**Exhibit 10.5**

 

EXECUTION COPY

 

ADMINISTRATIVE SERVICES AGREEMENT

 

BETWEEN

 

OSG AMERICA L.P., AND

 

OSG SHIP MANAGEMENT, INC.

 

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**TABLE OF CONTENTS**

 
| ** **       | ** **                                 | **Page** |
|------------------|--------------------------------------------|----------|
|             |                                       |     |
| SECTION 1.  | Definitions                                | 1        |
| SECTION 2.  | Administrative  Services                   | 2        |
| SECTION 3.  | Covenants                                  | 2        |
| SECTION 4.  | Non-exclusivity                            | 3        |
| SECTION 5.  | Confidential  Information                  | 3        |
| SECTION 6.  | Reimbursement  of Costs and Expenses       | 3        |
| SECTION 7.  | General  Relationship between the Parties  | 3        |
| SECTION 8.  | Indemnity                                  | 3        |
| SECTION 9.  | Consequential  Damages                     | 4        |
| SECTION 10. | Term and  Termination                      | 4        |
| SECTION 11. | Costs and  Expenses Upon Termination       | 4        |
| SECTION 12. | Surrender of  Books and Records            | 4        |
| SECTION 13. | Force Majeure                              | 5        |
| SECTION 14. | Entire  Agreement                          | 5        |
| SECTION 15. | Severability                               | 5        |
| SECTION 16. | Currency                                   | 5        |
| SECTION 17. | Choice of Law;  Submission to Jurisdiction | 5        |
| SECTION 18. | Notice                                     | 5        |
| SECTION 19. | Subcontracting  and Assignment             | 6        |
| SECTION 20. | Amendments;  Waivers                       | 6        |
| SECTION 21. | Counterparts                               | 6        |

 

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ADMINISTRATIVE SERVICES AGREEMENT (this “Agreement”), dated asof November 15, 2007, between OSG AMERICA L.P., a Delaware limitedpartnership (“OSG MLP”) and OSG SHIP MANAGEMENT, INC., a Delawarecorporation (“OSGM”).

 

WHEREAS OSGMLP, a limited partnership whose units are listed and will trade on the NewYork Stock Exchange, requires certain non-strategic administrative services;and

 

WHEREAS OSGMLP wishes to engage OSGM to provide such non-strategic administrative servicesto OSG MLP on the terms and subject to the conditions of this Agreement.

 

NOW,THEREFORE, in consideration of the foregoing and the respective covenants andagreements contained herein and for other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the Parties (asdefined below) hereto agree as follows:

 

SECTION 1.Definitions.  For the purposes ofthis Agreement:

 

“Affiliate”means, with respect to any Person, any other Person that directly or indirectlythrough one or more intermediaries controls, is controlled by or is undercommon control with, the Person in question. As used herein, the term “control” means the possession, director indirect, of the power to direct or cause the direction of the managementand policies of a Person, whether through ownership of Voting Securities, bycontract or otherwise.

 

“Change ofControl” means, with respect to any Person (the “Applicable Person”),any of the following events:  (a) anysale, lease, exchange or other transfer (in one transaction or a series ofrelated transactions) of all or substantially all of the Applicable Person’sassets to any other Person, unless immediately following such sale, lease,exchange or other transfer such assets are owned, directly or indirectly, bythe Applicable Person; (b) the consolidation or merger of the ApplicablePerson with or into another Person pursuant to a transaction in which theoutstanding Voting Securities of the Applicable Person are changed into orexchanged for cash, securities or other property, other than any suchtransaction where (i) the outstanding Voting Securities of the ApplicablePerson are changed into or exchanged for Voting Securities of the survivingPerson or its parent and (ii) the holders of the Voting Securities of theApplicable Person immediately prior to such transaction own, directly orindirectly, not less than a majority of the outstanding Voting Securities ofthe 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) ofthe Exchange Act) (other than OSG or its Affiliates, with respect to OSG MLPGeneral Partner), being or becoming the “beneficial owner” (as defined in Rules 13d-3and 13d-5 under the Exchange Act) of more than 50% of all of the

 

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then outstanding VotingSecurities of the Applicable Person, except in a merger or consolidation whichwould not constitute a Change of Control under clause (b) above.

 

“Costs andExpenses” has the meaning set forth in Section 6.

 

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

 

“LimitedPartnership Agreement” means the amended and restated agreement of limitedpartnership of OSG MLP dated as of November 15, 2007, as amended,supplemented or otherwise modified from time to time.

 

“OSG MLPGeneral Partner” means OSG America LLC, a Delaware limited liabilitycompany, that is the general partner of OSG MLP and any successor generalpartner of OSG MLP approved pursuant to Section 11.01 or Section 11.02of the Limited Partnership Agreement or the transferee of or successor to allof the general partner interest in OSG MLP pursuant to Section 4.06 of theLimited Partnership Agreement; provided, however, that suchtransferee or successor agrees to assume the rights and duties of OSG MLPGeneral Partner under this Agreement and to be bound by the provisions of thisAgreement;

 

“OSG MLPGroup” means OSG MLP and its subsidiaries.

 

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

 

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

 

“Services”has the meaning set forth in Section 2.

 

“Unitholders”means holders of units representing limited partnership interests in OSG MLP.

 

“VotingSecurities” means securities of any class of Person entitling the holdersthereof to vote in the election of members of the board of directors or othersimilar governing body of the Person.

 

SECTION 2.Administrative Services.  OSGMshall provide to any member of the OSG MLP Group such of the non-strategicadministrative services set forth in Schedule A to this Agreement (the “Services”),in a commercially reasonable manner, as OSG MLP, may from time to timereasonably request or direct, all such Services to be provided under thesupervision of OSG MLP, as represented by OSG MLP General Partner in itscapacity as the general partner of OSG MLP.

 

SECTION 3.Covenants.  During the term ofthis Agreement OSGM shall:

 

(a) diligently provide or subcontract for the provision of (inaccordance with Section 19) the Services to the OSG MLP Group as anindependent 

 

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contractor,and be responsible to OSG MLP for the due and proper performance of same;

 

(b) retain at all times a qualified staff so as to maintain alevel of expertise sufficient to provide the Services; and

 

(c) keep full and proper books, records and accounts showingclearly all transactions relating to its provision of the Services inaccordance with established general commercial practices and in accordance withUnited States generally accepted accounting principles, and allow OSG MLP andits representatives to audit and examine such books, records and accounts atany time during customary business hours.

 

SECTION 4.Non-exclusivity.  OSGM and itsemployees may provide services of a nature similar to the Services to any otherPerson.  There is no obligation for OSGMto provide the Services to the OSG MLP Group on an exclusive basis.

 

SECTION 5.Confidential Information.  OSGMshall be obligated to keep confidential, both during and after the term of thisAgreement, all information it has acquired or developed in the course ofproviding Services under this Agreement. OSGM MLP shall be entitled to any equitable remedy available at law orequity, including specific performance, against a breach by OSGM of thisobligation.  OSGM shall not resist suchapplication for relief on the basis that OSG MLP has an adequate remedy at law,and OSGM shall waive any requirement for the securing or posting of any bond inconnection with such remedy.

 

SECTION 6.Reimbursement of Costs and Expenses. In consideration for OSGM providing the Services, OSG MLP shallreimburse OSGM the costs and expenses set forth in Schedule B tothis Agreement (the “Costs and Expenses”) in the manner provided in Schedule Bto this Agreement.

 

SECTION 7.General Relationship between the Parties.  The relationship between the Parties is thatof independent contractor.  The Partiesto this Agreement do not intend, and nothing herein shall be interpreted so as,to create a partnership, joint venture, employee or agency relationship betweenOSGM and any one or more of OSG MLP, OSG MLP General Partner in its capacity asgeneral partner on behalf of OSG MLP or any member of the OSG MLP Group.

 

SECTION 8.Indemnity.  OSG MLP shallindemnify and hold harmless OSGM and its directors, officers, employees andagents against all actions, proceedings, claims, demands or liabilities whichmay be brought against them due to this Agreement including, withoutlimitation, all actions, proceedings, claims, demands or liabilities broughtunder the environmental laws of any jurisdiction, and against and in respect ofall costs and expenses (including legal costs and expenses on a full indemnitybasis) they may suffer or incur due to defending or settling same; provided,however that such indemnity shall exclude any or all losses, actions,proceedings, claims, demands, costs,

 

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damages, expenses andliabilities whatsoever which may be caused by or due to the gross negligence orwillful misconduct of OSGM or its employees or agents.

 

SECTION 9.Consequential Damages.  NEITHEROSGM NOR ANY OF ITS AFFILIATES SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL ORCONSEQUENTIAL DAMAGES SUFFERED BY ANY MEMBER OF THE OSG MLP GROUP, OR FORPUNITIVE DAMAGES, WITH RESPECT TO ANY TERM OR THE SUBJECT MATTER OF THISAGREEMENT, EVEN IF INFORMED OF THE POSSIBILITY THEREOF IN ADVANCE.  THIS LIMITATION APPLIES TO ALL CAUSES OFACTION, INCLUDING, WITHOUT LIMITATION, BREACH OF CONTRACT, BREACH OF WARRANTY,NEGLIGENCE, STRICT LIABILITY, FRAUD, MISREPRESENTATION AND OTHER TORTS.

 

SECTION 10.Term and Termination.  ThisAgreement shall commence as of the date first above written and shall continuefor successive one year terms unless terminated by either Party hereto on notless than 60 days’ notice prior to the end of the then current term.  Notwithstanding the foregoing a Party mayterminate this Agreement at any time if:

 

(a) in the case of OSG MLP, there is a Change of Control of OSGMand in the case of OSGM, if there is a Change of Control of OSG MLP;

 

(b) the other Party breaches this Agreement;

 

(c) a receiver is appointed for all or substantially all of theproperty of the other Party;

 

(d) an order is made to wind-up the other Party;

 

(e) a final judgment, order or decree which materially andadversely affects the ability of the other Party to perform this Agreementshall have been obtained or entered against that Party and such judgment, orderor decree shall not have been vacated, discharged or stayed; or

 

(f) the other Party makes a general assignment for the benefit ofits creditors, files a petition in bankruptcy or for liquidation, is adjudgedinsolvent or bankrupt, commences any proceeding for a reorganization or arrangementof debts, dissolution or liquidation under any law or statute or of anyjurisdiction applicable thereto or if any such proceeding shall be commenced.

 

SECTION 11.Costs and Expenses Upon Termination. Upon termination of this Agreement in accordance with Section 10,OSG MLP shall be obligated to pay OSGM any and all amounts payable pursuant to Section 6for Services provided prior to the time of termination.

 

SECTION 12.Surrender of Books and Records. Upon termination of this Agreement, OSGM shall forthwith surrender toOSG MLP any and all books, records, documents and other property in thepossession or control of OSGM relating to this

 

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Agreement and to the businessor affairs of OSG MLP and any member of the OSG MLP Group and, except asrequired by law, shall not retain any copies of same.

 

SECTION 13.Force Majeure.  Neither partyshall be liable for any failure to perform this Agreement due to any causebeyond its reasonable control.

 

SECTION 14.Entire Agreement.  This Agreementconstitutes the entire agreement of the Parties relating to the matterscontained herein, superseding all prior contracts or agreements, whether oralor written, relating to the matters contained herein.

 

SECTION 15.Severability.  If any provision ofthis Agreement (or any portion thereof) or the application of any suchprovision (or any portion thereof) to any Person or circumstance shall be heldinvalid, illegal or unenforceable in any respect by a court of competentjurisdiction, such invalidity, illegality or unenforceability shall not affectany other provision hereof (or the remaining portion thereof) or theapplication of such provision to any other Persons or circumstances.

 

SECTION 16.Currency.  Unless stated otherwise,all currency references herein are to United States Dollars.

 

SECTION 17.Choice of Law; Submission to Jurisdiction.  This Agreement shall be subject to andgoverned by the laws of the State of New York, without regard to anyconflicts-of-law rule or principle that might refer the construction orinterpretation of this Agreement to the laws of another jurisdiction.  Each Party hereby submits to the jurisdictionof the state and Federal courts located in the State of New York and to venuein New York, New York.

 

SECTION 18.Notice.  All notices or othercommunications required or permitted to be given hereunder shall be in writingand shall be delivered by hand or sent by facsimile or sent, postage prepaid,by registered, certified or express mail or overnight courier service and shallbe deemed given when so delivered by hand or facsimile, or if mailed, threedays after mailing (one business day in the case of express mail or overnightcourier service) to the Parties at the following addresses (or at such otheraddress for a Party as shall be specified by like notice):

 
| (a)    | if to OSGM:                         |
|--------|-------------------------------------|
|   |                                |
|   | Overseas  Shipping Group, Inc. |
|   | 666 Third  Avenue                   |
|   | New York, NY  10017                 |
|   | Attention:  Chief Financial Officer |
|   | Facsimile:  (212) 578 1832          |
|   |                                |
| (b)    | if to OSG  MLP:                     |
|   |                                |
|   | OSG America  L.P.                   |
|   | Two Harbour  Place                  |
|   | 302 Knights  Run Avenue             |

 

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|   | Suite 1200                     |
|--------|-------------------------------------|
|   | Tampa, FL  33602                    |
|   | Attention:  Chief Executive Officer |
|   | Facsimile:  (813) 221-2769          |

 

SECTION 19.Subcontracting and Assignment. OSGM shall not assign this Agreement to any Person that is not asubsidiary or Affiliate of OSGM except upon written consent of OSG MLP.  OSGM may freely subcontract or sublicense itsobligations to provide any Service under this Agreement, so long as OSGMremains liable for performance of the Services and its obligations under thisAgreement.

 

SECTION 20.Amendments; Waivers.  (a) Noprovision of this Agreement may be amended or waived unless such amendment orwaiver is in writing and signed, in the case of an amendment, by the Partieshereto, or in the case of a waiver, by the Party against whom the waiver is tobe effective; provided, however, that after the completion of OSGMLP’s initial public offering of common units representing limited partner interests,OSG MLP may not, without the prior approval of the conflicts committee of theboard of directors of the OSG MLP General Partner or, if there is no suchcommittee, the independent members of such board of directors, agree to anyamendment or modification of this Agreement that the OSG MLP General Partnerdetermines will adversely affect the holders of such common units.  The Parties hereto agree that, for purposesof this Section 20, any material change in the nature, quantity orduration of the Services to be provided under this Agreement shall constitute amodification of this Agreement.

 

(b) Thefailure of any Party to this Agreement to assert any of its rights under thisAgreement or otherwise shall not constitute a waiver of such rights nor shallany single or partial exercise by any Party to this Agreement of any of itsrights under this Agreement preclude any other or further exercise of suchrights or remedies under this Agreement. The rights and remedies herein provided shall be cumulative and notexclusive of any rights or remedies provided by law or otherwise.

 

SECTION 21.Counterparts.  This Agreement maybe executed in one or more counterparts, all of which shall be considered oneand the same agreement, and shall become effective when one or more suchcounterparts have been signed by each of the Parties and delivered to the otherParty.

 

*[Signature Page follows]*

 

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IN WITNESSWHEREOF, the Parties have executed this Agreement on, and effective as of, thedate first written above.

 

 
|   | OSG AMERICA L.P.,          |
|--------|----------------------------|
|   |                       |   |
|   |                       | by OSG AMERICA LLC, its general partner, |
|   |                       |   |
|   |                       | by |   /s/ Myles R. Itkin |
|   |                       |   |   Name: Myles R. Itkin |
|   |                       |   |   Title: Chief Financial Officer |
|   |                       |   |   |
|   |                       |   |   |
|   | OSG SHIP MANAGEMENT, INC., |
|   |                       |   |
|   |                       | by |   /s/ Lois Zabrocky |
|   |                       |   |   Name: Lois Zabrocky |
|   |                       |   |   Title: Vice President |

 

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SCHEDULE A

 

Services

 

OSGM shallprovide such of the following Services to any member of the OSG MLP Group, asOSG MLP General Partner may from time to time request and direct OSGM toprovide pursuant to Section 2:

 

(a)                                 keep and maintain atall times books, records and accounts which shall contain particulars ofreceipts and disbursements relating to the assets and liabilities of the OSGMLP Group, which books, records and accounts shall be kept and maintained inaccordance with normal commercial practices that will permit any member of theOSG MLP Group to prepare or cause to be prepared financial statements inaccordance with U.S. generally accepted accounting principles, and keep andmaintain at all times such additional books, records and accounts as the OSGMLP Group is required to keep and maintain under applicable U.S. federalsecurities laws and regulations and the Internal Revenue Code of 1986 andrelated regulations, all as amended from time to time;

 

(b)                                prepare all returns,filings and documents that OSG MLP is required to prepare pursuant to theLimited Partnership Agreement or that are otherwise necessary or desirable inconnection with the conduct of OSG MLP Group’s business, in each case, for thereview and approval of OSG MLP; and after such returns, filings and documentshave been reviewed and approved by OSG MLP, file such returns, filings anddocuments, as applicable, with the relevant authority;

 

(c)                                 advise, or arrange forthe provision of advice, as to OSG MLP’s obligations under applicable U.S.securities laws and regulations, including its continuous disclosureobligations under applicable U.S. securities laws and regulations and the rules andregulations of the New York Stock Exchange and any other securities exchangeupon which OSG MLP’s securities are listed or otherwise admitted for trading;prepare all reports and documents that OSG MLP is required to prepare pursuantto such laws, rules and regulations or that are otherwise necessary ordesirable, in each case, for the review and approval of OSG MLP; and after suchreports and documents have been reviewed and approved by OSG MLP, file,disseminate, post on the Internet, mail or otherwise distribute such reportsand documents, as OSG MLP may request or direct; provided, however,that nothing herein shall permit or authorize OSGM to act for or on behalf ofOSG MLP in dealing with any regulatory authority, except to the extentspecifically authorized by OSG MLP;

 

(d)                                provide, or arrange forthe provision of, investor relations services to Unitholders and financialmarkets; provided, however, that nothing herein 

 

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shall permitor authorize OSGM to determine the content of any communication by OSG MLP withits Unitholders or the financial markets;

 

(e)                                 provide, or arrangefor the provision of, all administrative matters in respect of (i) thecalling and arranging all meetings of Unitholders pursuant to the LimitedPartnership Agreement, (ii) the preparation of any materials (including noticesof meetings and information circulars) in respect thereof for the review andapproval of OSG MLP and (iii) after such materials have been reviewed andapproved by OSG MLP, the filing, posting on the Internet, mailing or otherdistribution of such materials as OSG MLP may request or direct;

 

(f)                                   provide, or arrangefor the provision of, such audit, internal audit, accounting, engineering,legal, insurance and other professional services as may be necessary ordesirable for the conduct of the OSG MLP Group’s business; provided, however,that nothing herein shall authorize or permit OSGM to select and appoint theauditor of OSG MLP, which shall be selected and appointed in accordance withthe provisions of the Limited Partnership Agreement for the appointment of theauditor of OSG MLP or as otherwise required by applicable law, or tocommunicate with the auditor other than in the ordinary course of making suchbooks and records of OSG MLP available for review as the auditor may requireand to respond to queries from the auditor with respect to the accounts andstatements prepared by, or the preparation of which were arranged by, OSGM, andin particular OSGM will not have any of the authorities, rights orresponsibilities of the audit committee of OSG MLP General Partner, but shallprovide, or arrange for the provision of, information to such committee as mayfrom time to time be required or requested; provided, further, however,that nothing herein shall entitle OSGM to retain legal counsel for the OSG MLP Groupunless such selection is specifically approved by OSG MLP;

 

(g)                                provide, or arrange forthe provision of, administrative, advisory, arrangement, negotiation,documentation, compliance or monitoring services in connection with any new orexisting financing for OSG MLP, including any interest rate swap agreements,foreign currency contracts, forward exchange contracts and any other hedgingarrangements;

 

(h)                                provide, or arrange forthe provision of, administrative, advisory, negotiation or documentationservices in connection any acquisition or divestment of any asset of the OSGMLP;

 

(i)                                    provide, or arrangefor the provision of, administrative, advisory, negotiation or documentationservices in connection with any offering of securities by OSG MLP;

 

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(j)                                    prepare andprovide, or arrange for the preparation and provision of, regular cash reportsand other accounting information for review by OSG MLP, so as to permit andenable OSG MLP to make all determinations of financial matters required to bemade pursuant to the Limited Partnership Agreement, including the determinationof amounts available for distribution by OSG MLP to its Unitholders, and toassist OSG MLP in making arrangements with the transfer agent for OSG MLP forthe payment of distributions to the Unitholders in accordance with the LimitedPartnership Agreement;

 

(k)                                 provide suchassistance to OSG MLP as OSG MLP may request or direct with respect to theperformance of the obligations to the Unitholders under the Limited PartnershipAgreement and to provide monitoring of various obligations and rights underagreements entered into by OSG MLP and provide advance reports on a timelybasis to OSG MLP advising of steps, procedures and compliance issues under suchagreements, so as to enable OSG MLP, through OSG MLP General Partner, to makeall such decisions as would be necessary or desirable thereunder; and

 

(l)                                    provide, or arrangefor the provision of,  such additionaladministrative services pertaining to the OSG MLP Group, the assets andliabilities of the OSG MLP Group or the Unitholders and matters incidentalthereto as may be reasonably requested by OSG MLP from time to time.

 

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SCHEDULE B

 

Costs and Expenses

 

Within 30 daysafter the end of each month, OSGM shall submit to OSG MLP for payment aninvoice for reimbursement of all costs and expenses reasonably incurred by OSGM(the “Costs and Expenses”) in connection with the provision of theServices listed in Schedule A by OSGM to the OSG MLP Group for such month. Eachstatement will contain such supporting detail as may be reasonably required tovalidate such amounts due.

 

OSG MLP shallmake payment within 15 days of the date of each invoice (any such day on whicha payment is due, the “Due Date”). All invoices for Services are payablein U.S. dollars. All amounts not paid within 10 days after the Due Date shallbear interest at the rate of 1.00% per annum over US$ LIBOR from such Due Dateuntil the date payment is received in full by OSGM.

 

Withoutlimiting the foregoing, Costs and Expenses shall include all fees from thirdparties for providing Services and OSGM’s internal costs for providing generaladministrative Services, such as the costs of OSGM’s internal lawyers,accountants, and finance, information technology and human resource personnel. OSGMmay, in its sole discretion, decide not to be reimbursed for the full amount ofthe internal costs for providing such Services, but the exercise of suchdiscretion shall not affect or modify OSGM’s right to be reimbursed the fullamount of the costs of Services provided after the exercise of such discretion.

 

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