Exhibit
10.4


U.S. SHIPPING PARTNERS L.P.

ANNUAL INCENTIVE PLAN


1.             Purpose.


The purpose of the U.S. Shipping Partners L.P. Annual Incentive Plan
(the “Plan”) is to motivate management and the employees of US Shipping
General Partner LLC., a Delaware limited liability company (the “Company”),
and its affiliates who perform services for the Company, its Affiliates and
U.S. Shipping Partners L.P., a Delaware limited liability partnership (the “Partnership”),
and its subsidiaries to collectively produce outstanding results, encourage
superior performance, increase productivity, and aid in attracting and
retaining key employees.


2.             Plan Guidelines.


The
administration of the Plan and any potential awards granted pursuant to the
Plan is subject to the determination by the Compensation Committee (the “Compensation
Committee” ) of the Company’s Board of Directors (the “Board”) that
the performance goals for the applicable periods have been achieved.  The Plan is an additional compensation
program designed to encourage Plan participants (designated by the Compensation
Committee) to exceed specified objective performance targets for the designated
period.  The Compensation Committee will
review performance results for the designated performance period, and
thereafter will determine whether or not to approve awards under the Plan.


3.             Performance
Targets.


(a)           Designation of Performance Targets.  The Company’s Chief Executive Officer shall
recommend, subject to the Compensation Committee’s approval, the performance
measures and performance targets to be used for each fiscal year (a “Plan
Year”) in determining the bonus amounts to be paid as a result of the
Plan.  Performance targets may be based
on Partnership, business unit and/or individual achievements, or any
combination of these, or on such other factors as the Company’s Chief Executive
Officer, subject to the approval of the Compensation Committee, may
determine.  Different performance
targets may be established for different participants for any Plan Year.  Satisfactory results, as determined by the
Compensation Committee in its sole discretion, must be achieved in order for an
award to be made pursuant to the Plan.


(b)           Equitable Adjustment to
Performance Targets.  At its
discretion, the Compensation Committee may adjust performance measure results
for extraordinary events or accounting adjustments resulting from significant
asset purchases or dispositions or other events not contemplated or otherwise
considered by the Compensation Committee when the performance measures and
targets were set.


4.             Participants.


The Compensation
Committee, in consultation with the Company’s Chief Executive Officer, will
designate members of management and employees of the Company and its affiliates
as eligible to participate in the Plan. 
Employees so designated shall be referred to as “Participants.”


 

















 


5.             Participation
Levels.


A Participant’s
designated level of participation in the Plan, or target bonus, will be
determined under criteria established or approved by the Compensation Committee
for that Plan Year or designated performance period.  Levels of participation in the Plan may vary according to a
Participant’s position and the relative impact such Participant can have on the
Company’s and/or affiliates’ operations. 
The amount of target bonus a participant may receive for any Plan Year,
if any, will depend upon the performance level achieved (unless waived) for
that Plan Year, as determined by the Compensation Committee.  No Participant 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 respecting each Participant.


6.             Award Payout.


Awards typically will be
determined after the end of the Plan Year or designated performance
period.  Awards will be paid in cash
annually, unless otherwise determined by the Compensation Committee. The
Compensation Committee will have the discretion, by Participant and by grant,
to reduce (but not to increase) some or all of the amount of any award that
otherwise would be payable by reason of the satisfaction of the applicable
performance targets.  In making any such
determination, the Compensation Committee is authorized to take into account
any such factor or factors it determines are appropriate, including but not
limited to Company, business unit and individual performance; provided,
however, that the exercise of such negative discretion with respect to one
Participant may not be used to increase the amount of any award otherwise
payable to another Participant.


7.             Termination of
Employment.


Termination of a
Participant’s employment for any reason prior to payout of an award under the
Plan will result in the Participant’s forfeiture of any right, title or
interest in any such award, unless and to the extent waived by the Compensation
Committee in its sole discretion.


8.             Amendment and
Termination.


The Board, in its sole
discretion, may amend or terminate the Plan at any time.


9.             Administration.


The Plan shall be
administered by the Compensation Committee. 
The Compensation Committee shall have the authority to interpret and
construe any and all provisions of the Plan, including all performance targets
and whether and to what extent achieved. 
Any determination made by the Compensation Committee shall be final and
conclusive and binding on all persons.


10.           Indemnification.


Neither the Company, nor
any affiliate, nor the Board, nor the Compensation Committee, nor any member of
the Board or the Compensation Committee, nor any employee of the Company or any
affiliate shall be liable for any act, omission, interpretation, construction
or


 


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 determination made in connection with the
Plan in good faith; and the members of the Board, the Compensation Committee
and/or the employees of the Company or any affiliate shall be entitled to
indemnification and reimbursement by the Company to the maximum extent
permitted by law in respect of any claim, loss, damage or expense (including
reasonable attorney’s fees) arising from their acts, omission and conduct in
their official capacity with respect to the Plan.


11.           General
Provisions.


(a)           Non-Guarantee of Employment.  Nothing contained in the Plan shall be
construed as a contract of employment between the Company and/or an affiliate
and a Participant, and nothing in the Plan shall confer upon any Participant
any right to continued employment with the Company or an affiliate, or to
interfere with the right of the Company or an affiliate to terminate a
Participant’s employment, with or without cause.


(b)           Interests Not Transferable.  No benefits under the Plan shall be subject
in any manner to alienation, sale, transfer, assignment, pledge, attachment or
other legal process, or encumbrance of any kind, and any attempt to do so shall
be void.


(c)           Facility Payment.  Any amounts payable hereunder to any person
under legal disability or who, in the judgment of the Compensation Committee or
its designee, is unable to properly manage his or her 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 Compensation Committee or its
designee may select, and each affiliate shall be relieved of any further
liability for payment of such amounts.


(d)           Governing Law.  The Plan and all matters relating to the
Plan shall be governed by the laws of the State of Delaware, without regard to its choice of law principles.


(e)           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.


(f)            Severability.  If any Plan provision 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 the law deemed applicable by the Compensation 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 Compensation 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.


(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 Company or any affiliate and a Participant or any
other person.  To the extent that any
person acquires a right to receive payments from the Company or any affiliate
pursuant to an award, such right shall be no greater than the right of any
general unsecured creditor of the Company or any affiliate.


 


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(h)           Headings.  Headings are given to the sections of the
Plan solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way material or relevant
to the construction or interpretation of the Plan or any provision of it.


(i)            Tax Withholding.  The Company and/or any affiliate may deduct
from any payment due under the Plan or otherwise to a Participant (or
beneficiary) amounts required by law to be withheld for purposes of federal,
state or local taxes.


 


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