Exhibit
10.(iii)(y)
CHANGE OF CONTROL
PROTECTION AGREEMENT
Agreement (this “Agreement”) made
as of January 1, 2006, 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 Mats Berglund (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;
and
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.
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 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 his 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 his duties with the Company (other
than failure resulting from his 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 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 “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 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, sale of all or substantially all of the Company’s
assets or combination of the foregoing transactions or a
liquidation of the Company, (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 two (2) consecutive years 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 two-thirds (2/3) 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.
(iv)
“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)
“Good Reason”
shall mean a termination 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
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diminution in the Executive’s position,
duties, responsibilities, title 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
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 date hereof and shall expire on the earliest
of (i) three (3) years from the date hereof, subject to
the right of the Board and the Executive to extend it, provided
that, if a Change of Control takes place prior to three
(3) years from the date hereof, the duration of this Agreement
under this subpart (i) shall be until two (2) years after
the Change of Control whether such two (2) year period ends
before or after the end of such three (3) year period;
(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 Control has taken place within ninety
(90) days thereafter, the Executive shall be entitled to the
amounts provided in Section 4 upon such termination. In
the event of an Anticipatory Termination, if any equity grants
which were granted prior to a Change of Control would vest on a
Change of Control after an 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
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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 date hereof, not beyond the last
day of extension permitted under Section 409A (“Code
Section 409A”) of the Internal Revenue Code of 1986, as
amended (the “Code”), without such option being deemed
subject to Code Section 409A as of the date
granted.
4.
Compensation on Change
of Control Termination . (a) 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, 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; 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 Section 4(b) and
Section 8 hereof, in a lump sum (without regard to any
interest which may have accrued thereon) within ten (10) days
after the satisfaction of the requirements of Section 8 hereof
(or, if such termination occurred prior to a Change of Control,
within ten (10) days after the latter of the aforesaid date or
the Change of Control), (i) two (2) times the sum of
(x) the Executive’s annual base salary rate in effect
immediately prior to his 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 his annual base salary), plus (y) 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(a)(B)(i)(y),
the Executive’s target incentive compensation shall be deemed
to be 50% of the Executive’s annual base salary rate in
effect immediately prior to his 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 his annual base salary);
(ii) a lump sum amount equal to twenty-four (24) months of
additional employer contributions under any qualified or
nonqualified defined contribution pension plan or arrangement of
the Company applicable to the Executive, measured from the date of
termination of employment and not contributed to the extent that
the Executive would otherwise be entitled to such contributions
during such period if he had contributed at the maximum permitted
salary reduction level during such period; (iii) a pro rata
target bonus for the year in which Executive is terminated based on
the portion of the year the Executive was employed, provided that,
if no target annual incentive compensation is in effect during such
period, then for the purpose of this Section 4(a)(B)(iii), the
Executive’s target incentive compensation shall be deemed to
be 50% of the Executive’s annual base salary rate in effect
immediately prior to his termination (or if such
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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 his
annual base salary); and (iv) to the extent not paid pursuant
to Section 4(a)(A) above, any earned but unpaid bonus for
a previously completed fiscal year of the Company; provided that
such bonus shall be paid to the Executive in the year following the
completed fiscal year of the Company when other executive’s
of the Company receive their bonuses; and
(C) subject to Section 4(b) and
Section 8 hereof, (i) continued coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”) under the Company health plans in which the
Executive participated immediately prior to the date of termination
of the Executive’s employment, or materially equivalent plans
thereto (the “Health Plans”), for the Executive and the
Executive’s dependents until the earliest of (a) the
Executive or the Executive’s eligible dependents, as the case
may be, ceasing to be eligible under COBRA, (b) twenty-four
(24) months following the date of termination of the
Executive’s employment, and (c) the Executive’s
commencement of other substantially full-time employment; provided
that the Executive timely elects such COBRA coverage and pays the
same premium amount for such coverage as the Executive would pay if
an active employee; and further provided that such coverage shall
cease to the extent that the providing of such coverage would
violate applicable law or result in the Executive or other
participants being taxed on the benefits under such Health Plan or
alternative materially equivalent coverage or a payment therefor
(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 Health Plans); and (ii) 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.
(b) If the Company determines in good
faith that any payment under Section 4(a) would cause a
violation of Code Section 409A if paid within the first six
(6) months after termination of the Executive’s
employment, such amount(s) shall not be paid during such six
(6) month period but shall instead be paid in a lump sum
(without interest) immediately after the end of such six
(6) month period. Thereafter, payments shall be made in
accordance with the Company’s normal payroll
practices.
5.
Excise Tax
. 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 Code or any person affiliated
with the Company or such person) as a result of a Change of 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 amounts of any Company Payments shall be automatically reduced
to an amount one dollar less than an amount that would subject the
Executive to the Excise Tax; 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
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security and other taxes on such Company
Payments. The Executive may elect which payments and benefits
shall be reduced to accomplish the foregoing, but, if the Executive
does not make such an election, cash payments shall be reduced
first.
(a)
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 Code 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 Code Section 280G(b)(2)) 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 r
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