Exhibit 10.5


 


K-SEA GP HOLDINGS
LP


 


LONG-TERM
INCENTIVE PLAN


 


1.                                      Purpose of the Plan.


 


The K-Sea GP Holdings LP Long-Term
Incentive Plan (the “Plan”) has been adopted by K-Sea
GP LLC, a Delaware limited liability company (the “Company”),
the general partner of K-Sea GP Holdings LP, a Delaware limited partnership
(the “Partnership”), and is intended to
promote the interests of the Partnership and the Company and their Affiliates (as
defined below) by providing to employees, consultants, and directors of the Company
and its Affiliates who perform services for or on behalf of the Partnership and
its subsidiaries incentive compensation awards for superior performance that
are based on Units (as defined below). The Plan is also contemplated to enhance
the ability of the Company and its Affiliates to attract and retain the
services of individuals who are essential for the growth and profitability of
the Partnership and its subsidiaries and to encourage them to devote their best
efforts to advancing the business of the Partnership and its subsidiaries.


 


2.                                      Definitions.


 


As used in the Plan, the
following terms shall have the meanings set forth below:


 


“Affiliate”
means, with respect to any Person, any other Person that directly or indirectly
through one or more intermediaries controls, is controlled by or is under
common control with, the Person in question. As used herein, the term “control”
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.


 


“Award”
means Unit, Restricted Unit, Phantom Unit, Option, Unit Appreciation Right or
DER granted under the Plan.


 


“Award
Agreement” means the written agreement or other instrument by which
an Award shall be evidenced.


 


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


 


“Change of Control” means, and shall be deemed to have occurred
upon the occurrence of one or more of the following events: (i) any Person
or group, other than Affiliates of Jefferies Capital Partners or the Company,
becomes the beneficial owner, by way of merger, consolidation,
recapitalization, reorganization or otherwise, of 66 2/3% or more of the
combined voting power of the equity interests in the Company or the Partnership,
(ii) the limited partners of the Partnership approve, in one or a series
of transactions, a plan of complete liquidation of the Partnership, (iii) the
sale or other disposition by either the Company or the Partnership of all or
substantially all of its assets in one or more transactions to any


 

















 


person other than the Company or an Affiliate of the Company, or (iv) a
transaction resulting in a Person other than the Company or one of its
Affiliates being the general partner of the Partnership.


 


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


 


“Committee”
means the Conflicts  Committee of the Board
or, if none, the Board or such committee of the Board, if any, as may be
appointed by the Board to administer the Plan.


 


“Consultant”
means an individual, other than an Employee or a Director, providing bona fide
services to the Partnership or any of its subsidiaries as a consultant or
advisor, as applicable, provided that such individual is a natural person.


 


“DER”
or “Distribution Equivalent Right”
means a right to receive an amount in cash or additional Awards equal to the
cash distributions made by the Partnership with respect to a Unit during a
specified period.


 


“Director”
means a member of the Board who is not an Employee.


 


“Employee”
means any employee of the Company or an Affiliate who performs services for the
Partnership or its Affiliates.


 


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


 


“Fair
Market Value” of a Unit means the closing sales price of a Unit on
the principal national securities exchange or other market in which trading in
Units occurs on the applicable date (or if there is no trading in the Units on
such date, on the next preceding date on which there was trading) as reported
in The Wall Street Journal (or other
reporting service approved by the Committee). In the event Units are not traded
on a national securities exchange or other market at the time a determination
of fair market value is required to be made hereunder, the determination of
fair market value shall be made in good faith by the Committee. Notwithstanding
the foregoing, with respect to an Award granted on the effective date of the
initial public offering of Units, Fair Market Value on such date shall mean the
initial offering price per Unit as stated on the cover page of the prospectus
which is part of the registration statement on Form S-1 for such offering.


 


“Option”
means an option to purchase Units granted under the Plan.


 


“Participant”
means any Employee, Consultant or Director granted an Award under the Plan.


 


“Person”
means an individual or a corporation, limited liability company, partnership,
joint venture, trust, unincorporated organization, association, government
agency or political subdivision thereof or other entity.


 


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“Phantom
Unit” means a phantom (notional) Unit granted under the Plan which
entitles the Participant to receive, in the discretion of the Committee, a Unit
or an amount of cash equal to the Fair Market Value of a Unit.


 


“Restricted
Period” means the period established by the Committee with respect
to an Award during which the Award remains nontransferable and subject to
forfeiture or is either not exercisable by or payable to the Participant, as
the case may be.


 


“Restricted
Unit” means a Unit granted under the Plan that is subject to a
Restricted Period.


 


“SEC”
means the Securities and Exchange Commission, or any successor thereto.


 


“UAR”
or “Unit Appreciation Right”
means an Award that, upon exercise, entitles the holder to receive, in cash or Units
in the discretion of the Committee, the excess of the Fair Market Value of a
Unit on the exercise date over the exercise price established for such Unit
Appreciation Right.


 


“Unit”
means a common unit of the Partnership.


 


3.                                      Administration.


 


(a)           General. The Plan shall be administered by
the Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee
by the Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to
a Participant; (iii) determine the number of Units to be covered by
Awards; (iv) determine the terms and conditions of any Award (including
but not limited to performance requirements for such Award); (v) determine
whether, to what extent, and under what circumstances Awards may be settled,
exercised, canceled, or forfeited; (vi) interpret and administer the Plan
and any instrument or agreement relating to an Award made under the Plan; (vii) establish,
amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (viii) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan. The
Committee may, in its discretion, provide for the extension of the
exercisability of an Award, accelerate the vesting or exercisability of an
Award, eliminate or make less restrictive any restrictions applicable to an
Award, waive any restriction or other provision of this Plan or an Award or
otherwise amend or modify an Award in any manner that is either (i) not
adverse to the Participant to whom such Award was granted or (ii) consented
to by such Participant.  Unless otherwise
expressly provided in the Plan, all designations, determinations,
interpretations, and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at any
time and shall be final, conclusive, and binding upon all Persons, including
the Company, the Partnership, any Affiliate, any Participant, and any
beneficiary of any Award. No member of the Committee or officer of the Company
to whom the Committee has delegated authority in accordance with the provisions
of Section 3(b) of this Plan shall be liable for anything done or
omitted to be done by him or her, by any member of the


 


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Committee or by any officer of the Company in
connection with the performance of any duties under this Plan, except for his
or her own willful misconduct or as expressly provided by statute.


 


(b)           Delegation.
Following the authorization of a pool of Units to be available for Awards, the
Board or the Committee may authorize a committee of one or more members of the
Board to grant individual Awards from such pool pursuant to such conditions or
limitations as the Board or the Committee may establish. The Committee may
delegate to the Chief Executive Officer and to other employees of the Company
its administrative duties under this Plan (excluding its granting authority)
pursuant to such conditions or limitations as the Committee may establish. The
Committee may engage or authorize the engagement of a third party administrator
to carry out administrative functions under the Plan.


 


4.                                      Units.


 


(a)           Limits on Units
Deliverable. Subject to adjustment as provided in Section 4(c),
the maximum number of Units that may be delivered or reserved for delivery or
underlying Awards in the aggregate issued under the Plan is 300,000. If any
Award expires, is canceled, exercised, paid or otherwise terminates without the
delivery of Units, then the Units covered by such Award, to the extent of such
expiration, cancellation, exercise, payment or termination, shall again be
Units with respect to which Awards may be granted. Units that are delivered by
a Participant in satisfaction of the exercise or other purchase price of an
Award or the tax withholding obligations associated with an Award or are withheld
to satisfy the Company’s tax withholding obligations are available for delivery
pursuant to other Awards.  The Committee
may from time to time adopt and observe such rules and procedures
concerning the counting of Units against the Plan maximum or any sublimit as it
may deem appropriate, including rules more restrictive than those set
forth above to the extent necessary to satisfy the requirements of any national
stock exchange on which the Units are listed or any applicable regulatory
requirement.  The Board and the
appropriate officers of the Company are authorized to take from time to time
whatever actions are necessary, and to file any required documents with
governmental authorities, stock exchanges and transaction reporting systems to
ensure that Units are available for issuance pursuant to Awards.


 


(b)           Sources of Units
Deliverable Under Awards. Any Units delivered pursuant to an Award
shall consist, in whole or in part, of Units acquired in the open market,
common units already owned by the Company, common units acquired by the Company
directly from the Partnership or any other person or any combination of the
foregoing.


 


(c)           Adjustments.
In the event that any distribution (whether in the form of cash, Units, other
securities, or other property), recapitalization, split, reverse split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Units or other securities of the Partnership,
issuance of warrants or other rights to purchase Units or other securities of
the Partnership, or other similar transaction or event affects the Units, then
the Committee shall, in such manner as it may deem equitable, adjust any or all
of (i) the number and type of Units (or other securities or property) with
respect to which Awards may be granted, (ii) the number and type of Units
(or other securities or property) subject to outstanding Awards, and (iii) the
grant or exercise price with respect to any Award or, make provision for a cash
payment to the holder of an outstanding Award; provided, that the number of
Units subject to


 


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any Award shall always be a whole number and
any adjustments of “stock rights” intended to be exempt from Section 409A
of the Code pursuant to Treas. Regs. § 1.409A-1(b)(5) shall be conducted
in a manner so as not to constitute grant of a new stock right or a change in
the time and form of payment pursuant to Treas. Regs. §1.409A-1(b)(5)(v).


 


5.                                      Eligibility.


 


Any Employee, Consultant or
Director shall be eligible to be designated a Participant and receive an Award
under the Plan.


 


6.                                      Awards.


 


Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award granted under the Plan or
any award granted under any other plan of the Company or any Affiliate. Awards
granted in addition to or in tandem with other Awards or awards granted under
any other plan of the Company or any Affiliate may be granted either at the
same time as or at a different time from the grant of such other Awards or
awards.


 


(a)           Units. The
Committee shall have the discretion to determine the Employees, Consultants and
Directors to whom Units shall be granted and the number of Units to be granted.  All Units granted shall be fully vested upon
grant and shall not be subject to forfeiture.


 


(b)           Restricted Units.
The Committee shall have the authority to determine the Employees, Consultants
and Directors to whom Restricted Units shall be granted, the number of
Restricted Units to be granted to each such Participant, the Restricted Period,
the conditions under which the Restricted Units may become vested or forfeited,
and such other terms and conditions as the Committee may establish with respect
to such Awards. To the extent provided by the Committee, in its discretion, a
grant of Restricted Units may provide that distributions made by the
Partnership with respect to the Restricted Units shall be subject to the same
forfeiture and other restrictions as the Restricted Unit and, if restricted,
such distributions shall be held, without interest, until the Restricted Unit
vests or is forfeited with the accumulated distributions being paid or
forfeited at the same time, as the case may be. Absent such a restriction on
the distributions in the Award Agreement, distributions during the Restricted
Period shall be paid to the holder of the Restricted Unit without restriction.


 


(c)           Phantom Units.
The Committee shall have the authority to determine the Employees, Consultants
and Directors to whom Phantom Units shall be granted, the number of Phantom
Units to be granted to each such Participant, the Restricted Period, the time
or conditions under which the Phantom Units may become vested or forfeited,
which may include, without limitation, the accelerated vesting upon the
achievement of specified performance goals, and such other terms and conditions
as the Committee may establish with respect to such Awards, including whether
DERs are granted with respect to such Phantom Units.


 


(d)           Options. The
Committee shall have the authority to determine the Employees, Consultants and
Directors to whom Options shall be granted, the number of Units to be covered
by each Option, whether DERs are granted with respect to such Option, the
purchase price therefor and the conditions and limitations applicable to the
exercise of the Option as the


 


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Committee shall determine, that are not
inconsistent with the provisions of the Plan. The term of an Option may not
exceed 10 years. The purchase price per Unit purchasable under an Option shall
be determined by the Committee at the time the Option is granted, provided such
purchase price may not be less than 100% of its Fair Market Value as of the
date of grant. The Committee shall determine the time or times at which an
Option may be exercised in whole or in part, which may include, without
limitation, accelerated vesting upon the achievement of specified performance
goals, and the method or methods by which payment of the exercise price with
respect thereto may be made or deemed to have been made, which may include,
without limitation, cash, check acceptable to the Company, a broker-assisted
cashless exercise through procedures approved by the Committee, delivery of
previously owned Units having a Fair Market Value on the exercise date equal to
the relevant exercise, or any combination thereof.


 


(e)           Unit Appreciation
Rights. The Committee shall have the authority to determine the
Employees, Consultants and Directors to whom Unit Appreciation Rights shall be
granted, the number of Units to be covered by each grant and the conditions and
limitations applicable to the exercise of the Unit Appreciation Right as the
Committee shall determine, that are not inconsistent with the provisions of the
Plan. The exercise price per Unit Appreciation Right shall be not less than
100% of its Fair Market Value as of the date of grant. The term of a Unit
Appreciation Right may not exceed 10 years.


 


(f)            Distribution Equivalent
Rights. The Committee shall have the authority to determine the
Employees, Consultants and Directors to whom DERs are granted, whether such
DERs are tandem or separate Awards, whether the DERs shall be paid directly to
the Participant, be credited to a bookkeeping account (with or without interest
in the discretion of the Committee) the vesting restrictions and payment
provisions applicable to the Award, and such other provisions or restrictions
as determined by the Committee in its discretion all of which shall be
specified in the Award Agreements.


 


7.                                      Limits on Transfer of
Awards.


 


Each Award shall be
exercisable or payable only to the Participant during the Participant’s
lifetime, or to the person to whom the Participant’s rights shall pass by will
or the laws of descent and distribution. No Award and no right under any such
Award may be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by a Participant and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Affiliate. Notwithstanding the
foregoing, to the extent specifically provided by the Committee with respect to
an Award, an Award may be transferred by a Participant without consideration to
immediate family members or related family trusts, limited partnerships or
similar entities or on such terms and conditions as the Committee may from time
to time establish.


 


8.                                      Securities Restrictions.


 


(a)           All certificates for Units or other securities of the
Partnership delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the Plan or the rules, regulations, and
other requirements of the SEC, any stock exchange upon which such Units or


 


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other securities are then listed, and any
applicable federal or state laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions.


 


(b)           Notwithstanding anything in the Plan or any Award
Agreement to the contrary, delivery of Units pursuant to the exercise or
vesting of an Award may be deferred for any period during which, in the good
faith determination of the Committee, the Company is not reasonably able to
obtain Units to deliver pursuant to such Award without violating the rules or
regulations of any applicable law or securities exchange. No Units or other
securities shall be delivered pursuant to any Award until payment in full of
any amount required to be paid pursuant to the Plan or the applicable Award Agreement
(including, without limitation, any exercise price or tax withholding) is
received by the Company.


 


9.                                      Change of Control.


 


Unless specifically provided
otherwise in the Award Agreement, upon a Change of Control or such time prior
thereto as established by the Committee, all outstanding Awards shall
automatically vest or become exercisable in full, as the case may be. In this
regard, all Restricted Periods shall terminate.


 


Except as otherwise provided
in the Award Agreement, the difference between the Fair Market Value of Units
on the payment date and the exercise price of an Option or UAR that is or
becomes fully vested and exercisable as of the date of a Change of Control (or
any earlier date related to the Change of Control and established by the
Committee) shall be paid in a single payment in Units, or cash and/or other
property, or any combination of Units and cash and/or other property, as
determined by the Committee. Except as otherwise provided in the Award
Agreement, any Award of Phantom Units or Restricted Units that pursuant to this
Section 9 are deemed to have the applicable Restriction Period lapse (and
to have all applicable performance criteria achieved at the maximum level, if
any) as of the date of a Change of Control (or any earlier date related to the
Change of Control and established by the Committee), shall be settled by (i) issuance
of unrestricted Units based on the number of Units that were subject to the
Award on the date of grant of the Award or (ii) payment of cash and/or
other property equal to the Fair Market Value of a Unit on the payout date for
each Phantom Unit or Restricted Unit or (iii) any combination of payouts
under clauses (i) and (ii) of this sentence, as determined by the
Committee. Any accelerated payout pursuant to this Section 9 shall be made
in a single payment within 30 days after the date of the Change of Control.


 


To the extent an Option or
UAR is not vested or exercisable, or a Phantom Unit or Restricted Unit does not
vest, pursuant to the preceding provisions of this Section 9 or the Award
Agreement upon the Change of Control, the Committee may, in its discretion,
cancel such Award or provide for an assumption of such Award or a replacement
grant on substantially the same terms; provided, however, upon any cancellation
of an Option or UAR that has an exercise price less than the Fair Market Value
of a Unit as of the date of cancellation or a Phantom Unit or Restricted Unit,
the holder shall be paid an amount in Units or cash and/or other property or any
combination of cash and/or other property, as determined by the Committee,
equal to the difference between the Fair Market Value of a Unit and the
exercise price if an Option or UAR or equal to the Fair Market Value of a Unit,
if a Phantom Unit or Restricted Unit.


 


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Notwithstanding the
foregoing, in the event an Award is not exempt from Section 409A of the
Code, no accelerated payment shall be made pursuant to this Section 9
unless the Change of Control constitutes a “change in control event” under
Treas. Regs. §1.409A-3(i)(5) or otherwise constitutes a permissible
payment event under Section 409A of the Code (a “409A Change of Control”).  In the event a Change of Control does not
qualify as a 409A Change of Control, payment pursuant to any Award not exempt
from Section 409A of the Code shall be made in accordance with the terms
of the Award Agreement.


 


10.                               Amendment and Termination.


 


Except as required by applicable
law or the rules of the principal securities exchange on which the Units
are traded, the Board may amend, alter, suspend, discontinue, or terminate the
Plan in any manner, including increasing the number of Units available for
Awards under the Plan,  without the
consent of any Participant, any other holder or beneficiary of an Award or any other
Person.


 


11.                               General Provisions.


 


(a)           No Rights to Award.
No Person shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Participants. The terms
and conditions of Awards need not be the same with respect to each recipient.


 


(b)           Tax Withholding.
The Company or any Affiliate is authorized to withhold from any Award, from any
payment due or transfer made under any Award or from any compensation or other
amount owing to a Participant the amount (in cash, Units, other securities, or
other property) of any applicable taxes payable at the minimum statutory rate
in respect of the grant of an Award, its exercise, the lapse of restrictions
thereon, or any payment or transfer under an Award or under the Plan and to
take such other action as may be necessary in the opinion of the Company to
satisfy its withholding obligations for the payment of such taxes.


 


(c)           No Right to Employment
or Services. The grant of an Award shall not be construed as giving
a Participant the right to be retained as an Employee, Consultant or Director, as
applicable. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment or service at any time.


 


(d)           Governing Law.
The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the
laws of the State of Delaware without regard to its conflict of laws
principles.


 


(e)           Severability.
If any provision of the Plan or any award is or becomes or is deemed to be
invalid, illegal, or unenforceable in any jurisdiction or as to any Person or
Award, or would disqualify the Plan or any award under any law deemed
applicable by the Committee, such provision shall be construed or deemed
amended to conform to the applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, person or award and the remainder of the Plan and any
such Award shall remain in full force and effect.


 


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(f)            Other Laws.
The Committee may refuse to issue or transfer any Units or other consideration
under an Award if, in its sole discretion, it determines that the issuance or
transfer of such Units or such other consideration might violate any applicable
law or regulation, the rules of the principal securities exchange on which
the Units are then traded, or entitle the Partnership or an Affiliate to
recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary
in connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary.


 


(g)           No Trust or Fund
Created. Neither the Plan nor any Award shall create or be construed
to create a trust or separate fund of any kind or a fiduciary relationship
between the Partnership, Company or any participating Affiliate and a
Participant or any other Person. To the extent that any Person acquires a right
to receive payments from the Partnership, Company or any Affiliate pursuant to
an Award, such right shall be no greater than the right of any general
unsecured creditor of the Partnership, Company or any participating Affiliate.


 


(h)           No Fractional Units.
No fractional Units shall be issued or delivered pursuant to the Plan or any
Award, and the Committee shall determine whether cash, other securities, or
other property shall be paid or transferred in lieu of any fractional Units or
whether such fractional Units or any rights thereto shall be canceled,
terminated, or otherwise eliminated.


 


(i)            Facility of Payment.
Any amounts payable hereunder to any person under legal disability or who, in
the judgment of the Committee, is unable to properly manage his financial
affairs, may be paid to the legal representative of such person, or may be
applied for the benefit of such person in any manner which the Committee may
select, and the Partnership, Company and its Affiliates shall be relieved of
any further liability for payment of such amounts.


 


(k)           Participation by
Affiliates. In making Awards to Employees employed by an Affiliate
of the Company, the Committee shall be acting on behalf of the Affiliate, and
to the extent the Partnership has an obligation to reimburse the Affiliate for
compensation paid to Employees for services rendered for the benefit of the
Partnership, such payments or reimbursement payments may be made by the
Partnership directly to the Affiliate, and, if made to the Company, shall be
received by the Company as agent for the Affiliate.


 


(l)            Gender and Number.
Words in the masculine gender shall include the feminine gender, the plural
shall include the singular and the singular shall include the plural.


 


(m)          No Guarantee of Tax
Consequences. None of the Board, the Partnership, the Company, any
Affiliate nor the Committee makes any commitment or guarantee that any federal,
state or local tax treatment will apply or be available to any person
participating or eligible to participate hereunder.


 


12.                               Term of the Plan.


 


The Plan has been approved
by the limited partners of the Partnership and shall become effective on the
later of the date of its approval by the Board or the initial public offering
of Units and shall terminate on, and no Awards may be granted after, the
earliest of the date established by the Board or the Committee, the 10th anniversary
of the date the Plan was


 


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approved by the limited partners of the
Partnership (or such earlier anniversary, if any, required by the rules of
the exchange on which Units are traded) or the date Units are no longer
available for delivery pursuant to Awards under the Plan. However, unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award granted prior to such termination, and the authority of the Committee
to amend, alter, adjust, suspend, discontinue, or terminate any such Award or
to waive any conditions or rights under such Award, shall extend beyond such
termination date.


 


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