EXHIBIT
10.4
FORM
OF
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 __________________ 1 (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
2 (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:
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1.
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Definitions
. The foregoing terms shall have the
following meaning:
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_________________________
1
Tier
A -
Messrs. Itkin, Johnston, Berglund and Whitworth.
2
This date is
correct for all the Amended and Restated Agreements except for
Jonathan Whitworth whose agreement is dated as of September 24,
2006.
(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 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, 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.
(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 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 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 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 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 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) (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:
(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 he 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 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. [ ADD TO WHITWORTH
AGREEMENT ONLY: In addition, 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 Section 6 of the letter
agreement between the Executive and the Company dated September 24,
2006 (the “ Employment Agreement ”) as modified
by the letter agreements between the Executive and the Company
dated of even date herewith, 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 Employment
Agreement and (i) the Executive shall not be entitled to receive
the amounts under Sections 4(b) 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
Employment Agreement 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.
(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
anadditional 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,
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 Com
