Document:

Exhibit
10.4

 

Execution Copy

 

 

 

OMNIBUS AGREEMENT

 

AMONG

 

UNITED STATES SHIPPING MASTER LLC

 

US SHIPPING GENERAL PARTNER LLC

 

U.S. SHIPPING OPERATING LLC

 

AND

 

U.S. SHIPPING PARTNERS L.P.

 

 

 

 

OMNIBUS AGREEMENT

 

THIS OMNIBUS AGREEMENT is entered into on, and
effective as of, the Closing Date, among United States Shipping Master LLC, a
Delaware limited liability company (“Shipping Master”), US Shipping General
Partner LLC, a Delaware limited liability company (including any permitted
successors and assigns under the MLP Agreement (as defined herein), the “General
Partner”), for itself and on behalf of the MLP in its capacity as general
partner, U.S. Shipping Operating LLC, a Delaware limited liability company (the
“OLLC”), and U.S. Shipping Partners L.P., a Delaware limited partnership (the “MLP”).  The above-named entities are sometimes
referred to in this Agreement each as a “Party” and collectively as the “Parties”.

 

R E C I T A L S:

 

The Parties desire by their execution of this
Agreement to evidence their understanding, (i) as more fully set forth in
Article II of this Agreement, with respect to certain non-competition
obligations on the part of the Shipping Master Entities (as defined herein)
during the term of this Agreement; (ii) as more fully set forth in
Article III of this Agreement, with respect to certain indemnification
obligations of Shipping Master; and (iii) as more fully set forth in Article IV
of this Agreement, with respect to a tax payment loan to be made by the General
Partner to the MLP.

 

In consideration of the premises and the covenants,
conditions, and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties hereby agree as follows:

 

ARTICLE I

Definitions

 

1.1       Definitions.  (a) Capitalized
terms used herein but not defined shall have the meanings given them in the MLP
Agreement.

 

(b)        As used in this
Agreement, the following terms shall have the respective meanings set forth
below:

 

“Agreement”
means this Omnibus Agreement, as it may be amended, modified, or supplemented
from time to time in accordance with the terms hereof.

 

“Assets” has the meaning given such term in Section 3.1.

 

“Change of
Control” means, with respect to any Person (the “Applicable
Person”), any of the following events: 
(i) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the
Applicable Person’s assets  to any other
Person, unless immediately following such sale, lease, exchange or other
transfer such assets are owned, directly or indirectly, by the Applicable
Person; (ii) the dissolution or liquidation of the Applicable Person;
(iii) the consolidation or merger of the Applicable Person with or into
another Person pursuant to

 

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a transaction
in which the outstanding Voting Securities of 
the Applicable Person are changed into or exchanged for cash, securities
or other property, other than any such transaction where (a) the
outstanding Voting Securities of the Applicable Person are changed into or
exchanged for Voting Securities of the surviving corporation or its parent and
(b) the holders of the Voting Securities of the Applicable Person
immediately prior to such transaction own, directly or indirectly, not less
than a majority of the outstanding Voting Securities of the surviving
corporation or its parent immediately after such transaction; and (iv) a “person”
or “group” (within the meaning of Sections 13(d) or 14(d)(2) of the
Exchange Act) being or becoming the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act) of more than 50% of all of
the then outstanding Voting Securities of the Applicable Person, except in a
merger or consolidation which would not constitute a Change of Control under
clause (iii) above.

 

“Closing
Date” means the date of the closing of the initial
public offering of common units representing limited partner interests in the
MLP.

 

“Conflicts
Committee” has the meaning given such term in the MLP
Agreement.

 

“Contribution
Agreement” has the meaning given such term in the MLP
Agreement.

 

“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.

 

“Covered Environmental
Losses” means all environmental and toxic tort losses, damages,
liabilities, claims, demands, causes of action, judgments, settlements, fines,
penalties, costs and expenses (including, without limitation, court costs and
reasonable attorney’s and experts’ fees) of any and every kind or character,
suffered or incurred by the Partnership Group by reason of or arising out of:

 

(i)                                     any
violation or correction of violation of Environmental Laws or

 

(ii)                                  any
event or condition associated with ownership or operation of the Assets
(including, without limitation, the presence of Hazardous Substances on, under,
about or migrating to or from the Assets or the disposal or release of
Hazardous Substances generated by operation of the Assets at non-Asset
locations) including, without limitation, (A) the cost and expense of any
investigation, assessment, evaluation, monitoring, containment, cleanup, repair,
restoration, remediation or other corrective action required or necessary under
Environmental Laws, (B) the cost or expense of the preparation and
implementation of any closure, remedial or corrective action or other plans
required or necessary under Environmental Laws and (C) the

 

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cost and
expense for any environmental or toxic tort pre-trial, trial or appellate legal
or litigation support work;

 

but only to
the extent that such violation complained of under clause (i), or such events
or conditions included in clause (ii), occurred before the Closing Date and
were unknown by the MLP and its management at the time of the Closing Date.

 

“Environmental Laws” means all federal, state, and local
laws, statutes, rules, regulations, orders, judgments and ordinances relating
to protection of health and safety and the environment including, without
limitation, the federal Comprehensive Environmental Response, Compensation and
Liability Act, the Superfund Amendments and Reauthorization Act, the Resource
Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, the Safe
Drinking Water Act, the Toxic Substances Control Act, the Oil Pollution Act of
1990, the Hazardous Materials Transportation Act, the Marine Mammal Protection
Act, the Endangered Species Act, the National Environmental Policy Act, and
other environmental conservation and protection laws, each as amended through
the Closing Date.

 

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

 

“General
Partner” has the meaning given such term in the
introduction to this Agreement.

 

“Hazardous Substance” means (a) any
substance that is designated, defined or classified as a hazardous waste,
hazardous material, pollutant, contaminant or toxic or hazardous substance, or
that is otherwise regulated under any Environmental Law, including, without
limitation, any hazardous substance as defined under the Comprehensive
Environmental Response, Compensation and Liability Act and (b) oil as defined
in the Oil Pollution Act of 1990, including without limitation petroleum, oil,
gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel
and other refined petroleum hydrocarbons.

 

“Market Value” means (a) with respect to a
Common Unit, the average closing sales price per Common Unit on the New York
Stock Exchange, or other exchange or quotation service on which the Common
Units may be listed for the five consecutive trading days immediately preceding
the date of determination (the “Common Unit Closing Price”) and (b) with
respect to a Subordinated Unit, the Common Unit Closing Price, discounted by
25%.  Notwithstanding the foregoing, the
amount of such discount shall be decreased by 5% immediately after (x) the
Minimum Quarterly Distribution has been paid to the holders of all outstanding
Units for four successive quarterly periods and (y) the Adjusted Basic Surplus
(as defined in the MLP Agreement) generated during by the Partnership during
such four-quarter period equaled or exceeded the sum of the Minimum Quarterly
Distribution paid to holders of all outstanding Units during such four-quarter
period; provided, that at least
one year must elapse between each such 5% decrease in amount of such discount.

 

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“Minimum Quarterly Distribution” has the
meaning given such term in the MLP Agreement.

 

“MLP” has the meaning given such term in the introduction to
this Agreement.

 

“MLP
Agreement” means the Amended and Restated Agreement of
Limited Partnership of the MLP, dated as of the Closing Date, as such agreement
is in effect on the Closing Date, to which reference is hereby made for all
purposes of this Agreement. An amendment or modification to the MLP Agreement
subsequent to the Closing Date shall be given effect for the purposes of this
Agreement only if it has received the approval that would be required pursuant
to Section 6.6 hereof if such amendment or modification were an amendment or
modification of this Agreement.

 

“OLLC” has the meaning given such term in the
introduction to this Agreement.

 

“Partnership
Entities” means the General Partner and each member of
the Partnership Group.

 

“Partnership
Group” means the MLP, the OLLC and any Subsidiary of
any such Person.

 

“Person”
means a corporation, partnership, joint venture, trust, limited
liability company, unincorporated organization or any other entity.

 

“Prospectus” means the final prospectus, dated October 28,
2004, relating to the initial public offering of common units representing
limited partner interests in the MLP, as filed with Securities and Exchange
Commission pursuant to Rule 424(b) under the Securities Act of 1933.

 

“Restricted
Businesses” has the meaning given such term in Section
2.1.

 

“Retained
Assets” has
the meaning given such term in the Contribution Agreement.

 

“Shipping
Master Entities” means Shipping Master and any Person
controlled by Shipping Master, in each case other than the Partnership
Entities.

 

“Sponsor Units” means the Common Units and
Subordinated Units received by Shipping Master pursuant to the Contribution
Agreement in connection with the formation of the MLP.

 

“Subsidiary” has the meaning given such term
in the MLP Agreement.

 

“Tax Payment Loan” has the meaning given such
term in Section 4.1.

 

“Unit” has the meaning given such term in the MLP
Agreement.

 

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“Voting Securities” means
securities of any class of Person entitling the holders thereof to vote in the
election of members of the board of directors or other similar governing body
of the Person.

 

ARTICLE II

Business Opportunities

 

2.1       Restricted
Businesses.  For so long as US Shipping General Partner LLC (or
any Person that directly, or indirectly through one or more intermediaries, is
controlled by or under common control with Shipping Master) is the general
partner of the MLP, each of the Shipping Master Entities shall be prohibited
from engaging in or acquiring (i) any business providing marine transportation,
distribution and logistics services or (ii) any business that generates “qualifying
income” within the meaning of Section 7704(d) at the time such business is
first proposed to be engaged in by any such Shipping Master Entity (“Restricted Businesses”).  Notwithstanding the foregoing, a Shipping Master Entity may own and/or
operate any of the Retained Assets.

 

2.2       Conflicts
Committee Exception.  Notwithstanding any provision of Section 2.1
to the contrary, the Shipping Master Entities may engage in any Restricted
Business with the approval of the Conflicts Committee.

 

2.3       Scope of
Prohibition. 
Except as provided in this Article II and the MLP Agreement, each
Shipping Master Entity shall be free to engage (whether directly or through the
acquisition of equity or debt interests in any Person) in any business activity
whatsoever, including those that may be in direct competition with any
Partnership Entity.

 

2.4       Enforcement.  Each
Shipping Master Entity agrees and acknowledges that the Partnership Entities do
not have an adequate remedy at law for the breach by the Shipping Master Entity
of the covenants and agreements set forth in this Article II, and that any
breach by any Shipping Master Entity of the covenants and agreements set forth
in this Article II would result in irreparable injury to the Partnership
Entities.  Each Shipping Master Entity
further agrees and acknowledges that any Partnership Entity may, in addition to
the other remedies which may be available to the Partnership Entities, file a
suit in equity to enjoin any Shipping Master Entity from such breach, and each
Shipping Master Entity consents to the issuance of injunctive relief to enforce
the provisions of Article II of this Agreement.

 

ARTICLE III

Indemnification

 

3.1       Shipping Master Indemnification.  Subject to
the provisions of Section 3.2 and Section 3.3, Shipping Master shall indemnify,
defend and hold harmless the Partnership Group from and against (a) any Covered
Environmental Losses relating to the assets contributed by the Shipping Master
Entities to the Partnership Group prior to or on the Closing Date (the “Assets”)
for a period of five (5) years from the Closing Date; (b) the

 

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failure of the Partnership Group to be the owner of such valid
leasehold interests or fee ownership interests in and to the Assets and such
failure renders the Partnership Entities unable to use or operate the Assets in
substantially the same manner that the Assets were used and operated by the
Shipping Master Entities immediately prior to the Closing Date to the extent
that the Shipping Master Entities are notified of any of the foregoing within
two (2) years of the Closing Date; (c) the failure of the Partnership Entities to have on the Closing Date any
consent or governmental permit and such failure renders the Partnership
Entities unable to use or operate the Assets in substantially the same manner
that the Assets were owned and operated by the Shipping Master Entities
immediately prior to the Closing Date to the extent that the Shipping Master
Entities are notified of any of the foregoing within two (2) years of the
Closing Date; (d) any events or conditions
attributable to or associated with the ownership or operation of the Retained
Assets, whether occurring before or after the Closing Date; and  (e) all
federal, state and local income tax liabilities attributable to the operation
of the Assets prior to the Closing Date, including any such income tax
liabilities of the Shipping Master Entities that may result from the
consummation of the formation transactions for the Partnership Group and the
General Partner until 60 days after the expiration of any applicable statute of
limitations but excluding any federal, state and local income taxes reserved on
the books of the Partnership Group on the Closing Date.

 

3.2       Limitations Regarding
Indemnification. 
The aggregate
liability of Shipping Master under Section 3.1(a) shall not exceed $10.0
million.  Furthermore,
no claim may be made against Shipping Master for indemnification pursuant to
Section 3.1(a) unless the aggregate dollar amount of all claims for
indemnification pursuant to such section shall exceed $500,000, in which case
Shipping Master shall be liable for claims for indemnification only to the
extent such aggregate amount exceeds $500,000.

 

3.3       Indemnification
Procedures.

 

(a)        The members of the
Partnership Group agree that within a reasonable period of time after they
become aware of facts giving rise to a claim for indemnification pursuant to
Section 3.1, they will provide notice thereof in writing to Shipping Master
specifying the nature of and specific basis for such claim.

 

(b)        Shipping Master shall
have the right to control all aspects of the defense of (and any counterclaims
with respect to) any claims brought against the Partnership Group that are covered
by the indemnification set forth in Section 3.1, including, without
limitation, the selection of counsel, determination of whether to appeal any
decision of any court and the settling of any such matter or any issues
relating thereto; provided, however, that no such
settlement shall be entered into without the consent (which consent shall not
be unreasonably withheld) of the Partnership Group unless it includes a full
release of the Partnership Group from such matter or issues, as the case may
be.

 

(c)        The members of the
Partnership Group agree to cooperate fully with Shipping Master with respect to
all aspects of the defense of any claims covered by the indemnification set
forth in Section 3.1, including, without limitation, the prompt

 

6

 

furnishing to Shipping Master of any correspondence or other notice
relating thereto that the Partnership Group may receive, permitting the names
of the members of the Partnership Group to be utilized in connection with such
defense, the making available to Shipping Master of any files, records or other
information of the Partnership Group that Shipping Master considers relevant to
such defense and the making available to Shipping Master of any employees of
the Partnership Group; provided, however,
that in connection therewith Shipping Master agrees to use reasonable efforts
to minimize the impact thereof on the operations of the Partnership Group and
further agrees to maintain the confidentiality of all files, records and other
information furnished by a member of the Partnership Group pursuant to this
Section 3.3.  In no event shall the
obligation of the Partnership Group to cooperate with Shipping Master as set
forth in the immediately preceding sentence be construed as imposing upon the
Partnership Group an obligation to hire and pay for counsel in connection with
the defense of any claims covered by the indemnification set forth in this Article
III; provided, however, that the members of
the Partnership Group may, at their own option, cost and expense, hire and pay
for counsel in connection with any such defense.  Shipping Master agrees to keep any such
counsel hired by the Partnership Group reasonably informed as to the status of
any such defense, but Shipping Master shall have the right to retain sole
control over such defense.

 

(d)        In determining the
amount of any loss, cost, damage or expense for which any of the members of the
Partnership Group is entitled to indemnification under this Agreement, the
gross amount of the indemnification will be reduced by (i) any insurance
proceeds realized by the Partnership Group, and such correlative insurance
benefit shall be net of any incremental insurance premium that becomes due and
payable by the Partnership Group as a result of such claim and (ii) all amounts
recovered by the Partnership Group under contractual indemnities from third
Persons.  The Partnership hereby agrees
to use commercially reasonable efforts to realize any applicable insurance
proceeds or amounts recoverable under such contractual indemnities.

 

3.4       Restriction
on Transfer of Sponsor Units.

 

(a)        Through and until the
expiration of the indemnity set forth in Section 3.1(a) above, Shipping Master
hereby agrees not to sell, convey, transfer, pledge or otherwise dispose of or
encumber any of its Sponsor Units, unless immediately following the closing of
such sale, conveyance, transfer, pledge or other disposal or encumbrance,
Shipping Master shall retain a number of Sponsor Units having, in the
aggregate, a Market Value of not less than $10.0 million, less any amounts paid
by the General Partner pursuant to its indemnification obligation under Section
3.1(a) prior to such determination. 
Shipping Master shall have no obligation to retain or hold any Units
other than as set forth in this Section 3.4.

 

ARTICLE IV

Tax Payment Loan and Repayment

 

4.1       Tax
Payment Loan. 
The General Partner hereby agrees to loan to the MLP an aggregate amount
(the “Tax Payment Loan”) equal to the lesser of (a) $770,000 and (b)

 

7

 

the estimated tax liability payments to be made
(including federal and state income taxes) for the year 2005 by USCS Chemical
Pioneer, Inc., a Delaware corporation and an indirect wholly-owned subsidiary
of the MLP (“Chemical Pioneer Inc.”). 
The Tax Payment Loan shall be disbursed in four equal installments.  The General Partner shall make such
disbursements to the MLP within ten days after the payment of each quarterly
distribution made by the MLP to unitholders in 2005.  Shipping Master hereby agrees to provide any
funds needed by the General Partner in order to fulfill its obligations under
this Section 4.1.

 

4.2       MLP
Repayment of Tax Payment Loan.

 

(a)        The MLP hereby agrees
to repay the General Partner in respect of the Tax Payment Loan an aggregate
amount equal to the lesser of (i) the unpaid balance of the Tax Payment Loan
and (ii) the excess, if any, in each of the years 2006 through 2014 of the
Gross Margin (as defined below) of Chemical Pioneer Inc. for such year over the
amount specified on Exhibit A hereto for such year, plus, in either case,
interest thereon at the applicable federal rate (“Interest”).  For purposes hereof, “Gross Margin” shall
mean the gross revenues of Chemical Pioneer Inc. less its voyage expenses and
vessel operating expenses, as determined in accordance with United States
generally accepted accounting principles consistently applied.

 

(b)        The MLP shall make
repayments of the Tax Payment Loan to the General Partner on December 31 of each
year, commencing December 31, 2007.

 

(c)        Notwithstanding the
foregoing, any remaining unpaid balance of the Tax Payment Loan, together with
Interest thereon, will be due and payable on December 31, 2014.  Furthermore, the MLP may prepay the Tax
Payment Loan at any time, in whole or in part, without penalty or premium,
provided that such prepayment does not adversely affect the MLP’s ability to
pay the Minimum Quarterly Distribution.

 

(d)        The MLP shall have no
obligation to the General Partner with respect to the repayment of the Tax
Payment Loan other than as set forth in this Section 4.2.

 

ARTICLE V

Solvency Representation

 

5.1       Solvency
of Shipping Master Entities.  Each of the Shipping Master Entities is, and
immediately after giving effect to the transactions contemplated in the
Contribution Agreement will be, Solvent. 
For purposes of this Section 5.1, “Solvent” means with respect to the
applicable party as of any date of determination, that on such date (a) the
fair value of the property of such party is greater than the total amount of
liabilities, including, without limitation, contingent liabilities of such
party that would constitute liabilities under United States generally accepted
accounting principles consistently applied, (b) the present fair saleable value
of the assets of such party is not less than the amount that will be required
to pay its debts as they become absolute and matured, taking into account the
possibility of refinancing such obligations and selling assets, (c) such

 

8

 

party does not intend to, and does not
believe that it will, incur debts or liabilities beyond such party’s ability to
pay such debts as they mature, taking into account the possibility of
refinancing such obligations and selling assets and (d) such party is not
engaged in business or a transaction, and does not intend to engage in business
or a transaction, for which such party’s property remaining after such
transaction would constitute unreasonably small capital.

 

ARTICLE VI

Miscellaneous

 

6.1       Choice of Law;
Submission to Jurisdiction.  This Agreement shall be subject to and
governed by the laws of the State of New York, excluding any conflicts-of-law
rule or principle that might refer the construction or interpretation of this
Agreement to the laws of another state. 
Each Party hereby submits to the jurisdiction of the state and federal
courts in the State of New York and to venue in New York, New York.

 

6.2       Notice.  All notices
or requests or consents provided for or permitted to be given pursuant to this
Agreement must be in writing and must be given by depositing same in the United
States mail, addressed to the Person to be notified, postpaid, and registered
or certified with return receipt requested or by delivering such notice in
person or by telecopier or telegram to such Party.  Notice given by personal delivery or mail
shall be effective upon actual receipt. 
Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient’s normal business hours, or at the
beginning of the recipient’s next business day after receipt if not received
during the recipient’s normal business hours. 
All notices to be sent to a Party pursuant to this Agreement shall be
sent to or made at the address set forth below such Party’s signature to this
Agreement, or at such other address as such Party may stipulate to the other
Parties in the manner provided in this Section 6.2.

 

6.3       Entire Agreement.  This
Agreement constitutes the entire agreement of the Parties relating to the
matters contained herein, superseding all prior contracts or agreements,
whether oral or written, relating to the matters contained herein.

 

6.4       Termination.  The
provisions of Article II of this Agreement will be terminated upon a Change of
Control of Shipping Master.

 

6.5       Effect of Waiver
or Consent. 
No waiver or consent, express or implied, by any Party to or of any
breach or default by any Person in the performance by such Person of its
obligations hereunder shall be deemed or construed to be a consent or waiver to
or of any other breach or default in the performance by such Person of the same
or any other obligations of such Person hereunder.  Failure on the part of a Party to complain of
any act of any Person or to declare any Person in default, irrespective of how
long such failure continues, shall not constitute a waiver by such Party of its
rights hereunder until the applicable statute of limitations period has run.

 

9

 

6.6       Amendment or
Modification. 
This Agreement may be amended or modified from time to time only by the
written agreement of all the Parties; provided, however, that the MLP and the
OLLC may not, without the prior approval of the Conflicts Committee, agree to
any amendment or modification of this Agreement that, in the reasonable
discretion of the General Partner, will adversely affect the holders of Common
Units.  Each such instrument shall be
reduced to writing and shall be designated on its face an “Amendment” or an “Addendum”
to this Agreement.

 

6.7       Assignment.  No Party
shall have the right to assign its rights or obligations under this Agreement
without the consent of the other Parties.

 

6.8       Counterparts.  This
Agreement may be executed in any number of counterparts with the same effect as
if all signatory Parties had signed the same document.  All counterparts shall be construed together
and shall constitute one and the same instrument.

 

6.9       Severability.  If any
provision of this Agreement or the application thereof to any Person or
circumstance shall be held invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provision to other
Persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.

 

6.10     Gender, Parts,
Articles and Sections.  Whenever the context requires, the gender of
all words used in this Agreement shall include the masculine, feminine and
neuter, and the number of all words shall include the singular and plural.  All references to Article numbers and Section
numbers refer to Articles and Sections of this Agreement.

 

6.11     Further
Assurances. 
In connection with this Agreement and all transactions contemplated by
this Agreement, each Party agrees to execute and deliver such additional
documents and instruments and to perform such additional acts as may be
necessary or appropriate to effectuate, carry out and perform all of the terms,
provisions and conditions of this Agreement and all such transactions.

 

6.12     Withholding or
Granting of Consent.  Each Party may, with respect to any consent
or approval that it is entitled to grant pursuant to this Agreement, grant or
withhold such consent or approval in its sole and uncontrolled discretion, with
or without cause, and subject to such conditions as it shall deem appropriate.

 

6.13     Laws and
Regulations. 
Notwithstanding any provision of this Agreement to the contrary, no
Party shall be required to take any act, or fail to take any act, under this
Agreement if the effect thereof would be to cause such Party to be in violation
of any applicable law, statute, rule or regulation.

 

6.14     Negotiation of
Rights of Shipping Master, Limited Partners, Assignees, and Third Parties. 
The provisions of this Agreement are enforceable solely by the Parties,
and no member of Shipping Master and no limited partner, member, assignee or
other Person of the MLP or the OLLC shall have the right, separate and apart
from Shipping

 

10

 

Master, the MLP or
the OLLC, to enforce any provision of this Agreement or to compel any Party to
comply with the terms of this Agreement.

 

6.15     No Recourse Against Officers or Directors.  For the
avoidance of doubt, the provisions of this Agreement shall not give rise to any
right of recourse against any officer or director of any Shipping Master Entity
or any Partnership Entity.

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on, and
effective as of, the Closing Date.

 

 

	
   

  	
  UNITED
  STATES SHIPPING MASTER LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul B. Gridley

  	
   

  
	
   

  	
   

  	
  Mr. Paul Gridley

  
	
   

  	
   

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
  399 Thornall Street

  
	
   

  	
  8th Floor

  
	
   

  	
  Edison, New Jersey 08837

  
	
   

  	
  Phone: (732) 635-1500

  
	
   

  	
  Fax: (732) 635-1940

  
	
   

  	
  Attention: Mr. Paul Gridley

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  US
  SHIPPING GENERAL PARTNER LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul B.
  Gridley

  	
   

  
	
   

  	
   

  	
  Mr. Paul Gridley

  
	
   

  	
   

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
  399 Thornall Street

  
	
   

  	
  8th Floor

  
	
   

  	
  Edison, New Jersey 08837

  
	
   

  	
  Phone: (732) 635-1500

  
	
   

  	
  Fax: (732) 635-1940

  
	
   

  	
  Attention: Mr. Paul Gridley

  

 

 

	
   

  	
  U.S. SHIPPING OPERATING LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  U.S. SHIPPING PARTNERS L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  US Shipping General Partner LLC, its general

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Paul B.
  Gridley

  	
   

  
	
   

  	
   

  	
   

  	
  Mr. Paul Gridley

  
	
   

  	
   

  	
   

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
  399 Thornall Street

  
	
   

  	
  8th Floor

  
	
   

  	
  Edison, New Jersey 08837

  
	
   

  	
  Phone: (732) 635-1500

  
	
   

  	
  Fax: (732) 635-1940

  
	
   

  	
  Attention: Mr. Paul Gridley

  
	
   

  	
   

  
	
   

  	
  U.S. SHIPPING PARTNERS L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  US Shipping
  General Partner LLC, its general

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Paul B.
  Gridley

  	
   

  
	
   

  	
   

  	
   

  	
  Mr. Paul Gridley

  
	
   

  	
   

  	
   

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
  399 Thornall Street

  
	
   

  	
  8th Floor

  
	
   

  	
  Edison, New Jersey 08837

  
	
   

  	
  Phone: (732) 635-1500

  
	
   

  	
  Fax: (732) 635-1940

  
	
   

  	
  Attention: Mr. Paul Gridley

  

 

 

Exhibit A

 

	
  Year

  	
   

  	
  Target Gross Margin

  	
   

  
	
   

  	
   

  	
  (dollars in thousands)

  	
   

  
	
  2006

  	
   

  	
  $

  	
  4,410

  	
   

  
	
  2007

  	
   

  	
  $

  	
  5,760

  	
   

  
	
  2008

  	
   

  	
  $

  	
  3,989

  	
   

  
	
  2009

  	
   

  	
  $

  	
  5,948

  	
   

  
	
  2010

  	
   

  	
  $

  	
  6,057

  	
   

  
	
  2011

  	
   

  	
  $

  	
  4,744

  	
   

  
	
  2012

  	
   

  	
  $

  	
  6,321

  	
   

  
	
  2013

  	
   

  	
  $

  	
  4,896

  	
   

  

 

12Exhibit 10.6

 

U.S. SHIPPING PARTNERS L.P.

EMPLOYEE UNIT PURCHASE PLAN

 

1.          Purpose of the Plan.

 

The
U.S. Shipping Partners L.P. Employee Unit Purchase Plan (the “Plan”) is
intended to (i) promote the interests of U.S. Shipping Partners L.P., a
Delaware limited partnership (the “Partnership”), by providing to
Employees of the Partnership and its Affiliates the opportunity to acquire or
increase their ownership of Units, (ii) provide a means whereby such
individuals may develop a sense of proprietorship and personal involvement in
the development and financial success of the Partnership and (iii) encourage
such individuals to devote their best efforts to the business of the
Partnership, thereby advancing the interests of the Partnership.

 

2.          Definitions.

 

(a)        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.

 

“Board” means the Board of Directors of US Shipping
General Partner LLC, a Delaware limited liability company.

 

“Committee” means the Compensation Committee of the
Board.

 

“Employee” means any individual who is a United States
citizen for maritime law purposes and a full-time employee of the Partnership
or one of its Affiliates, but, until the Committee decides
otherwise, excluding any employee covered by a collective bargaining agreement
unless such bargaining agreement provides for his participation in the Plan.

 

“Employer” means the Partnership and/or one of its
Affiliates, as the case may be.

 

“Fair Market Value” means, unless otherwise determined by the
Committee or required by applicable law, the closing sales price of a Unit 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 publicly-traded 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.

 

“Offering Period” means each calendar quarter or other period
as designated by the Committee from time to time.

 

 

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

 

“Purchase Period” means the 10-day period following the end of
each Offering Period; provided, however, the Purchase Period shall include such
other periods, if any, as may be designated by the Committee from time to time.

 

“Unit” means a Common Unit of the Partnership.

 

(b)       Gender and Number.  Except when otherwise indicated by the
context, the masculine gender shall also include the feminine gender, and the
definition of any term herein in the singular shall also include the plural.

 

3.          Eligibility.

 

(a)        Eligibility and Plan Entry Date.  All Employees shall be eligible to
participate in the Plan.  An Employee is
eligible to enter the Plan beginning on the first day of the month following
180 days after such individual’s employment commencement date.

 

(b)       Prior Service Credit.  The Committee, in it is discretion, may grant
prior service credit to individuals that become Employees pursuant to a
corporate merger or acquisition.

 

4.          Units Available Under the Plan.

 

(a)        Limits on Units Deliverable.  Subject to adjustment as provided in Section
4(c) below, the maximum number of Units that may be purchased under the Plan is
250,000.

 

(b)       Sources of Units Deliverable.  Units to be delivered under the Plan may be
Units acquired by the Partnership in the open market, Units already owned by
the Partnership, authorized but unissued Units, Units acquired directly from
any Person or any combination of the foregoing.

 

(c)        Adjustments.  In the event that the Committee determines
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 such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of the maximum number and type of Units (or other
securities or property) deliverable under the Plan, the maximum number and type
of Units (or other securities or property) acquired during a Purchase Period
and the applicable Unit price paid therefor. 
The adjustments determined by the Committee shall be final, binding and
conclusive.

 

2

 

5.          Purchase of Units.

 

(a)        Employee Withholding Elections.  The Committee shall provide an Employee with
the ability to purchase Units under the Plan upon the following terms and
conditions:

 

(i)        Effective as of the beginning of any
month or, if administratively feasible, the beginning of the next payroll
period, an Employee may elect to have his Employer withhold from the Employee’s
cash base salary or cash base wages for each future pay period, for the purchase
of Units hereunder, a designated whole percentage of the Employee’s cash base
pay or wages (in whole percentages only, not to exceed 10%).  An Employee may change (within the above
limitations) or, subject to Section 5(a)(vi), stop his withholding election at
any time; however, only two such changes may be made during any calendar
year.  All Employee elections and any
changes to an election shall be in such written form as the Committee or its
delegate may establish from time to time.

 

(ii)       Each withholding election made by an
Employee hereunder shall be an ongoing election until the earlier of the date
changed by the Employee or the date the Employee ceases to be eligible to
participate in the Plan.

 

(iii)      The Employer shall maintain for each
electing Employee a separate notional or ledger account reflecting the
aggregate amount of his cash base pay or wages that has been withheld and not
yet applied to the purchase of Units for such Employee.  An Employer, other than the Partnership,
shall remit to the Partnership all amounts of base pay or wages withheld by the
Employer promptly upon request by the Partnership in order to permit the
Partnership to fulfill its obligations under the Plan with respect to the
purchase of Units for Employees.  Amounts
of base pay or wages withheld by the Employer and remitted to the Partnership
shall not be segregated from the general assets of the Partnership and shall
not bear interest.

 

(iv)      During each Purchase Period, the
Partnership shall use, to the fullest extent practicable, all amounts then
credited to the notional accounts of the electing Employees to purchase Units
for such Employees.  Purchases of Units
may be made at any time or times during the Purchase Period on any securities
exchange on which the Units are traded, in the over-the-counter market and/or
in negotiated transactions as the Committee shall determine.

 

(v)       Upon an Employee’s termination of employment
with his Employer, all amounts then credited to his notional account under the
Plan, if any, shall be paid to the terminated Employee as soon as reasonably
practicable.

 

(vi)      Provided an Employee submits his election
to stop withholding prior to the fourteen business day period before the
beginning of an immediately upcoming Purchase Period, all amounts then credited
to such Employee’s notional account shall be returned to the Employee as soon
as administratively practicable.  Unless
otherwise administratively feasible, to the extent an Employee submits his
election to stop withholding within the fourteen business day period before the
beginning of the immediately upcoming Purchase Period, all amounts credited to
such Employee’s notional account will be applied toward the purchase of

 

3

 

Units in the immediately upcoming Purchase Period and
the Employee’s election to stop withholding shall become effective as of the
commencement of the next following Offering Period.  All requests to withdraw from the Plan
submitted during a Purchase Period will become effective as of the commencement
of the next following Offering Period.

 

(b)       Purchase of Units and Plan Expenses.
During each Purchase Period, the Partnership, using funds withheld from
Employees’ wages pursuant to this Section 5, shall purchase for the electing Employees
the maximum number of Units (including fractional Units) that can be acquired
(using the Unit’s Fair Market Value on the date of purchase) based on amounts
then credited to the electing Employees’ notional accounts.  The Partnership shall pay, other than from
the notional accounts, all brokerage fees and other costs and expenses of the
Plan.  To the extent that Units are
purchased on multiple days or at multiple times during a single Purchase
Period, the Partnership shall use the average of the Units’ Fair Market Value
at the times of purchase as the applicable Unit price upon which Units are
allocated to the participating Employees.

 

(c)        Withholding of Taxes.  To the extent that the Employer is required
to withhold any taxes in connection with the purchase of Units, it will be a
condition to the ownership of such Units that the Employee make arrangements
satisfactory to the Employer for the payment of such taxes, which may include,
but not be limited to, a reduction in the Employee’s notional account.

 

6.          Restrictions on Units.

 

(a)        Holding Period.  Subject to the exception provided below under
Section 6(b), all Units purchased under the Plan shall be subject to a “Holding
Period” which shall expire on the first anniversary of the date the Units were
purchased under the Plan.  During such
Holding Period, each Employee shall be prohibited from pledging, transferring,
selling or otherwise disposing of the restricted Units.  Upon the expiration of such Holding Period,
the Employee may, if he desires, make a request to the Partnership (or its
designated third party plan administrator, if any) to receive certificates for
all of such unrestricted whole Units. 
Otherwise, such Units shall be held without restriction (1) by the
Partnership or (2) in the name of the third party administrator (or its
designee), if any, for the benefit of the Employee. Upon payment during the
Holding Period of any distribution with respect to Units, each Employee shall
receive an amount in cash equal to, and at the same time as, the amount of such
distribution multiplied by the number of Units allocated to such Employee.

 

(b)       Holding Period Exception.  Notwithstanding the Holding Period imposed
above under Section 6(a) and subject to the conditions imposed pursuant to this
Section 6(b), an Employee will be permitted to pledge, transfer, sell or
otherwise dispose of his restricted whole Units during the one-year Holding
Period (a “Restricted Transfer”) by notifying the Employer (or its
designated third party plan administrator) of his intention to engage in a
Restricted Transfer.  If a Restricted
Transfer occurs, the Employee shall be prohibited from participating in the
Plan again until the first Purchase Period following the first anniversary of
the date of the Restricted Transfer.  During this period of prohibition, no amounts
shall be withheld from the Employee’s cash base salary or cash base wages.  Such withholding shall not be allowed to
resume, at the earliest, until the first pay period following the first
anniversary of the date of the

 

4

 

Restricted Transfer. 
To the extent an Employee has amounts credited to his notional account
under the Plan on the date of a Restricted Transfer, all such amounts will be
returned to the Participant.  To the
extent a Participant has a fractional Unit credited to his notional account
under the Plan on the date of a Restricted Transfer, such fractional Unit will
be liquidated and the Participant will receive his pro rata portion of the
proceeds from such liquidation.

 

(c)        Investment Representation.  Unless the Units subject to purchase under
the Plan have been registered under the Securities Act of 1933, as amended (the
“1933 Act”), and, in the case of any Employee who may be deemed an
affiliate (for securities law purposes) of the Partnership, such Units have
been registered under the 1933 Act for resale by such Participant, or the
Partnership has determined that an exemption from registration is available,
the Partnership may require prior to and as a condition of the delivery of any
Units that the person purchasing such Units hereunder furnish the Partnership
with a written representation in a form prescribed by the Committee to the
effect that such person is acquiring such Units solely with a view to
investment for his own account and not with a view to the resale or
distribution of all or any part thereof, and that such person will not dispose
of any of such Units otherwise than in accordance with the provisions of Rule
144 under the 1933 Act unless and until either the Units are registered under
the 1933 Act or the Partnership is satisfied that an exemption from such
registration is available.

 

(d)       Compliance with Securities Laws.  Notwithstanding anything herein or in any
other agreement to the contrary, the Partnership shall not be obligated to sell
or issue any Units to an Employee under the Plan unless and until the
Partnership is satisfied that such sale or issuance complies with (i) all
applicable requirements of the securities exchange on which the Units are
traded (or the governing body of the principal market in which such Units are
traded, if such Units are not then listed on an exchange), (ii) all applicable
provisions of the 1933 Act, and (iii) all other laws or regulations by which the
Partnership is bound or to which the Partnership is subject.

 

7.          Rights of Employees; Participants.

 

(a)        Employment.  The Plan will not confer upon any Employee
any right with respect to continuance of employment or other service with the
Employer, nor will it interfere in any way with any right the Employer would
otherwise have to terminate such Employee’s employment or other service at any
time.

 

(b)       Nontransferability.  No right to purchase Units granted under the
Plan shall be assignable or transferable during the lifetime of any Employee
either voluntarily or involuntarily, or be subjected to any lien, directly or
indirectly, by operation of law, or otherwise, including execution, levy,
garnishment, attachment, pledge or bankruptcy.

 

8.          Plan Administration.

 

(a)        Authority of Committee.  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) determine which persons are Employees who may
participate; (ii)

 

5

 

determine the number of Units to be purchased by an
Employee; (iii) determine the time and manner for purchasing Units; (iv)
interpret, construe and administer the Plan; (v) 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; (vi) make a determination
as to the right of any person to receive Units under the Plan; (vii) correct
any defect, supply any omission, or reconcile an inconsistency in the Plan; and
(viii) make any other determinations and take any other actions that the
Committee deems necessary or desirable for the administration of the Plan.

 

(b)       Determination under the Plan.  Unless otherwise expressly provided in the
Plan, all designations, determinations, interpretations, and other decisions
under or with respect to the Plan 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 Partnership, the Employer or any Employee.  No member of the Committee shall be liable
for any action, determination or interpretation made in good faith, and all
members of the Committee shall, in addition to their rights as directors, be
fully protected by the Partnership with respect to any such action,
determination or interpretation.

 

9.          Plan Amendment, Modification and Termination.

 

Except as otherwise required
by applicable law or exchange requirements, the Board may amend the Plan in any
manner, including increasing the maximum number of Units that may be purchased
under the Plan, without the consent of any Person.  The Plan may be terminated at any time by the
Board at any time and shall automatically terminate when all Units authorized
for purchase pursuant to the Plan have been purchased.  On termination of the Plan, all amounts then
remaining credited to the notional accounts for Employees shall be returned to
the affected Employees.

 

10.        Nonexclusivity of the Plan.

 

The adoption of the Plan by
the Partnership shall not be construed as creating any limitations on the power
or authority of the Partnership or any of its Affiliates to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Partnership or any of its Affiliates may deem necessary or desirable or to
preclude or limit the continuation of any other plan, practice or arrangement
for the payment of compensation or fringe benefits to employees, non-employee
directors, or consultants generally, or to any class or group of employees,
directors, or consultants, which the Partnership or any of its Affiliates now has
lawfully put into effect, including, without limitation, any long-term incentive plan.

 

11.        Requirements of Law.

 

(a)        Requirements of Law.  The issuance of Units pursuant to the Plan
shall be subject to all applicable laws, rules and regulations.

 

(b)       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 conflicts
of laws principles.

 

6

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