EXHIBIT 10.1

 

December 31, 2008

 

Mr. Morten Arntzen

1018 Weed Street

New Canaan, Connecticut 06840

 

Dear Mr. Arntzen:

 

This letter agreement shall serve as the second amendment to the employment
letter agreement (the “Agreement”), dated as of January 19, 2004, by and between
you and 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, to further facilitate compliance with Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), and the applicable regulations
thereunder.

 

Effective as of January 1, 2005, the Agreement is amended as follows:

 

1.         The first sentence of Section 5(a) of the Agreement is amended in its
entirety to read as follows:

 

“(a) Death. If your employment with the Company terminates as a result of your
death, the Company will pay or provide to your spouse or estate, as applicable,
(i) any Base Salary earned but not yet paid as of the date of termination, paid
in accordance with the usual payroll practices of the Company, (ii) any accrued
vacation pay payable pursuant to the Company’s policies, (iii) any documented
unreimbursed business expenses reimbursed in accordance with Company policies,
(iv) any earned but unpaid bonus for any prior completed fiscal year, earned and
paid in accordance with, and to the extent provided under, the terms of the
applicable plan or program, and (v) any amounts, benefits or rights you are due
or entitled to pursuant to the terms of any plan, policy, program or arrangement
of the Company applicable to you, including any equity grant in accordance
therewith, paid or provided, as applicable, in accordance with the terms and
conditions of the applicable plan, policy, program or arrangement (collectively
the “Accrued Amounts”).

 

2.

Section 5(c) of the Agreement is amended in its entirety to read as follows:

 

“(c) Without Cause or For Good Reason.     If the Company terminates your
employment without Cause (as defined in Exhibit A) or you terminate your
employment for Good Reason, you will receive your Accrued Amounts and, provided
such termination is prior to January 19, 2012, subject to your execution and
delivery to the Company of a waiver and general release in the form attached
hereto as Exhibit E (with such changes as may be required to make the waiver and
release voluntary and binding on you in accordance with applicable law) that has
become effective within ninety (90) days after such termination, the Company
agrees (i) subject to Section 7(m)(ii), to pay you at the same time as such
amounts would be paid to you had you remained employed by the Company an amount
equal to your proper monthly Base Salary (as defined herein) in effect on the
date immediately prior to your termination for a period of twenty-four (24)
months, subject to Section 6(m) below; provided that, subject to the delay set
forth in Section 7(m)(ii), the payment of such amount shall commence on the
ninetieth (90th) day after the date of such termination, which first payment
shall include payment of any amounts that would otherwise be due prior thereto,
(ii) to pay you a pro-rata portion of your annual bonus for the fiscal year in
which such 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 you are employed by the Company and the
denominator of which is 365), any such amount shall be paid to you 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) to accelerate the vesting on the next vesting tranche of
the Options described in Section 4(b) above so that they become immediately
vested (with all other unvested Options forfeited) and to permit your vested
Options to remain exercisable for a period of one (1) year (but not beyond the
original ten (10) year term) following your termination of employment without
Cause or for Good Reason, subject to earlier termination in accordance with the
terms of the Option Plan unrelated to termination of employment, provided that
no portion of the Option that vests upon such termination may be exercised by
you prior to delivery of the aforesaid waiver and general release and expiration
of the revocation period with regard thereto, (iv) to accelerate the lapse of
restrictions on the next vesting tranche of the Restricted Stock described in
Section 4(c) above so that they immediately vest (with all other unvested
Restricted Stock forfeited), and (v) (A) if benefits under the Company health
plans in which you participated immediately prior to the termination of your
employment, or materially equivalent plans maintained by the Company in
replacement thereof (the “Health Plans”) will not be taxable to you, 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 you, reimbursement for your 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 your premium rate
in effect your 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 you and your dependents until the earliest of (x) you or your 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 date of your termination of employment and (z) the date of your
permitted entry to any future employer’s health plan upon or following your
commencement of other substantially full-time employment or the equivalent (such
period, the “Coverage Period”). If you receive the benefits under (v)(A), then
notwithstanding the forgoing, you shall pay the same premium amount for such
coverage as you would pay if an active employee under the Health Plans (as
determined based on your premium rate in effect on your 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. If you receive the payments
under (v)(B) then 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 you is greater than the amount that would have been taxable to you if
you were an employee and participated in the Health Plans. The Coverage Period
shall run concurrently with the applicable continuation coverage for you and
your dependents pursuant to COBRA. Notwithstanding the foregoing, if the Company
terminates your employment without Cause or you terminate your employment for
Good Reason at any time during the two (2) year period following a Change of
Control (as defined in the Change of Control Agreement attached hereto as
Exhibit D (as amended from time to time, the “Change of Control Agreement”), (I)
the Company shall pay you such amounts and provide you with such benefits as
provided in the Change of Control Agreement, if then in effect, in lieu of
Sections 5(c)(i), 5(c)(ii) and 5(c)(v); (II) in lieu of Section 5(c)(iii), to
the extent not vested upon a Change of Control, the vesting of all of the
Options described in Section 4(b) above will accelerate and your vested Options
will remain exercisable for a period ending on the later of ninety (90) days
following your termination of employment or the Change of Control (but not
beyond the original ten (10) year term), subject to earlier termination in
accordance with the terms of the Option Plan unrelated to termination of
employment; (III) in lieu of Section 5(c)(iv), the lapsing of restrictions on
all of the Restricted Stock described in Section 4(c) above will accelerate to
the date of such termination; and (IV) any release requirement shall only be as
required pursuant to the Change of Control Agreement then in effect and shall
not apply to the treatment of the Options and Restricted Stock. You will not be
entitled to any other amounts, except with regard to indemnification and
directors’ and officers’ liability insurance.”

 

2.         Section 7(m) of the Agreement, which was added pursuant to an
amendment to the Agreement in the form of a letter agreement dated February 15,
2007, is amended in its entirety to read as follows:

 

 

“(m)

Section 409A Compliance.

 

(i)        The intent of the parties is that payments and benefits under this
Agreement comply with, or be exempt from, the requirements of Code Section 409A
and the regulations and guidance promulgated thereunder (collectively “Code
Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement
shall be limited, construed and interpreted in accordance with such intent. If
you notify the Company (with specificity as to the reason therefor) that you
believe that any provision of this Agreement (or of any award of compensation,
including equity compensation or benefits) would cause you to incur any
additional tax or interest under Code Section 409A and the Company concurs with
such belief or the Company (without any obligation whatsoever to do so)
independently makes such determination, and modifying such provision would avoid
such additional tax or interest, the Company shall, after consulting with you,
reform such provision to try to comply with Code Section 409A through good faith
modifications to the minimum extent reasonably appropriate to conform with Code
Section 409A. To the extent that any provision hereof is modified in order to
comply with Code Section 409A, such modification shall be made in good faith and
shall, to the maximum extent reasonably possible, maintain the original intent
and economic benefit to the Executive and the Company of the applicable
provision without violating the provisions of Code Section 409A.

 

(ii)       A termination of employment shall not be deemed to have occurred for
purposes of any provision of this Agreement providing for the payment of any
amounts or benefits upon or following a termination of employment unless such
termination is also a “Separation from Service” within the meaning of Code
Section 409A and, for purposes of any such provision of the Agreement,
references to a “termination,” “termination of employment” or like terms shall
mean Separation from Service. Notwithstanding any provision to the contrary in
this Agreement, if you are deemed on the date of your termination to be a
“specified employee” within the meaning of that term under Code Section
409A(a)(2)(B) and using the identification methodology selected by the Company
from time to time, or if none, the default methodology set forth in Code Section
409A, then with regard to any payment or the providing of any benefit that
constitutes “non-qualified deferred compensation” pursuant to Code Section 409A,
to the extent required to be delayed in compliance with Code Section
409A(a)(2)(B), such payment or benefit shall not be made or provided to you
(subject to the last sentence of this Section 7(m)(ii)) prior to the earlier of
(A) the expiration of the six (6)-month period measured from the date of your
Separation from Service, and (B) the date of your death (the “Delay Period”). On
the first day of the seventh month following the date of your Separation from
Service or, if earlier, on the date of your death, all payments delayed pursuant
to this Section 7(m)(ii) (whether they would have otherwise been payable in a
single sum or in installments in the absence of such delay) shall be paid or
reimbursed to you in a lump sum, and any remaining payments and benefits due to
you under this Agreement shall be paid or provided in accordance with the normal
payment dates specified for them herein. Notwithstanding the foregoing, to the
extent that the foregoing applies to the provision of any ongoing welfare
benefits provided to you that would not be required to be delayed if the
premiums therefor were paid by you, you shall pay the full cost of the premiums
for such welfare benefits during the Delay Period and the Company shall pay you
an amount equal to the amount of such premiums paid by you during the Delay
Period promptly after its conclusion.

 

(iii)      In no event whatsoever shall the Company be liable for any additional
tax, interest or penalties that may be imposed on you by Code Section 409A or
any damages for failing to comply with Code Section 409A or this Section 7(m).

 

(iv)      If under this Agreement, an amount is to be paid in two or more
installments, for purposes of Code Section 409A, each installment shall be
treated as a separate payment.

 

(v)       To the extent any reimbursement of costs and expenses provided for
under this Agreement constitutes taxable income to you for Federal income tax
purposes, such reimbursements shall be made no later than December 31 of the
calendar year next following the calendar year in which the expenses to be
reimbursed are incurred.

 

(vi)      With regard to any provision herein that provides for reimbursement of
expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the
right to reimbursement or in-kind benefits is not subject to liquidation or
exchange for another benefit, and (ii) the amount of expenses eligible for
reimbursement, or in-kind benefits, provided during any taxable year shall not
affect the expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other taxable year, provided that the foregoing clause (ii)
shall not be violated with regard to expenses reimbursed under any arrangement
covered by Section 105(b) of the Code solely because such expenses are subject
to a limit related to the period the arrangement is in effect.

 

(vii)     Any gross-up payment due to an Eligible Executive under the Agreement
shall be paid to the Eligible Executive no later than the end of the calendar
year following the year in which he or she paid the applicable tax.

 

(viii)    Whenever a payment under the Agreement specifies a payment period with
reference to a number of days, the actual date of payment within the specified
period shall be within the sole discretion of the Company.

 

(ix)      To the extent that this Agreement provides for your indemnification by
the Company and/or the payment or advancement of costs and expenses associated
with indemnification, any such amounts shall be paid or advanced to you only in
a manner and to the extent that such amounts are exempt from the application of
Code Section 409A in accordance with the provisions of Treasury Regulation
1.409A-1(b)(10).”

 

 

All other terms and conditions contained in the referenced Agreement shall
remain in full force and effect.

 

Very truly yours,

 

OVERSEAS SHIPHOLDING GROUP, INC.

 

 

By:

/s/James I. Edelson

Name: James I. Edelson

 

Title:

General Counsel and Secretary

 

 

I agree and accept the above terms:

 

 

/s/Morten Arntzen

Mr. Morten Arntzen