EXHIBIT
10.3
AMENDED AND
RESTATED
CHANGE OF
CONTROL
PROTECTION
AGREEMENT
This Amended and
Restated Change of Control Protection Agreement (this “
Agreement ”) is made and entered into as of December
31, 2008, (the “ Effective Date ”) by and
between Overseas Shipholding Group, Inc., a corporation
incorporated under the laws of Delaware with its principal office
at 666 Third Avenue, New York, New York 10017 (the “
Company ”) and Morten Arntzen (the “
Executive ”).
W I T N E S S
E T H:
WHEREAS, the
Company believes that the establishment and maintenance of a sound
and vital management of the Company and its affiliates is essential
to the protection and enhancement of the interests of the Company
and its stockholders;
WHEREAS, the
Company also recognizes that the possibility of a Change of Control
(as defined in Section 1 hereof), with the attendant uncertainties
and risks, might result in the departure or distraction of key
employees of the Company to the detriment of the
Company;
WHEREAS, the
Company has determined that it is appropriate to take steps to
induce key employees to remain with the Company, and to reinforce
and encourage their continued attention and dedication, when faced
with the possibility of a Change of Control;
WHEREAS, the
Company and the Executive are parties to that certain Agreement,
dated as of January 19, 2004, as amended on February 15, 2007 (the
“ Prior Agreement ”) which provided that the
Executive would receive certain severance benefits if his
employment was terminated in connection with a Change of Control;
and
WHEREAS
, the parties desire to amend
and restate the Prior Agreement effective as of the Effective Date
on the terms and conditions set forth herein.
NOW, THEREFORE,
in consideration of the premises and mutual covenants herein
contained, the parties hereto hereby agree as follows:
1.
A
Change of
Control shall be deemed to have
occurred if: (i) any person (as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and as used in Sections 13(d) and 14(d) thereof),
excluding the Company, any “Subsidiary,” any employee
benefit plan sponsored or maintained by the Company, or any
Subsidiary (including any trustee of any such plan acting in his
capacity as trustee), becomes the beneficial owner (as defined in
Rule 13(d)-3 under the Exchange Act) of shares of the Company
having at least thirty percent (30%) of the total number of votes
that may be cast for the election of directors of the Company;
provided, that no Change of Control will be deemed to have occurred
as a result of an increase in ownership percentage in excess of
thirty percent (30%) resulting solely from an acquisition of
securities by the Company unless and until such person acquires
additional shares of the Company; (ii) there is a merger or other
business combination of the Company, or a sale of
all or substantially all of the Company’s assets or
combination of the foregoing transactions (a “
Transaction ”), other than a Transaction involving
only the Company and one or more of its Subsidiaries, or a
Transaction immediately following which the shareholders of the
Company immediately prior to the Transaction continue to have a
majority of the voting power in the resulting entity in
approximately the same proportion as they had in the Company
immediately prior to the Transaction; or (iii) during any period of
twelve (12) consecutive months beginning on or after the date
hereof, the persons who were directors of the Company immediately
before the beginning of such period (the “Incumbent
Directors”) shall cease (for any reason other than death) to
constitute at least a majority of the board of directors of the
Company (the “ Board ”) or the board of
directors of any successor to the Company, provided that, any
director who was not a director as of the date hereof shall be
deemed to be an Incumbent Director if such director was elected to
the Board by, or on the recommendation of or with the approval of,
at least a majority of the directors who then qualified as
Incumbent Directors either actually or by prior operation of the
foregoing unless such election, recommendation or approval occurs
as a result of an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act or any successor provision) or other actual or
threatened solicitation of proxies or contests by or on behalf of a
person other than a member of the Board. Only one (1) Change of
Control may occur under this Agreement.
2.
Term . This Agreement shall commence on the Effective Date
and shall expire on the earliest of (i) January 19, 2012 (the
“ Expiration Date ”), subject to the right of
the Board and the Executive to extend the Expiration Date, provided
that if a Change of Control takes place prior to the Expiration
Date, the duration of this Agreement under this subpart (i) shall
be until the end of the two (2) year period commencing on the date
of the consummation of a Change of Control whether such two (2)
year period ends before or after the Expiration Date; (ii) the date
of the death of the Executive or retirement or other termination of
the Executive’s employment (voluntarily or involuntarily)
with the Company prior to a Change of Control other than as a
result of a termination by the Company without Cause (as defined
below) or by the Executive for Good Reason (as defined below) that
is an Anticipatory Termination (as defined below); or (iii) one
hundred twenty (120) days after an Anticipatory Termination by the
Company without Cause or by the Executive with Good Reason if a
Change of Control does not occur on or prior to such date.
Notwithstanding anything in this Agreement to the contrary, if the
Company becomes obligated to make any payment to the Executive
pursuant to the terms hereof at or prior to the expiration of this
Agreement, then this Agreement shall remain in effect for such and
related purposes (including but not limited to under Section 5
hereof) until all of the Company’s obligations hereunder are
fulfilled. Further, provided that a Change of Control has taken
place prior to the termination of this Agreement, the provisions of
Sections 10 hereof shall survive and remain in effect
notwithstanding the termination of this Agreement, the termination
of the Executive’s employment or any breach or repudiation or
alleged breach or repudiation by the Company or the Executive of
this Agreement or any one or more of its terms.
3.
Termination Following Change of Control . If, and only if, a
Change of Control occurs and the Executive’s employment with
the Company is terminated by the Company without Cause or by the
Executive for Good Reason at any time within two (2) years after
the Change of Control or there was an Anticipatory Termination and
the Change of Control has taken place within one hundred twenty
(120) days thereafter, the Executive shall be entitled
to the amounts and
benefits provided in Section 4 upon such termination. In the event
of an Anticipatory Termination within one hundred twenty (120) days
prior to a Change in Control, if any equity grants which were
granted prior to the Change of Control would vest on a Change of
Control after the Anticipatory Termination, any such equity grants
that otherwise would be forfeited (after application of any other
accelerated vesting provision) shall not be forfeited pending a
determination of whether or not a Change of Control occurs within
one hundred twenty (120) days thereafter (the “
Determination Period ”), but during the Determination
Period no unvested option shall vest or be exercisable, no other
unvested equity grant shall vest and no dividends shall be payable
unless and until the Change of Control takes place during the
Determination Period. If a Change of Control occurs during the
Determination Period, and the option exercise period would
otherwise have expired, then the exercise period for any equity
grants which otherwise would have expired during the Determination
Period shall automatically be deemed to have been extended to the
date which is thirty (30) days following the first date after such
Change of Control in which shares of the Company could be traded by
the Executive on the applicable market under the Company’s
trading window policies but, with regard to any outstanding options
on the Effective Date, not beyond the earlier of the latest date
that the option could have expired by its original terms under any
circumstance or the tenth (10 th ) anniversary of the
original date of grant of the option.
The foregoing
terms shall have the following meaning:
(i)
Termination for Good Reason . For purposes of this
Agreement, termination for Good Reason shall mean a termination of
employment by the Executive effected by a written notice given
within ninety (90) days after the occurrence of the Good Reason
event. For purposes of this Agreement, “Good Reason”
shall mean the occurrence of any of the following events without
the Executive’s express written consent which event is not
cured within ten (10) days after written notice thereof from the
Executive to the Company: (A) any material diminution in the
Executive’s position, duties, responsibilities or authority,
or the assignment to the Executive of duties and responsibilities
materially inconsistent with his position, except in connection
with the Executive’s termination for Cause or as a result of
death, or temporarily as a result of the Executive’s
incapacity or other absence for an extended period; (B) a reduction
in the Executive’s annual base salary; (C) a relocation of
the Company’s principal business location to an area which is
both outside of Manhattan, New York City, New York and outside of a
fifty (50) mile radius from the Executive’s current principal
residence; (D) failure by the Board to elect or re-elect the
Executive as a member of the Board or as Chief Executive Officer or
President or the Executive’s removal from any such position,
in all cases if such failure or removal is not for Cause; or (E)
any material breach by the Company of any material provision of the
Executive’s employment letter agreement with the Company,
dated as of January 19, 2004, as amended (the “ Employment
Agreement ”), or of Section 11 of this
Agreement.
(ii)
Cause . As used herein, the term “Cause” shall
mean: (A) the Executive’s willful misconduct involving the
Company or its assets, business or employees or in the performance
of his duties which is materially injurious to the Company; (B) the
Executive’s conviction of (or pleading guilty or nolo
contendre to) a felony (provided that for this purpose, a felony
shall cover any action or inaction that is a felony or crime under
federal, state or local law in the United States (collectively,
“ U.S. law ”) and any action or inaction which
takes place outside of the United States, if it would be a felony
under U.S. law); (C) the Executive’s continued and
substantial
failure to attempt in good faith to perform his duties with the
Company (other than failure resulting from his incapacity due to
physical or mental illness or injury or that of any member of the
Executive’s immediate family (provided that in a situation
relating to a member of the Executive’s immediate family he
has consulted with the Chairman of the Board and has in good faith
made a mutually satisfactory agreement for coverage of his
responsibilities and further provided that any temporary
adjustments in authority, duties or responsibility made by the
Company in connection therewith shall not be Good Reason)), which
failure has continued for a period of at least ten (10) days after
written notice thereof from the Company; (D) the Executive’s
breach of any material provisions of any agreement with the
Company, which breach, if curable, is not cured within ten (10)
days after written notice thereof from the Company (provided that
in the case of a breach of the Employment Agreement, clause (iv) of
the definition of Cause therein shall apply); or (E) the
Executive’s failure to attempt in good faith to promptly
follow a written direction of the Board which direction indicates
that failure to do so shall be grounds for termination, provided
that the failure shall not be considered “Cause” if the
Executive, in good faith, believes that such direction, or
implementation thereof, is illegal and he promptly so notifies the
Chairman of the Board in writing. No act or failure to act by the
Executive shall be deemed to be “willful” if he
believed in good faith that such action or non-action was in or not
opposed to, the best interests of the Company.
(iii)
A Termination without Cause . As used herein, the term
Termination without Cause shall mean a Termination by the Company
other than for a termination for Cause or due to
Disability.
(iv)
Disability . As used herein, Disability shall mean the
Executive’s failure to have performed his material duties and
responsibilities as a result of physical or mental illness or
injury for more than one hundred eighty (180) days during a three
hundred sixty-five (365) day period.
(v)
Anticipatory Termination . As used herein, the term
Anticipatory Termination means a Termination without Cause or a
Termination for Good Reason that occurs after a tender offer is
announced for the Company or after material discussions have
occurred with a possible acquiror with regard to a
Transaction.
4.
Compensation on Change of Control Termination . If, pursuant
to Section 3, the Executive is entitled to amounts and benefits
under this Section 4, the Executive shall receive the following
payments and benefits from the Company:
(a) (i) Subject
to submission of appropriate documentation, any incurred but
unreimbursed business expenses for the period prior to the
Executive’s termination payable in accordance with the
Company’s policies and practices; (ii) any base salary, bonus
(other than any annual bonus), vacation pay or other compensation
accrued or earned under law or in accordance with the
Company’s policies applicable to the Executive but not yet
paid, payable in accordance with the Company’s normal
policies and practices for such compensation; and (iii) any other
amounts or vested benefits due under the then applicable employee
benefit (including, without limitation, any non-qualified pension
plan or arrangement), equity or incentive plans of the Company then
in effect, applicable to the Executive as shall be determined and
paid in accordance with such plans;
(b) Subject to
Sections 4(i) and 22(b) hereof, a lump sum amount (without regard
to any interest which may have accrued thereon) paid within ten
(10) days after the Date of Termination (as defined below), equal
to two (2) times the Executive’s annual base salary rate in
effect within one hundred eighty (180) days prior to, or at any
time after, the Change of Control (or if such termination is by the
Executive pursuant to Section 3(i), the greater of the foregoing
and Executive’s annual base salary rate in effect immediately
prior to such reduction of the rate of his annual base salary) (the
“ Severance Base Salary Rate ”);
(c) Subject to
Section 22(b) hereof, a lump sum amount (without regard to any
interest which may have accrued thereon) paid on the 130
th day after the Date of Termination (as defined below)
equal to the sum of :
(i) the
Severance Base Salary Rate, plus
(ii) three
(3) times the Executive’s highest target annual incentive
compensation in effect within one hundred eighty (180) days prior
to, or at any time after, the Change of Control;
provided
, that if no
target annual incentive compensation is in effect during such
period, then for the purpose of this Section 4(c)(ii), the
Executive’s target incentive compensation shall be deemed to
be 50% of the Severance Base Salary Rate; plus
(iii) an
amount equal to thirty-six (36) months of additional employer
contributions that would have been made for the Executive under any
qualified or nonqualified defined contribution pension plan or
arrangement of the Company applicable to the Executive as in effect
on the Executive’s Date of Termination, with an increase in
his age by three (3) years for purposes of calculating any early
retirement subsidy or actuarial reduction, measured from the
Executive’s Date of Termination and not contributed to the
extent that the Executive would otherwise be entitled to such
contributions during such period if the Executive’s
employment had not been terminated and he had contributed at the
maximum permitted salary reduction level during such
period.
(d) Subject to
Sections 4(i) hereof, a pro rata annual bonus for the year in which
Executive is terminated based on actual results for such year and
pro rated based on the portion of the year the Executive was
employed, paid to the Executive in the calendar year following the
completed fiscal year of the Company for which such bonus was
earned when other executive’s of the Company receive their
bonuses for such fiscal year.
(e) Subject to
Sections 4(i) hereof, any earned but unpaid annual bonus for a
previously completed fiscal year of the Company, paid to the
Executive in the calendar year following the completed fiscal year
of the Company for which such bonus was earned when other
executive’s of the Company receive their bonuses for such
fiscal year.
(f) Subject to
Section 4(i) hereof, (i) if benefits under the Company health
plans, in which the Executive participated immediately prior to the
termination of the Executive’s employment, or materially
equivalent plans maintained by the Company in replacement thereof
(the “ Health Plans ”) will not be taxable to
the Executive, than continued coverage at the Company’s expense
(other than as set forth below) under the Health Plans, or (ii) if
benefits under the Health Plans will be taxable to the Executive,
reimbursement for the Executive’s premiums for continued
coverage under the Health Plans in the amount that the cost of such
coverage exceeds the active employee rate under the Health Plans
(as determined based on the premium rate in effect for the
Executive on the Executive’s Date of Termination and
excluding, for purposes of calculating cost, an employee’s
ability to pay premiums with pre-tax dollars), in either case for
the Executive and the Executive’s dependents until the
earliest of (x) thirty-six (36) months following the
Executive’s Date of Termination and (y) the Executive’s
commencement of other substantially full-time employment (such
period, the “ Coverage Period ”).
Notwithstanding the foregoing, in the case of (i), the Executive
shall pay the same premium amount for such coverage as the
Executive would pay if an active employee under the Health Plans
(as determined based on the premium rate in effect for the
Executive on the Executive’s Date of Termination and
excluding, for purposes of calculating cost, an employee’s
ability to pay premiums with pre-tax dollars) and the Company
portion of the premium for any such coverage shall be paid on a
monthly basis. In the case of (ii), any such reimbursement payment
shall be payable on the first Company payroll date for the
applicable month for which such premium amount is paid, such
payment to include a tax gross-up payment to the extent the amount
taxable to the Executive is greater than the amount that would have
been taxable to the Executive if the Executive was an employee and
participated in the Health Plans. The Coverage Period shall run
concurrently with the applicable continuation coverage for the
Executive and the Executive’s dependents pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985.
(g) Continued
coverage under the Company life insurance plan in which the
Executive participated immediately prior to the termination of the
Executive’s employment (at the same cost as for active
employees of equivalent age) at a benefit level equal to the higher
of the level in effect immediately prior to the Change of Control
or immediately prior to the Executive’s termination or,
alternatively, equivalent coverage (on a tax grossed up basis, to
the extent the amount taxable to the Executive is greater than the
amount taxable to him if he was an employee and participated in the
Company’s life insurance plan) for three (3) years from the
date of termination of the Executive’s employment, with any
Company portion of the premiums for such coverage paid on a monthly
basis.
(h) All
of the Executive’s then unvested equity awards which were
granted prior to a Change of Control shall automatically vest and
all restrictions thereon shall lapse.
(i) Notwithstanding
anything herein to the contrary, in the event that the Executive is
entitled to the benefits under this Section 4 as a result of an
Anticipatory Termination that occurred within 120 days prior to a
Change in Control a
