that, for each such
condition, any reference to the First Transaction Closing, the First
Transaction Closing Date and the First Transaction Purchased Units shall
instead refer to the Second Transaction Closing, the Second Transaction Closing
Date and the Second Transaction Purchased Units, respectively.

 

(c)           Conditions to K-Sea’s
Obligations at the Second Transaction Closing.  The obligation of K-Sea to issue and sell the
Second Transaction Purchased Units is subject to the satisfaction (or waiver by
the Purchaser) on or prior to the Second Transaction Closing of all of the
conditions set forth in Section 2.03(c) hereof (other than the
conditions set forth in Sections 2.03(c)(iii)(2) and (3));
provided that, for each such condition, any reference to the First Transaction
Closing, the First Transaction Closing Date and the First Transaction Purchase
Price shall instead refer to the Second Transaction Closing, the Second
Transaction Closing Date and the Second Transaction Purchase Price,
respectively.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF K-SEA

 

K-Sea
represents and warrants to the Purchaser, on and as of the date of this
Agreement and on and as of each of the Closing Dates, as follows:

 

Section 3.01          Formation and Qualification;
Citizenship.

 

Each
of the K-Sea Entities has been duly formed and is validly existing in good
standing under the Laws of its jurisdiction of formation, and is duly
registered or qualified to do business and is in good standing as a foreign
corporation, limited liability company, limited partnership or general
partnership, as the case may be, in each jurisdiction in which its ownership or
lease of property or the conduct of its businesses requires such registration
or qualification, except where the failure so to register or qualify would not
individually or in the aggregate, reasonably be expected to have a K-Sea
Material Adverse Effect.  Each of the
K-Sea Entities has all corporate, limited liability company, limited
partnership or general partnership, as the case may be, power and authority
necessary to own or lease its Properties currently owned or leased and to
conduct its business as currently conducted, in each case in all material
respects as described in the K-Sea SEC Documents.  Each of K-Sea and the Operating Partnership
is a citizen of the United States within the meaning of 46 U.S.C. Sec. 50501
for the purpose of operating the vessels in the coastwise trade of the United
States.

 

Section 3.02          Ownership of Subsidiaries.

 

Schedule
1.01(b) hereto sets forth the name of each of the K-Sea Subsidiaries and
the jurisdiction of its incorporation or formation, as applicable.  K-Sea, directly or indirectly, owns 100% of
the issued and outstanding capital stock, membership interests or partnership
interests, as the case may be, of the K-Sea Subsidiaries, free and clear of any
Liens, except for Liens created pursuant to the Debt Agreements.  Such capital stock, limited liability company
interests or limited partnership interests, as the case may be, have been duly
authorized and validly issued

 

16

 

and
are fully paid (to the extent required under such Subsidiary’s applicable
constituent documents) have not been issued in violation of any pre-emptive
rights or other similar rights, and are non-assessable (except as such
non-assessability may be affected by matters described in: (A) Sections 18-607
and 18-804 of the Delaware Limited Liability Company Act, in the case of a
Delaware limited liability company, and (B) Sections 17-303, 17-607 and 17-804
of the Delaware Revised Uniform Limited Partnership Act (the “Delaware LP
Act”), in the case of a Delaware limited partnership).

 

Section 3.03                             No Other
Subsidiaries.  Other than its ownership
interests in the K-Sea Subsidiaries, K-Sea does not own, directly or
indirectly, any equity or long-term debt securities of any other Person that,
individually or in the aggregate, would be deemed to be a “significant
subsidiary” as such term is defined in Rule 405 of the Securities Act.

 

Section 3.04                             Authorization;
Enforceability; Valid Issuance.

 

(a)                                  K-Sea has all
requisite limited partnership power and authority to issue and sell the
Purchased Units, in accordance with and upon the terms and conditions set forth
in the Basic Documents, and no further consent or authorization is required.

 

(b)                                 The Basic
Documents to which K-Sea is a party are or will be at the time of the Closings
duly authorized and validly executed and delivered by K-Sea and, assuming due
authorization, execution and delivery by the Purchaser or its Affiliate, as
applicable (if either the Purchaser or its Affiliate is a party thereto), will
constitute, valid and binding obligations of K-Sea; provided, that the
enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar Laws relating to or affecting
creditors’ rights generally, (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and (iii) public policy, applicable law relating to fiduciary duties,
indemnification and contribution, and an implied covenant of good faith and
fair dealing.

 

(c)                                  The Purchased
Units and the limited partner interests represented thereby will be at the time
of the applicable Closing duly authorized by K-Sea in accordance with the K-Sea
Partnership Agreement and, when issued and delivered against payment therefor
in accordance with this Agreement, will be validly issued, fully paid (to the
extent required under the K-Sea Partnership Agreement), will not be issued in
violation of any pre-emptive rights or other similar rights, and are
non-assessable (except as such non-assessability may be affected by matters
described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act) and
will be free of any and all Liens and restrictions on transfer, other than (i)
restrictions on transfer under Partnership 
Agreement or this Agreement and under applicable state and federal
securities laws, (ii) such Liens as are created by the Purchaser and (iii) such
Liens as arise under the K-Sea Partnership Agreement or the Delaware LP Act.

 

(d)                                 Upon issuance
in accordance with this Agreement and the K-Sea Partnership Agreement, the
Conversion Units will be duly authorized, validly issued, fully paid (to the
extent required by the K-Sea Partnership Agreement) and non-assessable (except
as such non-assessability may be affected by matters described in Sections
17-303, 17-607 and 17-804 of the Delaware LP Act) and will be free of any and
all Liens and restrictions on transfer, other than 

 

17

 

(i) restrictions on transfer under the K-Sea
Partnership Agreement or this Agreement and under applicable state and federal
securities laws, (ii) such Liens as are created by the Purchaser and (iii) such
Liens as arise under the K-Sea Partnership Agreement or the Delaware LP Act.

 

(e)                                  The K-Sea
Entity Operating Agreements have been duly authorized, executed and delivered
by the respective K-Sea Entities that are parties thereto, and are valid and
legally binding agreements of the respective K-Sea Entities that are parties
thereto, enforceable against such parties in accordance with their terms; provided,
that the enforceability thereof may be limited by (i) applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar laws
relating to or affecting creditors’ rights generally, (ii) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and (iii) public policy, applicable law relating
to fiduciary duties, indemnification and contribution, and an implied covenant
of good faith and fair dealing.

 

Section 3.05                             No Preemptive
Rights, Registration Rights or Options.

 

There
are no preemptive rights or other rights to subscribe for or options or
warrants to purchase, nor any restriction upon the voting or transfer of, any
equity securities in any of the K-Sea Entities, except (i) as described in the
K-Sea SEC Documents, (ii) for phantom units granted pursuant to the K-Sea
Transportation Partners L.P. Long-Term Incentive Plan (the “LTIP”) or
restricted units issued pursuant to the K-Sea Transportation Partners L.P.
Employee Unit Purchase Plan, and (iii) as contemplated by the Basic
Documents.  Except as contemplated by the
Basic Documents, the issuance and sale of the Purchased Units as contemplated
by this Agreement does not give rise to any rights for or relating to the
registration of any Common Units or other securities of K-Sea other than as
have been waived.

 

Section 3.06                             Capitalization.

 

As
of the date of this Agreement and as of the First Transaction Closing Date,
immediately prior to the issuance and sale of the First Transaction Purchased
Units, the issued and outstanding interests of K-Sea consist of 19,127,411
Common Units, the incentive distribution rights (as defined in the K-Sea
Partnership Agreement, the “Incentive Distribution Rights”) and 202,447
general partner units, excluding non-vested phantom units under the LTIP.  As of the Second Transaction Closing Date,
immediately prior to the issuance and sale of the Second Transaction Purchased
Units, the issued and outstanding interests of K-Sea consist of 19,127,411
Common Units, the First Transaction Purchased Units, the Incentive Distribution
Rights and 202,447 general partner units, excluding non-vested phantom units
under the LTIP.  All outstanding Common
Units and Incentive Distribution Rights and the limited partner interests
represented thereby have been duly authorized and validly issued in accordance
with the K-Sea Partnership Agreement and are fully paid (to the extent required
under the K-Sea Partnership Agreement) and non-assessable (except as such
non-assessability may be affected by matters described in Sections 17-303,
17-607 and 17-804 of the Delaware LP Act).

 

Section 3.07                             No Breach.

 

None
of the issuance and sale by K-Sea of the Purchased Units, the execution,
delivery and performance of the Basic Documents or the consummation of the
transactions contemplated 

 

18

 

hereby
or thereby (i) conflicts or will conflict with or constitutes or will
constitute a violation of any of the Operating Agreements, (ii) requires any
consent, approval or notice under or results in a breach or violation of, or
constitutes a default (or an event which, with notice or lapse of time or both,
would constitute such a default) under, any Contract to which any of the K-Sea
Entities is a party or by which any of them or any of their respective
Properties may be bound (other than conflicts, breaches, violations or defaults
that have been waived or cured), (iii) violates or will violate any Law of any
Governmental Authority in a proceeding to which any of them or their Property
is or was a party or (iv) results or will result in the creation or imposition
of any Lien upon any property or assets of any of the K-Sea Entities, which
conflicts, breaches, violations, defaults or Liens, in the case of clauses
(ii), (iii) or (iv), could reasonably be expected to be material to the K-Sea
Entities, taken as a whole.

 

Section 3.08                             No Approvals.

 

Except
for (i) the approvals required by the Commission in connection with any
registration statement filed under the Registration Rights Agreement, (ii) such
consents that have been obtained and (iii) such consents, approvals,
authorizations or orders that, if not obtained, would not reasonably be
expected to be material to the K-Sea Entities, taken as a whole, or the
Purchaser, no consent, approval, authorization or order of, or filing or
registration with, any Governmental Authority is required in connection with
the issuance and sale by K-Sea of the Purchased Units, the execution, delivery
and performance of each of the Basic Documents to which it is a party or the
consummation by K-Sea of the transactions contemplated by the Basic Documents.

 

Section 3.09                             No Default.

 

Except
as set forth in Schedule 3.09, none of the K-Sea Entities (i) is in
violation of its applicable Operating Agreement, (ii) is in default (and no
event has occurred which, with notice or lapse of time or both, would
constitute such a default) in the due performance or observance of any term,
covenant or condition contained in any Contract to which it is a party or by
which it is bound or to which any of its properties or assets is subject or
(iii) is in violation of any Law of any Governmental Authority, which default
or violation in the case of clause (ii) or (iii), would reasonably be expected
to result in a liability, individually or in the aggregate, to the K-Sea
Entities, taken as a whole, in excess of $5,000,000.

 

Section 3.10                             K-Sea SEC
Documents; K-Sea Financial Statements.

 

(a)                                  K-Sea has filed
or furnished with the Commission all reports, schedules, forms, statements and
other documents (including exhibits and other information incorporated therein)
required to be filed or furnished by it under the Exchange Act or the
Securities Act since July 1, 2009 (all such documents, collectively, the “K-Sea
SEC Documents”).  The K-Sea SEC
Documents, at the time filed or furnished (except to the extent corrected by a
subsequently filed or furnished K-Sea SEC Document filed or furnished prior to
the date hereof), (i) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein (in the light of the circumstances under
which they were made in the case of any prospectus) not misleading and (ii)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities 

 

19

 

Act, as applicable. 
All of (i) the audited financial statements and unaudited interim
financial statements of K-Sea included in the K-Sea SEC Documents (the “K-Sea
SEC Financial Statements”), at the time filed or furnished (except to the
extent corrected by a subsequently filed or furnished K-Sea SEC Document filed
or furnished prior to the date hereof) and (ii) the unaudited financial
statements of K-Sea for the fiscal year ended June 30, 2010 set forth on Schedule
3.10(a) hereto, and together with the K-Sea SEC Financial Statements, the “K-Sea
Financial Statements”), as of the date hereof, (a) were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the Commission) and (b) fairly present
(subject in the case of unaudited statements to normal, recurring and year-end
audit adjustments) in all material respects the financial position and results
of operations of the K-Sea Entities 
taken as a whole as of the dates and for the periods indicated.  PricewaterhouseCoopers LLP is an independent
registered public accounting firm with respect to K-Sea and has not resigned or
been dismissed as independent registered public accountants of K-Sea as a
result of or in connection with any disagreement with K-Sea on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures.

 

(b)                                 Except as
reflected, reserved against or accrued in the K-Sea Financial Statements and
for Liabilities that would not be required to be disclosed on a balance sheet
in accordance with GAAP, the K-Sea Entities have no Liabilities other than
(i) Liabilities that were incurred since June 30, 2010 in the Ordinary
Course and that would not reasonably be expected to have, individually or in
the aggregate, a K-Sea Material Adverse Effect and (ii) Liabilities that
would not reasonably be expected to be material to the K-Sea Entities, taken as
a whole.

 

Section 3.11                             No Material
Adverse Change.

 

Except
as reflected, reserved against or accrued in the K-Sea Financial Statements,
since June 30, 2009, or as set forth in or contemplated by the K-Sea SEC
Documents (excluding any disclosures set forth in any risk factor section or in
any other section to the extent they are forward looking statements or
cautionary, predictive or forward-looking in nature), there has not been (i)
any material adverse change, or any development involving a prospective
material adverse change, in the business, Properties, management, financial
condition or results of operations of the K-Sea Entities taken as a whole, (ii)
any transaction that is material to the K-Sea Entities taken as a whole, (iii)
any obligation or liability, direct or contingent (including any off-balance
sheet obligations), incurred by any of the K-Sea Entities that is material to
the K-Sea Entities taken as a whole, (iv) any change in the capital stock,
membership or other equity interests or outstanding Indebtedness of any of the
K-Sea Entities that is material to the K-Sea Entities taken as a whole, (v) any
dividend or distribution of any kind declared, paid or made on the capital
stock of, or in respect of membership or partnership interests in, the K-Sea
Entities, except for dividends or distributions made or paid to the K-Sea
Entities, (vi) any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance or from
any labor dispute or action, investigation or decree by a Governmental
Authority sustained by any of the K-Sea Entities, (vii) any material change in
K-Sea’s accounting principles, practices or methods, or (viii) any change,
event, occurrence, effect, fact, circumstance or condition that is or would
reasonably be expected to have, individually or in the aggregate, a K-Sea
Material Adverse Effect.

 

20

 

Section 3.12                             Title to Real
Property; Leases.

 

(a)                                  Each of the
K-Sea Entities has good and marketable title to all Property described in the
K-Sea SEC Documents as owned by such K-Sea Entity, free and clear of all (i)
Liens and security interests except Liens or security interests arising under or
securing indebtedness incurred under Debt Agreements or, with respect to the
K-Sea Vessels, Liens and security interests used to finance the acquisition of
the K-Sea Vessels, all of which have been previously disclosed to the Purchaser
or (ii) other claims and other encumbrances (other than Liens or security
interests) except, in each case, (a) as described, and subject to the
limitations contained, in the K-Sea SEC Documents, (b) such as do not
materially affect the value of such Property taken as a whole or (c) such as do
not materially interfere with the use of such Properties taken as a whole as
they have been used in the past and are proposed to be used in the future.

 

(b)                                 Each of the
K-Sea Entities has valid and enforceable leases with respect to any real
property and buildings held under lease by such K-Sea Entity with such
exceptions as do not materially interfere with the use of the Properties of the
K-Sea Entities taken as a whole as they have been used in the past and are
proposed to be used in the future.

 

Section 3.13                             Insurance.

 

The
K-Sea Entities maintain insurance covering their properties, operations,
personnel and businesses against such losses and risks and in such amounts as
is reasonably adequate for the conduct of their respective businesses and the
value of their respective Properties and as is customary for companies engaged
in similar businesses in similar industries. 
None of the K-Sea Entities has received written notice from any insurer
or agent of such insurer that substantial capital improvements (relating to
K-Sea and the K-Sea Subsidiaries on a consolidated basis) or other substantial
expenditures will have to be made in order to continue such insurance, and all
such insurance is outstanding and in force on the date hereof.

 

Section 3.14                             Litigation.

 

Except
as set forth in Schedule 3.14, there are no actions, suits, claims,
investigations or proceedings (including any of the foregoing relating to any
Environmental Law) pending before any Governmental Authority or, to the
Knowledge of K-Sea, threatened against any of the K-Sea Entities before or by
any Governmental Authority or any self-regulatory organization or other
non-governmental regulatory authority (including the NYSE) that are required to
be described in the K-Sea SEC Documents but are not described as required or
that would reasonably be expected to result in a liability, individually or in
the aggregate, to the K-Sea Entities, taken as a whole, in excess of
$5,000,000.

 

Section 3.15                             Employment
Related Matters.

 

Except
as set forth on Schedule 3.15, (1) Neither K-Sea nor any K-Sea Entity is
a party to any collective bargaining agreement or other contract or agreement
with any labor organization or other representative of any of K-Sea’s
employees, nor is any such contract or agreement presently being negotiated;
(2) to the Knowledge of K-Sea, no campaigns are being conducted to solicit
cards from any of employees of any K-Sea Entity to authorize representation by
any labor 

 

21

 

organization,
and no such campaigns have been conducted within the past three years; (3) no
labor strike, slowdown, work stoppage, dispute, lockout or other labor
controversy is in effect or, to the Knowledge of K-Sea, threatened, and no
K-Sea Entity has experienced any such labor controversy within the past three
years; (4) no unfair labor practice charge or complaint is pending or, to the
Knowledge of K-Sea, threatened against any K-Sea Entity; (5) no grievance or
arbitration proceeding is pending or, to the Knowledge of K-Sea, threatened
which, if adversely decided, may reasonably, individually or in the aggregate,
create a liability in excess of $500,000, or cause any K-Sea Entity to incur
expenses or forego operating savings in excess of $500,000; (6) no action,
complaint, charge, inquiry, proceeding or investigation by or on behalf of any
employee, prospective employee, former employee, labor organization or other
representative of any K-Sea Entity’s employees is pending or, to the best
knowledge of K-Sea, threatened which, if adversely decided, may reasonably,
individually or in the aggregate, create a liability in excess of $500,000; (7)
no K-Sea Entity is a party to, or otherwise bound by, any consent decree with,
or citation by, any Government Authority relating to employees or employment
practices; (8) the K-Sea Entities are in material compliance with all
applicable laws, agreements, contracts, policies, plans, and programs relating
to employment, employment practices, compensation, benefits, hours, terms and
conditions of employment, and the termination of employment, including but not
limited to any obligations pursuant to the Worker Adjustment and Retraining
Notification Act of 1988; (9) no K-Sea Entity will have any liability under any
benefit or severance policy, practice, agreement, plan, or program which exists
or arises, or may be deemed to exist or arise, under any applicable law or
otherwise, as a result of or in connection with the transactions contemplated
hereunder or the termination of any of K-Sea Entity’s employees on or prior to
the Closing Dates; and (10) no K-Sea Entity has closed any plant or facility,
effectuated any layoffs of employees or implemented any early retirement,
separation or window program within the past three years, nor has any  K-Sea Entity planned or announced any such
action or program for the future.

 

Section 3.16                             Tax Returns.

 

(a)                                  Each of the
K-Sea Entities has filed all material Tax Returns required to be filed through
the date of this Agreement, which returns are correct and complete in all
material respects, and all material Taxes due in relation to the K-Sea Entities
have been paid in full, other than those (i) that are being contested in good
faith by appropriate action and for which adequate reserves have been
established in accordance with GAAP, or (ii) where payment is not yet due and
adequate provision has been made in the K-Sea Financial Statements in
accordance with GAAP.  There are no
material Liens with respect to Taxes upon any of the assets or properties of
the K-Sea Entities, other than with respect to Taxes not yet due and payable.

 

(b)                                 There are no
asserted or threatened deficiencies or assessment of Taxes from any taxing
authority with respect to or attributable to the K-Sea Entities. There are no
ongoing material audits or examinations of any of the Tax Returns relating to
or attributable to the K-Sea Entities and no such material audit or examination
is threatened in writing. The K-Sea Entities have not granted any requests,
agreements, consents or waivers to extend the statutory period of limitations
applicable to the assessment of any material Taxes.

 

22

 

(c)                                  No K-Sea Entity
has any material obligation under any Tax sharing or Tax indemnity agreement or
similar contract or arrangement.  No
closing agreement pursuant to Section 7121 of the Internal Revenue Code of
1986, as amended (the “Code”) (or any similar provision of state, local
or foreign law) has been entered into by or with respect to any K-Sea
Entity.  No K-Sea Entity has any material
liability for Taxes of any other person as a transferee or successor, by
contract, or otherwise.

 

(d)                                 No K-Sea Entity
has engaged in a transaction that would be a “listed transaction” by or with
respect to any K-Sea Entity pursuant to Treasury Regulation Section 1.6011-4 or
any predecessor thereto.

 

(e)                                  Any K-Sea
Entity which is treated as a flow-through entity for U.S. federal income tax
purposes has a valid Section 754 election in effect.

 

Section 3.17                             Employee
Benefit Plans.

 

(a)                                  Except for
those Plans set forth on Schedule 3.17, all material Plans of the K-Sea
Entities have been disclosed in the K-Sea SEC Documents.

 

(b)                                 Each Plan has
been operated and administered in all material respects in accordance with its
terms and the requirements of all applicable Laws, including ERISA and the
Code.  No action, claim or proceeding is
pending or, to the Knowledge of K-Sea, threatened with respect to any Plan
(other than claims for benefits in the Ordinary Course) that would result in
any material liability to any K-Sea Entity and, to the Knowledge of K-Sea, no
fact or event exists that would give rise to any such action, claim or
proceeding.  No administrative
investigation, audit or other administrative proceeding by the Department of
Labor, the Department of Treasury, the IRS or other Governmental Authority are
pending or, to the Knowledge of K-Sea, threatened.

 

(c)                                  Each Plan that
is intended to be qualified under Section 401(a) of the Code has timely
received a favorable determination letter from the IRS and each trust
established in connection with any Plan that is intended to be exempt from
federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that it is so exempt, and, to the Knowledge
of K-Sea, no fact or event has occurred since the date of such determination
letter or letters from the IRS that would reasonably be expected to adversely
affect the qualified status of any such Plan or the exempt status of any such trust.

 

(d)                                 No event has
occurred and no condition exists with respect to any Plan that would subject
any K-Sea Entity, either directly or by reason of its affiliation with any
Person that, together with any of the K-Sea Entities, is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code (an “ERISA Affiliate”),
to any material tax, fine, lien, penalty or other liability imposed by ERISA,
the Code or other applicable Law.

 

(e)                                  No Plan is
subject to the requirements of Title IV of ERISA.  No Plan is a “multiemployer plan” (as defined
in Section 4001(a)(3) of ERISA) and none of the K-Sea Entities nor any of their
ERISA Affiliates has at any time contributed to, or has or had any liability or
obligation in respect of, any multiemployer plan.  No Plan provides post-employment welfare
(including health, medical or life insurance) benefits and none of the K-

 

23

 

Sea Entities has any
obligation to provide any such post-employment welfare benefits now or in the
future, other than as required by Section 4980B of the Code or any other
applicable Law.

 

(f)                                    No Plan exists
that, as a result of the execution and delivery of the Basic Documents, nor the
consummation of the transactions contemplated hereby or thereby, will (alone or
together with any other event) (i) entitle any current or former employee,
director or independent contractor of any of the K-Sea Entities to severance,
termination, change in control, retention or any similar compensation, benefits,
or property or (ii) accelerate the time of payment or vesting, or increase the
amount of any compensation due to, or in respect of, any current or former
employee, director or independent contractor of any of the K-Sea Entities.

 

Section 3.18                             Environmental
Compliance.

 

Except
as set forth in Schedule 3.18, the K-Sea Entities (i) are in compliance
with, and have not violated, any and all Environmental Laws, and, to the
Knowledge of K-Sea, there is no condition or circumstance that would reasonably
be expected to prevent or interfere with such compliance in the future, (ii)
have received all Environmental Permits required of them under applicable
Environmental Laws to conduct their respective businesses as they are currently
being conducted, (iii) are in compliance with all, and have not violated any,
terms and conditions of any such Environmental Permits and, to the Knowledge of
K-Sea, there is no condition or circumstance that would reasonably be expected
to prevent or interfere with such compliance in the future, (iv) do not have
any Liability in connection with the disposal of Hazardous Material or with the
release or threatened release into the environment of any Hazardous Material,
and Hazardous Materials are not present at or about any property or facility
currently or formerly owned, leased or operated by any of the K-Sea Entities in
condition that would reasonably be expected to result in Liability to any K-Sea
Entity relating to any Environmental Law, and (v) have not assumed, retained or
provided indemnity against any Liability of any other Person relating to any
Environmental Law, except where such failure to comply with Environmental Laws,
such failure to receive required Environmental Permits, such failure to comply
with the terms and conditions of such Environmental Permits, such liability in
connection with disposal, releases, or presence of such Hazardous Materials, or
such assumption, retention or indemnity would not reasonably be expected to
result in a liability, individually or in the aggregate, to the K-Sea Entities,
taken as a whole, in excess of $5,000,000.

 

Section 3.19                             Compliance with
Laws; Permits.

 

(a)                                  Except as set
forth in Schedule 3.19(a), each of the K-Sea Entities is in compliance
with all Laws applicable to its business, operations or assets, except for such
failures to be in compliance as would not reasonably be expected to result in a
liability, individually or in the aggregate, to the K-Sea Entities, taken as a
whole, in excess of $5,000,000.  None of
the K-Sea Entities has received any written notice of or been charged with any
violation of any Laws, except where such were such violations (i) would not
reasonably be expected to be material to the K-Sea Entities, taken as a whole
or (ii) have been disclosed in the K-Sea SEC Documents.

 

(b)                                 Except as set
forth in Schedule 3.19(b), excluding any Environmental Permits, each of
the K-Sea Entities has such permits, consents, licenses, franchises,
certificates and authorizations of governmental or regulatory authorities (“Permits”)
as are necessary to own 

 

24

 

its Properties and to conduct its business in the
manner it is currently conducted except for such permits which, if not
obtained, would not reasonably be expected to result in a liability,
individually or in the aggregate, to the K-Sea Entities, taken as a whole, in
excess of $5,000,000.  Except as set
forth in Schedule 3.19(b) or except as set forth in the K-Sea SEC
Documents, each of the K-Sea Entities has fulfilled and performed all its
material obligations with respect to such permits which are or will be due to
have been fulfilled and performed by such date and no event has occurred that
would prevent the permits from being renewed or reissued or which allows, or
after notice or lapse of time would allow, revocation or termination thereof or
results in any impairment of the rights of the holder of any such permit,
except for such non-renewals, non-issues, revocations, terminations and
impairments that would not reasonably be expected to result in a liability,
individually or in the aggregate, to the K-Sea Entities, taken as a whole, in
excess of $5,000,000.  Except as
described in the K-Sea SEC Documents, none of such permits contains any
restriction that is materially burdensome to the K-Sea Entities considered as a
whole.

 

Section 3.20                             NYSE Listing.

 

The
Common Units are listed on the NYSE, and K-Sea has not received any notice of
delisting.  The issuance and sale of the
Purchased Units and the issuance of Conversion Units does not contravene NYSE
rules and regulations.

 

Section 3.21                             Investment
Company.

 

None
of the K-Sea Entities is now, and after the sale of the Purchased Units to be
sold by K-Sea to the Purchaser hereunder will be, an “investment company” or a
company “controlled by” an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

 

Section 3.22                             MLP Status.

 

Other
than as set forth on Schedule 3.22, none of the K-Sea Entities is
treated as a corporation for U.S. federal Tax purposes.  K-Sea has, for each taxable year beginning
after December 31, 2003, during which K-Sea was in existence, met the gross
income requirements of Section 7704(c)(2) of the Code and for any taxable year
beginning on or prior to December 31, 2003, K-Sea was not a “publicly traded
partnership” within the meaning of Section 7704 of the Code.  K-Sea expects to meet the gross income
requirements of Section 7704(c)(2) of the Code for its taxable year ending
December 31, 2010.

 

Section 3.23                             Certain Fees.

 

Except
for the fees to be paid by K-Sea to UBS, no fees or commissions are or will be
payable by K-Sea to brokers, finders or investment bankers with respect to the
sale of any of the Purchased Units or the consummation of the transactions
contemplated by this Agreement.  K-Sea
agrees that it will indemnify and hold harmless the Purchaser from and against
any and all claims, demands or liabilities for broker’s, finder’s, placement or
other similar fees or commissions incurred by K-Sea or alleged to have been
incurred by K-Sea in connection with the sale of the Purchased Units or the
consummation of the transactions contemplated by this Agreement.

 

25

 

Section 3.24                             Form S-3
Eligibility.

 

K-Sea
is eligible to register the resale of its Common Units for resale by the
Purchaser under Form S-3 promulgated under the Securities Act.

 

Section 3.25                             Material
Agreements.

 

Each
material agreement (as defined in Section 601(b)(10) of Regulation
S-K promulgated by the Commission), including each exhibit to the K-Sea SEC
Documents, including amendments to or other modifications of pre-existing
material agreements, to which K-Sea is a party (the “Material Agreements”)
is in full force and effect and is valid and enforceable against the K-Sea
Entity party thereto. Except as set forth in Schedule 3.25, none of the
K-Sea Entities is in default (with or without due notice or lapse of time or
both) in any material respect under any Material Agreement.

 

Section 3.26                             Books and
Records; Sarbanes-Oxley Compliance.

 

(a)                                  Each of the
K-Sea Entities (i) has established and maintains a system of internal
accounting control over financial reporting sufficient to comply with all legal
and accounting requirements applicable to the K-Sea Entities, (ii) has
disclosed, based on its most recent evaluation of internal controls, to the
K-Sea Entities’ auditors and its audit committee, (x) any significant
deficiencies and material weaknesses in the design or operation of its internal
accounting controls which are reasonably likely to materially and adversely
affect the K-Sea Entities, taken as a whole, ability to record, process,
summarize, and report financial information, and (y) any fraud known to
the K-Sea Entities that involves management or other employees who have a
significant role in internal controls, and (iii) has not received any
complaint, allegation, assertion, or claim in writing regarding the accounting
practices, procedures, methodologies, or methods of any of the K-Sea Entities
or their internal accounting controls over financial reporting, including any
such complaint, allegation, assertion, or claim that any of the K-Sea Entities
has engaged in questionable accounting or auditing practices.

 

(b)                                 (i) K-Sea
has established and maintains disclosure controls and procedures (as such term
is defined in Rule 13a-15 under the Exchange Act), (ii) such
disclosure controls and procedures are designed to ensure that the information
required to be disclosed by K-Sea in the reports it files or submits under the
Exchange Act is accumulated and communicated to management of K-Sea, including
its principal executive officers and principal financial officers, as
appropriate, to allow timely decisions regarding required disclosure to be made
and (iii) such disclosure controls and procedures are effective in all
material respects in alerting K-Sea in a timely manner to material information
required to be disclosed in K-Sea’s reports filed with the Commission.

 

(c)                                  There is and
has been no failure on the part of K-Sea or, to the Knowledge of K-Sea, any of
K-Sea’s officers, or any member of the Board, in their capacities as such, to
comply in all material respects with the provisions of the Sarbanes-Oxley
Act of 2002, as amended, and the rules and regulations promulgated in
connection therewith.

 

26

 

Section 3.27                             Foreign Corrupt
Practices Act.

 

None
of the K-Sea Entities, nor any director, officer, agent or employee acting in
his or her capacity as a director, officer, agent or employee of any of the
K-Sea Entities, has, directly or indirectly through an intermediary or
otherwise, (i) made any unlawful payment to foreign or domestic government
officials or employees or to any foreign or domestic political parties or
campaigns or violated any provision of any applicable antibribery Laws,
including the Foreign Corrupt Practices Act of 1977, as amended, or (ii) taken
any action that would constitute a violation of any applicable antibribery
Laws, including the Foreign Corrupt Practices Act of 1977, as amended.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER

 

The
Purchaser hereby represents and warrants to K-Sea with respect to itself, on
and as of the date of this Agreement and as of each of the Closing Dates, as
follows:

 

Section 4.01                             Existence;
Citizenship.

 

The
Purchaser is duly organized and validly existing and in good standing under the
laws of its state of formation, with all necessary power and authority to own
properties and to conduct its business as currently conducted.  Purchaser is a citizen of the United States
within the meaning of 46 U.S.C. Sec. 50501 for the purpose of operating the
vessels in the coastwise trade of the United States.

 

Section 4.02                             Authorization;
Enforceability.

 

(a)                                  The Purchaser
has all necessary legal power and authority to purchase the Purchased Units, in
accordance with and upon the terms and conditions set forth in the Basic
Documents, and no further consent or authorization of the Purchaser is
required.

 

(b)                                 This Agreement
has been, and the Basic Documents to which the Purchaser will be a party at the
time of the Closings will be, duly authorized and validly executed and
delivered by the Purchaser and, assuming due authorization, execution and
delivery by K-Sea, will constitute legal, valid and binding obligations of the
Purchaser; provided, that the enforceability thereof may be limited by (i) bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
relating to or affecting creditors’ rights generally, (ii) general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and (iii) public policy, applicable
law relating to fiduciary duties, indemnification and contribution, and an
implied covenant of good faith and fair dealing.

 

Section 4.03                             No Breach.

 

The
execution, delivery and performance of the Basic Documents by the Purchaser and
the consummation by the Purchaser of the transactions contemplated thereby will
not (i) conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any material agreement
to which the Purchaser is a party or by which the Purchaser is bound or to
which any of the property or assets of the Purchaser is subject, (ii) conflict
with or result in any violation of the provisions of the organizational
documents of the Purchaser, or (iii) violate any statute, order, rule or
regulation of any court or Governmental Authority, except in 

 

27

 

the
case of clauses (i) and (iii), for such conflicts, breaches, violations or
defaults as would not prevent the consummation of the transactions contemplated
by the Basic Documents.

 

Section 4.04                             Certain Fees.

 

No
fees or commissions are or will be payable by the Purchaser to brokers, finders
or investment bankers with respect to the purchase of any of the Purchased
Units or the consummation of the transactions contemplated by this Agreement.  The Purchaser agrees that it will indemnify
and hold harmless K-Sea from and against any and all claims, demands or
liabilities for broker’s, finder’s, placement or other similar fees or
commissions incurred by the Purchaser or alleged to have been incurred by the
Purchaser in connection with the purchase of the Purchased Units or the
consummation of the transactions contemplated by the Basic Documents.

 

Section 4.05                             Unregistered
Securities.

 

(a)                                  Accredited
Investor Status; Sophisticated Purchaser.  The Purchaser is an “accredited investor”
within the meaning of Rule 501 under the Securities Act and is able to
bear the risk of its investment in the Purchased Units and the Conversion
Units.  The Purchaser has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the purchase of the Purchased Units and the
Conversion Units.

 

(b)                                 Information.  The Purchaser and its Representatives have
been furnished with materials relating to the business, finances and operations
of K-Sea and relating to the offer and sale of the Purchased Units and the
Conversion Units that have been requested by the Purchaser.  The Purchaser and its Representatives have
been afforded the opportunity to ask questions of K-Sea or its Representatives.  The Purchaser understands and acknowledges
that its purchase of the Purchased Units involves a high degree of risk and
uncertainty.  The Purchaser has sought
such accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its investment in the Purchased
Units.

 

(c)                                  Purchaser
Representation.  The
Purchaser is purchasing the Purchased Units for its own account and not with a
view to distribution in violation of any securities laws.  The Purchaser understands and acknowledges
that there is no public trading market for the Purchased Units and that none is
expected to develop.  The Purchaser has
been advised and understands and acknowledges that none of the Purchased Units
and the Conversion Units have been registered under the Securities Act or under
the “blue sky” laws of any jurisdiction and may be resold only if
registered pursuant to the provisions of the Securities Act (or if eligible,
pursuant to the provisions of Rule 144 promulgated under the Securities
Act or pursuant to another available exemption from the registration
requirements of the Securities Act).  The
Purchaser has been advised of and is aware of the provisions of Rule 144
promulgated under the Securities Act.

 

(d)                                 Legend.  The Purchaser understands and acknowledges
that, until such time as the Purchased Units and the Conversion Units have been
registered pursuant to the provisions of the Securities Act, or the Purchased
Units and the Conversion Units are eligible for resale pursuant to Rule 144
promulgated under the Securities Act without any restriction as to 

 

28

 

the number of securities as of a particular date
that can then be immediately sold, the Purchased Units and the Conversion Units
will bear the following restrictive legend:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. 
THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
THEREUNDER AND, IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION,
UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT OR THE ISSUER HAS RECEIVED
DOCUMENTATION REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT
REQUIRE REGISTRATION UNDER SUCH ACT. THIS SECURITY IS SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH IN (i) THE FOURTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP, DATED AS OF SEPTEMBER [•], 2010, AND (ii) THE
SECURITIES PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 1, 2010, BY AND BETWEEN
K-SEA AND THE PURCHASER PARTY THERETO, IN EACH CASE A COPY OF WHICH MAY BE
OBTAINED FROM K-SEA AT ITS PRINCIPAL EXECUTIVE OFFICES.”

 

(e)                                  Reliance
Upon the Purchaser’s Representations and Warranties.  The Purchaser understands and acknowledges
that the Purchased Units are being offered and sold in reliance on a
transactional exemption from the registration requirements of federal and state
securities laws, and that K-Sea, the Placement Agent and Latham &
Watkins LLP, counsel for K-Sea, are relying in part upon the truth and accuracy
of the representations, warranties, agreements, acknowledgments and
understandings of the Purchaser set forth in this Agreement in (i) concluding
that the issuance and sale of the Purchased Units is a “private offering” and,
as such, is exempt from the registration requirements of the Securities Act,
and (ii) determining the applicability of such exemptions and the
suitability of the Purchaser to purchase the Purchased Units.

 

Section 4.06                             Short Selling.

 

The
Purchaser represents and warrants that it has not entered into any Short Sales
of the Common Units owned by it between the time it first began discussions
with K-Sea or the Placement Agent about the transactions contemplated by this
Agreement and the date hereof.

 

Section 4.07                             K-Sea
Information.

 

The
Purchaser acknowledges and agrees that K-Sea has provided or made available to
the Purchaser (through EDGAR, K-Sea’s website or otherwise) all K-Sea SEC
Documents, as well as all press releases issued by K-Sea through the date of
this Agreement that are included in a filing by K-Sea on Form 8-K or
clearly posted on K-Sea’s website.

 

29

 

ARTICLE V

COVENANTS

 

Section 5.01                             Transfer
Restrictions.

 

(a)                                  Without the
prior written consent of the Purchaser, K-Sea shall not, during the period
commencing on the First Transaction Closing Date and ending 180 days
thereafter, (i) offer, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend or otherwise transfer or dispose of, directly or
indirectly; or (ii) enter into any swap or other transaction or
arrangement that transfers or that is designed to, or that might reasonably be
expected to, result in the transfer to another, in whole or in part, any of the
economic consequences of ownership of, (any such transaction described in (i) or
(ii) above, a “Transfer”), its Common Units, whether any such
transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Units or such other securities, in cash or otherwise.  For the avoidance of doubt, nothing herein
shall be deemed to restrict the Purchaser’s ability to request the filing of a
registration statement at any time pursuant to Section 2.01 of the
Registration Rights Agreement.

 

(b)                                 Without the
prior written consent of K-Sea, the Purchaser shall not, during the period
commencing on the First Transaction Closing Date and ending 180 days
thereafter, Transfer its Purchased Units; provided, however, that
the Purchaser may pledge all or any portion of its Purchased Units to any
holders of obligations owed by the Purchaser, including to the trustee for, or
representative of, such holders; and provided, further, that the
Purchaser may Transfer the Purchased Units to an Affiliate of the Purchaser if
such Transfer to an Affiliate would not, when aggregated with all other sales
or exchanges of Securities within the prior 12 month period, cause a technical
termination under Section 708 of the Code, provided, that (a) any
such transferee (1) agrees to be bound by all of the terms and conditions
of this Agreement, including this Section 5.01, (2) expressly
assumes a proportionate share (based on the number of Series A Preferred
Units being Transferred relative to the total number of Purchased Units) of the
Purchaser’s obligations in respect of indemnification pursuant to Section 6.02
of this Agreement, and (3) is a citizen of the United States within the
meaning of 46 U.S.C. Sec. 50501 for the purpose of operating the vessels in the
coastwise trade of the United States, and (b) the Purchaser acknowledges
and agrees that it shall remain the primary obligor under this Agreement.

 

(c)                                  Prior to the
second anniversary of the First Transaction Closing, the Purchaser will not,
directly or indirectly, Transfer any Series A Preferred Units or
Conversion Units to (i) any Competitor of K-Sea or (ii) any other
Person or “group” (within the meaning of Section 13(d) of the
Exchange Act) that will own more than 20% of the outstanding Common Units on an
as converted basis after such Transfer; provided  that, nothing in
this Section 5.01(c) shall restrict the Purchaser from
Transferring any Series A Preferred Units or Conversion Units to any of
the Persons referenced in clauses (i) and (ii) of this Section 5.01(c) if
such Transfer is pursuant to an underwritten public offering (and not a direct
placement of registered units to such Persons).

 

30

 

Section 5.02                             Standstill
Obligation.

 

(a)                                  Prior to the
second anniversary of the First Transaction Closing (the “Standstill
Termination Date”), without the prior written consent of K-Sea, the
Purchaser agrees that it shall not, nor shall it permit any of its Affiliates
to, nor shall the Purchaser agree, advise, assist, provide information or
provide financing to others, or permit its Affiliates to agree, advise, assist,
provide information or provide financing to others, to, individually or
collectively, directly or indirectly:

 

(i)                                       acquire or
offer to acquire or agree to acquire from any Person, directly or indirectly,
by purchase or merger, through the acquisition of control of another Person, by
joining a partnership, limited partnership or other “group” (within the meaning
of Section 13(d)(3) of the Exchange Act) or otherwise, beneficial
ownership of more than 1% of the equity securities of K-Sea, or direct or
indirect rights (including convertible securities) or options to acquire such
beneficial ownership (collectively, the “Securities”) (or otherwise act
in concert with respect to any such Securities with any Person that so
acquires, offers to acquire or agrees to acquire); provided, however,
that no such acquisition, offer to acquire or agreement to acquire shall be
deemed to occur solely due to: (a) the issuance of the Purchased Units
(including the issuance of any Conversion Units underlying the Purchased Units
and any additional Series A Preferred Units issued in respect of in-kind
distributions by K-Sea), (b) a unit split, reverse unit split,
reclassification, reorganization or other transaction by K-Sea affecting any
class of the outstanding equity securities of K-Sea generally or (c) a
dividend of units or other pro rata distribution by K-Sea to holders of its
outstanding equity securities; or

 

(ii)                                    make, or in any
way participate in, directly or indirectly, any “solicitation” of “proxies” to
vote (as such terms are used in the Regulation 14A promulgated under the
Exchange Act), become a “participant” in, or encourage, support or aid any
other Person to become a “participant,” in any “election contest” (as such
terms are defined in Rule 14a-11 promulgated under the Exchange Act) or
initiate, propose or otherwise solicit unitholders of K-Sea for the approval of
any unitholder proposals, in each case with respect to K-Sea; or

 

(iii)                                 form, join, in
any way participate in, or encourage the formation of, a “group” (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any
voting securities of K-Sea; or

 

(iv)                                deposit any
securities of K-Sea into a voting trust, or subject any securities of K-Sea to
any agreement or arrangement with respect to the voting of such securities, or
other agreement or arrangement having similar effect.

 

The
foregoing provisions of this Section 5.02(a) shall not apply (i) to
the Purchaser with respect to a Significant Event or (ii) to any person
who is a director of K-Sea acting in his capacity as a director of K-Sea in the
ordinary course and within K-Sea’s Board process.

 

(b)                                 If prior to the
Standstill Termination Date, K-Sea or its Affiliates conduct a process with one
or more potential bidders relating to a sale of all or substantially all of
K-Sea’s assets or a merger or other business combination transaction involving
K-Sea that would reasonably be expected to result in K-Sea’s then current
Unitholders owning less than 50% of the outstanding equity securities of the
combined Person following such sale, merger or other 

 

31

 

business combination transaction (a “Sales
Transaction”), then K-Sea agrees that it shall provide the Purchaser with
an invitation to bid, using substantially the same invitation to bid sent to
other potential bidders in such process, and shall provide to the Purchaser
substantially the same information relating to the K-Sea Entities that K-Sea
provided in such process to such other potential bidders, subject to a
confidentiality agreement acceptable to K-Sea containing confidentiality
restrictions no more restrictive in the aggregate than those in the
confidentiality agreement entered into by any other potential bidder in
connection with such process, and the restrictions set forth in Section 5.02(a) shall
not apply to any process or transaction described in this Section 5.02(b) for
the limited purpose of allowing the Purchaser to bid, negotiate and, with the
approval and recommendation of the Board, complete a Sales Transaction as
contemplated by this paragraph.  If K-Sea
elects not to pursue a Sales Transaction with the Purchaser following the
process described in this Section 5.02(b), then the restrictions in
Section 5.02(a) shall continue to apply to the Purchaser.

 

(c)                                  Notwithstanding
anything to the contrary in this Section 5.02, prior to the
Standstill Termination Date, at K-Sea’s request, the Purchaser shall be
permitted to provide strategic advice to K-Sea from time to time.

 

Section 5.03                             Further
Assurances; NYSE Listing; Citizenship.

 

From
time to time after the date hereof, without further consideration, K-Sea and
the Purchaser shall use their commercially reasonable efforts to take, or cause
to be taken, all actions necessary or appropriate to consummate the
transactions contemplated by this Agreement and the other Basic Documents.  Without limiting the foregoing, K-Sea shall (a) file
with the NYSE the proper form or other notification and required supporting
documentation, and provide to NYSE any other requested information, related to
the Conversion Units and (b) ensure that the issuance of the Purchased
Units and the Conversion Units is in compliance with applicable NYSE rules and
regulations.  At all times after the
Closings while it holds Conversion Units or Common Units, the Purchaser shall
remain a citizen of the United States within the meaning of 46 U.S.C. Sec.
50501 for the purpose of operating the vessels in the coastwise trade of the
United States.

 

Section 5.04                             Conduct of Business.

 

(a)                                  Subject to
applicable Law, during the period from the date hereof to the earlier of the
Second Transaction Closing or the Second Transaction Outside Date,
except as otherwise required by this Agreement, the K-Sea Entities (x) shall
conduct the Business in the Ordinary Course, maintain the assets of the
Business in good operating condition suitable in all material respects for
their intended purposes, and use their commercially reasonable efforts in the
Ordinary Course to (A) preserve intact the Business and its associated
goodwill, and (B) preserve intact the K-Sea Entities’ relationships with
their material customers, material suppliers, material creditors and employees,
and (y) except as the Purchaser otherwise consents in writing in advance, shall
cause each of the K-Sea Entities not to:

 

(i)                                     sell, lease,
license, transfer, pledge, mortgage, dispose of or encumber any material
assets, properties (whether real, personal, tangible or intangible), rights or
businesses, other than sales or dispositions of assets in the Ordinary Course
of Business;

 

32

 

(ii)                                  enter into any
Contract that would be material to the Business, or terminate or materially
extend or materially modify any such Material Agreements in each case other
than in the Ordinary Course of Business;

 

(iii)                               declare, set
aside or pay any dividend or distribution on any Common Units, Incentive
Distribution Rights or any other equity securities of K-Sea;

 

(iv)                              amend its
Operating Agreements;

 

(v)                                 split, combine,
subdivide, reclassify or redeem, or purchase or otherwise acquire, any
outstanding equity interests, including Common Units and Incentive Distribution
Rights;

 

(vi)                              purchase,
redeem or otherwise acquire or dispose directly or indirectly any interests or
shares of the capital stock or other equity interests or securities of any of
the K-Sea Subsidiaries;

 

(vii)                           merge or
consolidate with any Person or adopt a plan of complete or partial liquidation
or authorize or undertake a dissolution, consolidation, restructuring,
recapitalization or other reorganization;

 

(viii)                        make a material
change in its accounting or Tax principles, methods or policies except as
required by applicable regulatory authorities or independent accountants, file
any amended Tax Return that could result in a material liability for Taxes to
the Purchaser after the Closing, enter into any closing agreement, surrender
any right or claim a refund of any Taxes or consent to any extension or waiver
of the limitation period applicable to any material Tax claim or assessment
relating to the K-Sea Entities;

 

(ix)                                make any new
Tax election or change or revoke any existing Tax election, or settle or
compromise any Tax liability, in the case of any of the foregoing, which are
material to the business, financial condition or the results of operations of
the K-Sea Entities;

 

(x)                                   make any
acquisition of any assets or equity of any Person except in the Ordinary Course
of Business;

 

(xi)                                make any loans,
advances or capital contributions to or investments in any Person (other than
the Companies) in excess of $1 million in the aggregate except in the Ordinary
Course of Business;

 

(xii)                             incur, amend or
modify in any material respect the terms of, or refinance, any Indebtedness for
borrowed money, guarantee of Indebtedness for borrowed money or debt securities
any of the K-Sea Entities;

 

(xiii)                          waive, release
or settle any pending or threatened litigation or other proceedings before a
Government Authority (A) that will require the K-Sea Entities to pay an
amount in excess of $1 million or (B) entail the incurrence of (1) any
obligation or liability of the K-Sea Entities in excess of such amount,
including costs or revenue reductions or (2) 

 

33

 

obligations that would
impose any material restrictions on the business or operations of the K-Sea Entities; and

 

(xiv)                         authorize or
enter into any agreement or commitment with respect to any of the foregoing.

 

(b)                              From the date hereof until
the Second Transaction Outside Date, K-Sea shall not, and shall cause the K-Sea
Subsidiaries not to, amend the Debt Agreements without the prior written
consent of the Purchaser, not to be unreasonably withheld.

 

(c)                               K-Sea shall comply with
applicable law and the terms of any collective bargaining agreements with
respect to the obligations owed by any K-Sea Entities to any labor
organizations arising out of the transaction contemplated by this agreement.

 

Section 5.05                             Use of
Proceeds.

 

K-Sea
shall apply all the proceeds of the sale of the Purchased Units, net of fees
and expenses related to the negotiation and consummation of this Agreement, to
pay unpaid principal and accrued interest outstanding pursuant to the Debt
Agreements.

 

Section 5.06                             Reasonable Best
Efforts.

 

(a)                                  The Purchaser
and K-Sea shall, and K-Sea shall cause the K-Sea Entities, (i) to use
their reasonable best efforts to consummate the transactions contemplated by
this Agreement and to obtain as promptly as practicable all authorizations,
consents, orders and approvals of all Government Authorities that either party
reasonably determines may be or may become necessary, proper or advisable under
this Agreement and applicable Laws to be obtained respectively by them to
consummate and make effective such transactions, including, but not limited to,
the clearance required under the HSR Act, (ii) subject to such limitations
as set forth in this Section 5.06(a), take all actions as may be
reasonably requested by any such Government Entity to obtain such
authorizations, consents, orders and approvals, and (iii) cooperate with
the reasonable requests of each other in seeking to obtain as promptly as
practicable all such authorizations, consents, orders and approvals.  Neither the Purchaser nor K-Sea shall, and
K-Sea shall cause the K-Sea Subsidiaries not to, take or cause to be taken any
action that they are aware or should reasonably be aware would have the effect
of delaying, impairing or impeding in any material respect the receipt or
making of any such required authorizations, consents, orders, approvals or
filings or the consummation of the transactions contemplated hereby.

 

(b)                                 Each of
Purchaser and K-Sea shall, and K-Sea shall cause the K-Sea Entities to, use its
reasonable best efforts to file, as promptly as practicable, but in no event
later than ten (10) Business Days following the execution and delivery of
this Agreement, with the United States Federal Trade Commission and the United
States Department of Justice, the HSR Act notification and report form in
respect of the Second Transaction Closing contemplated hereby and any
supplemental information requested in connection therewith pursuant to the HSR
Act.  Each of Purchaser and K-Sea shall
furnish to each other’s counsel such necessary information and reasonable
assistance as the other may request in connection with its preparation of any
filing or submission that is necessary or advisable under the HSR Act.

 

34

 

(c)           Purchaser and K-Sea shall,
and K-Sea shall cause the K-Sea Entities to, keep each other apprised of the
status of any communications with, and any inquiries or requests for additional
information from any Governmental Authority and shall comply promptly with any
such inquiry or request.

 

(d)           Notwithstanding the
foregoing or anything else in this Agreement to the contrary, nothing in this
Agreement shall require Purchaser, any of the K-Sea Entities or any of their
respective Affiliates to agree to any divestiture or to proffer its willingness
to effect any divestiture, or to agree to any other requirements or condition
imposed on Purchaser, any of the K-Sea Entities or any of their respective
Affiliates or any requirement, condition or request of any Government
Authority.  In addition, nothing in this
Agreement shall obligate Purchaser or any K-Sea Entity to agree to any remedy
not conditioned on the consummation of the Second Transaction Closing.

 

Section 5.07          Short Sales.

 

The
Purchaser agrees not to enter into any Short Sales of the Common Units owned by
the Purchaser from the date hereof until such time as the Shelf Registration
Statement (as defined in the Registration Rights Agreement) is declared or
deemed effective by the Commission.

 

Section 5.08          Public Disclosure.

 

Notwithstanding
anything to the contrary contained herein, except as may be required to comply
with the requirements of any applicable Law and the rules and regulations
of the Commission or the NYSE, neither K-Sea nor the Purchaser shall, and K-Sea
and the Purchaser will cause their respective Affiliates and representatives
not to, from and after the date hereof, issue any press release in respect of
this Agreement or the transactions contemplated hereby or otherwise disclose
the identity of, or any other information concerning, the Purchaser or any of
its Affiliates without providing K-Sea or the Purchaser, as applicable, a
reasonable opportunity to review and comment on such disclosure (with such
comments being incorporated or reflected, to the extent reasonable, in any such
disclosure); provided, however, that nothing in this Section 5.08
shall delay any required filing or other disclosure with the NYSE or any
Governmental Authority or otherwise hinder the K-Sea Entities’, the Purchaser
or their respective representatives’ ability to timely comply with all laws or rules and
regulations of the NYSE or any Governmental Authority.

 

Section 5.09          Incentive Distribution
Rights Option.

 

(a)           During the Option Period,
the General Partner hereby grants the Purchaser an irrevocable option (the “Option”)
to purchase 35% of the outstanding equity interests in K-Sea IDR Holdings (the “IDR
Interests”) in exchange for $100,000 in cash (the “Option Consideration”).  The Option shall be exercisable at any time
during the Option Period for all, but not less than all, of the IDR Interests
by giving written notice to the General Partner (the “Option Exercise Notice”). 
Upon receipt of the Option Exercise Notice, the General Partner shall promptly,
and in any event within 10 Business Days, transfer the IDR Interests to the
Purchaser free and clear of all liens, encumbrances, security interests or
other charges, and the 

 

35

 

Purchaser shall transfer the Option Consideration to
the General Partner concurrently with such transfer.

 

(b)           The General Partner hereby
represents, warrants and covenants that (i) the General Partner is, and at
all times during the Option Period will be, the sole record and beneficial owner
of the all of the outstanding equity interests in K-Sea IDR Holdings, (ii) K-Sea
IDR Holdings is, and at all times during the Option Period will be, the sole
record and beneficial owner of the all of the outstanding Incentive
Distribution Rights, (iii) K-Sea IDR Holdings holds no other assets or
liabilities other than the Incentive Distribution Rights, and shall at all
times during the Option Period hold no other assets or liabilities other than
the Incentive Distribution Rights, (iv) the Incentive Distribution Rights
and the outstanding equity interests of K-Sea IDR Holding are, and at all times
will be, free and clear of all liens, encumbrances, security interests or other
charges, and (v) as of the date hereof and at all times, there are no
preemptive rights or other rights to subscribe for or options or warrants to
purchase, nor any restriction upon the voting or transfer of, the Incentive
Distribution Rights and any equity interests of K-Sea IDR Holding, except as
issued to the Purchaser pursuant to this Section 5.09 or as set
forth in the Partnership Agreement.

 

(c)           Prior to the First
Transaction Closing, the General Partner and the Purchaser shall negotiate
mutually agreeable amendments to the certificate of formation and limited
liability company agreement of K-Sea IDR Holdings, which shall include:

 

(i)            reasonable and customary
antidilution protections and pre-emptive rights;

 

(ii)           tag-along rights, pursuant
to which the Purchaser shall have the right to transfer a pro rata portion of
the IDR Interests in any transfer of the equity interests of K-Sea IDR Holdings
by any holder of such equity interests for the same per interest consideration
as such transferring holder, excluding certain transfers to affiliates of such
transferring holder; and

 

(iii)          drag along rights, pursuant
to which the Purchaser may be obligated to transfer all, but not less than all,
of the IDR Interests in any transaction involving the transfer of more than 50%
of the outstanding equity interests of K-Sea IDR Holdings for the same per
interest consideration as such transferring holder, excluding certain transfers
to affiliates of such transferring holder.

 

(d)           Without the prior written
consent of GP LLC, the Purchaser shall not, during the period commencing on the
First Transaction Closing Date and ending 180 days thereafter, Transfer its IDR
Interests; provided, however, that the Purchaser may Transfer the
IDR Interests to an Affiliate of the Purchaser, provided, that (a) any
such transferee agrees to be bound by all of the terms and conditions of this Section 5.09,
and (b) the Purchaser acknowledges and agrees that it shall remain the
primary obligor under this Section 5.09.  From the date of the First Transaction
Closing and for all times thereafter, the Purchaser shall not Transfer its IDR
Interests to any Person that is not a citizen of the United States within the
meaning of 46 U.S.C. Sec. 50501 for the purpose of operating the vessels in the
coastwise trade 

 

36

 

of the United States.  Prior to the second anniversary of the First
Transaction Closing, the Purchaser will not, directly or indirectly, Transfer
its IDR Interests to any Competitor of K-Sea.

 

ARTICLE VI

INDEMNIFICATION, COSTS AND EXPENSES

 

Section 6.01          Indemnification by K-Sea.

 

From
and after the First Transaction Closing, K-Sea agrees to indemnify the
Purchaser and its Representatives (collectively, “Purchaser Related Parties”)
from, and hold each of them harmless against, any and all losses, actions,
suits, proceedings (including any investigations, litigation or inquiries),
demands and causes of action, and, in connection therewith, and promptly upon
demand, pay or reimburse each of them for all reasonable costs, losses,
liabilities, damages or expenses of any kind or nature whatsoever (including
the reasonable fees and disbursements of counsel and all other reasonable
expenses incurred in connection with investigating, defending or preparing to
defend any such matter that may be incurred by them or asserted against or involve
any of them), whether or not involving a Third Party Claim, as a result of,
arising out of, or in any way related to (i) the failure of any of the
representations or warranties made by K-Sea contained herein to be true and
correct in all material respects as of the date hereof, as of the First
Transaction Closing Date and, if there is a Second Transaction Closing, as of
the Second Transaction Closing Date (except with respect to any provisions
including the word “material” or words of similar import, with respect to which
such representations and warranties must have been true and correct) or (ii) the
breach of any of the covenants of K-Sea contained herein; provided, that
in the case of the immediately preceding clause (i), such claim for indemnification
relating to a breach of any representation or warranty is made prior to the
expiration of such representation or warranty; provided, however,
that for purposes of determining when an indemnification claim has been made,
the date upon which a Purchaser Related Party shall have given notice (stating
in reasonable detail the basis of the claim for indemnification) to K-Sea shall
constitute the date upon which such claim has been made; provided, further,
that the liability of K-Sea shall not be greater in amount than the Purchase
Price.

 

Section 6.02          Indemnification by the
Purchaser.

 

From
and after the Closing, the Purchaser agrees to indemnify the K-Sea Entities and
their respective Representatives (collectively, “K-Sea Related Parties”)
from, and hold each of them harmless against, any and all losses, actions,
suits, proceedings (including any investigations, litigation or inquiries),
demands and causes of action, and, in connection therewith, and promptly upon
demand, pay or reimburse each of them for all reasonable costs, losses,
liabilities, damages or expenses of any kind or nature whatsoever (including
the reasonable fees and disbursements of counsel and all other reasonable
expenses incurred in connection with investigating, defending or preparing to
defend any such matter that may be incurred by them or asserted against or
involve any of them), whether or not involving a Third Party Claim, as a result
of, arising out of, or in any way related to (i) the failure of any of the
representations or warranties made by the Purchaser contained herein to be true
and correct in all material respects as of the date hereof, as of the First
Transaction Closing Date and, if there is a Second Transaction Closing, as of
the Second Transaction Closing Date or (ii) the breach of any of the
covenants of the Purchaser contained herein; provided, that in the case
of the immediately 

 

37

 

preceding
clause (i), such claim for indemnification relating to a breach of any representation
or warranty is made prior to the expiration of such representation or warranty;
provided, however, that for purposes of determining when an
indemnification claim has been made, the date upon which a K-Sea Related Party
shall have given notice (stating in reasonable detail the basis of the claim
for indemnification) to the Purchaser shall constitute the date upon which such
claim has been made; provided, further, that the liability of the
Purchaser (and its Affiliates, if the Purchaser Transfers a portion or all of
the Purchased Units to an Affiliate as permitted by Section 5.01)
shall not be greater in amount than the Purchase Price.

 

Section 6.03          Indemnification Procedure.

 

(a)           A claim for indemnification
for any matter not involving a Third Party Claim may be asserted by notice to
the party from whom indemnification is sought; provided, however,
that failure to so notify the indemnifying party shall not preclude the
indemnified party from any indemnification that it may claim in accordance with
this Article VI, except as otherwise provided in Sections 6.01
and 6.02.

 

(b)           Promptly after any K-Sea
Related Party or Purchaser Related Party (hereinafter, the “Indemnified
Party”) has received notice of any indemnifiable claim hereunder, or the
commencement of any action, suit or proceeding by a third person, which the
Indemnified Party believes in good faith is an indemnifiable claim under this
Agreement (each, a “Third Party Claim”), the Indemnified Party shall
give the indemnitor hereunder (the “Indemnifying Party”) written notice
of such Third Party Claim but failure to so notify the Indemnifying Party will
not relieve the Indemnifying Party from any liability it may have to such
Indemnified Party hereunder except to the extent that the Indemnifying Party is
materially prejudiced by such failure. 
Such notice shall state the nature and the basis of such Third Party
Claim to the extent then known.  The
Indemnifying Party shall have the right to defend and settle, at its own
expense and by its own counsel, any such matter as long as the Indemnifying
Party pursues the same diligently and in good faith.  If the Indemnifying Party undertakes to
defend or settle such Third Party Claim, it shall promptly, and in no event later
than five (5) days, notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in all commercially reasonable respects in the defense thereof
and/or the settlement thereof.  Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records and other information reasonably
requested by the Indemnifying Party and in the Indemnified Party’s possession
or control.  Such cooperation of the
Indemnified Party shall be at the cost of the Indemnifying Party. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability; provided, however, that the Indemnified Party shall be
entitled (i) at its expense, to participate in the defense of such
asserted liability and the negotiations of the settlement thereof and (ii) if
(A) the Indemnifying Party has, within ten (10) Business Days of when
the Indemnified Party provides written notice of a Third Party Claim, failed (y) to
assume the defense or settlement of such Third Party Claim and employ counsel
and (z) notify the Indemnified Party of such assumption, or (B) 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 

 

38

 

be reasonable defenses available to the Indemnified
Party that are different from or in addition 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 settlement or legal defense and otherwise to participate in the
defense of such action, with the expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
Indemnifying Party as incurred. 
Notwithstanding any other provision of this Agreement, the Indemnifying
Party shall not settle any indemnified claim without the consent of the
Indemnified Party, unless the settlement thereof imposes no liability or
obligation on, and includes a complete release from liability of, and does not
contain any admission of wrongdoing by, the Indemnified Party.

 

Section 6.04          Other Matters.

 

All
indemnification payments under this Article VI shall be adjustments
to the Purchase Price, except as otherwise required by applicable Law.

 

ARTICLE VII

TERMINATION

 

Section 7.01          Termination.

 

This
Agreement may be terminated at any time prior to the First Transaction Closing:

 

(a)           by the mutual written consent of the Purchaser and
K-Sea;

 

(b)           by either the Purchaser or K-Sea, by giving written
notice of such termination to the other party, if the First Transaction Closing
shall not have occurred on or prior to September 30, 2010 (the “Outside
Date”); provided, however, that the right to terminate this
Agreement under this  Section 7.01(b) shall
not be available to any party hereto whose failure to take any action required
to fulfill any of such party’s obligations under this Agreement has been the
cause of, or resulted in, the failure of the First Transaction Closing to occur
prior to such date;

 

(c)           by either the Purchaser or K-Sea, if any court of
competent jurisdiction or a Governmental Authority shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
nonappealable;

 

(d)           By K-Sea, if the Purchaser shall have breached any
of its representations, warranties, covenants or agreements contained in this
Agreement, which breach (x) would result in the failure of the
conditions set forth in Section 2.03(c)(i) or Section 2.03(c)(ii) and
(y) cannot be or is not cured prior to the Outside Date; provided, however,
that K-Sea is not then in material breach of this Agreement so as to cause any
of the conditions set forth in Section 2.03(b)(i) or Section 2.03(b)(ii) not
to be satisfied;

 

39

 

(e)           By the Purchaser, if K-Sea shall have breached any
of its representations, warranties, covenants or agreements contained in this
Agreement, which breach (x) would result in the failure of the conditions
set forth in Section 2.03(b)(i) or Section 2.03(b)(ii) and
(y) cannot be or is not cured prior to the Outside Date; provided, however,
that the Purchaser is not then in material breach of this Agreement so as to
cause any of the conditions set forth in Section 2.03(c)(i) or
Section 2.03(c)(ii) not to be satisfied.

 

Section 7.02          Effect of Termination.

 

In
the event of the termination of this Agreement, written notice thereof shall
promptly be given to the other party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further action by
or liability of any party; provided, however, that except as set
forth below, nothing herein shall relieve any party from liability for any
breach hereof prior to such termination; provided, further, that
this Section 7.02 and Article VIII (excluding Section 8.03
but including any related definitional provisions in Article I),
shall survive any termination of this Agreement.

 

ARTICLE VIII

MISCELLANEOUS

 

Section 8.01          Interpretation.

 

Article,
Section and Schedule references in this Agreement are references to the
corresponding Article, Section and Schedule to this Agreement, unless
otherwise specified.  All Schedules to
this Agreement are hereby incorporated and made a part hereof as if set forth
in full herein and are an integral part of this Agreement.  All references to instruments, documents,
Contracts and agreements are references to such instruments, documents,
Contracts and agreements as the same may be amended, supplemented and otherwise
modified from time to time, unless otherwise specified.  The word “including” shall mean “including
but not limited to” and shall not be construed to limit any general statement
that it follows to the specific or similar items or matters immediately
following it.  Whenever K-Sea has an
obligation under the Basic Documents, the expense of complying with that obligation
shall be an expense of K-Sea unless otherwise specified.  Any reference in this Agreement to $ shall
mean U.S. dollars.  Whenever any
determination, consent or approval is to be made or given by the Purchaser,
such action shall be in the Purchaser’s sole discretion, unless otherwise
specified in this Agreement.  If any
provision in the Basic Documents is held to be illegal, invalid, not binding or
unenforceable, (i) such provision shall be fully severable and the Basic
Documents shall be construed and enforced as if such illegal, invalid, not
binding or unenforceable provision had never comprised a part of the Basic
Documents, and the remaining provisions shall remain in full force and effect
and (ii) the parties hereto shall negotiate in good faith to modify the
Basic Documents so as to effect the original intent of the parties as closely
as possible in an acceptable manner in order that the transactions contemplated
hereby are consummated as originally contemplated to the greatest extent
possible.  When calculating the period of
time before which, within which or following which any act is to be done or
step taken pursuant to the Basic Documents, the date that is the reference date
in calculating such period shall be excluded. 
If the last day of such period is a non-Business Day, the period in
question shall end on the next succeeding Business Day.  Any words imparting the singular number only
shall include the plural and vice versa. 
The words 

 

40

 

such
as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Agreement as
a whole and not merely to a subdivision in which such words appear unless the
context otherwise requires.  The
provision of a Table of Contents, the division of this Agreement into Articles,
Sections and other subdivisions and the insertion of headings are for
convenience of reference only and shall not affect or be utilized in construing
or interpreting this Agreement.

 

Section 8.02          Survival of Provisions.

 

The
representations and warranties set forth in Sections
3.01, 3.02, 3.04, 3.06, 3.08, 3.21, 3.23, 4.01, 4.02, 4.04
and 4.05 hereunder shall survive the execution and delivery of this
Agreement indefinitely, the representations and warranties set forth in Sections
3.16 shall survive until sixty (60) days following the expiration of the
applicable statute of limitations, the representations and warranties set forth
in Sections 3.17 and 3.22 shall survive for a period of two (2) years
following the date hereof, regardless of any investigation made by or on behalf
of K-Sea or the Purchaser, and the other representations and warranties set
forth herein shall survive until the later of (i) a period of twelve (12)
months following the date hereof or (ii) 30 days following the date on
which the Purchaser is provided the audited financial statements of K-Sea for
the fiscal year ended June 30, 2011; regardless of any investigation made
by or on behalf of K-Sea or the Purchaser. 
The covenants made in this Agreement or any other Basic Document that by
their terms apply or are to be performed in whole or in part after the First
Transaction Closing will survive for the period provided in such covenants and
agreements, if any, or until fully performed; provided that, the covenants and
agreements contained in Section 8.04(b) hereof shall survive
indefinitely.  All covenants and
agreements that by their terms apply or are to be performed in their entirety
on or prior to the First Transaction Closing shall terminate at the First
Transaction Closing.

 

Section 8.03          No Waiver; Modifications in
Writing.

 

(a)           Delay.  No failure or delay on the part of any party
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.  The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to a party at law or in equity or otherwise.

 

(b)           Specific Waiver.  Except as otherwise provided herein, no
amendment, waiver, consent, modification or termination of any provision of
this Agreement or any other Basic Document (except in the case of the K-Sea
Partnership Agreement for amendments adopted pursuant to the terms thereof)
shall be effective unless signed by each of the parties hereto or thereto
affected by such amendment, waiver, consent, modification or termination.  Any amendment, supplement or modification of
or to any provision of this Agreement or any other Basic Document, any waiver
of any provision of this Agreement or any other Basic Document and any consent
to any departure by K-Sea from the terms of any provision of this Agreement or
any other Basic Document shall be effective only in the specific instance and
for the specific purpose for which made or given.  Except where notice is specifically required
by this Agreement, no notice to or demand on K-Sea in any case shall entitle
K-Sea to any other or further notice or demand in similar or other
circumstances.  Any investigation by or
on behalf of 

 

41

 

any party shall not be deemed to constitute a waiver
by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein.

 

Section 8.04          Binding Effect; Assignment.

 

(a)           Binding Effect.  This Agreement shall be binding upon K-Sea,
the Purchaser and their respective successors and permitted assigns.  Except as expressly provided in this
Agreement, this Agreement shall not be construed so as to confer any right or
benefit upon any Person other than the parties to this Agreement and their
respective successors and permitted assigns.

 

(b)           Assignment of Rights.  The Purchaser’s rights and obligations
hereunder (including the right to seek indemnification) may be transferred or
assigned in whole or in part by the Purchaser to any Affiliate of the Purchaser
without the consent of K-Sea so long as any such assignee is a citizen of the
United States within the meaning of 46 U.S.C. Sec. 50501 for the purpose of
operating the vessels in the coastwise trade of the United States.  Upon any such permitted transfer or
assignment, references in this Agreement to the Purchaser (as they apply to the
transferor or assignor, as the case may be) shall thereafter apply to such
transferee or assignee of the Purchaser unless the context otherwise
requires.  Without the written consent of
K-Sea, which consent shall not be unreasonably withheld, no portion of the
rights and obligations of the Purchaser under this Agreement may be assigned or
transferred by the Purchaser or such a transferee of Purchased Units to a
Person that is not an Affiliate of the Purchaser.  No portion of the rights and obligations of
K-Sea under this Agreement may be transferred or assigned without the prior
written consent of the Purchaser, which consent shall not be unreasonably
withheld.

 

Section 8.05          Confidentiality.

 

(a)           The Purchaser agrees to
abide by its obligations under the Confidentiality Agreement.

 

(b)           The K-Sea Entities and any
of their respective Representatives shall disclose any information naming the
Purchaser or any of its Affiliates (other than simply naming the Purchaser and
its Affiliates as a party to certain of the Basic Documents and describing the
transactions contemplated by the Basic Documents) in any filing with the
Commission, NYSE or any Governmental Authority or other public disclosure, only
after providing the Purchaser a reasonable opportunity to review and comment on
such disclosure (with such comments being incorporated or reflected, to the
extent reasonable, in any such disclosure); provided, however,
that nothing in this Section 8.05 shall delay any required filing
with the Commission, the NYSE or any Governmental Authority or other public
disclosure or otherwise hinder the K-Sea Entities’ or their Representatives’
ability to timely comply with all Laws or rules and regulations of the
Commission, NYSE or other Governmental Authority.

 

Section 8.06          Communications.

 

All
notices and demands provided for hereunder shall be in writing and shall be
given by hand delivery, registered or certified mail, return receipt requested,
regular mail, facsimile or air courier guaranteeing overnight delivery to the
following addresses:

 

42

 

(a)           If to the Purchaser:

 

First
Reserve Corporation

One
Lafayette Place

Greenwich, CT 06830

Attention: Alan G. Schwartz

Facsimile: (203) 661-6729

 

with a copy to:

 

Simpson
Thacher & Bartlett LLP

425 Lexington Avenue        

New York, New York 10017

Attention: Patrick J. Naughton

Facsimile: (212) 455-2502

 

(b)           If to K-Sea:

 

K-Sea
Transportation Partners L.P. 

One Town Center Boulevard, 17th Floor

East
Brunswick, New Jersey 08816

Attention: Timothy J. Casey

Facsimile: (732) 339-6140

 

with
a copy to:

 

Latham &
Watkins LLP 

717 Texas Avenue, 16th Floor 

Houston, Texas 77002 

Attention: Sean T. Wheeler

Facsimile: (713) 546-5401

 

or
to such other address as K-Sea or the Purchaser may designate in writing. All
notices and communications shall be deemed to have been duly given: (i) at
the time delivered by hand, if personally delivered; (ii) upon actual
receipt if sent by registered or certified mail, return receipt requested, or
regular mail, if mailed; (iii) when receipt is acknowledged, if sent by
facsimile; and (iv) upon actual receipt when delivered to an air courier
guaranteeing overnight delivery.

 

Section 8.07           Removal of Legend.

 

(a)           The Purchaser may request
K-Sea to remove the legend set forth in Section 4.05(d) from
the certificates evidencing the Purchased Units by submitting to K-Sea such
certificates, together with an opinion of counsel to the effect that such
legend is no longer required under the Securities Act or applicable state laws
as the case may be, as K-Sea may request; provided, that no opinion of counsel
shall be required if the Purchaser is effecting a sale of Purchased Units
pursuant to Rule 144 under the Securities Act (and the Purchaser delivers
a Rule 144 Representation Letter to K-Sea) or the Conversion Units have
been registered under the 

 

43

 

Securities Act pursuant to an effective registration
statement.  K-Sea shall cooperate with
the Purchaser to effect removal of such legend.

 

(b)           Certificates evidencing
Conversion Units shall not contain any legend (including the legend set forth
in Section 4.05(d)), (i) while a registration statement
covering the resale of such security is effective under the Securities Act and
the Purchaser delivers to K-Sea a representation letter agreeing that such
Conversion Units will be sold under such effective registration statement, or (ii) following
any sale of such Conversion Units pursuant to Rule 144, or (iii) if
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission).

 

Section 8.08           Entire Agreement.

 

This
Agreement, the other Basic Documents and the other agreements and documents
referred to herein are 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 and therein. 
There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein or the other Basic Documents with
respect to the rights granted by K-Sea or any of its Affiliates or the
Purchaser or any of its Affiliates set forth herein or therein.  This Agreement, the other Basic Documents and
the other agreements and documents referred to herein or therein supersede all
prior agreements and understandings between the parties with respect to such
subject matter.

 

Section 8.09           Governing Law; Submission to
Jurisdiction.

 

This
Agreement, and all claims or causes of action (whether in contract or tort)
that may be based upon, arise out of or relate to this Agreement or the
negotiation, execution or performance of this Agreement (including any claim or
cause of action based upon, arising out of or related to any representation or
warranty made in or in connection with this Agreement), will be construed in
accordance with and governed by the laws of the State of Delaware without
regard to principles of conflicts of laws. 
Any action against any party relating to the foregoing shall be brought
in any federal or state court of competent jurisdiction located within the
State of Delaware, and the parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
State of Delaware over any such action. 
The parties hereby irrevocably waive, to the fullest extent permitted by
applicable Law, any objection that they may now or hereafter have to the laying
of venue of any such dispute brought in such court or any defense of
inconvenient forum for the maintenance of such dispute.  Each of the parties hereto agrees that a
judgment in any such dispute may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by Law.

 

Section 8.10           Waiver of Jury Trial.

 

THE
PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, AND AGREES TO CAUSE ITS
AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER
THIS AGREEMENT OR (ii) IN ANY WAY 

 

44

 

CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT,
EQUITY OR OTHERWISE.  THE PARTIES TO THIS
AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE
PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY
OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

Section 8.11           Execution in 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.

 

[Remainder of Page Left Intentionally Blank]

 

45

 

IN
WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the
date first above written.

 

	
   

  	
  K-SEA
  TRANSPORTATION PARTNERS L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K-Sea
  General Partner L.P., its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  K-Sea
  General Partner GP LLC, its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  Timothy J. Casey

  
	
   

  	
   

  	
   

  	
   

  	
  Timothy
  J. Casey

  
	
   

  	
   

  	
   

  	
   

  	
  Chief
  Executive Officer and President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KA
  FIRST RESERVE, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  KA Fund Advisors, LLC, its managing member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James C. Baker

  
	
   

  	
   

  	
  Name:
  James C. Baker

  
	
   

  	
   

  	
  Title:
  Senior Managing Director

  

 

 

Signature Page to Purchase Agreement

 

 

	
   

  	
  K-SEA
  GENERAL PARTNER L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  K-Sea
  General Partner GP LLC, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Timothy J. Casey

  
	
   

  	
   

  	
   

  	
  Timothy
  J. Casey

  
	
   

  	
   

  	
   

  	
  Chief
  Executive Officer and President

  

 

 

Signature Page to Purchase Agreement

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