EXHIBIT
10.5
OVERSEAS
SHIPHOLDING GROUP, INC.
SEVERANCE
PROTECTION PLAN
Effective
January 1, 2006
As amended
and restated effective as of December 31, 2008
INTRODUCTION
The purpose
of this Overseas Shipholding Group, Inc. Severance Protection Plan
(“ Plan ”) is to enable Overseas Shipholding
Group, Inc. (the “ Company ”) to offer a form of
protection for a possible loss of income to certain key employees
in the event their employment with the Company is terminated
without Cause (as defined in Appendix B hereto), thereby protecting
and enhancing the interests of the Company and its stockholders by
inducing such key employees to remain with the Company, and to
reinforce and encourage their continued focus and dedication.
Accordingly, to accomplish this purpose, the Board of Directors of
the Company (the “ Board ”) adopted this Plan,
effective January 1, 2006.
The Plan is
hereby amended and restated in its entirety in the form set forth
herein, effective as of December 31, 2008, in a manner that is
intended to comply with Section 409A of the Internal Revenue Code
of 1986, as amended (the “ Code ”) and the
regulations and guidance promulgated thereunder (collectively
“ Code Section 409A ”) and to enhance the
benefits that are available hereunder. Any individual who was an
Eligible Executive (as defined below) on December 31, 2008 shall
remain an Eligible Executive under the terms and conditions of the
Plan as set forth herein.
1.
Eligible Executives. For the
purpose of this Plan, “ Eligible Executives ”
shall mean collectively the Tier A Executives and the Tier B
Executives designated from time to time in the sole discretion of
the Board or the Committee (as defined in Section 9(a) below)
pursuant to a Notice of Eligibility, in the form attached hereto as
Appendix A, who have executed and delivered to the Committee the
Acknowledgment and Agreement set forth in such Notice of
Eligibility. The Board or the Committee may change an Eligible
Executive’s designation from Tier A to Tier B upon one (1)
year’s prior written notice and from Tier B to Tier A at any
time upon written notice.
2.
Term. The
protection period under this Plan (the “ Protection
Period ”) shall commence on January 1, 2006 and
shall continue until terminated or modified by the Company on not
less than one (1) year’s prior written notice to the Eligible
Executives then participating in the Plan. Notwithstanding the
foregoing, the Protection Period will terminate as to any Eligible
Executive upon (i) such Eligible Executive’s termination of
employment due to death, Disability (as defined in Appendix B
hereto), retirement, or resignation by the Eligible Executive for
any reason, (ii) the Company’s termination of such Eligible
Executive’s employment with or without Cause, or (iii) upon
one (1) year’s prior written notice by the Company to the
Eligible Executive of the Eligible Executive’s ceasing to be
eligible to participate in this Plan. Termination of the Protection
Period for an Eligible Executive shall not impact (x) any of the
Company’s then existing obligations to make payments or
provide benefits hereunder to such Eligible Executive as a result
of the Eligible Executive’s prior termination without Cause,
or (y) the continuing obligations of such Eligible Executive under
Section 7 hereof.
3.
Termination .
(a) If,
during the Protection Period as provided in Section 2 hereof, an
Eligible Executive’s employment with the Company is
terminated by the Company without Cause (the date of any such
termination, the “ Termination Date ”) the
Eligible Executive shall be entitled to the amounts provided in
Section 4 as of the Termination Date applicable to such Eligible
Executive.
(b) For
purposes of this Plan, a termination without Cause shall be a
termination by the Company other than for Cause or Disability. A
constructive termination shall not be treated as a termination
without Cause.
4. Severance
Compensation.
(a) If,
pursuant to Section 3, an Eligible Executive is entitled to the
amounts and benefits under this Section 4, the Eligible Executive
shall receive the following payments and benefits from the
Company:
(i) (A)
Subject to submission of appropriate documentation, any incurred
but unreimbursed business expenses for the period prior to the
Eligible Executive’s termination payable in accordance with
the Company’s policies and practices; (B) 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 Eligible Executive but
not yet paid, payable in accordance with the Company’s normal
policies and practices for such compensation; and (C) 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 Eligible
Executive as shall be determined and paid or provided in accordance
with the applicable plan or arrangement.
(ii) Subject
to Section 5 hereof: (A) an amount equal to the Eligible
Executive’s monthly base salary at the rate in effect
immediately prior to his or her termination, subject to Section
18(b), paid in equal installments on the Company’s normal
payroll dates in accordance with the usual payroll practices of the
Company, but off the employee payroll, for (x) if the Eligible
Executive is a Tier A Executive, twenty-four (24) months after the
Eligible Executive’s employment terminates or, (y) if the
Eligible Executive is a Tier B Executive, eighteen (18) months
after the Eligible Executive’s employment terminates, (B) a
pro-rata portion of the Eligible Executive’s annual bonus for
the fiscal year in which the Eligible Executive’s termination
occurs based on actual results for such year (determined by
multiplying the amount of such annual bonus which would be due for
the full fiscal year by a fraction, the numerator of which is the
number of days during the fiscal year of termination that the
Eligible Executive is employed by the Company and the denominator
of which is 365), and (C) any earned but unpaid annual bonus for a
previously completed fiscal year of the Company. Any bonus payable
to an Eligible Executive pursuant to (B) or (C) shall be paid to
the Eligible Executive in the calendar year following the completed
fiscal year of the Company for which such bonus is earned at such
time as other executives of the Company receive their bonuses for
such year, but in no event by later than December 31 of such
following year.
(iii) Subject
to Section 5 hereof, (A) if benefits under the Company health plans
in which the Eligible Executive participated immediately prior to
the Eligible Executive’s Termination Date, or materially
equivalent plans maintained by the Company in replacement thereof
(the “ Health Plans ”) will not be taxable to
the Eligible Executive, then continued
coverage at the Company’s expense (other than that set forth
below) under the Health Plans, or (B) if benefits under the Health
Plans will be taxable to the Eligible Executive, reimbursement for
the Eligible 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 Eligible
Executive on his or her Termination Date and excluding, for
purposes of calculating cost, an employee’s ability to pay
premiums with pre-tax dollars), in either case for the Eligible
Executive and the Eligible Executive’s dependents until the
earliest of (x) the Eligible Executive or the Eligible
Executive’s eligible dependents, as the case may be, ceasing
to be eligible under Consolidated Omnibus Budget Reconciliation Act
of 1985 (“ COBRA ”), (y) eighteen (18) months
following the Eligible Executive’s Termination Date and (z)
the date of the Eligible Executive’s permitted entry to any
future employer’s health plan upon or following the Eligible
Executive’s commencement of other substantially full-time
employment or the equivalent (such period, the “ Coverage
Period ”). Notwithstanding the foregoing, in the case of
(A), the Eligible Executive shall pay the same premium amount for
such coverage as he or she would pay if an active employee under
the Health Plans (as determined based on the premium rate in effect
for the Eligible Executive on his or her Termination Date 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 (B), 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 Eligible Executive is greater than the amount that
would have been taxable to the Eligible Executive if he or she were
an employee and participated in the Health Plans. The
Coverage
Period shall run concurrently with the applicable continuation
coverage for the Eligible Executive and the Eligible
Executive’s dependents pursuant to COBRA.
(b) In
the event of any violation of Section 7 hereof by an Eligible
Executive, the Company may immediately cease making any further
payments to such Eligible Executive under Section 4(a)(ii) and
cease providing the benefits to such Eligible Executive under
Section 4(a)(iii) and all amounts previously paid to such Eligible
Executive under Section 4(a)(ii) beyond ten thousand dollars
($10,000) shall be immediately repaid to the Company upon
demand.
5.
Acceptance Form and Release . Any and all amounts payable
and benefits or additional rights provided to an Eligible Executive
pursuant to Sections 4(a)(ii) and 4(a)(iii) of this Plan shall only
be payable or provided if the Eligible Executive executes and
delivers to the Company an Acceptance Form and Release in the form
attached hereto as Appendix C (the “ Release ”)
discharging all claims of the Eligible Executive which may have
occurred up to the Termination Date applicable to such Eligible
Executive (with such changes therein as may be necessary to make it
valid and encompassing under applicable law). The Company shall
provide the Eligible Executive with a copy of the Release within
seven (7) days following his or her Termination Date and the
Eligible Executive will be required to provide the Company with a
an executed copy of the Release that has become effective within
sixty (60) days following the Eligible Executive’s
Termination Date. Notwithstanding anything herein to the contrary,
all amounts payable to the Eligible Executive pursuant to Sections
4(a)(ii)(A) and 4(a)(iii) of this Plan shall, subject to Section
18(b), commence on the sixtieth (60 th ) day after the
Eligible Employee’s Termination Date, which first payment
shall include payment of any amounts that would otherwise be due
prior thereto. The Eligible Executive shall forfeit his or
her right to
receive the payments and benefits provided under Sections 4(a)(ii)
and 4(a)(iii) of this Plan in the event that the requirements of
this Section 5 are not timely satisfied.
6.
No Duty to Mitigate/Set-off . Other than as set forth in
Section 4(a)(iii)(C), if an Eligible Executive becomes
entitled to the amounts payable and benefits or additional rights
provided in Section 4 of this Plan, such Eligible Executive shall
not be required to seek other employment or to attempt in any way
to reduce any amounts payable to the Eligible Executive by the
Company pursuant to this Plan. The amounts due under Section 4 are
inclusive, and in lieu of, any amounts payable under any other
salary continuation or cash severance arrangement of the Company
and to the extent paid or provided under any other such arrangement
shall be offset against the amount due hereunder.
7. Confidentiality,
Non-Competition, Non-Solicitation and Cooperation.
(a) In
consideration of participating in this Plan (during and after the
Protection Period no matter how the Protection Period ends), by the
execution and delivery to the Committee of the Acknowledgement and
Agreement set forth on the Notice of Eligibility provided to such
Eligible Executive by the Board or the Committee in the form
attached hereto as Appendix A, each Eligible Executive agrees to
the following agreements:
(i) during
the Eligible Executive’s employment with the Company and
thereafter, the Eligible Executive, directly or indirectly, shall
not for any reason whatsoever, communicate or disclose to any
unauthorized person, firm or corporation, or use for the Eligible
Executive’s own account, without the prior written consent of
the Board or the Chief Executive Officer of the Company (the
“ CEO ”), any proprietary processes, trade
secrets or other confidential data or information of the Company
and its related and affiliated companies concerning their
businesses or affairs, accounts, products, services or customers,
it being understood,
however, that the obligations of this Section 7(a)(i) shall not
apply to the extent that the aforesaid matters (i) are disclosed in
circumstances in which the Eligible Executive is legally required
to do so, provided that the Eligible Executive gives the Company
prompt written notice of receipt of notice of any legal proceedings
so as the Company has the opportunity to obtain a protective order,
or (ii) become known to and available for use by the public other
than by the Eligible Executive’s wrongful act or
omission;
(ii) during
the Eligible Executive’s employment with the Company and
thereafter, the Eligible Executive shall fully cooperate with the
Company or its counsel in connection with any matter,
investigation, proceeding or litigation regarding any matter in
which the Eligible Executive was involved during his or her
employment with the Company or to which the Eligible Executive has
knowledge based on his or her employment with the
Company;
(iii) during
the Eligible Executive’s employment with the Company and for
the one (1) year period thereafter, the Eligible Executive shall
not participate, directly or indirectly, as an individual
proprietor, partner, stockholder, officer, employee, director,
joint venturer, investor, lender, consultant or in any capacity
whatsoever (within the United States of America, or in any country
where the Company or its affiliates do business) in a business in
competition with any Material Business (as defined below) conducted
by the Company as of the date of the termination of the Eligible
Executive’s employment (“ Competitor ”),
provided, however, that such participation will not include (i) the
mere ownership of not more than one percent (1%) of the total
outstanding stock of a publicly held company, (ii) engaging in any
activity with, or for, a non-competitive division, subsidiary or
affiliate of any Competitor, or (iii) any activity engaged in with
the prior written approval of the Board or the CEO. A business
shall be deemed to be a “ Material Business ” of
the Company if it generated more than 5% of the
Company’s revenues in the fiscal year ending immediately
prior to termination of the Eligible Executive’s employment
or is projected to generate more than 5% of the Company’s
revenues in the fiscal year of termination of the Eligible
Executive’s employment;
(iv) during
the Eligible Executive’s employment with the Company and for
the two (2) year period thereafter, the Eligible Executive, shall
not directly or indirectly, individually or on behalf of any other
person, firm, corporation or other entity, solicit, induce, hire or
retain any employee of the Company (or any person who had been such
an employee in the prior six (6) months) to leave the employ of the
Company or to accept employment or retention as an independent
contractor with, or render services to or with any other person,
firm, corporation or other entity unaffiliated with the Company or
take any action to assist or aid any other person, firm,
corporation or other entity in identifying, soliciting, hiring or
retaining any such employee; provided, an Eligible Executive may
serve as a reference after he or she is no longer employed by the
Company, but not with regard to any entity with which he or she is
affiliated or from which he or she is receiving compensation and
this provision shall not be violated by general advertising not
specifically targeted at employees of the Company;
(v) during
the Eligible Executive’s employment with the Company and for
the one (1) year period thereafter, the Eligible Executive shall
not solicit or induce any customer of the Company to purchase goods
or services offered by the Company from another person, firm,
corporation or other entity or assist or aid any other persons or
entity in identifying or soliciting any such customer;
(vi) during
the Eligible Executive’s employment with the Company and
thereafter, the Eligible Executive shall not make any statement
that disparage the Company or its employees, officers, directors,
products or services. Notwithstanding the foregoing,
truthful
statements made in the course of sworn testimony in administrative,
judicial or arbitral proceedings (including, without limitation,
depositions in connection with such proceedings) by the Eligible
Executive shall not be subject to this Section 7(a)(vi). In
addition, traditional competitive statements made by an Eligible
Executive which are not based on his or her employment with the
Company shall not be deemed a violation of the foregoing if the
Eligible Executive is in a competitive position; and
(vii) the
Eligible Executive shall not resign from the Company for any reason
within one hundred eighty (180) days from the date such Eligible
Executive becomes an Eligible Executive under this Plan.
(b) Because
the Company’s remedies at law for a breach or threatened
breach of any of the provisions of this Section 7 would be
inadequate, in the event of such a breach or threatened breach by
an Eligible Executive, in addition to any remedies at law, the
Company shall be entitled to obtain equitable relief in the form of
specific performance, a temporary restraining order, a temporary or
permanent injunction or any other equitable remedy which may then
be available against such Eligible Executive without the need to
post a bond.
(c) If
it is determined by a court of competent jurisdiction that any
restriction in this Section 7 is excessive in duration or scope or
is unreasonable or unenforceable, such restriction may be modified
or amended by the court to render it enforceable to the maximum
extent permitted.
8.
Funding. This Plan
shall be funded out of the general assets of the Company as and
when benefits are payable under this Plan. To the extent that any
Eligible Executive acquires a right to receive payments under this
Plan, such right shall not be secured by any assets of the Company
or any of its affiliated companies. The Eligible Executives shall
be general
creditors of the Company. Any assignment, lien or other encumbrance
by an Eligible Executive of the amounts and benefits provided under
this Plan shall be null and void. If the Company decides in its
sole discretion to establish any advance accrued reserve on its
books against the future expense of benefits payable hereunder, or
if the Company decides in its sole discretion to fund a trust under
this Plan, such reserve or trust shall not under any circumstances
be deemed to be an asset of this Plan.
9.
Administration of this Plan.
(a) The
general administration of this Plan on behalf of the Company (as
Plan Administrator under Section 3(16)(A) of the Employee
Retirement Income Security Act of 1974, as amended (“
ERISA ”)) shall be placed with an administrative
committee appointed by the Board to administer this Plan (the
“ Committee ”).
(b) The
Company may, in its sole discretion, pay or reimburse the members
of the Committee for all reasonable expenses incurred in connection
with their duties hereunder.
(c) Decisions
of the Committee shall be made by a majority of its members
attending a meeting at which a quorum is present (which meeting may
be held telephonically), or by written action in accordance with
applicable law. Subject to the terms of this Plan and provided that
the Committee acts in good faith, the Committee shall have complete
authority to determine an Eligible Executive’s participation
and benefits under this Plan, to interpret and construe, in its
sole discretion, the provisions of this Plan, and to make decisions
in all disputes involving the rights of any person interested in
this Plan. All decisions by the Committee shall be made in the
Committee’s sole discretion and shall be final and binding on
all persons having or claiming any interest in this
Plan.
(d) The
Committee may delegate any and all of its powers and
responsibiliti
