Document:

EXHIBIT 10(iii)(u)

                         SEVERANCE PROTECTION AGREEMENT

      This Severance Protection Agreement (the "Agreement") is made as of the
12th day of December, 2003, by and between Overseas Shipholding Group, Inc., a
corporation incorporated under the laws of Delaware with its principal office at
511 Fifth Avenue, New York, New York 10017 (the "Company") and Peter J. Swift
(the "Executive").

                              W I T N E S S E T H:

      WHEREAS, the Company believes that the continuation and maintenance of a
sound and vital management of the Company and its affiliates is essential to the
protection and enhancement of the interests of the Company and its stockholders;

      WHEREAS, the Company also recognizes that the search for, and hiring of, a
new chief executive officer ("CEO") of the Company may result in the departure
or distraction of key employees of the Company to the detriment of the Company;
and

      WHEREAS, the Company has determined that it is appropriate to take steps
to induce key employees to remain with the Company, and to reinforce and
encourage their continued focus and dedication.

      NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:

      1. Term. The Protection Period under this Agreement shall commence on the
Commencement Date, which shall be the earlier of (a) the date a written
employment agreement is executed by the Company and an individual who shall
serve as the new CEO of the

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Company or (b) the date a new CEO (other than an interim CEO) commences
employment with the Company, and shall expire on the earlier of (a) eighteen
(18) months following the Commencement Date or (b) the date of the Executive's
termination of employment due to death, Disability (as defined in Section 2
below), retirement, resignation by the Executive with or without Good Reason (as
defined in Section 2 below) or termination by the Company with or without Cause
(as defined in Section 2 below).

      2. Termination. (a) If, during the Protection Period as provided in
Section 1 hereof, the Executive's employment with the Company is terminated by
the Company without Cause (as defined below) or by the Executive for Good Reason
(as defined below) the Executive shall be entitled to the amounts provided in
Section 3 as of the date of such termination (the "Termination Date").

      (b) For purposes of this Agreement, the following definitions shall apply:

            (i) Resignation for Good Reason. For purposes of this Agreement,
Resignation for Good Reason shall mean a resignation by the Executive effected
by a written notice of termination to the Company following the Executive's
thirty (30) day written notice to the Company of the occurrence of a Good Reason
event which is not materially cured by the Company within such thirty (30) day
period. "Good Reason" shall mean the occurrence of any of the following events
without the Executive's express written consent: (A) any material diminution in
the Executive's role, duties, responsibilities or authority, or the assignment
to the Executive of duties and responsibilities materially inconsistent with his
position, except in connection with the Executive's termination of employment
for Cause or as a result of the Executive's death, or temporarily as a result of
the Executive's incapacity or other absence; (B) a reduction in the Executive's
annual base salary; or (C) a relocation of the Executive's principal

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business location to an area outside of a fifty (50) mile radius of the
Executive's current principal business location and the Executive's home.

            (ii) Termination Without Cause. A termination without Cause shall be
a termination by the Company other than for Cause or Disability (each as defined
below).

      (A) As used herein, the term "Cause" shall mean: (I) the engaging by the
Executive in willful misconduct either (x) involving the Company or its assets,
business or employees, or (y) which is materially injurious to the Company
economically or to the Company's reputation; (II) the Executive's conviction or
indictment for (or pleading guilty or nolo contendere to) (x) a felony, or (y)
any other crime involving any financial or moral impropriety, or (z) any other
crime which, in the determination of the Board of Directors of the Company (the
"Board") would materially interfere with the Executive's ability to perform his
services to the Company or otherwise be materially injurious to the Company
economically or otherwise; (III) the continued and substantial failure by the
Executive to perform his duties with the Company (other than a failure resulting
from Executive's incapacity due to physical or mental illness or injury), which
failure has continued for a period of at least ten (10) days after written
notice thereof from the Company; (IV) the breach by the Executive of any
material provisions of any agreement with the Company, which breach is not cured
within ten (10) days after written notice thereof from the Company; or (V)
refusal to follow the legal written direction of the Board or a more senior
officer within five (5) business days of it being given, provided that the
foregoing refusal shall not be "Cause" if the Executive, in good faith, believes
that such direction is illegal and Executive promptly so notifies the Board.

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      (B) As used herein, the term "Disability" shall mean the Executive's
failure to perform his material duties and responsibilities as a result of
physical or mental illness or injury for one hundred eighty (180) days during a
three hundred sixty-five (365) day period.

      3. Severance Compensation. If, pursuant to Section 2, the Executive is
entitled to amounts and benefits under this Section 3, the Company shall,
subject to the provisions hereof, (a) pay to the Executive at the same time as
such amounts would be paid to the Executive if he had remained an employee (i)
for twenty-four (24) months an amount based on the Executive's highest annual
base salary rate in effect during the six (6) month period immediately prior to
his termination, less legally required taxes and any sums owed by the Executive
to the Company, (ii) subject to submission of documentation, any incurred but
unreimbursed business expenses for the period prior to termination payable in
accordance with the Company's policies and practices, and (iii) any base salary,
bonus, vacation pay or other compensation accrued or earned under law or in
accordance with the Company's policies applicable to the Executive but not yet
paid; (b) pay to the Executive any other amounts or vested benefits due under
applicable employee benefit (including, without limitation any Supplemental
Executive Retirement Plan), equity or incentive plans of the Company then in
effect, applicable to the Executive as shall be determined and paid in
accordance with such plans; and (c) provide for the benefit of the Executive and
the Executive's eligible dependents for a period ending at the earliest of (i)
the Executive and the Executive's eligible dependents ceasing to be eligible
under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), (ii)
eighteen (18) months following the Executive's Termination Date and (iii) the
Executive's commencement of other substantially full-time employment (such
period to be counted against the COBRA continuation coverage period), at the
Company's expense (subject to the Executive

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paying the same portion of premiums he paid as an active employee), continued
coverage under the Company health plans in which the Executive and the
Executive's eligible dependents participated immediately prior to the
Termination Date (or replacement plans therefor) .

      4. Acceptance and Release. Any and all amounts payable and benefits or
additional rights provided pursuant to Sections 3(a) and 3(c) of this Agreement
shall only be payable if the Executive delivers to the Company the attached
Acceptance Form and Release (Exhibit A) discharging all claims of the Executive
which may have occurred up to the Termination Date (with such changes therein as
may be necessary to make it valid and encompassing under applicable law) within
twenty-one (21) days of presentation thereof by the Company to the Executive.
Notwithstanding anything herein to the contrary, if the Executive materially
breaches any of the provisions of Section 6 of this Agreement, the Company may
cease all payments and benefits due to the Executive under Sections 3(a) and
3(c) hereof (other than as required by law).

      5. No Duty to Mitigate/Set-off. The Company agrees that if the Executive's
employment with the Company is terminated pursuant to this Agreement during the
term of this Agreement, the Executive shall not be required to seek other
employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to this Agreement. The amounts due under
Section 3 are inclusive, and in lieu of, any amounts payable under any other
salary continuation or cash severance arrangement of the Company and to the
extent paid or provided under any other such arrangement shall be offset against
the amount due hereunder.

      6.    (a) Confidentiality and Cooperation. The Executive shall not at any
time during the term of this Agreement, or thereafter, directly or indirectly,
for any reason

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whatsoever, communicate or disclose to any unauthorized person, firm or
corporation, or use for the Executive's own account, without the prior written
consent of the Board, any proprietary processes, trade secrets or other
confidential data or information of the Company and its related and affiliated
companies concerning their businesses or affairs, accounts, products, services
or customers, it being understood, however, that the obligations of this Section
shall not apply to the extent that the aforesaid matters (i) are disclosed in
circumstances in which the Executive is legally required to do so, provided that
the Executive gives the Company prompt written notice of receipt of notice of
any legal proceedings so as the Company has the opportunity to obtain a
protective order, or (ii) become known to and available for use by the public
other than by the Executive's wrongful act or omission. During and after his
employment, the Executive shall cooperate with the Company or its counsel in
connection with any matter, investigation, proceeding or litigation regarding
any matter in which the Executive was involved during his employment with the
Company or to which the Executive has knowledge based on his employment with the
Company.

            (b) Nonsolicitation. During the Executive's employment with the
Company and for the one (1) year period thereafter, the Executive agrees that he
will not, directly or indirectly, individually or on behalf of any other person,
firm, corporation or other entity, solicit, induce, hire or retain any employee
of the Company to leave the employ of the Company or to accept employment or
retention as an independent contractor with, or render services to or with any
other person, firm, corporation or other entity unaffiliated with the Company or
take any action to assist or aid any other person, firm, corporation or other
entity in identifying, soliciting, hiring or retaining any such employee
(provided the Executive may serve as a reference after he is no longer employed
by the Company but not with regard to any entity

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with which he is affiliated or from which he is receiving compensation).
Furthermore, during the Executive's employment with the Company and for the one
(1) year period thereafter, the Executive will not solicit or induce any
customer of the Company to purchase goods or services offered by the Company
from another person, firm, corporation or other entity or assist or aid any
other persons or entity in identifying or soliciting any such customer.

            (c) Agreement to Not Disparage. The Executive agrees that while
employed by the Company and thereafter, he will not make any statements that
disparage the Company or its employees, officers, directors, products or
services. Notwithstanding the foregoing, truthful statements made in the course
of sworn testimony in administrative, judicial or arbitral proceedings
(including, without limitation, depositions in connection with such proceedings)
by the Executive shall not be subject to this Section 6(c). Traditional
competitive statements made by the Executive but not based on his employment
with the Company, also shall not be deemed a violation of the foregoing if the
Executive is in a competitive position.

            (d) Equitable Relief and Other Remedies. Because the Company's
remedies at law for a breach or threatened breach of any of the provisions of
this Section would be inadequate, the Executive acknowledges and agrees that, in
the event of such a breach or threatened breach, in addition to any remedies at
law, the Company shall be entitled to obtain equitable relief in the form of
specific performance, a temporary restraining order, a temporary or permanent
injunction or any other equitable remedy which may then be available.

            (e) Reformation. If it is determined by a court of competent
jurisdiction that any restriction in this Section 6 is excessive in duration or
scope or is unreasonable or unenforceable, it is the intention of the parties
that such restriction may be modified or amended by the court to render it
enforceable to the maximum extent permitted.

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            (f) Survival of Provisions. The obligations contained in this
Section 6 shall survive the termination, separation, or expiration of the
Executive's employment with the Company and shall be fully enforceable
thereafter.

      7. Employee Benefit Plans. The amounts and benefits specified in Section 3
hereof shall not be paid to the Executive as an employee and the Executive shall
not be eligible to participate in employee benefit plans maintained by the
Company during such period except as specifically provided herein. Amounts paid
pursuant to Section 3 shall not be taken into account for purposes of
determining contributions to or calculating accrued benefits under the employee
benefit plans maintained by the Company.

      8. Non-Resignation. In consideration of this Agreement, the Executive
agrees that he shall not resign from the Company without Good Reason for at
least one hundred eighty (180) days from the date of this Agreement.

      9. Successors; Binding Agreement. In addition to any obligations imposed
by law upon any successor to the Company, the Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to
expressly assume and agree in writing to perform this Agreement in the same
manner and to the same extent that the Company would have been required to
perform the Agreement if no such succession had taken place. This Agreement
shall inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive shall die while any amount
would still be payable to the Executive, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate, as if the Executive

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had continued to live. This Agreement is personal to the Executive and neither
this Agreement nor any rights or obligations hereunder may be assigned by the
Executive.

      10. Miscellaneous. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the CEO or other such officer as may be
specifically designated by the Board. No waiver of a breach under this Agreement
shall be deemed a waiver of similar or dissimilar provisions or conditions at
any time. This Agreement constitutes the entire Agreement between the Executive
and the Company with respect to the severance protection offered by the Company
to the Executive, except as may be provided in any other written agreement. This
Agreement is being executed for a limited purpose and for a specified Protection
Period (as set forth in Section 1 hereof). This Agreement does not confer or
impose any severance protection for the Executive following the termination of
the Protection Period. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either the Executive or the Company which are not expressly set forth in this
Agreement. All references to any law shall be deemed also to refer to any
successor provisions to such laws.

      11. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

      12. Notices. Any notice or other communication required or permitted under
this Agreement shall be in writing and shall be delivered personally, or sent by
registered mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, or, if

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mailed, five (5) days after the date of deposit in the United States mails.
Notices and communications shall be delivered or sent to the following
addresses:

                  (i)   If to the Company, to:
                        Overseas Shipholding Group, Inc.
                        511 Fifth Avenue
                        New York, New York 10017
                        Attention: Chairman or CEO

                  (ii)  If to the Executive, to his or her last shown
                        address on the books of the Company.

      Any party may designate another address or person for receipt of notices
hereunder by providing notice as specified in this Section 12.

      13. Service with Any Subsidiary. For purposes of this Agreement,
employment with any subsidiary shall be deemed to be employment by the Company
and references to the Company shall include all such entities, except that the
payment obligation hereunder shall be solely that of the Company.

      14. Separability. If any provisions of this Agreement (including Exhibit
A) shall be declared to be invalid or unenforceable, in whole or in part, by a
court of competent jurisdiction, such invalidity or unenforceability shall not
affect the validity of the remaining provisions of this Agreement, including
Exhibit A.

      15. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive, equity or other plan or program provided by the Company for which the
Executive may qualify, nor shall anything herein (except Section 6) limit or
otherwise prejudice such rights as the Executive may have under any other
currently existing plan, agreement as to employment or termination from

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employment with the Company or statutory entitlements. Amounts that are vested
benefits or those which the Executive is otherwise entitled to receive under any
plan or program of the Company, at or subsequent to the Termination Date, shall
be payable in accordance with such plan or program, except as otherwise
specifically provided herein. Notwithstanding the foregoing, the Executive shall
not be entitled to received duplicative severance payments and benefits and, to
the extent that the Executive is entitled to severance payments and benefits
under any other plan or agreement (for example, the Change of Control Agreement,
dated March 24, 1999, as amended on February 14, 2001 and June 21, 2002 between
the Company and the Executive), the Executive shall be entitled to the greater
of the payments and benefits thereunder or hereunder but not under both plans or
agreements.

      16. At Will Employment. This Agreement does not constitute a contract of
employment and, subject to any other agreement between the Executive and the
Company, the Company reserves the right to terminate the Executive's employment
at any time with or without reason or notice (unless otherwise prohibited by
law), subject to the payment provisions hereof.

      17. Governing Law. This Agreement shall be construed, interpreted, and
governed in accordance with the laws of the State of Delaware without reference
to rules relating to conflicts of law.

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      IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Executive has hereunto set his hand as of the date first set
forth above.

                                         OVERSEAS SHIPHOLDING GROUP, INC.

                                         By: /s/ Morton P. Hyman
                                             -----------------------------------
                                         Name:  Morton P. Hyman
                                         Title: Chairman, President and Chief
                                                Executive Officer

                                         PETER J. SWIFT

                                         /s/ Peter J. Swift
                                         ---------------------------------------

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                                    EXHIBIT A

                           ACCEPTANCE FORM AND RELEASE

Release

      1. I agree and acknowledge that the payments and other benefits provided
pursuant to the Severance Protection Agreement ("Agreement"), dated _________:
(i) are in full discharge of any and all liabilities and obligations of the
Company to me, monetarily or with respect to employee benefits or otherwise,
including but not limited to any and all obligations arising under any alleged
written or oral employment agreement, policy, plan or procedure of the Company
and/or any alleged understanding or arrangement between me and the Company; and
(ii) exceed any payment, benefit, or other thing of value to which I might
otherwise be entitled under any policy, plan or procedure of the Company and/or
any agreement between me and the Company.

      2. (a) In consideration for the payments and benefits to be provided to me
pursuant to the Agreement, I forever release and discharge the Company from any
and all claims. This includes claims that are not specified in this Agreement,
claims of which I am not currently aware, claims under: (i) the Age
Discrimination in Employment Act, as amended; (ii) Title VII of the Civil Rights
Act of 1964, as amended; (iii) the Americans with Disabilities Act, as amended;
(iv) the Employee Retirement Income Security Act of 1974, as amended (excluding
claims for accrued, vested benefits under any employee benefit pension plan of
the Company in accordance with the terms and conditions of such plan and
applicable law); (v) the Workers' Adjustment and Retraining Notification Act;
(vi) the Family and Medical Leave Act; (vii) any claim under the New York State
Human Rights Law and the New York City Administrative Code; (viii) any other
claim (whether based on federal, state, or local law, statutory or decisional)

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relating to or arising out of my employment, the terms and conditions of such
employment, the separation of such employment, and/or any of the events relating
directly or indirectly to or surrounding the separation of that employment,
including, but not limited to, breach of contract (express or implied), wrongful
discharge, detrimental reliance, defamation, emotional distress or compensatory
or punitive damages; and (ix) any claim for attorneys' fees, costs,
disbursements and/or the like. Notwithstanding anything herein to the contrary,
the sole matters to which this Release does not apply are (i) the rights of
indemnification and directors and officers liability insurance coverage to which
I was entitled immediately prior to my termination; and (ii) my rights under any
tax-qualified pension plan or claims for accrued vested benefits under any other
employee benefit plan, policy or arrangement maintained by the Company or under
COBRA.

            (b) This release applies to me and to anyone who succeeds to my
rights, such as my heirs, executors, administrators of my estate, trustees, and
assigns. This release is for the benefit of (i) the Company, (ii) any related
corporation or entity, (iii) any director, officer, employee, or agent of the
Company or of any such related corporation or entity, or (iv) any person,
corporation or entity who or that succeeds to the rights of the Company or of
any such person, corporation or entity.

      3. I acknowledge that I: (a) have carefully read in their entirety the
Agreement, the Acceptance Form and Release [and the information attached as
Appendix I provided pursuant to the Older Workers Benefit Protection Act]; (b)
have had an opportunity to consider fully for at least twenty-one (21) days the
terms of the Agreement, the Acceptance Form and Release [and information
attached as Appendix I]; (c) have been advised by the Company in writing to
consult with an attorney of my choosing in connection with the Agreement,
Acceptance Form and

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Release [and the information attached as Appendix I]; (d) fully understand the
significance of all of the terms and conditions of the Agreement, Acceptance
Form and Release [and the information attached as Appendix I], and have
discussed them with my independent legal counsel, or have had a reasonable
opportunity to do so; (e) have had answered to my satisfaction any questions I
have asked with regard to the meaning and significance of any of the provisions
of the Agreement, the Acceptance Form and Release [and the information attached
as Appendix I]; and (f) am signing this Acceptance Form and Release voluntarily
and of my own free will and assent to all the terms and conditions contained
herein and contained in the Agreement, Acceptance Form and Release.

      4. I understand that I will have twenty-one (21) days from the date of
receipt of the Agreement, Acceptance Form and Release [and information attached
as Appendix I] to consider the terms and conditions of those documents. I may
accept the Agreement by signing the Acceptance Form and Release and returning
them to ___________________. After executing the Acceptance Form and Release and
returning them to ___________________, I shall have seven (7) days (the"
Revocation Period") to revoke this Agreement by indicating my desire to do so in
writing delivered by no later than 5:00 p.m. on the seventh (7th) day following
the date I sign and return the Acceptance Form and Release. The effective date
of the Agreement shall be the eighth (8th) day following my signing and return
of the Acceptance Form and Release. If the last day of the Revocation Period
falls on a Saturday, Sunday or holiday, the last day of the Revocation Period
will be deemed to be the next business day. In the event I do not accept the
Agreement, or in the event I revoke the Acceptance Form and Release during the
Revocation Period, the Agreement, including but not limited to the obligation of
the Company to provide the payments and other benefits, shall be deemed
automatically null and void.

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Print Name:___________________________              Date: ________________
                      Employee

Signature:____________________________
                      Employee

STATE OF NEW YORK       )
                        ) ss:
COUNTY OF ___________   )

      On this __ day of ________ _____, before me personally came
_______________ to be known and known to me to be the person described and who
executed the foregoing Release, and (s)he duly acknowledged to me that (s)he
executed the same.

      ______________________________

              Notary Public

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                           ACCEPTANCE FORM AND RELEASE

Acceptance Form:

I have read the Severance Protection Agreement, dated ______ ("Agreement") and
the accompanying Release [and the information attached as Appendix I] and hereby
accept the benefits provided under the Agreement, subject to the terms and
conditions set forth in the Agreement and Release.

Print Name:___________________________            Date: _____________________
                            Employee

Signature:____________________________
                            Employee

         STATE OF NEW YORK      )
                                ) ss:
         COUNTY OF ___________  )

      On this __ day of ________ _____, before me personally came
_______________ to be known and known to me to be the person described and who
executed the foregoing Acceptance Form, and (s)he duly acknowledged to me that
(s)he executed the same.

___________________________
Notary PublicEXHIBIT 10 (iii)(v)

                                                            January 19, 2004

Mr. Morten Arntzen
1018 Weed Street
New Canaan, Connecticut 06840

                        Re:   Terms of Employment

Dear Mr. Arntzen:

      This letter, when countersigned by you, will confirm our agreement as to
your becoming President and Chief Executive Officer ("CEO") of Overseas
Shipholding Group, Inc. (together with its Successors and Assigns as defined in
Section 7(d) hereof, the "Company") on January 19, 2004 (the "Effective Date")
in accordance with the terms and conditions of this letter (the "Letter
Agreement" or "Agreement"). This Letter Agreement shall be effective upon it
being executed by the parties.

1.    Title and Position. You will serve as President and CEO of the Company
      and, as such, have the duties and responsibilities commensurate with the
      position at public companies of similar size and ownership. In addition,
      you will be appointed to the Company's Board of Directors (the "Board")
      at, or prior to, the next meeting of the Board. You will report to the
      Board. While you are employed by the Company, you will (a) devote
      substantially all of your business time and reasonable best efforts to the
      performance of your duties and (b) discharge your duties diligently,
      faithfully and in what you believe in your good faith judgment is the best
      interests of the Company. Notwithstanding the obligation to devote
      substantially all of your business time to the performance of our duties,
      you may manage your personal and family passive investments, be involved
      in charitable activities (including serving on their boards) and, with the
      prior consent of the Board, serve on other for profit boards, provided
      that such activities in the aggregate do not materially interfere with the
      performance of your duties or breach your fiduciary duty to the Company.
      The Board has agreed that you may continue to serve on the board of
      directors of Chiquita Brands International, Inc., subject to the
      limitations set forth in the prior sentence.

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2.    Employment. Your employment is at will employment and as such may be
      terminated by you or the Company at any time for any reason or no reason,
      provided that, in the event of your voluntary termination of employment
      without Good Reason (as defined in Exhibit A) prior to January 19, 2007,
      you shall give the Company thirty (30) days' prior written notice.

3.    Compensation.

            (a)   Base Salary. As compensation for your services, the Company
                  will pay you a base salary at the rate of $750,000 per year,
                  in accordance with the usual payroll practices of the Company
                  (as increased from time to time, the "Base Salary"). Your Base
                  Salary will be subject to annual review for increase (but may
                  not be decreased) and is subject to merit increases as
                  determined by the Board.

            (b)   Bonus Payments. Bonuses will be paid to you in accordance with
                  the Company's applicable bonus plans, policies and procedures
                  as in effect from time to time. For fiscal year 2004, you will
                  receive a minimum guaranteed cash bonus of 50% of your Base
                  Salary (i.e. $375,000), to be paid in accordance with the
                  Company's usual practices, provided that you are employed by
                  the Company on December 31, 2004. Notwithstanding the
                  foregoing, in the event of your death or Disability
                  termination (as defined in Section 5(b) herein) prior to
                  December 31, 2004, you or your beneficiary will receive the
                  applicable pro rata portion of the minimum guaranteed bonus
                  described in the foregoing sentence, based on the product of
                  (x) a fraction the numerator of which is the number of days in
                  2004 you are employed by the Company prior to your death or
                  Disability termination and the denominator of which is 365 and
                  (y) the minimum guaranteed bonus (the "Pro Rata Guaranteed
                  Bonus").

4.    Benefits and Business Expenses.

            (a)   Benefits. While you are employed by the Company, you will be
                  entitled to participate, to the extent eligible under the
                  standard eligibility provisions of such plans, in all benefit
                  plans and programs (including, without limitation, the
                  Company's vacation policy and the Basic Supplemental Executive
                  Retirement Plan (the "Basic SERP")), in accordance with the
                  terms thereof in effect from time to time as generally
                  applicable to senior executives. There is no guarantee that
                  any plan or program (including the Basic SERP) shall continue
                  indefinitely. For clarity, you recognize that you will not
                  necessarily be eligible to participate in the Supplemental
                  Executive Retirement Plan Plus or any other benefit plan
                  specifically designed for special situations or arrangements.

            (b)   Initial Stock Option Grant. On the Effective Date, you will be
                  granted options to acquire 100,000 shares of common stock of
                  the Company (the "Options"). The Options will be non-qualified
                  stock options

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                  granted under, and governed by, the Company's 1998 Stock
                  Option Plan (the "Option Plan") and the associated Option
                  Agreement (in the form attached hereto as Exhibit B). The
                  Options will have an exercise price equal to the Fair Market
                  Value (as defined in the Option Plan) of the Company's Stock
                  on the Effective Date. The Options will vest and become
                  exercisable in three (3) equal tranches on the day prior to
                  each of the first, second and third anniversaries of the
                  Effective Date provided that you are employed by the Company
                  on each such vesting date, subject to earlier vesting in
                  certain situations, as provided herein, in the Option
                  Agreement or in the Option Plan. The Options will have a ten
                  (10) year term, subject to earlier termination in accordance
                  with this Letter Agreement, the Option Plan and the Option
                  Agreement. The Options will vest upon a Change of Control (as
                  defined in the Change of Control Agreement attached hereto as
                  Exhibit D) unless Section 8.1(b) of the Option Plan as in
                  effect as of the Effective Date (utilizing the definition of
                  Change of Control set forth in the Change of Control
                  Agreement) applies. In the event Section 8.1(b) applies,
                  "Options" shall also include any "Alternative Option" as
                  defined in the Option Plan.

            (c)   Initial Restricted Stock Grant. As a material inducement to
                  you to agree to the terms of this Letter Agreement and become
                  the Company's CEO, you will be granted on the Effective Date
                  50,000 shares of restricted stock of the Company (the
                  "Restricted Stock"). The Restricted Stock will be governed by
                  the Restricted Stock Agreement (in the form attached hereto as
                  Exhibit C). Except as otherwise provided herein or in the
                  Restricted Stock Agreement, restrictions on the Restricted
                  Stock will lapse with respect to one fourth of the shares on
                  the day before each of the next four (4) anniversaries of the
                  Effective Date provided you are employed by the Company on
                  each such date. When Restricted Stock vests, the certification
                  for such vested stock will be delivered to you with only such
                  legends as may be required by law or in the Company's good
                  faith implementation of legal requirements. In the event you
                  vest in any Restricted Stock prior to January 18, 2005, the
                  Company shall use reasonable business efforts to register the
                  vested Restricted Stock for resale by you by promptly filing a
                  Form S-8 with a resale prospectus with regard to the vested
                  Restricted Stock, provided that (i) at any time after January
                  19, 2005 the Company shall have the right to amend such Form
                  S-8 to remove the resale prospectus, and (ii) that you shall
                  not sell any securities relying on such resale prospectus if
                  the Company has notified you in writing that because of
                  non-public developments such resale prospectus may not be
                  utilized (but the Company shall promptly notify you in writing
                  when such limitation no longer applies), and (iii) the
                  foregoing shall not relieve you of any obligations you may
                  have under the securities laws with regard to insider trading.

            (d)   Future Grants. You will be entitled to future equity grants as
                  determined by the Board, or the applicable Committee thereof,
                  and they shall be subject to such terms as provided in the
                  applicable grant.

<PAGE>

            (e)   Perquisites. You will be entitled to perquisites consistent
                  with Company practices as in effect from time to time.

            (f)   Business Expenses. Upon presentation of appropriate
                  documentation, you will be reimbursed by the Company for
                  reasonable business expenses, in accordance with Company
                  policies, in connection with the performance of your duties
                  hereunder.

            (g)   Disability Policy. Upon presentation of appropriate
                  documentation, the Company will pay the premiums for the Mass
                  Mutual disability insurance policy number 8370383 and the
                  Boston Mutual disability insurance policy number 5070-0012
                  maintained by you, in an amount up to $11,000 per annum. The
                  foregoing shall not limit your participation in the Company's
                  disability programs, except to the extent required by the
                  underwriters thereof.

            (h)   Legal Fees. Upon presentation of appropriate documentation
                  (including time sheets), the Company shall pay reasonable
                  legal fees (at your counsel's lowest standard rate for each
                  lawyer involved), and expenses incurred in connection with the
                  negotiation and execution of this Letter Agreement, but not in
                  excess of $25,000.

            (i)   Indemnification and Directors and Officers Liability
                  Insurance. You shall be indemnified and be covered by
                  officers' and directors' liability insurance to the same
                  extent that the Company covers the directors of the Company
                  (subject to any legal or indemnity limitations). Such
                  indemnification and coverage shall continue after the
                  Employment Term with regard to actions or inactions during the
                  Employment Term while liability exists to the same extent that
                  directors are covered.

5.    Consequences of Termination.

            (a)   Death. If your employment with the Company terminates as a
                  result of your death, the Company will pay or provide to your
                  spouse or estate, as applicable, (i) any Base Salary earned
                  but not yet paid as of the date of termination, (ii) any
                  accrued vacation pay payable pursuant to the Company's
                  policies, (iii) any documented unreimbursed business expenses,
                  (iv) any earned bonus for any prior completed fiscal year
                  earned in accordance with, and to the extent provided under,
                  the terms of the applicable plan or program but not yet paid,
                  and (v) any amounts, benefits or rights you are due or
                  entitled to pursuant to the terms of any plan, policy, program
                  or arrangement of the Company applicable to you or any other
                  written agreement with the Company, including any equity grant
                  in accordance therewith (collectively the "Accrued Amounts").
                  You will also, if applicable, receive the Pro Rata Guaranteed
                  Bonus. You will not be entitled to any other amounts, except
                  rights with regard to indemnification and directors' and
                  officers' liability insurance.

<PAGE>

            (b)   Disability. If your employment with the Company terminates as
                  a result of your Disability, the Company will pay you the
                  Accrued Amounts and the Pro Rata Guaranteed Bonus, if
                  applicable. You will not be entitled to any other amounts,
                  except rights with regard to indemnification and directors'
                  and officers' liability insurance and as provided in the last
                  sentence hereof. For purposes of this Letter Agreement,
                  Disability means your failure (on an actual basis) or
                  inability (on a projected basis (including any prior actual
                  absence period) as determined by a physician selected by the
                  Board in good faith and reasonably acceptable to you) to
                  respectively, have performed or be able to perform your
                  material duties and responsibilities as a result of physical
                  or mental illness or injury for more than one hundred eighty
                  (180) days during a three hundred sixty-five (365) day period.
                  In the event such termination is on a projected basis, your
                  actual termination date shall be at the earliest of your
                  actually satisfying the above actual absence requirement, your
                  qualifying to commence receiving disability benefits under any
                  Company paid for or sponsored long-term disability program,
                  your death or six (6) months after such termination
                  determination, but in such interim you shall be entitled to
                  your compensation hereunder, but shall not have any offices,
                  any responsibilities, duties or authority or any right to
                  terminate for Good Reason.

            (c)   Without Cause or For Good Reason. If the Company terminates
                  your employment without Cause (as defined in Exhibit A) or you
                  terminate your employment for Good Reason, you will receive
                  your Accrued Amounts and, provided such termination is prior
                  to January 19, 2007, subject to your execution of a waiver and
                  general release in the form attached hereto as Exhibit E (with
                  such changes as may be required to make the waiver and release
                  voluntary and binding on you in accordance with applicable
                  law) within the later of ninety (90) days after such
                  termination or twenty-one (21) days after the waiver and
                  general release is provided to you, the Company agrees (i) to
                  pay you at the same time as such amounts would be paid to you
                  had you remained employed by the Company an amount equal to
                  your proper monthly Base Salary (as defined herein) in effect
                  on the date immediately prior to your termination for a period
                  of twenty-four (24) months, subject to Section 6(m) below,
                  (ii) to accelerate the vesting on the next vesting tranche of
                  the Options described in Section 4(b) above so that they
                  become immediately vested (with all other unvested Options
                  forfeited) and to permit your vested Options to remain
                  exercisable for a period of one (1) year (but not beyond the
                  original ten (10) year term) following your termination of
                  employment without Cause or for Good Reason, subject to
                  earlier termination in accordance with the terms of the Option
                  Plan unrelated to termination of employment, provided that no
                  portion of the Option that vests upon such termination may be
                  exercised by you prior to delivery of the aforesaid waiver and
                  general release and expiration of the revocation period with
                  regard thereto, (iii) to accelerate the lapse of restrictions
                  on the next vesting tranche of the Restricted Stock described
                  in Section

<PAGE>

                  4(c) above so that they immediately vest (with all other
                  unvested Restricted Stock forfeited), and (iv) to provide for
                  the benefit of you and your eligible dependents for a period
                  ending at the earliest of (A) you or your eligible dependents
                  (as applicable) ceasing to be eligible under the Consolidated
                  Omnibus Budget Reconciliation Act of 1985 ("COBRA"), (B)
                  eighteen (18) months following your termination of employment
                  with the Company, and (C) the date of your permitted entry to
                  any future employer's health coverage plan upon or following
                  your commencement of other substantially full-time employment
                  or the equivalent (such period to be counted against the COBRA
                  continuation coverage period), at the Company's expense
                  (subject to you paying the same portion of premiums you paid
                  as an active employee), continued coverage under the Company
                  health plans in which you and your eligible dependents
                  participate immediately prior to the date your employment
                  terminates. Notwithstanding the foregoing, if the Company
                  terminates your employment without Cause or you terminate your
                  employment for Good Reason at any time during the two (2) year
                  period following a Change of Control (as defined in the Change
                  of Control Agreement attached hereto as Exhibit D) or in the
                  event of your Anticipatory Termination (as defined in the
                  Change of Control Agreement) within one hundred and twenty
                  (120) days prior to a Change of Control, (i) the Company shall
                  pay you such amounts and provide you with such benefits as
                  provided in the Change of Control Agreement attached hereto as
                  Exhibit D if it is then in effect (or, if not, any replacement
                  change of control agreement then in effect) in lieu of
                  Sections 5(c)(i) and 5(c)(iv), (ii) in lieu of Section
                  5(c)(ii), to the extent not vested upon a Change of Control,
                  the vesting of all of the Options described in Section 4(b)
                  above will accelerate and your vested Options will remain
                  exercisable for a period ending on the later of ninety (90)
                  days following your termination of employment or the Change of
                  Control (but not beyond the original ten (10) year term),
                  subject to earlier termination in accordance with the terms of
                  the Option Plan unrelated to termination of employment, (iii)
                  in lieu of Section 5(c)(iii), the lapsing of restrictions on
                  all of the Restricted Stock described in Section 4(c) above
                  will accelerate to the date of such termination, and (iv) any
                  release requirement shall only be as required pursuant to the
                  change of control agreement then in effect and shall not apply
                  to the treatment of the Options and Restricted Stock. You
                  will not be entitled to any other amounts, except with regard
                  to indemnification and directors' and officers' liability
                  insurance.

            (d)   For Cause. If the Company terminates your employment for
                  Cause, the Company will pay you the Accrued Amounts other than
                  any unpaid bonus and you shall not be entitled to any other
                  amount, except with regard to indemnification and directors'
                  and officers' liability insurance.

            (e)   Voluntary Resignation Without Good Reason. If your employment
                  terminates as a result of your voluntary resignation without
                  Good

<PAGE>

                  Reason, the Company will pay you the Accrued Amounts
                  (including the minimum guaranteed bonus under Section 3(b), to
                  the extent unpaid, if your termination of employment is on or
                  after January 1, 2005). You shall not be entitled to any other
                  amounts, except with regard to indemnification and directors'
                  and officers' liability insurance.

            (f)   No Mitigation. Following your termination of employment, you
                  shall be under no obligation to seek other employment and,
                  except as provided under Section 6(m), there shall be no
                  setoff against any amounts due you hereunder on account of
                  remuneration attributable to any subsequent employment that
                  you may obtain or, on other than a Cause termination, on
                  account of any claim the Company or any affiliate may have
                  against you.

            (g)   Resignation as a Director. Upon any termination of your
                  employment, you agree to promptly resign in a writing
                  delivered to the Company as an officer and director of the
                  Company and any affiliate and from any other fiduciary
                  position with the foregoing.

6.    Confidential Information, Non-Competition and Non-Solicitation.

            (a)   You acknowledge that as a result of your employment by the
                  Company, you will obtain confidential information as to the
                  Company and its affiliates and create relationships with
                  customers, suppliers and other persons dealing with the
                  Company and its affiliates and the Company and its affiliates
                  will suffer substantial damage, which would be difficult to
                  ascertain, if you should use such confidential information or
                  take advantage of such relationship (other than in the good
                  faith performance of your duties during the Employment Term)
                  and that because of the nature of the information that will be
                  known to you and the relationships created it is necessary for
                  the Company and its affiliates to be protected by the
                  prohibition against Competition as set forth herein, as well
                  as the Confidentiality restrictions set forth herein. For
                  purposes of this Letter Agreement, an affiliate of any entity
                  means an entity that directly or indirectly controls, is
                  controlled by, or is under common control with, such other
                  entity.

            (b)   You acknowledge that the retention of the customers of the
                  Company and its affiliates is important to the businesses of
                  the Company and its affiliates and that you will create
                  relationships with such customers as a result of being an
                  executive of the Company, and, therefore, it is necessary for
                  the Company and its affiliates to be protected from your
                  Solicitation of such customers as set forth below.

            (c)   You acknowledge that the retention of nonclerical employees
                  employed by the Company and its affiliates in which the
                  Company and its affiliates have invested training and depends
                  on for the operation of their businesses is important to the
                  businesses of the Company and its affiliates, that you will
                  obtain unique information as to such employees

<PAGE>

                  as an executive of the Company and will develop a unique
                  relationship with such persons as a result of being an
                  executive of the Company and, therefore, it is necessary for
                  the Company and its affiliates to be protected from your
                  Solicitation of such employees as set forth below.

            (d)   You acknowledge that the provisions of this Agreement are
                  reasonable and necessary for the protection of the businesses
                  of the Company and its affiliates and that part of the
                  compensation paid under this Agreement and the agreement to
                  pay severance in certain instances is in consideration for the
                  agreements in this Section.

            (e)   While you are employed by the Company and for one (1) year
                  after your termination of employment, you will not engage in
                  Solicitation (other than in the good faith performance of your
                  duties during the Employment Term) and will not enter into
                  Competition with the Company or its affiliates.

            (f)   Competition means: participating, directly or indirectly, as
                  an individual proprietor, partners, stockholder, officer,
                  employee, director, joint venturer, investor, lender,
                  consultant or in any capacity whatsoever (within the United
                  States of America, or in any country where the Company or its
                  affiliates do business) in a business in competition with any
                  Material Business (as defined below) conducted by the Company
                  as of the date of the termination of your employment
                  ("Competitor"), provided, however, that such participation
                  will not include (i) the mere ownership of not more than one
                  percent (1%) of the total outstanding stock of a publicly held
                  company, (ii) working as an investment banker or financial
                  consultant (other than as "disguised" employment for any
                  Competitor), (iii) engaging in any activity with, or for, a
                  non-competitive division, subsidiary or affiliate of any
                  Competitor, or (iv) any activity engaged in with the prior
                  written approval of the Board. A business shall be deemed to
                  be a Material Business of the Company if it generated more
                  than 5% of the Company's revenues in the fiscal year ending
                  prior to termination of your employment or is projected to
                  generate more than 5% of the Company's revenues in the fiscal
                  year of termination of your employment.

            (g)   Solicitation means: (i) with regard to Section 6(c) and
                  Section 6(e), the recruiting, soliciting or inducing, of any
                  nonclerical employee or employees of the Company or its
                  affiliates to terminate their employment with, or otherwise
                  cease their relationship with, the Company or its affiliates,
                  or hiring or assisting another person or entity to hire any
                  nonclerical employee of the Company or its affiliates or any
                  person who within six (6) months before had been a nonclerical
                  employee of the Company or its affiliates and was not
                  terminated by the Company without "cause" after the end of
                  your employment, provided, however, that solicitation will not
                  include (1) any of the foregoing activities engaged in with
                  the prior written approval of the Board, (2) serving as a
                  reference for a current or former employee of

<PAGE>

                  the Company or its affiliates if such employee has no
                  relationship to any entity by which you are employed or are
                  otherwise being compensated or retained at the time the
                  reference is given (including as a likely prospective employer
                  or retainer), or (3) the hiring of a current or former
                  non-clerical employee of the Company or its affiliates by an
                  entity by which you are employed, compensated or retained if
                  you are in no way involved with such hire, or the
                  identification of the person to be hired, and you give no
                  endorsement or reference with regard to such hire; or (ii)
                  with regard to Section 6(b) and Section 6(e), the soliciting,
                  enticing or inducing, of any customer of the Company or an
                  affiliate (which shall mean any person, firm or corporation
                  which has done actual business with the Company prior to
                  termination of your employment and within the one (1) year
                  period immediately prior to the date of your action or was in
                  active discussions with the Company during such period about
                  such business and such discussions have not been terminated)
                  to become a client or customer of any other person, firm or
                  corporation with respect to products and/or services then sold
                  or under development by the Company or to otherwise cease
                  doing business with the Company or its affiliates or reduce
                  the amount of business it does with the Company or its
                  affiliates, and you will not approach any such person, firm or
                  corporation for such purpose or authorize or knowingly approve
                  the taking of such actions by any other person.

            (h)   If any restriction set forth in this Section 6 is found by any
                  court of competent jurisdiction to be unenforceable because it
                  extends for too long a period of time or over too great a
                  range of activities or in too broad a geographic area, it will
                  be interpreted to extend over the maximum period of time,
                  range of activities or geographic area as to which it may be
                  enforceable. If any provision of this Section 6 is declared to
                  be invalid or unenforceable, in whole or in part, as a result
                  of the foregoing, as a result of public policy or for any
                  other reason, such invalidity will not affect the remaining
                  provisions of this Section which will remain in full force and
                  effect.

            (i)   During and after the Employment Term (other than in the good
                  faith performance of your duties during the Employment Term),
                  you will hold in a fiduciary capacity for the benefit of the
                  Company and its affiliates all secret or confidential
                  information, knowledge or data relating to the Company and its
                  affiliates, and their respective businesses, including any
                  confidential information (which you know or should know is
                  confidential) of customers of the Company and its affiliates,
                  (i) obtained by you during your employment by the Company and
                  its affiliates and (ii) not otherwise public knowledge or
                  known within the applicable industry ("Confidential
                  Information"). For this purpose, Confidential Information
                  shall not include the names, telephone numbers and addresses
                  of customers and other persons that would otherwise be
                  obtained from public records. Other than in the good faith
                  performance of your duties, you will not, without prior
                  written consent of the Company, unless compelled or required

<PAGE>

                  pursuant to the order of a court or by action by a
                  governmental, legislative, administrative or other legal body
                  having actual or apparent jurisdiction over such matter,
                  communicate or divulge any Confidential Information other than
                  the Company and those designated by it. In the event you are
                  compelled by order of a court or by action of a governmental,
                  legislative, administrative or legal body to communicate or
                  divulge any Confidential Information to anyone other than the
                  foregoing, you will promptly notify the Company of any such
                  order and you will cooperate to the best of your ability with
                  the Company in protecting such information to the extent
                  possible under applicable law. Nothing herein shall prevent
                  you from disclosing any Confidential Information in connection
                  with enforcing your rights under this Letter Agreement or
                  under any plan, policy, program or arrangement of, or any
                  other agreement with, the Company, or its affiliates, to an
                  arbitrator in an arbitration as provided for in Section 7(g)
                  hereof.

            (j)   Upon termination of your employment with the Company and its
                  affiliates, or at any time as the Company may request, you
                  will promptly deliver to the Company, as requested, all
                  documents (whether prepared by the Company, an affiliate, you
                  or a third party and including Board related matters) relating
                  to the Company, an affiliate or any of their businesses or
                  property which you may possess or have under your direction or
                  control other than (a) your personal items, such as
                  photographs, personal and non-business related correspondence,
                  personal and non-business related diaries or calendars, and
                  phone books of a purely non-business nature, (b) copies, but
                  not originals, of names, addresses and phone numbers from
                  personal rolodexes and phone books which includes business
                  contacts, (c) documents provided to you in your capacity as a
                  participant in any employee benefit plan, policy or program of
                  the Company or any agreement by and between you and the
                  Company with regard to your employment, benefits or severance
                  or (d) copies, but not originals, of expense reimbursement
                  information which you reasonably believe may be needed for
                  your personal tax purposes. In the event of any litigation or
                  investigation (including by a regulatory or governmental body)
                  thereafter related to Board actions or inactions, upon your
                  reasonable request and subject to satisfactory confidentiality
                  agreements and protection of privilege, the Company shall make
                  available to you copies of relevant Board minutes (including
                  of any committee of the Board of which you were a member).

            (k)   During the Employment Term and thereafter, you will not
                  criticize or disparage the Company or its affiliates or their
                  officers, directors, employees, services or products. The
                  Company agrees that it will use reasonable business efforts to
                  cause its senior officers and directors, while related to the
                  Company, not to disparage you after you are no longer employed
                  by the Company. The foregoing limitations shall not be
                  violated by statements or actions (i) while you are employed,
                  in the performance of your duties or otherwise in meetings
                  with the Board or

<PAGE>

                  Board members, (ii) in truthful testimony in response to legal
                  process or regulatory inquiry, or (iii) after employment while
                  in a competitive situation, so long as not based on your
                  employment with the Company. In addition, a party shall not be
                  deemed to be criticizing or disparaging by merely denying or
                  correcting the accuracy of a public statement or report.

            (l)   In the event of a breach or potential breach of this Section
                  6, you acknowledge that the Company and its affiliates will be
                  caused irreparable injury and that money damages may not be an
                  adequate remedy and agree that the Company and its affiliates
                  will be entitled to injunctive relief (in addition to its
                  other remedies at law) to have the provisions of this Section
                  6 enforced. It is hereby acknowledged that the provisions of
                  this Section 6 are for the benefit of the Company and all of
                  the affiliates of the Company and each such entity may enforce
                  the provisions of this Section 6 and only the applicable
                  entity can waive the rights hereunder with respect to its
                  confidential information and employees. The foregoing shall
                  apply to affiliates only to the extent your action relates to
                  their Confidential Information or business.

            (m)   In the event of a material breach of this Section 6 by you
                  (provided that if you are then employed by the Company, only
                  if such breach would also be Cause), the Company shall provide
                  you with written notice describing the conduct giving rise to
                  such breach and may cease paying you, and shall be relieved of
                  any obligation with regard to, any severance payments pursuant
                  to Section 5(c) due after such breach, including, without
                  limitation, any outstanding Options shall cease to be
                  exercisable on the later of ninety (90) days after termination
                  of your employment and the date of such breach.

7.    Miscellaneous.

            (a)   Governing Law. This Agreement is governed by and construed in
                  accordance with the laws of the State of New York without
                  reference to principles of conflict of laws.

            (b)   Entire Agreement/Amendment. This Agreement, including the
                  exhibits hereto, contains the entire understanding between you
                  and the Company with respect to your employment by the Company
                  from and after the Effective Date and supersedes any prior
                  agreements between the Company and you with respect thereto.
                  This Agreement may not be altered, modified, amended or
                  terminated except by a written instrument signed by you and
                  the Company. The severance amounts payable under Section 5(c)
                  of this Agreement are in lieu of severance or similar payments
                  under any plan or program of the Company or its affiliates and
                  you shall not be entitled to any other such severance while
                  you are entitled to severance under Section 5(c), provided
                  that in lieu of the amounts due hereunder, to the extent
                  applicable, you shall be entitled to amounts under any Change
                  of Control type agreement. In the event of any inconsistency
                  between any provision of this

<PAGE>

                  Agreement and any provision of any Exhibit attached hereto or
                  between any provision of any Exhibit attached hereto and any
                  other Exhibit, the provision more favorable to you shall
                  govern, provided that the foregoing shall not prevail over any
                  provisions of the Option Plan or other stockholder approved
                  plan that does not permit variance by its terms or only
                  permits variance by plan amendment.

            (c)   Waivers. No waiver by any person of any breach of any
                  provision of this Letter Agreement, including any Exhibit
                  attached hereto, shall be deemed to be a waiver of any similar
                  or dissimilar breach at the same or any other time. To be
                  effective, any waiver must be set forth in writing signed by
                  the waiving person and must specifically refer to the breach
                  that is being waived. Notwithstanding the foregoing, in the
                  event you do not assert a Good Reason event within one hundred
                  and twenty (120) days after first learning of the occurrence
                  thereof, it shall be deemed waived.

            (d)   Assignment. Your rights and obligations under this Agreement
                  are not assignable by you, except as provided by will or
                  operation of law or in accordance with this Section 7(d) or
                  any plan, policy, program, arrangement or corporate governance
                  document of, or other agreement with, the Company or any
                  affiliate. The Company's rights and obligations under this
                  Agreement are not assignable by the Company except to any
                  successor to the Company or an acquirer of all or
                  substantially all of the assets of the Company; provided such
                  successor or acquirer agrees to assume the Company's
                  obligations under this Agreement either by contract or
                  operation of law (the "Successors and Assigns"). You shall be
                  entitled, to the extent permitted under applicable law or
                  under any applicable plan, program, policy, grant or agreement
                  of the Company, to select and change a beneficiary or
                  beneficiaries to receive any compensation or benefit hereunder
                  following your death by giving the Company written notice
                  thereof. In the event of your death or a judicial
                  determination of your incompetence, references to you in this
                  Letter Agreement, including any Exhibit attached hereto, shall
                  be deemed, where appropriate, to refer to your beneficiary,
                  estate or other legal representative.

            (e)   Successors; Binding Agreement; Third Party Beneficiaries. This
                  Agreement will inure to the benefit of and be binding upon the
                  person or legal representatives, executors, administrators,
                  successors, heirs, distributes, devisees, legatees and
                  permitted assigns of the parties hereto.

            (f)   Conflict and Representation. You represent that you are not
                  subject to any limitations that would be violated by you
                  entering into this Agreement or performance of your
                  obligations hereunder or interfere with, or limit, your
                  ability to perform your duties hereunder.

<PAGE>

            (g)   Arbitration. Any dispute or controversy arising under or in
                  connection with this Agreement, including any Exhibit attached
                  hereto, other than with regard to Section 6 hereof (provided
                  that if no injunctive or equitable relief is being sought in
                  connection with such dispute or controversy (whether or not
                  granted or rejected), issues under Section 6 shall be governed
                  by this Section 7(g)), shall be settled exclusively by
                  arbitration conducted in the City of New York in the State of
                  New York under the Commercial Arbitration Rules then
                  prevailing of the American Arbitration Association and such
                  submission shall request the American Arbitration Association
                  to: (i) appoint an arbitrator, who shall be an attorney,
                  experienced and knowledgeable concerning the matter then in
                  dispute; (ii) require the testimony to be transcribed; (iii)
                  require the award to be accompanied by findings of fact and
                  the statement for reasons for the decision; and (iv) request
                  the matter to be handled by and in accordance with the
                  expedited procedures provided for in the Commercial
                  Arbitration Rules. The determination of the arbitrator shall
                  be final and binding and judgment may be entered on the
                  arbitrator's award in any court having jurisdiction. The
                  Company and you shall be liable for your own expenses,
                  including attorneys' fees.

            (h)   Notices. Any notice, consent, demand, request, or other
                  communication given in connection with this Letter Agreement
                  shall be in writing and shall be deemed to have been given,
                  provided that written acknowledgment of receipt is obtained,
                  (a) when delivered personally or (b) give days after being
                  sent by prepaid certified or registered mail, or two days
                  after being sent by a nationally recognized overnight courier,
                  to the address (if any) specified below for such person or
                  entity (or to such other address as shall have specified by
                  ten (10) days' written advance notice given in accordance with
                  this Section 7(h):

                  If to the Company:     511 Fifth Avenue
                                         New York, New York 10017

                  If to you:             The address of your principal
                                         residence as it appears in the
                                         Company's records.

            (i)   Withholding. The Company may withhold from any and all amounts
                  payable under this Agreement such Federal, state and local
                  taxes as may be required to be withheld pursuant to any
                  applicable law or regulation.

<PAGE>

            (j)   Counterparts. This Agreement may be signed in any number of
                  counterparts, each of which will be an original, with the same
                  force and effect as if the signature thereto and hereto were
                  upon the same instrument.

            (k)   Documentation. This Agreement is subject to you providing upon
                  commencement of employment the required evidence of your legal
                  right to work in the United States.

            (l)   Authority. The Company represents and warrants that this
                  Letter Agreement has been authorized by all necessary
                  corporate action and the person executing it has the authority
                  to do so.

If the terms and conditions set forth above accurately reflect the understanding
between you and the Company, please execute a copy of this letter agreement and
return it to acknowledge your agreement to the foregoing.

                           OVERSEAS SHIPHOLDING GROUP, INC.

                           By: /s/ Robert N. Cowen
                               --------------------------------------
                               Robert N. Cowen
                               Senior Vice President and Chief Operating Officer

Agreed & Accepted:

/s/ Morten Arntzen
---------------------------

<PAGE>

Exhibit A

            CAUSE. For purposes of this Agreement, Cause means: (i) your willful
            misconduct of a material (but determined without regard to the size
            of the Company) nature, either (A) involving the Company or its
            assets, business or employees or in the performance of your duties,
            or (B) which is materially injurious to the Company economically or
            to the Company's reputation as determined in good faith by the
            Board; (ii) your conviction for (or pleading guilty or nolo
            contendre to) (A) a felony, (B) any other crime involving any
            financial or moral impropriety or turpitude, or (C) any other crime
            which, in the good faith determination of a majority of the Board
            would materially interfere with your ability to perform your
            services to the Company or otherwise be materially injurious to the
            Company economically or to the Company's reputation (provided that
            for purposes of this subpart (ii), a felony or crime shall cover any
            action or inaction that is a felony or crime under federal, state or
            local law in the United States (collectively, "U.S. law") and any
            action or inaction which takes place outside of the United States,
            if it would be a felony or crime under U.S. law); (iii) your
            continued and substantial failure to perform your duties with the
            Company (other than failure resulting from your incapacity due to
            physical or mental illness or injury or that of any member of your
            immediate family, provided that in a situation relating to a member
            of your immediate family you have consulted with the Chairman of the
            Board and have in good faith made a mutually satisfactory agreement
            for coverage of your responsibilities and further provided that any
            temporary adjustments in authority, duties or responsibility made by
            the Company in connection therewith shall not be Good Reason), which
            failure has continued for a period of at least ten (10) days after
            written notice thereof from the Company; (iv) your breach of any
            material provisions of Section 1 (other than performance efforts
            issues) or Section 6 of this Agreement, which breach, if curable, is
            not cured within ten (10) days after written notice thereof from the
            Company; or (v) your failure to attempt in good faith to promptly
            follow a written direction of the Board which direction indicates
            that failure to do so shall be grounds for termination, provided
            that the failure will not be considered "Cause" if you, in good
            faith, believe that such direction, or implementation thereof, is
            illegal and you promptly so notify the Chairman of the Board in
            writing. No act or failure to act by you shall be deemed to be
            "willful" if you believed in good faith that such action or
            non-action was in or not opposed to, the best interests of the
            Company. The Board shall not terminate you for Cause without giving
            you at least ten (10) days' prior written notice of its
            consideration of such termination and the opportunity to appear, in
            person or by telephone, before the Board. Upon giving you such
            notice of its intent, the Board may suspend you for up to twenty
            (20) days from your position pending such determination without it
            being treated either as a breach of this Agreement or Good Reason.

<PAGE>

            TERMINATION WITHOUT CAUSE. For purposes of this Agreement,
            Termination without Cause shall mean termination of your employment
            by the Company other than for Cause or Disability.

            GOOD REASON. For purposes of this Agreement, Good Reason means any
            of the following events without your prior written consent that is
            not cured by the Company within thirty (30) days of written notice
            given to the Company, (provided that if you are removed as CEO,
            President or as a member of the Board, the Company shall not have an
            opportunity to cure): (i) any material diminution in your position,
            duties, responsibilities or authority, or the assignment to you of
            duties and responsibilities materially inconsistent with your
            position, except in connection with your termination for Cause or as
            a result of your death, or temporarily as a result of your
            incapacity or other absence for an extended period; (ii) a reduction
            in your annual Base Salary; (iii) a relocation of your principal
            business location to an area which is both outside of Manhattan, New
            York City, New York and outside of a fifty (50) mile radius from
            your current principal residence; (iv) failure by the Board to elect
            or re-elect you as a member of the Board or as CEO or President or
            your removal from any such position, in all cases if such failure or
            removal is not for Cause; (v) any material breach by the Company of
            any material provision of this Agreement; or (vi) the failure of an
            acquiror of all or substantially all of the assets or business of
            the Company to assume the Company's obligations under this
            Agreement.

            Notwithstanding the foregoing, with regard to provisions that become
            applicable upon a Change of Control as defined in the Change of
            Control Agreement (attached as Exhibit D), the foregoing definitions
            of Cause and Good Reason shall not apply and the definitions of
            Cause and Good Reason set forth in the Change of Control Agreement
            shall be substituted therefor as applicable.

<PAGE>

                                    EXHIBIT B
                             STOCK OPTION AGREEMENT
                                 PURSUANT TO THE
                        OVERSEAS SHIPHOLDING GROUP, INC.
                                STOCK OPTION PLAN

            AGREEMENT, dated as of January 19, 2004 (the "Grant Date") by and
between Overseas Shipholding Group, Inc. (the "Company") and Morten Arntzen (the
"Participant").

                              Preliminary Statement

The Board of Directors of the Company, pursuant to the Overseas Shipholding
Group, Inc. 1998 Stock Option (the "Plan"), has authorized this grant of an
option (the "Option") to purchase the number of shares of the Company's common
stock, par value $1.00 per share (the "Common Stock") set forth below to the
Participant, as an Eligible Employee of the Company, its parent or a Subsidiary
(collectively, the Company, its parent and all such Subsidiaries of the Company
shall be referred to as the "Employer"). The parties hereto desire to enter into
this Agreement in order to set forth the terms of the Option. Unless otherwise
indicated, any capitalized term used but not defined herein shall have the
meaning ascribed to such term in the Plan. A copy of the Plan has been delivered
to the Participant. By signing and returning this Agreement, the Participant
acknowledges having received and read a copy of the Plan and agrees to comply
with the Plan, this Agreement and all applicable laws and regulations.

            Accordingly, the parties hereto agree as follows:

            1. Grant of Option. Subject in all respects to the Plan and the
terms and conditions set forth herein and therein, as of the Grant Date, the
Participant is hereby granted an Option to purchase from the Company
non-qualified stock options to purchase 100,000 shares of Common Stock (the
"NQSOs"), which are not intended to be incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). The NQSOs shall be referred to herein as the "Option". The price per
share of such NQSOs shall be equal to $35.70, which is the Fair Market Value of
the Company's Common Stock on the Grant Date.

            2. Exercise.

            (a) Except as set forth in Section 2(b) below or Section 3(c) below,
the Option is exercisable in installments as provided below, which shall be
cumulative. The following table indicates each date (the "Vesting Date") upon
which the Participant shall be entitled to exercise the Option with respect to
the number of shares granted as indicated beside that date, provided that the
Participant has not incurred a Termination of

<PAGE>

            Employment prior to such date:

            -----------------------------------------
            Vesting Date              Number of NQSOs
            -----------------------------------------
            January 18, 2005          33,334
            -----------------------------------------
            January 18, 2006          33,333
            -----------------------------------------
            January 18, 2007          33,333
            ------------------ ----------------------

            There shall be no proportionate or partial vesting in the periods
between the Vesting Dates and, except as provided in Section 2(b) below or in
Section 3(c) below, all vesting shall occur only on the aforementioned Vesting
Dates.

            To the extent that the Option has become vested and exercisable with
respect to a number of shares of Common Stock granted as provided herein, the
Option may thereafter be exercised by the Participant, in whole or in part, at
any time or from time to time prior to the expiration of the Option as provided
herein in accordance with Section 6.3(d) of the Plan, including, without
limitation, the filing of such written form of exercise notice, if any, as may
be promulgated by the Committee, the payment (or arrangement for payment
satisfactory to the Committee) in full of the Option Price multiplied by the
number of shares of Common Stock so exercised, and in accordance with applicable
tax and other laws.

            (b) Upon the occurrence of a Change of Control, if an Alternative
Option (as defined in the Plan) is not provided as described in Section 8.1(b)
of the Plan, the Option shall immediately become exercisable with respect to all
shares of Common Stock subject thereto. If an Alternative Option is provided to
the Participant in accordance with Section 8.1(b) of the Plan, the term "Option"
shall also include any Alternative Option. Notwithstanding the provisions of
Article VIII of the Plan (concerning Change of Control Provisions), upon the
Participant's Termination of Employment without Cause or for Good Reason (as
such terms are defined in the Change of Control Agreement between the
Participant and the Company, dated as of January 19, 2004 (the "Change of
Control Agreement")) at any time during the two-year period following a Change
of Control or in the case of Participant's Anticipatory Termination (as defined
in Participant's Change of Control Agreement) within one hundred and twenty
(120) days prior to a Change of Control, the Option shall immediately become
exercisable with respect to all shares of Common Stock subject thereto. The
definition of Change of Control in the Plan shall not apply to the Option and
instead the definition of Change of Control set forth in Participant's Change of
Control Agreement shall be substituted for such definition and shall apply to
the Option for all purposes.

            (c) Notwithstanding any other provision to the contrary, to the
extent this Option is not vested upon the Participant's Termination of
Employment, the unvested portion of the Option shall, upon such Termination of
Employment, be non-exercisable and shall be canceled. Notwithstanding the
foregoing, in the event of an Anticipatory Termination, any unvested Option that
would otherwise be forfeited (after application of any other accelerated vesting
provision) shall not be forfeited pending a determination of whether or not a
Change of Control occurs within one hundred twenty (120) days thereafter, but
during such determination period no unvested Option shall vest or be exercisable
and no other unvested Option shall vest.

<PAGE>

            3. Termination.

            Except as otherwise provided in this Section or in the Plan, the
Option shall expire on the tenth (10th) anniversary of the date of grant of the
Option; provided, however that, to the extent vested at the time of a
Participant's Termination of Employment (including pursuant to Section 2(b)
above or Section 3(c) below), the Option shall expire as follows:

            (a) In the event of the Participant's Termination of Employment by
reason of death or Disability (as defined in the Employment Letter Agreement
between the Company and the Participant, dated as of January 19, 2004 (the
"Letter Agreement")), the Option shall expire on the earlier of (x) one (1) year
from the date of such death or Disability or (y) the stated term of the Option
pursuant to this Section 3.

            (b) In the event of the Participant's Termination of Employment by
reason of Retirement, the Option shall expire on the earlier of (x) one (1) year
from the date of such Retirement or (y) the stated term of the Option pursuant
to this Section 3; provided, however, that, if the Participant dies within such
one (1) year exercise period, any unexercised Stock Option held by such
Participant shall thereafter be exercisable, to the extent to which it was
exercisable at the time of death, for a period of one (1) year from the date of
such death, but not beyond the stated term of the Option pursuant to this
Section 3.

            (c) In the event of Participant's Termination of Employment without
Cause or for Good Reason (as such terms are defined in Exhibit A to the Letter
Agreement) prior to January 19, 2007 in a situation not covered by 2(b) above,
subject to the Participant's execution of, and non-revocation of, the waiver and
general release in accordance with the terms of the Letter Agreement (and
Exhibit E thereto), vesting on the next vesting tranche of the Option shall
accelerate and be deemed to have vested as of the Termination of Employment, and
the vested Option shall expire upon the earlier of (x) one (1) year from the
date of such termination of employment or (y) the stated term of the Option
pursuant to this Section 3; provided, however, that no portion of the Option
that vests upon such Termination of Employment may be exercised by the
Participant prior to the delivery of the waiver and general release and the
expiration of the revocation period with regard thereto.

<PAGE>

            (d) In any of the cases set forth in 2(b) above, the Option shall
expire on the earlier of (x) ninety (90) days from the later of the date of such
Termination of Employment or the Change of Control, or (y) the stated term of
the Option pursuant to this Section 3.

            (e) In the event of the Participant's voluntary Termination of
Employment (except as provided in Section 3(c) or (d) above or (f) below), the
Option shall expire on the earlier of (x) thirty (30) days from the date of such
termination or (y) the stated term of the Option pursuant to this Section 3.

            (f) In the event of the Participant's Termination of Employment (i)
for Cause (as defined in the Letter Agreement without regard to whether it
occurs before or after January 19, 2007) or (ii) which is a voluntary
Termination within ninety (90) days after an event that would be grounds for a
Termination of Employment for Cause, the Participant's entire Option (whether or
not vested) shall be forfeited and canceled in its entirety upon such
Termination of Employment.

            (g) In the event of the Participant's material breach of Section 6
of the Letter Agreement (provided that if the Participant is then employed by
the Company, only if such breach would also be Cause (as defined in the Letter
Agreement whether before or after January 19, 2007)), the Option shall expire on
the earlier of (x) the later of ninety (90) days after the date of the
Participant's Termination of Employment and the date of such breach, or (y) the
stated term of the Option pursuant to this Section 3.

            Termination of Employment shall have the meaning set forth in the
Plan.

            4. Restriction on Transfer of Option. The Option granted hereby is
not transferable other than by will or under the applicable laws of descent and
distribution and during the lifetime of the Participant may be exercised only by
the Participant or the Participant's guardian or legal representative. In
addition, the Option shall not be assigned, negotiated, pledged or hypothecated
in any way (whether by operation of law or otherwise), and the Option shall not
be subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, negotiate, pledge or hypothecate the Option, or in the event
of any levy upon the Option by reason of any execution, attachment or similar
process contrary to the provisions hereof, the Option shall immediately become
null and void.

            5. Rights as a Stockholder. The Participant shall have no rights as
a stockholder with respect to any shares covered by the Option unless and until
the Participant has become the holder of record of the shares, and no
adjustments shall be made for dividends in cash or other property, distributions
or other rights in respect of any such shares, except as otherwise specifically
provided for in the Plan.

<PAGE>

            6. Provisions of Plan Control. This Agreement is subject to all the
terms, conditions and provisions of the Plan, including, without limitation, the
amendment provisions thereof, and to such rules, regulations and interpretations
relating to the Plan as may be adopted by the Committee and as may be in effect
from time to time. The Plan is incorporated herein by reference. If and to the
extent that this Agreement conflicts or is inconsistent with the terms,
conditions and provisions of the Plan, the Plan shall control, and this
Agreement shall be deemed to be modified accordingly.

            7. Authorized Shares. The Company represents and warrants that the
shares of Common Stock underlying the Option are available for issuance under
the Plan and have been reserved.

            8. Notices. Any notice or communication given hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, or
by United States mail, to the appropriate party at the address set forth below
(or such other address as the party shall from time to time specify):

            If to the Company, to:

            Overseas Shipholding Group, Inc.
            511 Fifth Avenue
            New York, New York 10017
            Attn: Mr. Robert Cowen

            If to the Participant, to:

            Morten Arntzen
            At his address last recorded
            on the books of the Company.

      9. No Obligation to Continue Employment. This Agreement does not guarantee
that the Employer will employ the Participant for any specific time period, nor
does it modify in any respect the Employer's right to terminate or modify the
Participant's employment or compensation.

<PAGE>

            IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.

                                         OVERSEAS SHIPHOLDING GROUP, INC.

                                         By:___________________________________
                                         Authorized Officer

                                         ______________________________________
                                         Participant
                                         Social Security No.:__________________

<PAGE>

                                    EXHIBIT C

                        OVERSEAS SHIPHOLDING GROUP, INC.
                           RESTRICTED STOCK AGREEMENT

                                                     January 19, 2004

Dear Mr. Arntzen:

      I am pleased to advise you that the Compensation Committee of the Board of
Directors of the Overseas Shipholding Group, Inc. (the "Company") granted to you
as an inducement to join the Company on the date set forth above (the "Grant
Date") 50,000 shares of the validly issued common stock of the Company, $1.00
par value per share (the "Shares") subject to the terms and conditions of this
letter. The purchase price for the Shares is zero. The Shares are subject to
certain vesting restrictions relating to the passage of time as an employee of
the Company. While such restrictions are in effect (the "Restriction Period"),
the Shares subject to such restrictions are referred to herein as "Restricted
Stock." The Restriction Period shall end for Shares of Restricted Stock on the
date such Shares become vested hereunder. Shares of common stock to be issued
pursuant to this Agreement shall be made available only from issued Shares of
common stock reacquired by the Company and held in treasury. The Company
represents that, as of the Grant Date, it had enough treasury Shares to satisfy
this award and that it reserved enough treasury Shares to satisfy this award.

      1. Vesting. The Restricted Stock will become vested and cease to be
Restricted Stock (but will remain subject to paragraph 8 of this letter) in four
installments as follows: 25% on the day before each of the first, second, third
and fourth anniversaries of the Grant Date such that the Restricted Stock shall
be fully vested on the day before the fourth anniversary of the Grant Date,
provided that you remain continuously employed by the Company through the
applicable vesting date. Notwithstanding the foregoing, (a) if the Company
terminates your employment without Cause or you terminate your employment for
Good Reason (as such terms are defined in Exhibit A to the employment letter
agreement dated as of January 19, 2004 between you and the Company (the "Letter
Agreement")) prior to January 19, 2007, the Restricted Stock scheduled to vest
on the next vesting date will, subject to your execution of, and non-revocation
of, the waiver and general release in accordance with the terms of the Letter
Agreement (and Exhibit E thereto), become vested and cease to be Restricted
Stock (but will remain subject to paragraph 8 of this letter), and (b) upon your
termination of employment without Cause or for Good Reason (as such terms are
defined in the Change of Control Agreement between you and the Company, dated as
of January 19, 2004 (the "Change of Control Agreement"))at any time during the
two-year period following a Change of Control (as defined in the Change of
Control Agreement) or, subject to the last sentence of Section 3 hereof, in the
case of your Anticipatory Termination (as defined in the Change of Control
Agreement) within one hundred twenty (120) days prior to a Change of Control,
all of the Restricted Stock will become vested and cease to be Restricted Stock
(but will remain subject to paragraph 8 of this letter).

<PAGE>

      2. Restrictions on Transfer. You shall not sell, transfer, pledge,
hypothecate, assign or otherwise encumber or dispose of the Shares that are
Restricted Stock, except as set forth in this Agreement. Any attempted sale,
transfer, pledge, hypothecation, assignment or other disposition of such shares
in violation of this Agreement shall be void and of no effect and the Company
shall have the right to disregard the same on its books and records and to issue
"stop transfer" instructions to its transfer agent. The provisions of this
Section 2 shall cease to apply to Shares of Restricted Stock on the date such
Shares become vested hereunder.

      3. Forfeiture. Except as expressly provided in paragraph 1 with respect to
(i) your termination without Cause or for Good Reason (as defined in the Letter
Agreement) prior to January 19, 2007, (ii) your termination of employment
without Cause or for Good Reason (as defined in the Change of Control Agreement)
following a Change of Control, or (iii) your possible Anticipatory Termination
prior to a Change of Control, if your employment is terminated for any reason
during the relevant Restriction Period, including, without limitation, death,
Disability (as defined in Letter Agreement, in which event you shall be
determined to have terminated employment at the time specified in Section 5(b)
of the Letter Agreement), retirement, resignation without Good Reason (as
defined in the Letter Agreement) or for Cause (as defined in the Letter
Agreement), you will forfeit to the Company, without compensation, any and all
Restricted Stock that is unvested as of the date of termination of your
employment. In the event of an Anticipatory Termination, any Shares of
Restricted Stock that would otherwise be forfeited (after application of any
other accelerated vesting provision) shall not be forfeited pending a
determination of whether or not a Change of Control occurs within one hundred
twenty (120) days thereafter, but during such determination period no unvested
Shares of Restricted Stock shall vest and any dividends that are payable on
unvested Shares shall not be paid unless and until a Change of Control takes
place within the prescribed one hundred twenty (120) day period.

      4. Rights as a Holder of Restricted Stock. From and after the Grant Date,
you will have the right to vote the Restricted Stock, to receive and retain all
regular cash dividends payable to holders of Shares of record on and after the
Grant Date (although such dividends will be treated, to the extent required by
applicable law, as additional compensation for tax purposes), and to exercise or
benefit from all other rights, powers and privileges of a holder of Shares with
respect to the Restricted Stock, with the exceptions that (i) you will not be
entitled to delivery of the stock certificate or certificates representing the
Shares of Restricted Stock until the Shares of Restricted Stock have vested;
(ii) the Company (or its designated agent) will retain custody of the stock
certificate or certificates representing the Restricted Stock and any other cash
or property ("RS Property") issued in respect of the Restricted Stock, including
cash or stock dividends and other non-cash dividends (other than regular cash
dividends which will be paid to you) during the applicable Restriction Period;
(iii) no RS Property will bear interest or be segregated in separate accounts
during the applicable Restriction Period, except that any cash of more than
$1,000 shall bear interest until paid at the one year Treasury Note rate in
effect on the date it is put in escrow; and (iv) you may not transfer the
Restricted Stock during the applicable Restriction Period.

      5. Adjustments. In the event of any stock dividend, split up, split-off,
spin-off, distribution, recapitalization, combination or exchange of shares,
merger, consolidation, reorganization or liquidation or the like, the Restricted
Stock shall, subject

<PAGE>

to Section 4 above, receive the same consideration or distributions as other
shares of Common Stock or be adjusted on the same basis as other shares of
Common Stock. Any consideration or distributions payable or deliverable with
respect to the Restricted Stock shall be held by the Company on your behalf and
shall be delivered to you at the time the related Shares of Restricted Stock
would have vested hereunder.

      6. Taxes; Section 83(b) Election. You acknowledge, subject to the last
sentence of this paragraph, that (i) no later than the date on which any
Restricted Stock shall have become vested, you will pay to the Company, or make
arrangements satisfactory to the Company regarding payment of, any federal,
state, local or foreign taxes of any kind required by law to be withheld with
respect to any Restricted Stock which shall have become so vested; (ii) the
Company shall, to the extent permitted by law, have the right to deduct from any
payment of any kind otherwise due to you any federal, state, local or foreign
taxes of any kind required by law to be withheld with respect to any Restricted
Stock which shall have become so vested, including that the Company may, but
shall not be required to, sell a number of shares of Common Stock sufficient to
cover applicable withholding taxes; and (iii) in the event that you do not
satisfy (i) above on a timely basis, the Company may, but shall not be required
to (and shall not to the extent it would violate the Sarbanes-Oxley Act), pay
such required withholding and treat such amount as a demand loan to you at the
maximum rate permitted by law, with such loan, at the Company's sole discretion
and provided the Company so notifies you within thirty (30) days of the making
of the loan, secured by the Shares and any failure by you to pay the loan upon
demand shall entitle the Company to all of the rights at law of a creditor
secured by the Shares. The Company may hold as security any certificates
representing any Shares and, upon demand of the Company, you shall deliver to
the Company any certificates in your possession representing Shares together
with a stock power duly endorsed in blank. You also acknowledge that it is your
sole responsibility, and not the Company's, to file timely and properly any
election under Section 83(b) of the Internal Revenue Code and any corresponding
provisions of state tax laws, if you wish to utilize such election.

      7. Legends. All certificates representing the Restricted Stock shall have
endorsed thereon the following legends:

      a) "THE ANTICIPATION, ALIENATION, ATTACHMENT, SALE, TRANSFER, ASSIGNMENT,
PLEDGE, ENCUMBRANCE OR CHARGE OF THE SHARES OF STOCK REPRESENTED HEREBY ARE
SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING A VESTING SCHEDULE AND FORFEITURE
PROVISION AND RESTRICTIONS AGAINST TRANSFER) OF AN AGREEMENT ENTERED INTO
BETWEEN THE REGISTERED OWNER AND THE OVERSEAS SHIPHOLDING GROUP, INC. (THE
"COMPANY") DATED AS OF THE 19th DAY OF JANUARY, 2004. COPIES OF SUCH AGREEMENT
ARE ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."

      b) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED."

<PAGE>

      c) Any legend required to be placed thereon by applicable blue sky laws or
other law of any state or securities law.

      d) When Restricted Stock vests, the certification for such vested Shares
will be delivered to you with only such legends as may be required by law or in
the Company's good faith implementation of legal requirements. When such legends
are no longer required, upon your written request, the Company shall cause any
such legends to be removed.

      Notwithstanding the foregoing, in no event shall the Company be obligated
to issue a certificate representing the Restricted Stock prior to vesting.

      8. Securities Representations. The Shares are being issued to you in
reliance upon the following express representations and warranties: (i) the
Shares are being acquired for your own account and not with a view to, or for
sale with, the distribution thereof, nor with any present intention of
distributing or selling any such Shares; (ii) you have been advised that you may
be an "affiliate" within the meaning of Rule 144 under the Securities Act of
1933 (the "Act") and in this connection the Company is relying in part your
representations set forth in this paragraph; (iii) if you are an affiliate, the
Shares must be held and sold only pursuant to any available exemption from any
applicable resale restrictions or until the Company files a registration
statement (or a "re-offer prospectus") with regard to such Shares and the
Company is under no obligation to register the Shares (or to file a "re-offer
prospectus") except as provided in the Letter Agreement; (iv) the transfer of
Shares has not been registered under the Act, and the Shares must be held
indefinitely unless subsequently registered under the Act or an exemption from
such registration is available and the Company is under no obligation to
register the Shares except as provided in the Letter Agreement; and (v) if you
are an affiliate, you understand that the exemption from registration under Rule
144 will not be available unless (x) a public trading market then exists for the
Shares of the Company; (y) adequate information concerning the Company is then
available to the public; and (z) other terms and conditions of Rule 144 or any
exemption therefrom are complied with and that any sale of the Shares may be
made only in limited amounts in accordance with such terms and conditions.

      9. Not an Employment Agreement. The issuance of the Shares hereunder does
not constitute an agreement by the Company to continue to employ you during the
entire, or any portion of, the term of this Agreement, including but not limited
to any period during which Restricted Stock is outstanding.

      10. Attorney-in-Fact Status. The Company, its successors and assigns, is
hereby appointed your attorney-in-fact, with full power of substitution, for the
purpose of carrying out the provisions of this letter and taking any action and
executing any instruments which such attorney-in- fact may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Upon the Board of
Director's request, you will deliver to the Company a duly signed stock power,
endorsed in blank, relating to the Restricted Stock, solely to enable the
Company to retire or cancel the Shares upon forfeiture in accordance with this
Agreement.

<PAGE>

      11. Uncertificated Shares. Notwithstanding anything else herein, the
Compensation Committee may, in its sole and absolute discretion and in
accordance with Section 158 of the Delaware General Corporation Law, issue the
Shares in the form of uncertificated shares. Such uncertificated shares of
Restricted Stock shall be credited to a book entry account maintained by the
Company (or its designee) on your behalf. If thereafter, certificates are issued
with respect to the uncertificated shares of Restricted Stock, such issuance and
delivery of certificates shall be in accordance with the applicable terms of
this Agreement.

      12. Miscellaneous.

      (a) This Agreement share inure to the benefit of and be binding upon the
parties hereto and their respective heirs, personal legal representatives,
successors, trustees, administrators, distributees, devisees and legatees. The
Company may assign to, and require, any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, any subsidiary or any division of the
Company or subsidiary by which you are employed to expressly assume and agree in
writing to perform this Agreement. Notwithstanding the foregoing, you may not
assign this Agreement.

      (b) This award of Restricted Stock shall not affect in any way the right
or power of the Board of Directors or stockholders of the Company to make or
authorize an adjustment, recapitalization or other change in the capital
structure or the business of the Company, any merger or consolidation of the
Company or subsidiaries, any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Common Stock, the dissolution or
liquidation of the Company or subsidiaries, any sale or transfer of all or part
of its assets or business or any other corporate act or proceeding.

      (c) You agree that the award of the Restricted Stock hereunder is special
incentive compensation and that it, any dividends paid thereon (even if treated
as compensation for tax purposes) and any other RS Property will not be taken
into account as "salary" or "compensation" or "bonus" in determining the amount
of any payment under any pension, retirement or profit-sharing plan of the
Company or any life insurance, disability or other benefit plan of the Company,
unless otherwise specifically included in "salary" or "compensation" or "bonus"
for purposes of such plan.

      (d) No amendment, modification or waiver of any of the provisions of this
Agreement shall be effective unless in writing and signed by the party against
whom it is sought to be enforced.

      (e) This Agreement may be executed in one or more counterparts, all of
which taken together shall constitute one contract.

      (f) The failure of any party hereto at any time to require performance by
another party of any provision of this Agreement shall not affect the right of
such party to require performance of that provision, and any waiver by any party
of any breach of any provision of this Agreement shall not be construed as a
waiver of any continuing or succeeding breach of such provision, a waiver of the
provision itself, or a waiver of any right under this Agreement.

<PAGE>

      (g) The headings of the paragraphs of this Agreement have been inserted
for convenience of reference only and shall in no way restrict or modify any of
the terms or provisions hereof.

      (h) The Company shall pay all fees and expenses necessarily incurred by
the Company in connection with this Agreement and will from time to time use its
reasonable efforts to comply with all laws and regulations which, in the opinion
of counsel to the Company, are applicable thereto.

      (i) All notices, consents, requests, approvals, instructions and other
communications provided for herein shall be in writing and validly given or made
when delivered, or on the second succeeding business day after being mailed by
registered or certified mail, whichever is earlier, to the persons entitled or
required to receive the same. Notices to the Company shall be addressed to its
principal office, attention of the General Counsel and notices to you shall be
addressed to the address set forth below your name at the end of this Agreement.

      (j) By executing this Agreement, the award of Restricted Stock and the
terms and conditions described herein shall be accepted by you.

      (k) This Agreement shall be governed, interpreted and construed and the
legal relationships of the parties determined in accordance with the internal
laws of the State of New York (regardless of the law that might otherwise govern
under applicable principles of conflict laws)

                             *         *       *

<PAGE>

      Please sign a copy of this letter acknowledging and accepting the terms
and conditions of the grant and return it to Mr. Robert Cowen at Overseas
Shipholding Group, Inc., 511 Fifth Avenue, New York, New York 10017 as soon as
possible. If you have any questions in connection with the grant, feel free to
call Mr. Cowen at _____________.

OVERSEAS SHIPHOLDING GROUP, INC.

By:_______________________________
       Robert N. Cowen
Title: Senior Vice President and Chief Operating Officer

____________________________________       _________________________
Morten Arntzen                                                 Date

Address: 1018 Weed Street
         New Canaan, Connecticut 06840

<PAGE>

                                    EXHIBIT D

                                    AGREEMENT

            Agreement made as of the 19th day of January, 2004, by and between
Overseas Shipholding Group, Inc., a corporation incorporated under the laws of
Delaware with its principal office at 511 Fifth Avenue, New York, New York 10017
(the "Company") and Morten Arntzen (the "Executive").

                              W I T N E S S E T H:

      WHEREAS, the Company believes that the establishment and maintenance of a
sound and vital management of the Company and its affiliates is essential to the
protection and enhancement of the interests of the Company and its stockholders;

      WHEREAS, the Company also recognizes that the possibility of a Change of
Control of the Company (as defined in Section 1 hereof), with the attendant
uncertainties and risks, might result in the departure or distraction of key
employees of the Company to the detriment of the Company; and

      WHEREAS, the Company has determined that it is appropriate to take steps
to induce key employees to remain with the Company, and to reinforce and
encourage their continued attention and dedication, when faced with the
possibility of a Change of Control of the Company.

      NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:

      1. A Change of Control shall be deemed to have occurred if: (i) any person
(as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and as used in Sections 13(d) and 14(d) thereof),
excluding the Company, any "Subsidiary," any employee benefit plan sponsored or
maintained by the Company, or any Subsidiary (including any trustee of any such
plan acting in his capacity as trustee), becomes the beneficial owner (as
defined in Rule 13(d)-3 under the Exchange Act) of shares of the Company having
at least thirty percent (30%) of the total number of votes that may be cast for
the election of directors of the Company; (ii) there is a merger or other
business combination of the Company, sale of all or substantially all of the
Company's assets or combination of the foregoing transactions or a liquidation
of the Company, (a "Transaction"), other than a Transaction involving only the
Company and

<PAGE>

one or more of its Subsidiaries, or a Transaction immediately following which
the shareholders of the Company immediately prior to the Transaction continue to
have a majority of the voting power in the resulting entity in approximately the
same proportion as they had in the Company immediately prior to the Transaction;
or (iii) during any period of two (2) consecutive years beginning on or after
the date hereof, the persons who were directors of the Company immediately
before the beginning of such period (the "Incumbent Directors") shall cease (for
any reason other than death) to constitute at least a majority of the board of
directors of the Company or the board of directors of any successor to the
Company, provided that, any director who was not a director as of the date
hereof shall be deemed to be an Incumbent Director if such director was elected
to the board of directors by, or on the recommendation of or with the approval
of, at least two-thirds (2/3) of the directors who then qualified as Incumbent
Directors either actually or by prior operation of the foregoing unless such
election, recommendation or approval occurs as a result of an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act or any successor provision) or other
actual or threatened solicitation of proxies or contests by or on behalf of a
person other than a member of the Board. Only one (1) Change of Control may
occur under this Agreement.

      2. Term. This Agreement shall commence on the date hereof and shall expire
on the earliest of (i) three (3) years from the date hereof, subject to the
right of the Board of Directors of the Company (the "Board") and the Executive
to extend it, provided that if a Change of Control takes place prior to three
(3) years from the date hereof, the duration of this Agreement under this
subpart (i) shall be until two (2) years after the Change of Control whether
such two (2) year period ends before or after the end of such three (3) year
period; (ii) the date of the death of the Executive or retirement or other
termination of the Executive's employment (voluntarily or involuntarily) with
the Company prior to a Change of Control other than as a result of a termination
by the Company without Cause (as defined below) or by the Executive for Good
Reason (as defined below) that is an Anticipatory Termination (as defined
below); or (iii) one hundred twenty (120) days after an Anticipatory Termination
by the Company without Cause or by the Executive with Good Reason if a Change of
Control does not occur on or prior to such date. Notwithstanding anything in
this Agreement to the contrary, if the Company becomes obligated to make any
payment to the Executive pursuant to the terms hereof at or prior to the
expiration of this Agreement, then this Agreement shall remain in effect for
such and related purposes (including but not limited to under Section 5 hereof)
until all of the Company's obligations hereunder are fulfilled. Further,
provided that a Change of Control has taken place prior to the termination of
this Agreement, the provisions of Sections 10 hereof shall survive and remain in
effect notwithstanding the termination of this Agreement, the termination of the
Executive's employment or any breach or repudiation or alleged breach or
repudiation by the Company or the Executive of this Agreement or any one or more
of its terms.

      3. Termination Following Change of Control. If, and only if, a Change of
Control occurs and the Executive's employment with the Company is terminated by
the Company without Cause or by the Executive for Good Reason at any time within
two (2) years after the Change of Control or there was an Anticipatory
Termination and the Change of Control has taken place within one hundred twenty
(120) days thereafter, the Executive shall be entitled to the amounts provided
in Section 4 upon such termination. In the event of an Anticipatory Termination,
if any equity grants would vest on a Change

<PAGE>

of Control after an Anticipatory Termination, any equity grants that otherwise
would be forfeited (after application of any other accelerated vesting
provision) shall not be forfeited pending a determination of whether or not a
Change of Control occurs within one hundred twenty (120) days thereafter, but
during such determination period no unvested option shall vest or be
exercisable, no other unvested equity grant shall vest and no dividends shall be
payable unless and until the Change of Control takes place during the prescribed
period.

      The foregoing terms shall have the following meaning:

            (i) Termination for Good Reason. For purposes of this Agreement,
termination for Good Reason shall mean a termination by the Executive effected
by a written notice given within ninety (90) days after the occurrence of the
Good Reason event. For purposes of this Agreement, "Good Reason" shall mean the
occurrence of any of the following events without the Executive's express
written consent which event is not cured within ten (10) days after written
notice thereof from the Executive to the Company: (A) any material diminution in
the Executive's position, duties, responsibilities or authority, or the
assignment to the Executive of duties and responsibilities materially
inconsistent with his position, except in connection with the Executive's
termination for Cause or as a result of death, or temporarily as a result of the
Executive's incapacity or other absence for an extended period; (B) a reduction
in the Executive's annual base salary; (C) a relocation of the Company's
principal business location to an area which is both outside of Manhattan, New
York City, New York and outside of a fifty (50) mile radius from the Executive's
current principal residence; (D) failure by the Board to elect or re-elect the
Executive as a member of the Board or as Chief Executive Officer or President or
the Executive's removal from any such position, in all cases if such failure or
removal is not for Cause; or (E) any material breach by the Company of any
material provision of the Executive's employment letter agreement with the
Company, dated as of January 19, 2004 or of Section 11 of this Agreement.

            (ii) Cause. As used herein, the term "Cause" shall mean: (A) the
Executive's willful misconduct involving the Company or its assets, business or
employees or in the performance of his duties which is materially injurious to
the Company; (B) the Executive's conviction of (or pleading guilty or nolo
contendre to) a felony (provided that for this purpose, a felony shall cover any
action or inaction that is a felony or crime under federal, state or local law
in the United States (collectively, "U.S. law") and any action or inaction which
takes place outside of the United States, if it would be a felony under U.S.
law); (C) the Executive's continued and substantial failure to attempt in good
faith to perform his duties with the Company (other than failure resulting from
his incapacity due to physical or mental illness or injury or that of any member
of the Executive's immediate family (provided that in a situation relating to a
member of the Executive's immediate family he has consulted with the Chairman of
the Board and has in good faith made a mutually satisfactory agreement for
coverage of his responsibilities and further provided that any temporary
adjustments in authority, duties or responsibility made by the Company in
connection therewith shall not be Good Reason)), which failure has continued for
a period of at least ten (10) days after written notice thereof from the
Company; (D) the Executive's breach of any material provisions of any agreement
with the Company, which breach, if curable, is not cured within ten (10) days
after written notice thereof from the Company (provided that in the case of a
breach of the Executive's employment letter agreement, dated as of January 19,
2004,

<PAGE>

clause (iv) of the definition of Cause therein shall apply); or (E) the
Executive's failure to attempt in good faith to promptly follow a written
direction of the Board which direction indicates that failure to do so shall be
grounds for termination, provided that the failure shall not be considered
"Cause" if the Executive, in good faith, believes that such direction, or
implementation thereof, is illegal and he promptly so notifies the Chairman of
the Board in writing. No act or failure to act by the Executive shall be deemed
to be "willful" if he believed in good faith that such action or non-action was
in or not opposed to, the best interests of the Company.

            (iii) A Termination without Cause. As used herein, the term
Termination without Cause shall mean a Termination by the Company other than for
a termination for Cause or due to Disability.

            (iv) Disability. As used herein, Disability shall mean the
Executive's failure to have performed his material duties and responsibilities
as a result of physical or mental illness or injury for more than one hundred
eighty (180) days during a three hundred sixty-five (365) day period.

            (v) Anticipatory Termination. As used herein, the term Anticipatory
Termination means a Termination without Cause or for Good Reason that occurs
after a tender offer is announced for the Company or after material discussions
have occurred with a possible acquiror with regard to a Transaction.

      4. Compensation on Change of Control Termination. If, pursuant to Section
3, the Executive is entitled to amounts and benefits under this Section 4, the
Company shall, subject to Section 8, pay and provide to Executive: (A) in a lump
sum within ten (10) days after such termination (or, if such termination
occurred prior to a Change of Control, within ten (ten) days after the Change of
Control) (i) three (3) times the sum of Executive's (x) highest rate of annual
base salary plus (y) target annual incentive compensation (and, to the extent
such target, annual incentive compensation has not been established, it shall be
deemed to be fifty percent (50%) of the Executive's annual base salary), in each
case in effect within one hundred eighty (180) days prior to, or at any time
after, the Change of Control (the "One Year Amount"), (ii) subject to submission
of documentation, any incurred but unreimbursed business expenses for the period
prior to termination payable in accordance with the Company's policies, and
(iii) any base salary, bonus, vacation pay or other compensation accrued or
earned under law or in accordance with the Company's policies applicable to the
Executive but not yet paid; (B) any other amounts or benefits due under the then
applicable employee benefit (including without limitation any Supplemental
Executive Retirement Plan), equity or incentive plans of the Company applicable
to the Executive as shall be determined and paid in accordance with such plans;
(C) three (3) years of additional service and compensation credit at the One
Year Amount for pension purposes, and an increase in his age by three (3) years
for purposes of calculating any early retirement subsidy or actuarial reduction,
under any defined benefit type qualified or nonqualified pension plan or
arrangement of the Company applicable to Executive, measured from the date of
termination of employment and not credited to the extent that the Executive is
otherwise entitled to such credit during such three (3) year period, which
payments shall be made through and in accordance with the terms of the
nonqualified defined benefit pension plan or arrangement if any then exists that
is not purely an excess plan within the meaning of 4 U.S.C. ss.
114(b)(1)(I)(ii),

<PAGE>

or, if not, in an actuarially equivalent lump sum (using the actuarial factors
then applying in the Company's defined benefit plan covering the Executive); (D)
continued coverage under the Company health plans in which the Executive
participates (whether as an active or former employee) immediately prior to the
Change of Control or equivalent plans thereto (the "Health Plans") for the
Executive (except in the case of the Executive's death) and the Executive's
dependents for three (3) years from the date of termination of the Executive's
employment, provided that premiums for such coverage shall be paid by the
Executive on the same basis as prior to the Change of Control; and further
provided that such coverage shall cease to the extent that the providing of such
coverage would violate applicable law or result in other participants being
taxed on the benefits under such Health Plan or, alternatively, equivalent
coverage (on a tax grossed up basis, to the extent the amount taxable to the
Executive is greater than the amount taxable to him if he was an employee and
participated in the Health Plans; and (E) continued coverage under the Company
life insurance plan in which the Executive participates (at the same cost as for
active employees of equivalent age) at a benefit level equal to the higher of
the level in effect immediately prior to the Change of Control or immediately
prior to the Executive's termination or, alternatively, equivalent coverage (on
a tax grossed up basis, to the extent the amount taxable to the Executive is
greater than the amount taxable to him if he was an employee and participated in
the Company's life insurance plan) for three (3) years from the date of
termination of the Executive's employment.

      5. Excise Tax.

      (a). In the event that the Executive shall become entitled to payments
and/or benefits provided by this Agreement or any other amounts in the "nature
of compensation" (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership or effective control covered by Section 280G(b)(2) of
the Internal Revenue Code of 1986, as amended (the "Code") or any person
affiliated with the Company or such person) as a result of a Change of Control
(collectively the "Company Payments"), and if such Company Payments will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (and
any similar tax that may hereafter be imposed by any taxing authority) the
amounts of any Company Payments shall be automatically reduced to an amount one
dollar less than an amount that would subject the Executive to the Excise Tax;
provided, however, that the reduction shall occur only if the reduced Company
Payments received by the Executive (after taking into account further reductions
for applicable federal, state and local income, social security and other taxes)
would be greater than the unreduced Company Payments to be received by the
Executive minus (i) the Excise Tax payable with respect to such Company Payments
and (ii) all applicable federal, state and local income, social security and
other taxes on such Company Payments. The Executive may elect which payments and
benefits shall be reduced to accomplish the foregoing, but, if the Executive
does not make such an election, cash payments shall be reduced first.

      (b) For purposes of determining whether any of the Company Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (x) the Company
Payments shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Code Section 280G(b)(3) of the Code) shall be treated
as subject to the Excise Tax, unless and except to the extent that, in the
opinion of the Company's

<PAGE>

independent certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected by
such accountants (the "Accountants") such Company Payments (in whole or in part)
either do not constitute "parachute payments," including giving effect to the
recalculation of stock options in accordance with Treasury Regulation Section
1.280G-1 Q/A33, represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in excess of the "base
amount" or are otherwise not subject to the Excise Tax, and (y) the value of any
non-cash benefits or any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G of the Code. To
the extent permitted under Revenue Procedure 2003-68, the value determination
shall be recalculated to the extent it would be beneficial to the Executive, at
the request of the Executive.

      (c) For purposes of making the calculation hereunder, the Executive shall
be deemed to pay U.S. federal income taxes at the highest marginal rate of U.S.
federal income taxation in the calendar year in which the Company Payments are
to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence for the calendar
year in which the Company Payments are to be made, net of the maximum reduction
in U.S. federal income taxes which could be obtained from deduction of such
state and local taxes if paid in such year.

      (d) In the event of any controversy with the Internal Revenue Service (or
other taxing authority) with regard to the Excise Tax, the Executive shall
permit the Company to control issues related to the Excise Tax (at its expense),
provided that such issues do not potentially materially adversely affect the
Executive, but the Executive shall control any other issues. In the event the
issues are interrelated, the Executive and the Company shall in good faith
cooperate so as not to jeopardize resolution of either issue, but if the parties
cannot agree the Executive shall make the final determination with regard to the
issues. In the event of any conference with any taxing authority as to the
Excise Tax or associated income taxes, the Executive shall permit the
representative of the Company to accompany the Executive, and the Executive and
the Executive's representative shall cooperate with the Company and its
representative.

      (e) The Company shall be responsible for all charges of the Accountants.

      (f) The Company and the Executive shall promptly deliver to each other
copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax.

      6. Notice of Termination. After a Change of Control, any purported
termination of the Executive's employment (other than by reason of death) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 14. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment. Further, a Notice of Termination for
Cause after a Change of Control is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than two-thirds (2/3) of the
entire membership of the Board at a meeting of the Board which was called and
held for the purpose of considering such termination and which the Executive had
the right to attend and speak finding that, in the good faith opinion of the
Board, the

<PAGE>

Executive has engaged in conduct set forth in the definition of Cause herein,
and specifying the particulars thereof in detail.

      7. Date of Termination. "Date of termination," with respect to any
purported termination of the Executive's employment after a Change of Control,
shall mean the date specified in the Notice of Termination and, in the case of a
termination by the Executive for Good Reason, shall not be less than five (5)
days nor more than sixty (60) days, from the date such Notice of Termination is
given). In the event a Notice of Termination is given by the Company, the
Executive may treat such notice as having a date of termination at any date
between the date of receipt of such notice and the date of termination indicated
in the Notice of Termination by the Company; provided, that the Executive must
give the Company written notice of the date of termination if he deems it to
have occurred prior to the date of termination indicated in the Notice of
Termination.

      8. No Duty to Mitigate/Set-off. The Company agrees that if the Executive's
employment with the Company is terminated pursuant to this Agreement during the
term of this Agreement, the Executive shall not be required to seek other
employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to this Agreement. Further, the amount of any
payment or benefit provided for in this Agreement shall not be reduced by any
compensation earned by the Executive or benefit provided to the Executive as the
result of employment by another employer or otherwise. Except as otherwise
provided herein and apart from any disagreement between the Executive and the
Company concerning interpretation of this Agreement or any term or provision
hereof, the Company's obligations to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against the Executive. The amounts due under Section 4 are inclusive, and in
lieu of, any amounts payable under any other salary continuation or cash
severance arrangement of the Company, including, without limitation, under the
Executive's employment letter agreement dated as of January 19, 2004, and to the
extent paid or provided under any other such arrangement shall be offset against
the amount due hereunder.

      9. Service with Subsidiaries. For purposes of this Agreement, employment
by a subsidiary or a parent of the Company shall be deemed to be employment by
the Company and references to the Company shall include all such entities,
except that the payment obligation hereunder shall be solely that of the
Company. A Change of Control, however, as used in this Agreement, shall refer
only to a Change of Control of the Company.

      10. Confidentiality; No Resignation.

      (a) Without implication as to any other provisions of the employment
letter agreement, dated as of January 19, 2004, Section 6 of the employment
letter agreement concerning confidentiality, non-competition and
non-solicitation (other than Section 6(m) thereof) shall continue to apply
following the Change of Control of the Company.

<PAGE>

      (b) In consideration of this Agreement, the Executive agrees that he will
not resign from the Company without Good Reason for at least one hundred eighty
(180) days from the date hereof, except the foregoing shall not apply after a
Change of Control.

      (c) In consideration of this Agreement, the Executive agrees that, if he
is terminated from employment or if he terminates employment, within ninety (90)
days following a Change of Control, he will, following a Change of Control and
conditioned on timely payment of amounts due him hereunder, if requested by the
Company consult in a senior advisory capacity to assist in the orderly
transition to new management for a period of ninety (90) days following a Change
of Control.

      (d) The Company shall continue to cover the Executive, or cause the
Executive to be covered, under any director and officer insurance maintained
after the Change of Control for directors and officers of the Company (whether
by the Company or another entity) at the highest level so maintained for any
other past or active director or officer with regard to any action or omission
of the Executive while an officer or director of the Company. Such coverage
shall continue for any period during which the Executive may have any liability
for the aforesaid actions or omissions.

      (e) Following a Change of Control, the Company shall indemnify the
Executive to the fullest extent permitted by law against any claims, suits,
judgments, expenses (including reasonable attorney fees), with advancement of
legal fees and disbursements to the fullest extent permitted by law, arising
from, out of, or in connection with the Executive's services as an officer or
director of the Company, as an officer or director of any affiliate for which
the Executive was required to serve as such by the Company or as a fiduciary of
any benefit plan of the Company or any affiliate.

      11. Successors; Binding Agreement. In addition to any obligations imposed
by law upon any successor to the Company, the Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to
expressly assume and agree in writing to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable to
the Executive hereunder if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate. This Agreement is personal to the
Executive and neither this Agreement or any rights hereunder may be assigned by
the Executive.

      12. Miscellaneous. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. This Agreement
constitutes the entire Agreement between the parties hereto

<PAGE>

pertaining to the subject matter hereof. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
All references to any law shall be deemed also to refer to any successor
provisions to such laws.

      13. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

      14. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, or sent by
registered mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, or, if mailed, five days after the date of deposit in the
United States mails, or as follows:

      If to the Company, to:

      Overseas Shipholding Group, Inc.
      511 Fifth Avenue
      New York, New York  10017
      Attention: Chairman

      If to the Executive, to his shown address on the books of the Company.

      Any party may by notice given in accordance with this Section to the other
parties, designate another address or person for receipt of notices hereunder.

      15. Separability. If any provisions of this Agreement shall be declared to
be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.

      16. Legal Fees. In the event the Company does not make the payments due
hereunder on a timely basis and the Executive collects any part or all of the
payments provided for hereunder or otherwise successfully enforces the terms of
this Agreement by or through a lawyer or lawyers, the Company shall pay all
costs of such collection or enforcement, including reasonable legal fees and
other reasonable fees and expenses which the Executive may incur (on a tax
grossed up basis, to the extent such amounts are taxable to the Executive). The
Company shall pay to the Executive interest at the prime lending rate (as
announced from time to time by Citibank, N.A.) on all or any part of any amount
to be paid to Executive hereunder that is not paid when due. The prime rate for
each calendar quarter shall be the prime rate in effect on the first day of the
calendar quarter.

      17. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration conducted in the
City of New York in the State of New York under the Commercial Arbitration Rules
then prevailing of the American Arbitration Association and such submission
shall request the American Arbitration Association to: (i) appoint an arbitrator
experienced and knowledgeable concerning the matter then in dispute; (ii)
require the testimony to be transcribed; (iii) require the award to be
accompanied by findings of fact and the statement for reasons for the decision;
and (iv) request the matter to be handled by and in

<PAGE>

accordance with the expedited procedures provided for in the Commercial
Arbitration Rules. The determination of the arbitrators, which shall be based
upon a de novo interpretation of this Agreement, shall be final and binding and
judgment may be entered on the arbitrators' award in any court having
jurisdiction. The Company shall pay all costs of the American Arbitration
Association and the arbitrator.

      18. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive, equity or other plan or program provided by the Company and for which
the Executive may qualify, nor shall anything herein (except Section 8) limit or
otherwise prejudice such rights as the Executive may have under any other
currently existing plan, agreement as to employment or severance from employment
with the Company or statutory entitlements, provided, that to the extent such
amounts are paid under Section 4 hereof or otherwise, they shall not be due
under any such program, plan, agreement, or statute. Amounts that are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company, at or subsequent to the date of termination shall be
payable in accordance with such plan or program, except as otherwise
specifically provided herein.

      19 Not an Agreement of Employment. This is not an agreement assuring
employment and, subject to any other agreement between the Executive and the
Company, the Company reserves the right to terminate the Executive's employment
at any time with or without cause, subject to the payment provisions hereof, if
any, that are applicable. The Executive acknowledges that he is aware that he
shall have no claim against the Company hereunder or for deprivation of the
right to receive the amounts hereunder as a result of any termination that does
not specifically satisfy the requirements hereof or as a result of any other
action taken by the Company.

      20. Independent Representation. The Executive acknowledges that he has
been advised by the Company to have the Agreement reviewed by independent
counsel and has been given the opportunity to do so.

      21. Governing Law. This Agreement shall be construed, interpreted, and
governed in accordance with the laws of the State of Delaware without reference
to rules relating to conflicts of law.

      IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Executive has hereunto set his hand as of the date first set
forth above.

OVERSEAS SHIPHOLDING GROUP, INC.

By:  _________________________________
Name: Robert N. Cowen
Title: Senior Vice President and Chief Operating Officer

EXECUTIVE

______________________________________
Morton Arntzen

<PAGE>

                                    EXHIBIT E

                           WAIVER AND GENERAL RELEASE

      1. I agree and acknowledge that the payments and other benefits provided
pursuant to Section 5(c) of the Letter Agreement ("Agreement"), dated as of
January 19, 2004: (i) are in full discharge of any and all liabilities and
obligations of the Company to me, monetarily or with respect to employee
benefits or otherwise, including but not limited to any and all obligations
arising under any alleged written or oral employment agreement, policy, plan or
procedure of the Company and/or any alleged understanding or arrangement between
me and the Company (other than my rights to indemnification and directors' and
officers' liability insurance or as otherwise set forth herein); and (ii) exceed
any payment, benefit, or other thing of value to which I might otherwise be
entitled under any policy, plan or procedure of the Company and/or any agreement
between me and the Company.

      2. (a) In consideration for the payments and benefits to be provided to me
pursuant to the Agreement, I forever release and discharge the Company from any
and all claims of any kind whatsoever through the date hereof, whether known or
unknown. This includes claims that are not specified in this Agreement, claims
of which I am not currently aware, claims under: (i) the Age Discrimination in
Employment Act, as amended; (ii) Title VII of the Civil Rights Act of 1964, as
amended; (iii) the Americans with Disabilities Act, as amended; (iv) the
Employee Retirement Income Security Act of 1974, as amended (excluding claims
for accrued, vested benefits under any employee benefit pension plan of the
Company in accordance with the terms and conditions of such plan and applicable
law); (v) the Workers' Adjustment and Retraining Notification Act; (vi) the
Family and Medical Leave Act; (vii) any claim under the New York State Human
Rights Law and the New York City Administrative Code; (viii) any

<PAGE>

other claim (whether based on federal, state, or local law, statutory or
decisional) relating to or arising out of my employment, the terms and
conditions of such employment, the separation of such employment, and/or any of
the events relating directly or indirectly to or surrounding the separation of
that employment, including, but not limited to, breach of contract (express or
implied), wrongful discharge, detrimental reliance, defamation, emotional
distress or compensatory or punitive damages; and (ix) any claim for attorneys'
fees, costs, disbursements and/or the like. Notwithstanding anything herein to
the contrary, the sole matters to which this release does not apply are (i) the
rights of indemnification and directors' and officers' liability insurance
coverage to which I was entitled pursuant to the Agreement, under applicable law
or pursuant to the Company's corporate documents; (ii) my rights under Sections
5(c) and 6(k) of the Agreement (and Sections 7(d) and 7(g) of the Agreement as
they apply thereto), including but not limited to severance payments; and (iii)
rights under any tax-qualified pension plan, claims for accrued vested benefits
or welfare benefits (other than severance related benefits) under any other
employee benefit plan, policy or arrangement maintained by the Company or under
COBRA or any rights with respect to vested equity grants, whether pursuant to
equity plans and/or grants or pursuant to the Agreement or any other agreement
with the Company.

      (b) This release applies to me and to anyone who succeeds to my rights,
such as my heirs, executors, administrators of my estate, trustees, and assigns.
This release is for the benefit of (i) the Company, (ii) any of its affiliates
(as defined in the Agreement), (iii) any director, officer, employee, or agent
of the Company or of any of its affiliates (but as to any such director,
officer, employee or agent of the Company or of any of its affiliates only in
connection with, or in relationship to, his or its capacity as a director,
officer, employee or agent of the Company or its affiliate, as the case may be,

<PAGE>

and not in connection with, or in relationship to, his or its personal capacity
unrelated to the Company or any of its affiliates), or (iv) any person,
corporation or entity who or that succeeds to the rights of the Company or any
affiliate (as defined in the Agreement) of such person, corporation or entity
(but only to the extent any claims released herein relate to my employment with
the Company or any of its affiliates).

      3. I acknowledge that I: (a) have carefully read in their entirety the
Agreement and this Waiver and General Release; (b) have had an opportunity to
consider fully for at least twenty-one (21) days the terms of the Agreement and
this Waiver and General Release; (c) have been advised by the Company in writing
to consult with an attorney of my choosing in connection with the Agreement and
this Waiver and General Release; (d) fully understand the significance of all of
the terms and conditions of the Agreement and this Waiver and General Release,
and have discussed them with my independent legal counsel, or have had a
reasonable opportunity to do so; (e) have had answered to my satisfaction any
questions I have asked with regard to the meaning and significance of any of the
provisions of the Agreement and this Waiver and General Release; and (f) am
signing this Waiver and General Release voluntarily and of my own free will and
assent to all the terms and conditions contained herein and contained in the
Agreement.

      I understand that I will have until the later of (i) ninety (90) days
after termination of my employment and twenty one (21) days from the date of
receipt of this Waiver and General Release to consider the terms and conditions
herein. I may accept this Waiver and General Release by executing it and
returning it to the Company's Chief Legal Officer. After executing this Waiver
and General Release and returning it to the Chief Legal Officer, I shall have
seven (7) days (the "Revocation Period") to revoke this

<PAGE>

Waiver and General Release by indicating my desire to do so in writing delivered
by no later than 5:00 p.m. on the seventh (7th) day following the date I sign
and return this Waiver and General Release. If the last day of the Revocation
Period falls on a Saturday, Sunday or holiday, the last day of the Revocation
Period will be deemed to be the next business day. In the event I revoke the
Waiver and General Release during the Revocation Period, Section 5(c) of the
Agreement, including but not limited to the obligation of the Company to provide
the payments and other benefits, shall be deemed automatically null and void,
provided that failing to execute this release or revoking it in accordance
herewith will not affect my rights to Accrued Amounts (as defined in the
Agreement) or any other rights, benefits or entitlements that I may have under
any applicable plan, policy, program, arrangement of, or other agreement with,
the Company or any affiliate.

Morten Arntzen
       Date:_______________________

Signature:________________________
       Morten Arntzen

<PAGE>

STATE OF NEW YORK      )
                       ) ss:
COUNTY OF ___________  )

On this __ day of ________ _____, before me personally came _______________ to
be known and known to me to be the person described and who executed the
foregoing Waiver and General Release, and he duly acknowledged to me that he
executed the same.

____________________________
Notary Public

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