Document:

Exhibit 10.5

 

EXECUTION COPY

 

ADMINISTRATIVE SERVICES AGREEMENT

 

BETWEEN

 

OSG AMERICA L.P., AND

 

OSG SHIP MANAGEMENT, INC.

 

 

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

  

 

 

ADMINISTRATIVE SERVICES AGREEMENT (this “Agreement”), dated as
of November 15, 2007, between OSG AMERICA L.P., a Delaware limited
partnership (“OSG MLP”) and OSG SHIP MANAGEMENT, INC., a Delaware
corporation (“OSGM”).

 

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

 

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

 

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 (as
defined below) hereto agree as follows:

 

SECTION 1.
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.

 

“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.

 

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

 

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

 

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

 

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

 

“OSG MLP
Group” 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, limited
liability 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.

 

“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.

 

SECTION 2.
Administrative Services.  OSGM
shall provide to any member of the OSG MLP Group such of the non-strategic
administrative services set forth in Schedule A to this Agreement (the “Services”),
in a commercially reasonable manner, as OSG MLP, may from time to time
reasonably request or direct, all such Services to be provided under the
supervision of OSG MLP, as represented by OSG MLP General Partner in its
capacity as the general partner of OSG MLP.

 

SECTION 3.
Covenants.  During the term of
this Agreement OSGM shall:

 

(a) diligently provide or subcontract for the provision of (in
accordance with Section 19) the Services to the OSG MLP Group as an
independent 

 

2

 

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 a
level of expertise sufficient to provide the Services; and

 

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

 

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

 

SECTION 5.
Confidential Information.  OSGM
shall be obligated to keep confidential, both during and after the term of this
Agreement, all information it has acquired or developed in the course of
providing Services under this Agreement. 
OSGM MLP shall be entitled to any equitable remedy available at law or
equity, including specific performance, against a breach by OSGM of this
obligation.  OSGM shall not resist such
application 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 in
connection with such remedy.

 

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

 

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

 

SECTION 8.
Indemnity.  OSG MLP shall
indemnify and hold harmless OSGM and its directors, officers, employees and
agents against all actions, proceedings, claims, demands or liabilities which
may be brought against them due to this Agreement including, without
limitation, all actions, proceedings, claims, demands or liabilities brought
under the environmental laws of any jurisdiction, and against and in respect of
all costs and expenses (including legal costs and expenses on a full indemnity
basis) 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,

 

3

 

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

 

SECTION 9.
Consequential Damages.  NEITHER
OSGM NOR ANY OF ITS AFFILIATES SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES SUFFERED BY ANY MEMBER OF THE OSG MLP GROUP, OR FOR
PUNITIVE DAMAGES, WITH RESPECT TO ANY TERM OR THE SUBJECT MATTER OF THIS
AGREEMENT, EVEN IF INFORMED OF THE POSSIBILITY THEREOF IN ADVANCE.  THIS LIMITATION APPLIES TO ALL CAUSES OF
ACTION, INCLUDING, WITHOUT LIMITATION, BREACH OF CONTRACT, BREACH OF WARRANTY,
NEGLIGENCE, STRICT LIABILITY, FRAUD, MISREPRESENTATION AND OTHER TORTS.

 

SECTION 10.
Term and Termination.  This
Agreement shall commence as of the date first above written and shall continue
for successive one year terms unless terminated by either Party hereto on not
less than 60 days’ notice prior to the end of the then current term.  Notwithstanding the foregoing a Party may
terminate this Agreement at any time if:

 

(a) in the case of OSG MLP, there is a Change of Control of OSGM
and 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 the
property of the other Party;

 

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

 

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

 

(f) the other Party makes a general assignment for the benefit of
its creditors, files a petition in bankruptcy or for liquidation, is adjudged
insolvent or bankrupt, commences any proceeding for a reorganization or arrangement
of debts, dissolution or liquidation under any law or statute or of any
jurisdiction 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 6
for Services provided prior to the time of termination.

 

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

 

4

 

Agreement and to the business
or affairs of OSG MLP and any member of the OSG MLP Group and, except as
required by law, shall not retain any copies of same.

 

SECTION 13.
Force Majeure.  Neither party
shall be liable for any failure to perform this Agreement due to any cause
beyond its reasonable control.

 

SECTION 14.
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 15.
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 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 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 18.
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 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

  

 

5

 

	
   

  	
  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 a
subsidiary or Affiliate of OSGM except upon written consent of OSG MLP.  OSGM may freely subcontract or sublicense its
obligations to provide any Service under this Agreement, so long as OSGM
remains liable for performance of the Services and its obligations under this
Agreement.

 

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

 

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

 

SECTION 21.
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
Party.

 

[Signature Page follows]

 

6

 

IN WITNESS
WHEREOF, the Parties have executed this Agreement on, and effective as of, the
date 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

  

 

 

SCHEDULE A

 

Services

 

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

 

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

 

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

 

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

 

(d)                                provide, or arrange for
the provision of, investor relations services to Unitholders and financial
markets; provided, however, that nothing herein 

 

A-1

 

shall permit
or authorize OSGM to determine the content of any communication by OSG MLP with
its Unitholders or the financial markets;

 

(e)                                 provide, or arrange
for the provision of, all administrative matters in respect of (i) the
calling and arranging all meetings of Unitholders pursuant to the Limited
Partnership Agreement, (ii) the preparation of any materials (including notices
of meetings and information circulars) in respect thereof for the review and
approval of OSG MLP and (iii) after such materials have been reviewed and
approved by OSG MLP, the filing, posting on the Internet, mailing or other
distribution of such materials as OSG MLP may request or direct;

 

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

 

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

 

(h)                                provide, or arrange for
the provision of, administrative, advisory, negotiation or documentation
services in connection any acquisition or divestment of any asset of the OSG
MLP;

 

(i)                                    provide, or arrange
for the provision of, administrative, advisory, negotiation or documentation
services in connection with any offering of securities by OSG MLP;

 

A-2

 

(j)                                    prepare and
provide, or arrange for the preparation and provision of, regular cash reports
and other accounting information for review by OSG MLP, so as to permit and
enable OSG MLP to make all determinations of financial matters required to be
made pursuant to the Limited Partnership Agreement, including the determination
of amounts available for distribution by OSG MLP to its Unitholders, and to
assist OSG MLP in making arrangements with the transfer agent for OSG MLP for
the payment of distributions to the Unitholders in accordance with the Limited
Partnership Agreement;

 

(k)                                 provide such
assistance to OSG MLP as OSG MLP may request or direct with respect to the
performance of the obligations to the Unitholders under the Limited Partnership
Agreement and to provide monitoring of various obligations and rights under
agreements entered into by OSG MLP and provide advance reports on a timely
basis to OSG MLP advising of steps, procedures and compliance issues under such
agreements, so as to enable OSG MLP, through OSG MLP General Partner, to make
all such decisions as would be necessary or desirable thereunder; and

 

(l)                                    provide, or arrange
for the provision of,  such additional
administrative services pertaining to the OSG MLP Group, the assets and
liabilities of the OSG MLP Group or the Unitholders and matters incidental
thereto as may be reasonably requested by OSG MLP from time to time.

 

A-3

 

SCHEDULE B

 

Costs and Expenses

 

Within 30 days
after the end of each month, OSGM shall submit to OSG MLP for payment an
invoice for reimbursement of all costs and expenses reasonably incurred by OSGM
(the “Costs and Expenses”) in connection with the provision of the
Services listed in Schedule A by OSGM to the OSG MLP Group for such month. Each
statement will contain such supporting detail as may be reasonably required to
validate such amounts due.

 

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

 

Without
limiting the foregoing, Costs and Expenses shall include all fees from third
parties for providing Services and OSGM’s internal costs for providing general
administrative Services, such as the costs of OSGM’s internal lawyers,
accountants, and finance, information technology and human resource personnel. OSGM
may, in its sole discretion, decide not to be reimbursed for the full amount of
the internal costs for providing such Services, but the exercise of such
discretion shall not affect or modify OSGM’s right to be reimbursed the full
amount of the costs of Services provided after the exercise of such discretion.

 

B-1Exhibit 10.6.1

 

DIRECTOR AND OFFICER INDEMNITY AGREEMENT

 

This agreement (the “Agreement”)
is made and entered into as of the 14th day of May, 2007, by and
between OSG America L.P., a Delaware limited partnership (the “Partnership”),
and Morten Arntzen, (the “Indemnitee”).

 

RECITALS

 

A.            The Indemnitee is Chairman of the Board of Directors of OSG
America LLC, a Delaware limited liability company and the general partner of
the Partnership (the “General Partner”).

 

B.            Both the Partnership
and the Indemnitee recognize the increased risk of litigation and other claims
being asserted against directors and officers of public entities in today’s
environment.

 

C.            Section 17-108 of
the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. Section 17-101,
et seq., (the “Act”) expressly
recognizes that, subject to such standards and restrictions as may be set forth
in its partnership agreement, a limited partnership may, and shall have the
power to, indemnify and hold harmless any person from and against any and all
claims and demands whatsoever.

 

D.            Subject to the
limitations set forth therein, Section 7.07 of the Amended and Restated
Agreement of Limited Partnership of the Partnership (the “Partnership
Agreement”) requires the Partnership to indemnify and advance expenses to the
directors and officers of the General Partner to the fullest extent permitted
by law and the Indemnitee has been serving and continues to serve as Chairman of the Board of Directors of the General
Partner in part in reliance on such provision.

 

E.             In recognition of the
Indemnitee’s need for substantial protection against any potential personal
liability in order to assure the Indemnitee’s continued service to the Partnership
and General Partner in an effective manner and the Indemnitee’s reliance on the
provisions of the Partnership Agreement and in part to provide the Indemnitee
with specific contractual assurance that the protection promised by the Partnership
Agreement will be available to the Indemnitee, the Partnership wishes to
provide in this Agreement for the indemnification of and the advancing of
expenses to the Indemnitee to the fullest extent (whether partial or complete)
permitted by the Partnership Agreement and as set forth in this Agreement, and,
to the extent insurance is maintained, for the continued coverage of the Indemnitee
under the Partnership’s directors’ and officers’ liability insurance policies.

 

In consideration of the
foregoing and the mutual covenants contained herein, and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto agree as follows:

 

 

1.             Certain Definitions.

 

(a)           “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, such
Person. 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.

 

(b)           “Board of
Directors”
means the Board of Directors of the General Partner.

 

(c)           “Change in Control”
means, and shall be deemed to have occurred upon one or more of the following
events: (i) any transaction resulting in the Partnership (or its successor
or survivor by way of merger, consolidation, or some other transaction, or a
parent or subsidiary thereof) ceasing to be an Affiliate of OSG (or its
successor or survivor by way of merger, consolidation, or some other
transaction, or a parent or subsidiary thereof); (ii) the limited partners
of the Partnership approve, in one transaction or a series of transactions, a
plan of complete liquidation of the Partnership; (iii) the sale or other
disposition by either the General Partner or the Partnership of all or
substantially all of its assets, or the sale or other disposition of all or
substantially all of the assets of the Partnership’s subsidiaries, in one or
more transactions to any Person other than the General Partner or an Affiliate
of the General Partner; or (iv) a transaction resulting in a Person other
than OSG (or its successor or survivor by way of merger, consolidation, or some
other transaction, or a parent or subsidiary thereof) or an Affiliate thereof
being the general partner of the Partnership (or its successor or survivor by
way of merger, consolidation, or some other transaction, or a parent or
subsidiary thereof).

 

(d)           “Expenses”
means all direct and indirect costs of any type or nature whatsoever
(including, without limitation, all attorneys’ fees and related disbursements
and other out-of- pocket costs) actually and reasonably incurred by the Indemnitee
in connection with the investigation, defense or appeal of or being a witness
in, participating in or preparing to defend a Proceeding or establishing or
enforcing a right to (i) indemnification or advancement of expenses under
this Agreement, the Partnership Agreement, the Act or otherwise or (ii) directors’
and officers’ liability insurance coverage; provided, however,
that Expenses shall not include any judgments, fines or penalties or amounts
paid in settlement of a Proceeding. 
Should any payments by the Partnership under this Agreement be
determined to be subject to any federal, state or local income or excise tax, “Expenses”
shall also include such amounts as are necessary to place the Indemnitee in the
same after-tax position (after giving effect to all applicable taxes) as the
Indemnitee would have been in had no such tax been determined to apply to such
payments.

 

(e)           “Indemnifiable Event”
is any event or occurrence related to the fact that the Indemnitee is or was a
director or officer of the General Partner, or is or was serving at the request
of the General Partner as a director, officer, employee, trustee or agent of
another corporation, partnership, joint venture, trust, nonprofit entity or
other entity (including service with respect to employee benefit plans), or by
reason of anything done or not done by the Indemnitee in any such capacity.

 

2

 

(f)            “Indemnification Period” shall be such period as the Indemnitee
shall continue to serve as a director or officer of the General Partner, or
shall continue at the request of the General Partner to serve as a director,
officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust, nonprofit entity or other entity, and thereafter so long as the
Indemnitee shall be subject to any possible Proceeding arising out of the Indemnitee’s
tenure in the foregoing positions.

 

(g)           “Losses” are
any judgments, fines, penalties and amounts paid in settlement (including all
interest assessments and other charges paid or payable in connection with or in
respect of such judgments, fines, penalties or amounts paid in settlement) of
any Proceeding.

 

(h)           “OSG” means Overseas Shipholding Group, Inc.,
a Delaware corporation.

 

(i)            “Person” means an individual or a
corporation, firm, limited liability company, partnership, joint venture,
trust, unincorporated organization, association, government agency or political
subdivision thereof or other entity.

 

(j)            “Proceeding” shall mean any completed, actual, pending or
threatened action, suit, claim, inquiry or proceeding, whether civil, criminal,
administrative or investigative (including an action by or in the right of the Partnership)
and whether formal or informal.

 

(k)           “Reviewing Party”
shall mean (i) the Board of Directors (provided that a majority of
directors are not parties to the Proceeding), (ii) a person or body
selected by the Board of Directors or (iii) if there has been a Change in
Control, the special independent counsel referred to in Section 5.

 

2.             Indemnification and Advancement
of Expenses.  Subject to the limitations set forth in Section 4:

 

(a)           Indemnification.  The Partnership shall indemnify and hold
harmless the Indemnitee, to the fullest extent permitted by the Partnership
Agreement, as soon as practicable after written demand is presented to the Partnership,
in the event the Indemnitee was or is made or is threatened to be made a party
to or witness in or is otherwise involved in a Proceeding by reason, in whole
or in part, of an Indemnifiable Event against all Expenses and Losses incurred
by the Indemnitee in connection with such Proceeding.  In the event of any change, after the date of
this Agreement, in any applicable law, statute or rule regarding the right
of a Delaware limited partnership to indemnify any director or officer of its
general partner, such change, to the extent it would expand the Indemnitee’s
rights under this Agreement, shall be included within the Indemnitee’s rights
and the Partnership’s obligations under this Agreement, and, to the extent it
would narrow the Indemnitee’s rights or the Partnership’s obligations under
this Agreement, shall be excluded from this Agreement; provided, however,
that any change required by applicable laws, statutes or rules to be
applied to this Agreement shall be so applied regardless of whether the effect
of such change is to narrow the Indemnitee’s rights or the Partnership’s
obligations under this Agreement.

 

(b)           Advancement of Expenses.  The Partnership shall, to the fullest extent permitted
by the Partnership Agreement, pay the Expenses incurred by the Indemnitee as
soon as 

 

3

 

practicable after written demand is presented to the Partnership in the
event the Indemnitee was or is made or is threatened to be made a party to or
witness in or is otherwise involved in a Proceeding by reason, in whole or in
part, of an Indemnifiable Event in advance of its final disposition; provided,
however, that, to the extent required by law, such payment of expenses
in advance of the final disposition of the Proceeding shall be made only upon
receipt of an undertaking by the Indemnitee to repay all amounts advanced if it
should be ultimately determined that the Indemnitee is not entitled to be
indemnified under this Agreement, the Act or otherwise.

 

(c)           Partial Indemnity.  If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Partnership for some or a
portion of the Losses or Expenses, but not, however, for all of the total
amount thereof, the Partnership shall indemnify the Indemnitee for the portion
thereof to which the Indemnitee is entitled. 
Notwithstanding any other provision of this Agreement, to the extent
that the Indemnitee has been successful on the merits or otherwise in defense
of any issue or matter therein, including dismissal without prejudice, the Indemnitee
shall be indemnified against all Expenses incurred in connection therewith.

 

(d)           Contribution.  If the indemnification provided in Section 2(a) for
any reason is held by a court of competent jurisdiction to be unavailable to the
Indemnitee, then in respect of any Indemnifiable Event, the Partnership shall
contribute to the amount of Expenses and Losses paid in settlement actually
incurred and paid or payable by the Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Partnership
on the one hand and the Indemnitee on the other hand from the transaction from
which such Proceeding arose and (ii) the relative fault of the Partnership
on the one hand and of the Indemnitee on the other hand in connection with the
events which resulted in such Expenses and Losses, as well as any other
relevant equitable considerations.  The
relative fault of the Partnership on the one hand and of the Indemnitee on the
other hand shall be determined by reference to, among other things, the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent the circumstances resulting in such expenses, judgments, fines or
settlement amounts.  The Partnership and
the Indemnitee agree that it would not be just and equitable if contribution
pursuant to this Section 2(d) were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.

 

(e)           Enforcement.  If a claim for indemnification (following the
final disposition of such Proceeding) under Section 2(a) or
advancement of Expenses under Section 2(b) is not paid in full within
thirty days after a written claim therefor by the Indemnitee has been presented
to the Partnership, the Indemnitee may file suit against the Partnership to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim.  In addition, the Indemnitee may file suit
against the Partnership to establish a right to indemnification or advancement
of Expenses arising under this Agreement, the Partnership Agreement, the Act or
otherwise.  In any such action the Partnership
shall have the burden of proving by clear and convincing evidence that the Indemnitee
is not entitled to the requested indemnification or advancement of Expenses
under applicable law.

 

3.             Notification and Defense of
Proceeding.  Promptly after receipt by the Indemnitee of
notice of the commencement of or threat of the commencement of any Proceeding, the

 

4

 

Indemnitee
shall, if a request for indemnification in respect thereof is to be made
against the Partnership under this Agreement, notify the Partnership of the
commencement thereof; but the failure to notify the Partnership will not
relieve the Partnership from any liability which it may have to the Indemnitee
under this Agreement or otherwise unless and only to the extent that such
omission can be shown to have prejudiced the Partnership’s ability to defend
the Proceeding.  Except as otherwise
provided below, the Partnership shall be entitled to assume the defense of such
Proceeding, with counsel approved by the Indemnitee (which approval shall not
be unreasonably withheld).  After notice
from the Partnership to the Indemnitee of its election to assume the defense
thereof, the Partnership will not be liable to the Indemnitee under this
Agreement for any legal or other expenses subsequently incurred by the Indemnitee
in connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. 
The Indemnitee shall have the right to employ its counsel in such
Proceeding, but the fees and expenses of such counsel incurred after notice
from the Partnership of its assumption of the defense thereof shall be at the
expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee
has been authorized by the Partnership, (ii) the Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Partnership and the
Indemnitee in the conduct of the defense of such Proceeding or (iii) the Partnership
shall not in fact have employed counsel to assume the defense of such
Proceeding, in each of which cases the fees and expenses of counsel shall be at
the expense of the Partnership.  The Partnership
shall not be entitled to assume the defense of any Proceeding brought by or on
behalf of the Partnership or as to which the Indemnitee shall have made the
conclusion provided for in clause (ii) of this Section 3.  The Partnership shall not settle any
Proceeding in any manner, which would impose any penalty, limitation,
admission, Loss or Expense on the Indemnitee without the Indemnitee’s prior
written consent.  Neither the Partnership
nor the Indemnitee will unreasonably withhold its consent to any proposed
settlement, provided that the Indemnitee may, in the Indemnitee’s sole
discretion, withhold consent to any proposed settlement that would impose any penalty,
limitation, admission, Loss or Expense on the Indemnitee.

 

4.             Limitation on Indemnification.  Notwithstanding the terms of Section 2:

 

(a)           the obligations of the Partnership set forth in Section 2
shall be subject to the condition that the Reviewing Party shall not have
determined (based on a written opinion of outside counsel in all cases) that the
Indemnitee would not be permitted to be so indemnified under the Partnership
Agreement; provided, however, that if the Indemnitee has commenced
or thereafter commences legal proceedings in a court of competent jurisdiction
to secure a determination that the Indemnitee should be indemnified under the
Partnership Agreement, any determination made by the Reviewing Party that the Indemnitee
would not be permitted to be indemnified under applicable law shall not be
binding and the Indemnitee shall not be required to reimburse the Partnership
for any advancement of Expenses until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed) and the Partnership shall not be obligated to indemnify or
advance to the Indemnitee any additional amounts covered by such Reviewing
Party determination (unless there has been a determination by a court of
competent jurisdiction that the Indemnitee would be permitted to be so
indemnified under applicable law);

 

(b)           the Partnership shall not be required to indemnify or
advance Expenses to the Indemnitee with respect to a Proceeding (or part thereof)
by the Indemnitee (and not by way 

 

5

 

of defense), except if the commencement of such Proceeding (i) was
authorized in the specific case by the Board of Directors or (ii) brought
to establish or enforce a right to indemnification and/or advancement of
Expenses arising under this Agreement, the Partnership Agreement, the Act or
otherwise;

 

(c)           the Partnership shall not be obligated pursuant to the terms
of this Agreement to indemnify the Indemnitee for any amounts paid in
settlement of a Proceeding unless the Partnership consents in advance in
writing to such settlement, which consent shall not be unreasonably withheld;

 

(d)           the Partnership shall not be obligated pursuant to the terms
of this Agreement to indemnify the Indemnitee on account of any suit in which
judgment is rendered against the Indemnitee for an accounting of profits made
from the purchase or sale by the Indemnitee of securities of the Partnership
pursuant to the provisions of Section l6(b) of the Securities
Exchange Act of 1934, as amended or similar provisions of any federal, state or
local statutory law;

 

(e)           the Partnership shall not be obligated pursuant to the terms
of this Agreement to indemnify the Indemnitee if a final decision by a court
having jurisdiction in the matter shall determine that such indemnification is
not lawful; and

 

(f)            the Partnership shall not be
obligated pursuant to the terms of this Agreement to make any payment in
connection with any Proceeding to the extent the Indemnitee has otherwise
actually received payment (under any insurance policy or otherwise) of the
amounts otherwise indemnifiable under this Agreement.

 

5.             Change in Control.  The Partnership agrees that if there is a
Change in Control, then with respect to all matters thereafter arising
concerning the rights of the Indemnitee to indemnity payments and Expense
advances under this Agreement, the Partnership Agreement and any other
agreements now or hereafter in effect relating to Proceedings for Indemnifiable
Events, the Partnership shall seek legal advice only from special independent
counsel selected by the Indemnitee and approved by the Board of Directors
(which approval shall not be unreasonably withheld), and who has not otherwise
performed services for the Partnership (other than in connection with such
matters) or the Indemnitee.  Without
limiting the Board of Director’s obligation not to unreasonably withhold its approval,
in the event that the Indemnitee and the Partnership are unable to agree on the
selection of the special independent counsel, such special independent counsel
shall be selected by lot from among at least five nationally recognized law
firms each in New York City, New York, each having no less than 250 lawyers.  Such selection shall be made in the presence
of the Indemnitee (and the Indemnitee’s legal counsel or either of them, as the
Indemnitee may elect).  Such special
independent counsel, among other things, shall determine whether and to what
extent the Indemnitee would be permitted to be indemnified under applicable law
and shall render its written opinion to the Partnership and the Indemnitee to
such effect.  The Partnership agrees to
pay the reasonable fees of the special independent counsel referred to above
and to fully indemnify such counsel against any and all expenses (including
attorneys’ fees), Proceedings, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant to this Agreement.

 

6

 

6.             Subrogation.  In the event of payment to the Indemnitee
under this Agreement, the Partnership shall be subrogated to the extent of such
payment to all of the rights of recovery of the Indemnitee, who shall execute
all papers required and shall do everything that may be necessary to secure
such rights, including the execution of such documents necessary to enable the Partnership
effectively to bring suit to enforce such rights.

 

7.             No Presumptions.  For purposes of this Agreement, the
termination of any Proceeding against the Indemnitee by judgment, order,
settlement (whether with or without court approval) or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
the Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law.  In
addition, neither the failure of the Reviewing Party to have made a determination
as to whether the Indemnitee has met any particular standard of conduct or had
any particular belief, nor an actual determination by the Reviewing Party that the
Indemnitee has not met such standard of conduct or did not have such belief
shall be a defense to the Indemnitee’s Proceeding for indemnification or create
a presumption that the Indemnitee has not met any particular standard of
conduct or did not have any particular belief.

 

8.             Non-Exclusivity.  The rights conferred on the Indemnitee by
this Agreement shall be in addition to, and shall not be deemed exclusive of,
any other rights which the Indemnitee may have or hereafter acquire under any
statute, the certificate of limited partnership of the Partnership and the
Partnership Agreement, any other agreement, vote of unitholders or a resolution
of directors, or otherwise, and to the extent that during the Indemnification
Period such rights are more favorable than the rights currently provided under
this Agreement to the Indemnitee, the Indemnitee shall be entitled to the full
benefits of such more favorable rights to the extent permitted by law.  Other than as set forth in this Section 8,
in the case of any inconsistency between the indemnification provisions of this
Agreement and any other agreement relating to the indemnification of the
Indemnitee, the indemnification provisions of this Agreement shall control.

 

9.             Liability Insurance.  The Partnership may, to the extent that the
Board of Directors in good faith determines it to be economically reasonable,
maintain a policy of directors’ and officers’ liability insurance, on such
terms conditions as may be approved by the Board of Directors.  To the extent the Partnership maintains
directors’ and officers’ liability insurance, the Indemnitee shall be covered
by such policy in such a manner as to provide the Indemnitee the same rights
and benefits as are accorded to the most favorably insured of the General
Partner’s directors, if the Indemnitee is a director, or of the General Partner’s
officers, if the Indemnitee is not a director but is an officer.  Notice of any termination or failure to renew
such policy shall be provided to the Indemnitee promptly upon the Partnership’s
becoming aware of such termination or failure to renew.  The Partnership shall provide to the
Indemnitee copies of all such insurance policies and any endorsements thereto
whenever such documents have been provided to the Partnership.

 

10.           Amendment/Waiver.  No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto.  No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any 

 

7

 

other
provisions of this Agreement (whether or not similar) nor shall such waiver
constitute a continuing waiver.  Any
waiver to this Agreement shall be in writing.

 

11.           Binding Effect.  This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets of the Partnership, assigns, spouses, heirs, and personal and
legal representatives.

 

12.           Survival.  This Agreement shall continue in effect
during the Indemnification Period, regardless of whether the Indemnitee
continues to serve as an officer or director of the General Partner or of any
other enterprise at the General Partner’s request.

 

13.           Severability.  The provisions of this Agreement shall be
severable in the event that any provision of this Agreement (including any
provision within a single section, paragraph or sentence) is held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and the
remaining provisions shall remain enforceable to the fullest extent permitted
by law.

 

14.           Period of Limitations.  No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Partnership against the Indemnitee
or the Indemnitee’s estate, spouse, heirs, executors or personal or legal
representatives after the expiration of three years from the date of accrual of
such cause of action, and any claim or cause of action of the Partnership shall
be extinguished and deemed released unless asserted by the timely filing of a
legal action within such three year period; provided, however,
that if any shorter period of limitations is otherwise applicable to any such
cause of action, such shorter period shall govern.

 

15.           Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument, notwithstanding
that both parties are not signatories to the original or same counterpart.

 

16.           Governing Law.  This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws.

 

 

	
   

  	
  OSG AMERICA L.P.,

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  OSG America LLC, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Myles R. Itkin

  	
   

  
	
   

  	
   

  	
  Myles R. Itkin

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Morten Arntzen

  	
   

  
	
   

  	
  Morten Arntzen

  
					

 

8

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