Exhibit 10(iii)(j)
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 Lois
Zabrocky (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(iii) 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 Change of Control Protection
Agreement, dated as of January 1, 2006 (the “ Prior
Agreement ”); and
WHEREAS , the Prior Agreement
will expire by its terms on December 31, 2008 unless further
extended by the Company and the Executive and the parties desire to
extend the term of Prior Agreement and 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.
Definitions
. The foregoing terms shall
have the following meaning:
(i)
“ Anticipatory
Termination ” means a termination of the
Executive’s employment without Cause or for Good Reason that
occurs after a tender offer is announced for the Company or after
material discussions have occurred with a possible acquirer with
regard to a Transaction, provided, that such offer or discussions
have not terminated.
(ii)
“ Cause ” shall
mean: (A) the Executive’s willful misconduct involving
the Company or its assets, business or employees or in the
performance of her duties which is materially injurious to the
Company (in a manner which would effect the Company
economically or as to its reputation);
(B) the Executive’s indictment for, or 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 her duties with the Company (other than
failure resulting from her incapacity due to physical or mental
illness or injury), 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; or (E) the Executive’s
failure to attempt in good faith to promptly follow a written
direction of the Board of Directors of the Company (the “
Board ”) or a more senior officer, 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 she 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 she
believed in good faith that such action or non-action was in or not
opposed to, the best interests of the Company.
(iii)
A “ Change of Control
” shall mean the occurrence of any of the following
events: (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 her 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 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 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.
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(iv)
“ Disability ”
shall mean the Executive’s failure to have performed her
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)
“ 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, title or authority, or the assignment to
the Executive of duties and responsibilities materially
inconsistent with her 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
Executive’s principal business location to an area outside of
a fifty (50) mile radius of both the Executive’s current
principal business location and the Executive’s principal
residence; or (D) any breach of Section 13 of this
Agreement.
(vi)
A termination “ without
Cause ” shall mean a termination of the Executive’s
employment by the Company other than for a termination for Cause or
due to Disability.
2.
Term . This Agreement shall commence on the
Effective Date and shall expire on the earliest of:
(i) December 31, 2011 (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 a period of two
(2) years after 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 or by the Executive for
Good Reason that is an Anticipatory Termination; or
(iii) ninety (90) 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 and 12 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, (i) 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
(ii) there was an Anticipatory Termination and the Change
of
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Control has taken place within ninety (90) 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 ninety (90) 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
ninety (90) 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.
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(h),
8 and 21(b) hereof, a lump sum amount (without regard to any
interest which may have accrued thereon) paid on the 60
th day after the Executive’s Date of
Termination equal to two (2) times the Executive’s
annual base salary rate in effect immediately prior to her
termination (or if such termination is by the Executive pursuant to
Section 1(v)(B), Executive’s annual base salary rate in
effect immediately prior to such reduction of the rate of her
annual base salary) (the “ Severance Base Salary Rate
”);
(c) Subject to Sections 8 and
21(b) hereof, a lump sum amount (without regard to any
interest which may have accrued thereon) paid on the 100
th day after the Executive’s Date of
Termination equal to the sum of:
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(i) two (2) times the sum
of 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)(i), the
Executive’s target incentive compensation shall be deemed to
be 50% of the Executive’s Severance Base Salary Rate;
plus
(ii) an amount equal to
twenty-four (24) 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 (as defined below), 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 she had contributed at the
maximum permitted salary reduction level during such
period.
(d) Subject to Sections
4(h) and 8 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(h) and 8 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 Sections
4(h) and 8 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) twenty-four (24) 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
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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)
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.
(h)
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 90 days prior to a Change in
Control and if as a result of the termination of the
Executive’s employment the Executive was entitled to receive
the payments and benefits provided under the Overseas Shipholding
Group, Inc. Severance Protection Plan (the “
Severance Plan ”), then the Executive shall continue
to be entitled to receive such payments and benefits under and in
accordance with the terms and conditions of the Severance Plan and
(i) the Executive shall not be entitled to receive the amounts
under Sections 4(b), 4(d) and 4(e); (ii) the benefits or
payments under Section 4(f) shall commence in the first
month following the expiration of any health plan or health care
reimbursement coverage provided to the Executive pursuant to the
Severance Plan following a termination of the Executive’s
employment and the term “Coverage Period” shall mean a
period of six (6) months from the date that benefits or
payments under Section 4(f) commence in accordance with
this Section 4(h)(ii); and (iii) all other payments and
benefits set forth in this Section 4 shall be provided to the
Executive as set forth herein.
(i) Except as set forth in
Section 4(h), in the event that the Executive is entitled to
receive the payments and benefits set forth in this Section 4,
then the Executive shall not be eligible to participate in any
other severance, termination, change in control or similar plan,
policy or practice of the Company.
5.
Excise Tax
.
(a)
In the event that the Executive
shall become entitled to payments and/or benefits provided by this
Agreement or any other amounts in the “nature of
compensation” (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a change of ownership
or effective control covered by Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (“ Code
”) or any person affiliated with the Company or such person)
as a result of a Change in Control (collectively the “
Company Payments ”), and if such Company Payments will
be subject to the tax (the “ Excise Tax ”)
imposed by Section 4999 of the Code (and any similar tax that
may hereafter be imposed by any taxing authority), the Company
shall pay to the Executive at the time specified in
Section 5(e) hereof an additional amount (the “
Gross-Up Payment ”) such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Company
Payments and any U.S. federal,
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state, and local income or payroll tax upon the
Gross-Up Payment provided for by this Section 5(a), but before
deduction for any U.S. federal, state, and local income or payroll
tax on the Company Payments, shall be equal to the Company
Payments.
(b)
Notwithstanding the foregoing
provisions of Section 5(a) to the contrary, if it shall
be determined that the Executive is entitled to a Gross-Up Payment,
but the Company Payments do not exceed 110% of the greatest amount
(the “ Reduced Amount ”) that could be paid to
the Executive such that the receipt of the Company Payments would
not give rise to any Excise Tax, then no Gross-Up Payment shall be
made to the Executive and the Company Payments, in the aggregate,
shall be reduced to an amount that is one dollar ($1) less than the
Reduced Amount; provided, however, that the reduction shall occur
only if the reduced Company Payments received by the Executive
(after taking into account further reductions for applicable
federal, state and local income, social security and other taxes)
would be greater than the unreduced Company Payments to be received
by the Executive minus (i) the Excise Tax payable with respect
to such Company Payments and (ii) all applicable federal,
state and local income, social security and other taxes on such
Company Payments. If the Reduced Amount is to be effective,
the Company Payments shall be reduced in the following order:
(A) any cash severance based on a multiple of annual base
salary or bonus, (B) any other cash amounts payable to the
Executive, (C) any benefits valued as “parachute
payments,” (D) acceleration of vesting of any stock
option or similar awards for which the exercise price exceeds the
then fair market value, and (E) acceleration of vesting of any
equity not covered by clause (D) above. In the event
that the Internal Revenue Service or court ultimately makes a
determination that the “excess parachute payments” plus
the “base amount” is an amount other than as determined
initially, an appropriate adjustment shall be made with regard to
the Gross-Up Payment or Reduced Amount, as applicable, to reflect
the final determination and the resulting impact on whether this
Section 5(b) applies.
(c)
For purposes of determining whether
any of the Company Payments will be subject to the Excise Tax and
the amount of such Excise Tax, (x) the Company Payments shall
be treated as “parachute payments” within the meaning
of Section 280G(b)(2) of the Code, and all
“parachute payments” in excess of the “base
amount” (as defined under Section 280G(b)(3) of the
Code) shall be treated as subject to the Excise Tax, unless and
except to the extent that, in the opinion of the Company’s
independent certified public accountants appointed prior to any
change in ownership (as defined under
Section 280G(b)(2) of the Code) or tax counsel selected
by such accountants (the “ Accountants ”) such
Company Payments (in whole or in part) either do not constitute
“parachute payments,” including giving effect to the
recalculation of stock options in accordance with Treasury
Regulation Section 1.280G-1 Q/A33, represent reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the
“base amount” or are otherwise not subject to the
Excise Tax, and (y) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Accountants
in accordance with the principles of Section 280G of the
Code. All determinations hereunder shall be made by the
Accountants which shall provide detailed supporting calculations
both to the Company and the Executive at such time as it is
requested by the Company or the Executive. The determination
of the Accountants , subject to the adjustments provided
below, shall be final and binding upon the Company and the
Executive.
(d)
For purposes of determining the
am
