Exhibit 10.3




 





 


OMNIBUS AGREEMENT


 


AMONG


 


OVERSEAS SHIPHOLDING GROUP, INC.,


 


OSG AMERICA LLC,


 


OSG AMERICA L.P., AND


 


OSG AMERICA OPERATING COMPANY LLC




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I

  	
   

  
	
   

  	
   

  
	
  Definitions

  	
   

  
	
   

  	
   

  
	
  SECTION 1.01.  Definitions

  	
  2

  
	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  
	
  Restricted Business Opportunities

  	
   

  
	
   

  	
   

  
	
  SECTION 2.01.  Restricted
  Businesses

  	
  7

  
	
  SECTION 2.02.  Permitted
  Exceptions

  	
  7

  
	
  SECTION 2.03.  Scope of
  Prohibition

  	
  9

  
	
  SECTION 2.04.  Enforcement

  	
  9

  
	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
   

  	
   

  
	
  Optional Jones Act Assets

  	
   

  
	
   

  	
   

  
	
  SECTION 3.01.  Option to
  Purchase Certain Jones Act Assets

  	
  9

  
	
  SECTION 3.02.  Exercise Period
  of Options

  	
  10

  
	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
   

  	
   

  
	
  Business Opportunities and Option Exercise Procedures

  	
   

  
	
   

  	
   

  
	
  SECTION 4.01.  Notice of
  Offered Assets

  	
  10

  
	
  SECTION 4.02.  Exercise of
  Options

  	
  10

  
	
  SECTION 4.03.  Term Sheets

  	
  11

  
	
  SECTION 4.04.  Access to
  Information

  	
  11

  
	
  SECTION 4.05.  Purchase Price

  	
  11

  
	
  SECTION 4.06.  Last Chance
  Option

  	
  12

  
	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
   

  	
   

  
	
  Rights of First Offer

  	
   

  
	
   

  	
   

  
	
  SECTION 5.01.  Rights of First
  Offer

  	
  12

  
	
  SECTION 5.02.  Procedures for
  Rights of First Offer

  	
  13

  



 

















 


	
  ARTICLE VI

  	
   

  
	
   

  	
   

  
	
  Indemnification

  	
   

  
	
   

  	
   

  
	
  SECTION 6.01.  OSG Indemnification

  	
  14

  
	
  SECTION 6.02.  Limitation
  Regarding Indemnification

  	
  14

  
	
  SECTION 6.03.  Indemnification
  Procedures

  	
  15

  
	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
   

  	
   

  
	
  Miscellaneous

  	
   

  
	
   

  	
   

  
	
  SECTION 7.01.  Choice of Law;
  Submission to Jurisdiction

  	
  16

  
	
  SECTION 7.02.  Notice

  	
  16

  
	
  SECTION 7.03.  Entire Agreement

  	
  17

  
	
  SECTION 7.04.  Termination

  	
  17

  
	
  SECTION 7.05.  Waiver; Effect
  of Waiver or Consent

  	
  17

  
	
  SECTION 7.06.  Amendment or
  Modification

  	
  17

  
	
  SECTION 7.07.  Assignment

  	
  17

  
	
  SECTION 7.08.  Counterparts

  	
  17

  
	
  SECTION 7.09.  Severability

  	
  18

  
	
  SECTION 7.10.  Gender,
  Articles, Sections and Schedules

  	
  18

  
	
  SECTION 7.11.  Further
  Assurances

  	
  18

  
	
  SECTION 7.12.  Withholding or
  Granting of Consent

  	
  18

  
	
  SECTION 7.13.  Laws and
  Regulations

  	
  18

  
	
  SECTION 7.14.  Negotiation of
  Rights of OSG, Limited Partners, Assignees, and Third Parties

  	
  18

  
	
  SECTION 7.15.  No Recourse
  Against Officers or Directors

  	
  18

  



 

















 


OMNIBUS AGREEMENT is entered into on, and
effective as of, the Closing Date (as defined herein), among OVERSEAS
SHIPHOLDING GROUP, INC., a Delaware corporation (“OSG”), OSG AMERICA
LLC, a Delaware limited liability company (including any permitted successors
and assigns under the Partnership Agreement (as defined herein), “OSG MLP
General Partner”), for itself and on behalf of OSG MLP (as defined herein)
in its capacity as general partner, OSG AMERICA L.P., a Delaware limited
partnership (“OSG MLP”), and OSG AMERICA OPERATING COMPANY LLC, a
Delaware limited liability company (“OSG MLP Operating Company”).


 


WHEREAS OSG
MLP proposes to undertake an initial public offering of its common units and
the Parties (as defined herein) desire to enter into this Agreement to evidence
their understanding with respect to the various matters set forth herein;


 


WHEREAS the Parties
desire by their execution of this Agreement to evidence their understanding, as
more fully set forth in Article II and Article IV, with respect to
(a) those business opportunities that the OSG Entities (as defined herein)
will not pursue during the term of this Agreement and (b) the procedures
whereby such business opportunities are to be offered to the OSG Partnership
Group (as defined herein) and accepted or declined;


 


WHEREAS the
Parties desire by their execution of this Agreement to evidence their
understanding, as more fully set forth in Article III and Article IV,
with respect to (a) OSG MLP’s exclusive options to acquire the Option Assets
(as defined herein) and (b) the procedures whereby such options are exercised;


 


WHEREAS the Parties
desire by their execution of this Agreement to evidence their understanding, as
more fully set forth in Article V, with respect to (a) OSG’s right of
first offer with respect to certain Jones Act Assets (as defined herein) that
the OSG MLP Entities may wish to dispose of and (b) OSG MLP’s right of
first offer with respect to certain Jones Act Assets (as defined herein) the
OSG Entities may wish to dispose of; and


 


WHEREAS the Parties
desire by their execution of this Agreement to evidence their understanding, as
more fully set forth in Article VI, with respect to certain
indemnification obligations of OSG.


 


NOW,
THEREFORE, in consideration of the foregoing and the respective covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:


 

















 


ARTICLE I


 


Definitions


 


SECTION 1.01. Definitions.  For the purposes of this Agreement:


 


“Affiliate”
means, with respect to any Person, any other Person that directly or indirectly
through one or more intermediaries’ controls, is controlled by or is under
common control with, the Person in question. As used herein, the term “control”
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.


 


“Agreement”
means this Omnibus Agreement, as it may be amended, modified, or supplemented
from time to time in accordance with Section 7.06 hereof.


 


“APSI”
means Aker Philadelphia Shipyard, Inc., a Pennsylvania corporation.


 


“ASC”
means American Shipping Corporation, a Delaware corporation.


 


“Bender”
means Bender Shipbuilding & Repair Co., Inc., an Alabama corporation.


 


“Bid Jones
Act Assets” has the meaning given to such term in
Section 2.02(e)(iii).


 


“Change of
Control” means, with respect to any Person (the “Applicable Person”),
any of the following events:  (a) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the Applicable Person’s
assets to any other Person, unless immediately following such sale, lease,
exchange or other transfer such assets are owned, directly or indirectly, by
the Applicable Person; (b) the consolidation or merger of the Applicable
Person with or into another Person pursuant to a transaction in which the
outstanding Voting Securities of the Applicable Person are changed into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Securities of the Applicable
Person are changed into or exchanged for Voting Securities of the surviving
Person or its parent and (ii) the holders of the Voting Securities of the
Applicable Person immediately prior to such transaction own, directly or
indirectly, not less than a majority of the outstanding Voting Securities of
the surviving Person or its parent immediately after such transaction; and (c) a
“person” or “group” (within the meaning of Sections 13(d) or 14(d)(2) of
the Exchange Act) (other than OSG or its Affiliates, with respect to OSG MLP
General Partner), being or becoming the “beneficial owner” (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) of more than 50% of all of the then
outstanding Voting Securities of the Applicable Person, except in a merger or
consolidation which would not constitute a Change of Control under clause (b)
above.


 


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“Closing
Date” means the date of the closing of the initial public offering of
common units representing limited partner interests in OSG MLP.


 


“Conflicts
Committee” means the Conflicts Committee of the board of directors of OSG
MLP General Partner.


 


“Contribution
Agreement” means that certain Amended and Restated, Contribution,
Conveyance and Assumption Agreement, dated as of the Closing Date, among OSG
Bulk Ships, Inc., OSG Ship Management, Inc., OSG MLP One Percent Interest
Corporation, OSG MLP General Partner and OSG MLP, together with the additional
conveyance documents and instruments contemplated or referenced thereunder.


 


“Contribution
Assets” has the meaning given such term in Section 6.01.


 


“control”
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.


 


“Covered
Environmental Losses” means all Losses suffered or incurred by the OSG MLP
Group by reason of, arising out of or resulting from:


 


(a) any
violation or correction of violation of Environmental Laws; or


 


(b) any event,
omission or condition relating to environmental or human health and safety
matters, in each case, associated with the ownership or operation by the OSG
Entities of the Contribution Assets (including, without limitation, the
presence of Hazardous Substances on, under, about or migrating to or from the
Contribution Assets or the disposal, release of or exposure to Hazardous
Substances generated by or otherwise related to the operation of the
Contribution Assets, irrespective of where such assets are located), including,
without limitation, (i) the cost and expense of any investigation,
assessment, evaluation, monitoring, containment, cleanup, repair, restoration,
remediation or other corrective action required or necessary under
Environmental Laws, (ii) the cost or expense of the preparation and
implementation of any closure, remedial, corrective action or other plans required
or necessary under Environmental Laws and (iii) the cost and expense for
any environmental or toxic tort pre-trial, trial or appellate legal or
litigation support work;


 


but only to
the extent that such violation complained of under clause (a), or such
events, omissions or conditions included in clause (b), occurred before
the Closing Date; and, provided that, in no event shall Losses to the
extent arising from a change in any Environmental Law after the Closing Date be
deemed “Covered Environmental Losses”.


 


“Environmental
Laws” means all U.S. Federal, state and local and all foreign laws,
statutes, rules, regulations, orders, judgments and ordinances relating to
protection of health and safety and the environment, including, without
limitation, the United States Federal Comprehensive Environmental Response,
Compensation and 


 


3

















 


Liability Act,
the Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water
Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the Oil
Pollution Act of 1990, the Hazardous Materials Transportation Act, the Marine
Mammal Protection Act, the Endangered Species Act, the National Environmental
Policy Act, and other environmental conservation and protection laws, each as
amended through the Closing Date.


 


“Exchange
Act” means the Securities Exchange Act of 1934, as amended.


 


“First
Offer Negotiation Notice” has the meaning given such term in
Section 5.02(b).


 


“First
Offer Negotiation Period” has the meaning given such term in Section 5.02(b).


 


“Hazardous
Substances” means (a) substances defined in or regulated under
applicable Environmental Laws; (b) petroleum and petroleum products,
including crude oil and any fractions thereof; (c) natural gas, synthetic
gas and any mixtures thereof; (d) any substances with respect to which a Federal,
state, foreign or local agency requires environmental investigation,
monitoring, reporting or remediation; (e) any hazardous waste or solid
waste, pollutant or contaminant within the meaning of any Environmental Law;
(f) any solid, hazardous, dangerous or toxic chemical, material, waste or
substance, within the meaning of and regulated by any Environmental Law; (g) any
radioactive material; and (h) any asbestos-containing materials that
represent a health hazard.


 


“Jones Act
Assets” means any tanker or tug-barge unit used in connection with a
Restricted Business and related charters and where the context requires
includes the entity that owns or charters such tanker or tug-barge unit.


 


“Jones Act
Project” means any project involving a Restricted Business.


 


“Last
Chance Option” has the meaning given such term in Section 4.06.


 


“Losses”
means losses, damages, liabilities, claims, demands, causes of action,
judgments, settlements, fines, penalties, costs and expenses (including,
without limitation, court costs and reasonable attorneys’ and experts’ fees) of
any and every kind or character; provided, however, that such
term shall not include any special, indirect, incidental or consequential
damages.


 


“Lease”,
for the avoidance of doubt, includes without limitation, a bareboat charter
agreement.


 


“Negotiation
Period” has the meaning given such term in Section 4.05.


 


“Offered
Assets” has the meaning given such term in Section 4.01.


 


“Offered
Assets Notice” has the meaning given such term in Section 4.01.


 


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“Option
Assets” has the meaning given such term in Section 3.01.


 


“Option
Assets Exercise Notice” has the meaning given such term in
Section 4.02.


 


“Options”
has the meaning given such term in Section 3.01.


 


“OSG”
is defined in the introduction to this Agreement.


 


“OSG
Bareboat Charter Entity” has the meaning given such term in
Section 3.01(b)(i).


 


“OSG Barge
Entity” has the meaning given such term in Section 3.01(a)(ii).


 


“OSG
Entities” means OSG and any Person controlled, directly or indirectly, by
OSG other than the OSG MLP Entities.


 


“OSG MLP”
is defined in the introduction to this Agreement.


 


“OSG MLP
General Partner” is defined in the introduction to this Agreement.


 


“OSG MLP
Entities” means OSG MLP General Partner and each member of the OSG MLP
Group.


 


“OSG MLP
Group” means OSG MLP and any Person controlled by OSG MLP.


 


“OSG MLP
Group Member” means any Person that is part of the OSG MLP Group.


 


“OSG Time
Charter Entity” has the meaning given such term in
Section 3.01(b)(ii).


 


“OSG Tug
Entity” has the meaning given to such term in Section 3.01(a)(i).


 


“Parties”
means the parties to this Agreement and their successors and permitted assigns.


 


“Partnership
Agreement” means the Amended and Restated Agreement of Limited Partnership
of the OSG MLP, dated as of the Closing Date, as such agreement is in effect on
the Closing Date, to which reference is hereby made for all purposes of this
Agreement. No amendment or modification to the Partnership Agreement subsequent
to the Closing Date shall be given effect for purposes of this Agreement unless
consented to by each of the Parties to this Agreement.


 


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“Partnership
Securities” has the meaning given to such term in the Partnership
Agreement.


 


“Person”
means an individual, corporation, partnership, joint venture, trust, limited
liability company, unincorporated organization or any other entity.


 


“Potential
Transferee” has the meaning given such term in Section 5.02(a).


 


“Potential
Transferee Group Member” means the Potential Transferee and any Person controlled
by such Potential Transferee.


 


“Proposed
Purchase Price” has the meaning given to such term in Section 4.05.


 


“Proposed
Purchase Price Notice” has the meaning given to such term in
Section 4.05.


 


“Rejection
Notice” has the meaning given to such term in Section 5.02(d).


 


“Restricted
Business” has the meaning given to such term in Section 2.01.


 


“Retained
Assets” means all right, title and interest in and to assets of the OSG
Entities other than the Contribution Assets.


 


“Retained
Liabilities” means any and all liabilities and obligations of any and every
kind or character of the OSG Entities not assumed by the OSG MLP Group pursuant
to the Contribution Agreement.


 


“Sale
Assets” has the meaning given such term in Section 5.02(a).


 


“Section 7-704(d)”
means Section 7-704(d) of the Internal Revenue Code of 1986, as amended,
and any successor provision thereto.


 


“Term Sheet”
has the meaning given such term in Section 4.03.


 


“Transfer”
means any transfer, assignment, sale or other disposition of the leasehold
interests or fee ownership interests in any Jones Act Assets by an OSG Entity
or OSG MLP Group Member or all of the capital stock or membership interests of
the OSG Entity or OSG MLP Group Member that leases or owns any Jones Act Assets,
as applicable; provided, however, that such term shall not
include:  (a) transfers,
assignments, sales or other dispositions from an OSG Entity to another OSG
Entity, or from an OSG MLP Group Member to another OSG MLP Group Member; (b) transfers,
assignments, sales or other dispositions pursuant to the terms of any related
charter, contract of affreightment or other agreement with a charter party or
the party to the contract of affreightment, as applicable; (c) transfers,
assignments, sales or other dispositions pursuant to Article II; or (d) grants
of security interests in or mortgages or liens on such Jones Act Assets in
favor of a bona fide third-party lender (but not the foreclosing of any such
security interest, mortgage or lien).


 


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“Transfer
Notice” has the meaning given such term in Section 5.02(a).


 


“Transferring
Party” has the meaning given such term in Section 5.02(a).


 


“Transferring
Party Parent” has the meaning given such term in Section 5.02(a).


 


“Voting
Securities” means securities of any class of Person entitling the holders
thereof to vote in the election of members of the board of directors or other
similar governing body of the Person.


 


ARTICLE II


 


Restricted Business Opportunities


 


SECTION 2.01. Restricted
Businesses.  Except as permitted by
Section 2.02, OSG shall not, and shall not permit the other OSG Entities
to, engage in or acquire or invest in any business that provides marine
transportation, distribution and logistics services in connection with the
transportation of crude oil and refined petroleum products by water between
points in the United States to which the United States coastwise laws apply to
the extent such business, at the time such business is first proposed to be
engaged in by any such OSG Entity, generates “qualifying income” within the
meaning of Section 7-704(d) (each a “Restricted Business”).


 


SECTION 2.02. Permitted
Exceptions.  Notwithstanding any
provision of Section 2.01 to the contrary, any OSG Entity may engage in
the following activities under any of the following circumstances:


 


(a) the engagement in, acquisition of or investment in any Restricted Business
with the approval of the Conflicts Committee;


 


(b) the ownership, operation and/or chartering of any Retained Assets
(including replacements of and modifications or additions to the Retained
Assets) or Option Assets (including replacements of and modifications or
additions to the Option Assets) and in the case of any Option Assets unless and
until such Option Assets are Transferred to an OSG MLP Group Member upon the
exercise of the Option to acquire such Option Assets;


 


(c) the ownership, operation and/or chartering of any Jones Act Assets
acquired after the Closing Date, including Jones Act Assets acquired as part of
a larger transaction, if the OSG Entity acquiring such Jones Act Assets has
offered OSG MLP General Partner the opportunity for any of the OSG MLP Group
Members to acquire such Jones Act Assets in accordance with the procedures set
forth in Article IV and OSG MLP General Partner, with the approval of the
Conflicts Committee, has elected not to cause any OSG MLP Group Member to acquire
such Jones Act Assets;


 


7

















 


(d) the entry into any arrangement for the construction of newbuild
Jones Act Assets and/or the chartering of such newbuild Jones Act Assets to a
third party that is not an Affiliate of OSG and upon delivery of any such
newbuild Jones Act Assets the ownership, operation and/or chartering of such
newbuild Jones Act Asset if the OSG Entity acquiring such Jones Act Assets has
offered OSG MLP General Partner the opportunity for any of the OSG MLP Group
Members to acquire such newbuild Jones Act Assets in accordance with the
procedures set forth in Article IV and OSG MLP General Partner, with the
approval of the Conflicts Committee, has elected not to cause any OSG MLP Group
Member to acquire such Jones Act Assets;


 


(e) the ownership, operation and/or chartering of Jones Act Assets that
(i) have been offered to OSG MLP General Partner as described in Section 2.02(c),
(ii) are newbuild Jones Act Assets that have been offered to OSG MLP
General Partner as described in Section 2.02(d) or (iii) relate to a
tender, bid or award for a proposed Jones Act Project that an OSG Entity has
submitted or received (or hereafter submits or receives) (such Jones Act Assets
in clause (iii) being referred to herein as “Bid Jones Act Assets”),
in each case pending the applicable offer of such Jones Act Assets to OSG MLP
General Partner and the determination of OSG MLP General Partner in accordance
with Article IV whether to acquire such Jones Act Assets and, if OSG MLP
General Partner, with the approval of the Conflicts Committee, has elected to
cause an OSG MLP Group Member to acquire such Jones Act Assets, pending the
closing of such acquisition;


 


(f) the ownership, operation and/or chartering of Jones Act Assets
referred to in Section 2.02(e) that OSG MLP General Partner, with the
approval of the Conflicts Committee, has elected to cause an OSG MLP Group
Member to acquire such Jones Act Assets but in respect of which (i) OSG
and the Conflicts Committee failed to agree upon the terms and conditions for
the Transfer of such Jones Act Assets to an OSG MLP Group Member in accordance
with Article IV and (ii) the Last Chance Option was not exercised in
accordance with Section 4.05;


 


(g) the provision by OSG Entities of ship management services relating
to a Restricted Business;


 


(h) the acquisition of up to a 9.9% equity ownership, voting or profit
participation interest in any publicly traded Person (other than OSG MLP) that
engages in a Restricted Business;


 


(i) the ownership, operation and/or chartering of any Jones Act Assets
with respect to which OSG MLP General Partner has advised OSG that OSG MLP
General Partner has elected, with the approval of the Conflicts Committee, not
to cause an OSG MLP Group Member to acquire (or seek to acquire).


 


8

















 


SECTION 2.03. Scope
of Prohibition.  If any OSG Entity
engages in a Restricted Business pursuant to any of the exceptions described in
Section 2.02 OSG shall not, and shall not permit the other OSG Entities
to, subsequently expand such business other than pursuant to the exceptions
contained in Section 2.02. Except as otherwise provided in this Article II
and the Partnership Agreement each OSG Entity shall be free to engage (whether
directly or through the acquisition of equity or debt interests in any Person) in
any business activity whatsoever, including those that may be in direct
competition with any OSG MLP Entity.


 


SECTION 2.04. Enforcement.  OSG agrees and acknowledges that OSG MLP does
not have an adequate remedy at law for the breach by OSG of its covenants and
agreements set forth in this Article II, and that any breach by OSG of its
covenants and agreements set forth in this Article II would result in
irreparable injury to OSG MLP. OSG further agrees and acknowledges that OSG MLP
may, in addition to the other remedies which may be available to OSG MLP, file
a suit in equity to enjoin OSG from such breach, and consent to the issuance of
injunctive relief to enforce the provisions of this Article II.


 


ARTICLE III


 


Optional Jones Act Assets


 


SECTION 3.01. Option
to Purchase Certain Jones Act Assets. 
OSG, on behalf of itself and the other OSG Entities, hereby grants to
OSG MLP General Partner, on behalf of OSG MLP, exclusive options for any of the
OSG MLP Group Members to:


 


(a)  purchase (i) all of the capital stock or
membership interests of each OSG Entity specified in Schedule I to this
Agreement (each an “OSG Tug Entity”) that has entered into a
shipbuilding contract with Bender to construct the newbuild Jones Act Assets
specified in Schedule I to this Agreement alongside the name of such OSG Tug
Entity and (ii) with respect to each such OSG Tug Entity, all of the
capital stock or membership interests of each OSG Entity (each an “OSG Barge
Entity”) specified in Schedule 1 alongside such OSG Tug Entity that
has entered into a shipbuilding contract with Bender to construct the newbuild
Jones Act Assets specified in Schedule I alongside the name of such OSG
Barge Entity;


 


(b)  purchase (i) all of the capital stock or
membership interests of each OSG Entity specified in Schedule II to this
Agreement (each an “OSG Bareboat Charter Entity”) that has entered into
a bareboat charter agreement with a wholly owned subsidiary of ASC to lease
from such wholly owned subsidiary of ASC the newbuild Jones Act Assets
specified in Schedule II to this Agreement alongside the name of such OSG Bareboat
Charter Entity that is being or will be constructed by APSI and (ii) with
respect to each such OSG Bareboat Charter Entity, all of the capital stock or
membership interests of each OSG Entity specified in Schedule II alongside
such OSG Bareboat Charter Entity that is the indirect parent of the OSG Entity
that has entered into a time charter agreement with such OSG Bareboat Charter
Entity to time charter the newbuild


 


9

















 


Jones Act Assets leased by such OSG Bareboat
Charter Entity from a wholly owned subsidiary of ASC (each such indirect parent
OSG Entity an “OSG Time Charter Entity”);


 


Each OSG
Entity subject to clauses (a) and (b) above (collectively, the “Option
Assets”) shall be subject to separate options (each an “Option”, and
collectively, the “Options”) capable of being exercised by OSG MLP
General Partner, with the approval of the Conflicts Committee, individually and
separate from each other Option.


 


SECTION 3.02. Exercise
Period of Options.  Each Option to
acquire Option Assets may be exercised by OSG MLP General Partner, with the
approval of the Conflicts Committee, at any time during the period commencing
as of the Closing Date and ending on the date that is 364 days after the
date of delivery of the applicable Option Assets subject to such Option.


 


ARTICLE IV


 


Business Opportunities and Option Exercise Procedures


 


SECTION 4.01. Notice
of Offered Assets.  In the event that
(a) an OSG Entity acquires Jones Act Assets as described in
Section 2.02(c), (b) an OSG Entity enters into an arrangement for the
construction of newbuild Jones Act Assets as described in Section 2.02(d)
or (c) an OSG Entity is awarded a contract for the transportation
requirements for all or any portion of any proposed Jones Act Project for which
an OSG Entity has tendered or submitted a bid or received an award as described
in Section 2.02(e)(iii), then:


 


(i) in the
case of clause (a) above, not later than 30 days after the
consummation of the acquisition; or


 


(ii) in the
case of clauses (b) and (c) above, not later than 180 days before the
scheduled delivery date of the relevant newbuild Jones Act Assets or Bid Jones
Act Assets,


 


OSG shall
notify (an “Offered Assets Notice”) OSG MLP General Partner of such
event and offer OSG MLP General Partner the opportunity for any of the OSG MLP
Group Members to acquire such Jones Act Assets (the “Offered Assets”).


 


SECTION 4.02. Exercise
of Options.  OSG MLP General Partner
shall notify (an “Option Assets Exercise Notice”) OSG during the
exercise period for each Option that either (a) OSG MLP General Partner has
elected, with the approval of the Conflicts Committee, not to exercise such
Option or (b) OSG MLP General Partner, with the approval of the Conflicts
Committee, has elected to exercise such Option and wishes to cause an OSG MLP
Group Member to acquire the Option Assets subject to such Option, subject to the
negotiation of the terms and conditions of the Transfer to an OSG


 


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MLP Group Member of such Option Assets in
accordance with the provisions of this Article IV.


 


SECTION 4.03. Term
Sheets.  In the event that (a) OSG
gives an Offered Assets Notice or (b) OSG MLP General Partner gives an
Option Assets Exercise Notice electing, with the approval of the Conflicts
Committee, to exercise the applicable Option, then:


 


(i) in the case of clause (a) above, at the same time the Offered
Assets Notice is given;


 


(ii) in the case of clause (b) above, not later than 45 days after
the date of the Option Assets Exercise Notice,


 


OSG shall
submit a term sheet (a “Term Sheet”) to OSG MLP General Partner
containing the fundamental terms and conditions (other than purchase price) on
which it would be willing to Transfer (or to cause another OSG Entity to
Transfer) to an OSG MLP Group Member the applicable Offered Assets or Option
Assets, as applicable, including any liabilities to be assumed by OSG MLP.


 


SECTION 4.04. Access
to Information. As soon as practicable after a Term Sheet has been
submitted to OSG MLP General Partner, OSG will deliver to OSG MLP General
Partner all information prepared by or on behalf of or in the possession of OSG
relating to the Offered Assets or the Option Assets, as applicable, and
reasonably requested by OSG MLP General Partner. As a condition of delivery of
such information to OSG MLP General Partner, OSG may require OSG MLP General
Partner to execute a formal confidentiality agreement in respect of such
information in a form reasonably satisfactory to OSG.


 


SECTION 4.05. Purchase
Price.  Within 45 days after receiving
a Term Sheet, OSG MLP General Partner shall, with the approval of the Conflicts
Committee, notify (a “Proposed Purchase Price Notice”) OSG of the consideration,
which may be any combination of cash and Partnership Securities, (the “Proposed
Purchase Price”) it is willing to cause an OSG MLP Group Member to pay for
the applicable Offered Assets or Option Assets. OSG and the Conflicts Committee
shall negotiate in good faith for a 50-day period following receipt of the
Proposed Purchase Price Notice by OSG (the “Negotiation Period”) the
terms and conditions of an agreement, including the consideration, for the
Transfer of such Offered Assets or Option Assets, as applicable, to an OSG MLP
Group Member and such terms and conditions and consideration are to be based on
the terms and conditions set forth in the Term Sheet and the Proposed Purchase
Price Notice. If OSG and the Conflicts Committee are unable to agree on the
terms and conditions of an agreement for the Transfer of such Offered Assets or
Option Assets, as applicable, during the Negotiation Period then OSG and the
Conflicts Committee shall negotiate in good faith for a further 10-day period
the terms and conditions of a cash-only agreement for the Transfer of such
Offered Assets or Option Assets, as applicable, to an OSG MLP Group and failing
agreement the applicable OSG Entity may Transfer the applicable Offered Assets
or Option Assets to a third party not Affiliated with OSG


 


11

















 


within 180 days after the end of the 10-day
period immediately following the Negotiation Period on terms and conditions that
are not materially more favorable to the proposed purchaser than the terms and
conditions specified in the Term Sheet and for a purchase price that is not
less than 101% of the fair market value of the Proposed Purchase Price without
any further obligation, during such 180 day period, to offer OSG MLP General
Partner the opportunity for any of the OSG MLP Group Members acquire the
applicable Offered Assets or Option Assets in accordance with Article V.


 


SECTION 4.06. Last
Chance Option.  If the applicable OSG
Entity has not Transferred, or agreed in writing to Transfer, such Offered
Assets or Option Assets, as applicable, to a third party not Affiliated with
OSG within 180 days after the end of the Negotiation Period in accordance with
Section 4.05 then OSG MLP General Partner may elect, with the approval of
the Conflicts Committee, to cause an OSG MLP Group Member to acquire the
applicable Offered Assets or Option Assets upon the terms and conditions specified
in the Term Sheet and for the Proposed Purchase Price (a “Last Chance Option”).
OSG MLP General Partner shall notify OSG within 45 days of the earlier of
the expiration of the 180-day period after the end of the 10-day period immediately
following the Negotiation Period and such date on which OSG notifies OSG MLP
General Partner that it will no longer pursue a Transfer to a third party not
Affiliated with OSG that either (a) OSG MLP General Partner has elected, with
the approval of the Conflicts Committee, not to exercise the Last Chance Option
or (b) OSG MLP General Partner, with the approval of the Conflicts Committee,
has elected to exercise the Last Chance Option and wishes to cause an OSG MLP
Group Member to acquire the Offered Assets or Option Assets subject to such
Last Chance Option upon the terms and conditions specified in the Term Sheet
and for the Proposed Purchase Price. In the event that OSG MLP General Partner
elects, with the approval of the Conflicts Committee, not to exercise the Last
Chance Option with respect to such Offered Assets or Option Assets, then such
OSG Entity shall be permitted to retain such Offered Assets or Option Assets in
accordance with Article II.


 


ARTICLE V


 


Rights of First Offer


 


SECTION 5.01. Rights
of First Offer.  (a)  OSG MLP, on behalf of itself and the other
OSG MLP Group Members, hereby grants to OSG a right of first offer on any
proposed Transfer by any OSG MLP Group Member of any Jones Act Assets owned, operated
or chartered by any such OSG MLP Group Member.


 


(b)  OSG, on behalf of itself and the other OSG
Entities, hereby grants to OSG MLP General Partner, on behalf of OSG MLP, a
right of first offer on any proposed Transfer by any OSG Entity of any Jones
Act Assets owned, operated or chartered by any such OSG Entity, including any
Option Asset or Offered Asset not purchased by any OSG MLP Group Member
pursuant to Article IV.


 


12

















 


(c)  The Parties acknowledge that all potential
Transfers of Jones Act Assets pursuant to this Article V are subject to
obtaining any and all written consents of governmental authorities and other
non-affiliated third parties and to the terms of all existing agreements in
respect of such Jones Act Assets.


 


SECTION 5.02. Procedures
for Rights of First Offer.  (a)  In the event that an OSG MLP Group Member or
an OSG Entity (as applicable, the “Transferring Party”) proposes to
Transfer any Jones Act Assets (the “Sale Assets”) to a third party not
Affiliated with such Transferring Party, prior to engaging in any negotiations
or otherwise offering to Transfer the Sale Assets to any such third party, OSG
or OSG MLP General Partner on behalf of such Transferring Party (the “Transferring
Party Parent”) shall notify (a “Transfer Notice”) OSG or OSG MLP
General Partner, as applicable, (the “Potential Transferee”) of such
event and shall specify in such Transfer Notice the fundamental terms and
conditions (including the consideration to be paid) on which it would be
willing to Transfer (or if it is not the Transferring Party, to cause the
Transferring Party to Transfer) to a Potential Transferee Group Member the Sale
Assets, including any liabilities to be assumed by the Potential Transferee
Group Member. OSG General Partner may only give a Transfer Notice with the
approval of the Conflicts Committee.


 


(b)  The Potential Transferee shall notify (a “First
Offer Negotiation Notice”) the Transferring Party Parent within 10 days
of receiving a Transfer Notice that either (a) the Potential Transferee
does not wish to cause a Potential Transferee Group Member to acquire the Sale
Assets or (b) the Potential Transferee does wish to cause a Potential
Transferee Group Member to acquire the Sale Assets, subject to the negotiation
of the terms and conditions of the Transfer of the Sale Assets to a Potential
Transferee Group Member in accordance with the provisions of this
Article V. OSG General Partner may only give a First Offer Negotiation
Notice with the approval of the Conflicts Committee.


 


(c)  In the event that a Potential Transferee
gives a First Offer Negotiation Notice specifying that the Potential Transferee
does wish to cause a Potential Transferee Group Member to acquire the Sale
Assets then the Potential Transferee and the Transferring Party Parent shall
negotiate in good faith for a 60-day period following receipt of the First
Offer Negotiation Notice by the Transferring Party Parent (the “First Offer
Negotiation Period”) the terms and conditions of an agreement for the
Transfer of such Sale Assets to a Potential Transferee Group Member and such
terms and conditions are to be based on the terms and conditions set forth in
the Transfer Notice.


 


(d)  If (i) the Potential Transferee has
given a First Offer Negotiation Notice specifying that the Potential Transferee
does not wish to cause a Potential Transferee Group Member to acquire the Sale
Assets (a “Rejection Notice”) or (ii) the Potential Transferee and
the Transferring Party Parent are unable to agree on the terms and conditions
of an agreement for the Transfer of such Sale Assets during the First Offer
Negotiation Period, then the Transferring Party may Transfer such Sale Assets
to a third party not Affiliated with the Transferring Party within 180 days
after the earlier of the date the Transferring Party Parent receives a
Rejection Notice and the end of the First


 


13

















 


Offer Negotiation Period on terms and
conditions that are not materially more favorable to the proposed purchaser
than the terms and conditions specified in the Transfer Notice.


 


(e)  If the Transferring Party has not
Transferred, or agreed in writing to Transfer, such Sale Assets to a third
party not Affiliated with such Transferring Party within 180 days after
the earlier of the date the Transferring Party Parent receives a Rejection
Notice and the end of the First Offer Negotiation Period in accordance with clause (d)
then the Transferring Party shall not thereafter Transfer any of such Sale
Assets without first offering such Sale Assets to the applicable Potential
Transferee in the manner provided above.


 


ARTICLE VI


 


Indemnification


 


SECTION 6.01. OSG
Indemnification.  Subject to the
provisions of Section 6.02 and Section 6.03, OSG shall indemnify,
defend and hold harmless the OSG MLP Group from and against:  (a) any
Covered Environmental Losses relating to the assets contributed by the OSG
Entities to the OSG MLP Group prior to or on the Closing Date (the “Contribution
Assets”) to the extent that OSG is notified by OSG MLP General Partner of
any such Covered Environmental Losses within five years after the Closing Date;
(b) Losses to the OSG MLP Group arising from (i) the failure of the OSG
MLP Group, immediately after the Closing Date, to be the owner of such valid
leasehold interests or fee ownership interests in and to the Contribution
Assets, as applicable, as are necessary to enable the OSG MLP Group Members to
own or operate the Contribution Assets in substantially the same manner that the
Contribution Assets were owned or operated by the OSG Entities immediately
prior to the Closing Date or (ii) the failure of the OSG MLP Entities to
have by the Closing Date any consent or governmental permit necessary to allow
the OSG MLP Entities to own or operate the Contribution Assets in substantially
the same manner that the Contribution Assets were owned or operated by the OSG
Entities immediately prior to the Closing Date, in each of clauses (i) and
(ii) above, to the extent that OSG is notified by OSG MLP General Partner of such
Losses within three years after the Closing Date; (c) all U.S. Federal,
state and local income tax liabilities attributable to the operation of the
Contribution Assets prior to the Closing Date, including any such income tax
liabilities that may result from the consummation of the formation transactions
for the OSG MLP Group and OSG MLP General Partner but excluding any U.S. Federal,
state and local income taxes reserved on the books of the OSG MLP Group on the Closing
Date, to the extent that OSG is notified by OSG MLP General Partner of such
income tax liabilities within 60 days after the expiration of the applicable
statute of limitations for any claims relating thereto; (d) Losses
attributable to or associated with ownership or operation of the Retained
Assets, whether occurring before or after the Closing Date; and (e) any
Retained Liabilities.


 


SECTION 6.02. Limitation
Regarding Indemnification.  The
aggregate liability of OSG under Section 6.01(a) above shall not exceed
$10,000,000. Furthermore, no claim may be made against OSG for indemnification
pursuant to Section 6.01(a)


 


14

















 


unless the aggregate dollar amount of all
claims for indemnification pursuant to such section shall exceed $500,000, in
which case OSG shall be liable for claims for indemnification only to the
extent such aggregate amount exceeds $500,000. Notwithstanding the foregoing,
in the case any Covered Environmental Losses relating to the December 19, 2006
Plea Agreement between OSG and the United States, the limitations on liability
contained in this Section 6.02 shall not apply to OSG’s indemnification
obligations under Section 6.01(a) above for criminal fines, special assessments
or community service payments set forth in Paragraphs 6 and 9 of such Plea
Agreement.


 


SECTION 6.03. Indemnification
Procedures.  (a)  OSG MLP General Partner agrees on behalf of
OSG MLP and the OSG MLP Group Members, that within a reasonable period of time
after any OSG MLP Group member becomes aware of facts giving rise to a claim
for indemnification pursuant to Section 6.01, to notify OSG of the nature
and specific basis for such claim.


 


(b)  OSG shall have the right to control all
aspects of the defense of (and any counterclaims with respect to) any claims brought
against the OSG MLP Group that are covered by the indemnification set forth in Section 6.01,
including, without limitation, the selection of counsel, determination of
whether to appeal any decision of any court and the settling of any matter or
any issue relating thereto; provided, however, that no such
settlement shall be entered into without the consent (which consent shall not
be unreasonably withheld) of OSG MLP General Partner (with the concurrence of
the Conflicts Committee), on behalf of the OSG MLP Group, unless it includes a
full release of the OSG MLP Group from such matter or issue, as the case may
be.


 


(c)  OSG MLP and OSG MLP General Partner shall,
and shall cause the OSG MLP Group Members to, cooperate fully with OSG with
respect to all aspects of the defense of any claims covered by the
indemnification set forth in Section 6.01, including, without limitation,
the prompt furnishing to OSG of any correspondence or other notice relating
thereto that the OSG MLP Group may receive, permitting the names of the members
of the OSG MLP Group to be utilized in connection with such defense, the making
available to OSG of any files, records or other information of the OSG MLP
Group that OSG considers relevant to such defense and the making available to OSG
of any employees of the OSG MLP Group; provided, however, that in
connection therewith OSG agrees to use reasonable efforts to minimize the
impact thereof on the operations of the OSG MLP Group and further agrees to
maintain the confidentiality of all files, records and other information
furnished by an OSG MLP Group Member pursuant to this Section 6.03. The OSG
MLP Group Members, may, at their own option, cost and expense, hire and pay for
counsel in connection with any such defense. OSG agrees to keep any such
counsel hired by the OSG MLP Group reasonably informed as to the status of any
such defense (including providing such counsel with such information related to
any such defense as such counsel may reasonably request) but OSG shall have the
right to retain sole control over such defense.


 


(d)  In determining the amount of any Loss for
which any of the members of the OSG MLP Group are entitled to indemnification
under this Agreement, the gross


 


15

















 


amount of the indemnification will be reduced
by (i) any insurance proceeds realized by the OSG MLP Group and such
correlative insurance benefit shall be net of any incremental insurance premium
that becomes due and payable by the OSG MLP Group as a result of such claim,
and (ii) all amounts recovered by the OSG MLP Group under contractual
indemnities from any third party. OSG MLP hereby agrees to use commercially
reasonable efforts to realize any applicable insurance proceeds or amounts
recoverable under such contractual indemnities; provided, however,
that the costs and expenses (including, without limitation, court costs and
reasonable attorneys’ fees) of the OSG MLP Group in connection with such
efforts shall be promptly reimbursed by OSG in advance of any determination of
whether such insurance proceeds or other amounts will be recoverable.


 


ARTICLE VII


 


Miscellaneous


 


SECTION 7.01. Choice
of Law; Submission to Jurisdiction.  This
Agreement shall be subject to and governed by the laws of the State of New
York, without regard to any conflicts-of-law rule or principle that might refer
the construction or interpretation of this Agreement to the laws of another
jurisdiction. Each Party hereby submits to the jurisdiction of the state and Federal
courts located in the State of New York and to venue in New York, New York.


 


SECTION 7.02. Notice.  All notices or other communications required
or permitted to be given hereunder shall be in writing and shall be delivered
by hand or sent by facsimile or sent, postage prepaid, by registered, certified
or express mail or overnight courier service and shall be deemed given when so
delivered by hand or facsimile, or if mailed, three days after mailing (one
business day in the case of express mail or overnight courier service) to the
Parties at the following addresses (or at such other address for a Part as
shall be specified by like notice):


 


(a)  if to OSG:


 


Overseas Shipping Group, Inc.


666 Third Avenue


New York, NY 10017


Attention:


Facsimile: (212)


 


(b)  if to OSG MLP General Partner or OSG MLP:


 


In care of OSG America LLC


Two Harbour Place


302 Knights Run Avenue


Suite 1200


Tampa, FL 33602


 


16

















 


Attention:  President


Facsimile:  (813)


 


SECTION 7.03. Entire
Agreement.  This Agreement constitutes
the entire agreement of the Parties relating to the matters contained herein,
superseding all prior contracts or agreements, whether oral or written,
relating to the matters contained herein.


 


SECTION 7.04. Termination.  The provisions of Articles II, IV
(except with respect to Option Assets) and V of this Agreement (but not less
than all of such Articles II and V) may be terminated by (a) OSG,
with respect to all OSG Entities, upon notice to the other Parties upon a
Change of Control of OSG and (b) OSG MLP General Partner, with respect to
the OSG MLP Group, upon notice to the other Parties upon a Change of Control of
OSG MLP General Partner.


 


SECTION 7.05. Waiver;
Effect of Waiver or Consent.  Any Party
hereto may (a) extend the time for the performance of any obligation or
other act of any other Party hereto or (b) waive compliance with any
agreement or condition contained herein. Except as otherwise specifically
provided herein, any such extension or waiver shall be valid only if set forth
in a written instrument duly executed by the Party or Parties to be bound
thereby; provided, however, that OSG MLP may not, without the
prior approval of the Conflicts Committee, agree to any extension or waiver of
this Agreement that, in the reasonable discretion of OSG MLP General Partner,
will adversely affect the holders of common units of OSG MLP. No waiver or
consent, express or implied, by any Party of or to any breach or default by any
Person in the performance by such Person of its obligations hereunder shall be
deemed or construed to be a waiver or consent of or to any other breach or
default in the performance by such Person of the same or any other obligations
of such Person hereunder. Failure on the part of a Party to complain of any act
of any Person or to declare any Person in default, irrespective of how long
such failure continues, shall not constitute a waiver by such Party of its
rights hereunder until the applicable statute of limitations period has run.


 


SECTION 7.06. Amendment
or Modification.  This Agreement may
be amended or modified from time to time only by the written agreement of all
the Parties hereto; provided, however, that OSG MLP may not,
without the prior approval of the Conflicts Committee, agree to any amendment
or modification of this Agreement that, in the reasonable discretion of OSG MLP
General Partner, will adversely affect the holders of common units of OSG MLP.


 


SECTION 7.07. Assignment.  No Party shall have the right to assign its
rights or obligations under this Agreement without the consent of the other Parties
hereto; provided, however, that OSG may make such an assignment
in the event that there is a Change of Control in respect of OSG.


 


SECTION 7.08. Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the Parties and delivered to the other Parties.


 


17

















 


SECTION 7.09. Severability.  If any provision of this Agreement (or any
portion thereof) or the application of any such provision (or any portion
thereof) to any Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof (or the remaining portion thereof) or the application of such provision
to any other Persons or circumstances.


 


SECTION 7.10. Gender,
Articles, Sections and Schedules.  Whenever
the context requires, the gender of all words used in this Agreement shall
include the masculine, feminine and neuter, and the number of all words shall
include the singular and plural. When a reference is made in this Agreement to
an Article, Section or Schedule, such reference shall be to an Article or
Section of, or Schedule to, this Agreement unless otherwise indicated.


 


SECTION 7.11. Further
Assurances.  In connection with this
Agreement and all transactions contemplated by this Agreement, each signatory
party hereto agrees to execute and deliver such additional documents and
instruments and to perform such additional acts as may be necessary or
appropriate to effectuate, carry out and perform all of the terms, provisions
and conditions of this Agreement and all such transactions.


 


SECTION 7.12. Withholding
or Granting of Consent.  Each Party
may, with respect to any consent or approval that it is entitled to grant
pursuant to this Agreement, grant or withhold such consent or approval in its
sole and uncontrolled discretion, with or without cause, and subject to such
conditions as it shall deem appropriate.


 


SECTION 7.13. Laws
and Regulations.  Notwithstanding any
provision of this Agreement to the contrary, no Party to this Agreement shall
be required to take any act, or fail to take any act, under this Agreement if
the effect thereof would be to cause such Party to be in violation of any
applicable law, statute, rule or regulation.


 


SECTION 7.14. Negotiation
of Rights of OSG, Limited Partners, Assignees, and Third Parties.  The provisions of this Agreement are
enforceable solely by the Parties to this Agreement, and no shareholder of OSG and
no limited partner, member, assignee or other Person of OSG MLP shall have the
right, separate and apart from OSG or OSG MLP to enforce any provision of this
Agreement or to compel any Party to this Agreement to comply with the terms of
this Agreement.


 


SECTION 7.15. No
Recourse Against Officers or Directors. 
For the avoidance of doubt, the provisions of this Agreement shall not
give rise to any right of recourse against any officer or director of any OSG
Entity or any OSG MLP Entity.


 


[Signature Page follows]


 


18

















 


 


IN WITNESS
WHEREOF, the Parties have executed this Omnibus Agreement on, and effective as
of, the Closing Date.


 


	
   

  	
  OVERSEAS SHIPHOLDING GROUP,

  INC.,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
				



 


 


	
   

  	
  OSG AMERICA LLC,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
				



 


 


	
   

  	
  OSG AMERICA L.P.,

  
	
   

  	
   

  
	
   

  	
  by

  	
  OSG AMERICA LLC, its general

  partner,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
					



 


 


	
   

  	
  OSG AMERICA OPERATING

  COMPANY LLC,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title: